<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
REALNAMES CORPORATION
(Exact name of registrant as specified in its charter)
--------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7379 94-3917934
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
2 CIRCLE STAR WAY, 2ND FLOOR
SAN CARLOS, CA 94070
(650) 298-8080
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
--------------------------
JAMES N. STRAWBRIDGE
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL AND ADMINISTRATIVE OFFICER
REALNAMES CORPORATION
2 CIRCLE STAR WAY, 2ND FLOOR
SAN CARLOS, CA 94070
(650) 298-8080
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
MARK A. BERTELSEN BROOKS STOUGH
JOSE F. MACIAS GUNDERSON DETTMER STOUGH
WILSON SONSINI GOODRICH & ROSATI VILLENEUVE FRANKLIN & HACHIGIAN, LLP
PROFESSIONAL CORPORATION 155 CONSTITUTION DRIVE
650 PAGE MILL ROAD MENLO PARK, CALIFORNIA 94025
PALO ALTO, CALIFORNIA 94304 (650) 321-2400
(650) 493-9300
--------------------------
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
<TABLE>
<CAPTION>
Title of Each Class of Proposed Maximum Aggregate Amount of
Securities to be Registered Offering Price(1) Registration Fee
<S> <C> <C>
Common Stock, par value $0.001 per share........................ $80,500,000 $22,379
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee required
by Section 6(b) of the Securities Act, and computed pursuant to Rule 457(o)
of 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 WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED , 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SHARES
[LOGO]
COMMON STOCK
-----------------
REALNAMES CORPORATION IS OFFERING SHARES OF ITS COMMON STOCK. THIS IS OUR
INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE
ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $ AND
$ PER SHARE.
-------------------
WE HAVE APPLIED TO LIST OUR COMMON STOCK ON THE NASDAQ NATIONAL MARKET UNDER THE
SYMBOL "NAME."
-------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS REALNAMES
------------------ ------------------ ------------------
<S> <C> <C> <C>
PER SHARE.......................................... $ $ $
TOTAL.............................................. $ $ $
</TABLE>
REALNAMES HAS GRANTED THE UNDERWRITERS THE RIGHT TO PURCHASE UP TO AN ADDITIONAL
SHARES TO COVER OVER-ALLOTMENTS.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MORGAN STANLEY & CO. INCORPORATED EXPECTS TO DELIVER THE SHARES TO PURCHASERS ON
, 1999.
-------------------
MORGAN STANLEY DEAN WITTER
HAMBRECHT & QUIST
ROBERTSON STEPHENS
PAINEWEBBER INCORPORATED
WIT CAPITAL CORPORATION
, 1999
<PAGE>
Inside Front Cover:
[Graphic depicting the various URLs, or web addresses, required to locate a
specific website using traditional web navigation juxtaposed with the one
Internet Keyword required to get to the same web site.]
Gatefold:
[Graphic depicting how a web user can use the RealNames Service to navigate to
desired content on the Internet. This graphic includes depictions of the web
user, the logos of distributors of the RealNames Service, the RealNames routers
and a variety of possible Internet Keyword results, including logos of some
RealNames customers.]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 4
Risk Factors................................... 7
Use of Proceeds................................ 23
Dividend Policy................................ 23
Preemptive Rights.............................. 23
Capitalization................................. 24
Dilution....................................... 26
Selected Financial Data........................ 28
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 29
<CAPTION>
PAGE
-----
<S> <C>
Business....................................... 41
Management..................................... 61
Related Party Transactions..................... 72
Principal Stockholders......................... 74
Description of Capital Stock................... 77
Shares Eligible for Future Sale................ 80
Underwriters................................... 82
Legal Matters.................................. 84
Experts........................................ 84
Where You Can Find More Information............ 85
Index to Financial Statements.................. F-1
</TABLE>
------------------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell shares of common stock and
seeking offers to buy shares of common stock, only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the common stock. In this
prospectus, the "Company," "we," "us" and "our" refer to RealNames Corporation.
------------------------
Except as set forth in the financial statements or as otherwise specified,
all information in this prospectus is based on the following assumptions:
- the conversion of all outstanding shares of our preferred stock into
common stock upon the closing of this offering;
- the filing of our amended and restated certificate of incorporation
immediately prior to the effectiveness of this registration statement;
- no exercise of warrants or other rights to purchase shares of common stock
that are outstanding on, or may be issued after, June 30, 1999; and
- no exercise of the underwriters' over-allotment option.
RealNames and RealNames Service are among the servicemarks we own. This
prospectus includes other marks we own as well as trade names, servicemarks and
trademarks of other companies.
------------------------
We have made some statements in this prospectus, including some under
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business" and elsewhere, which
constitute forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any results, levels of activity, performance or achievements
expressed or implied by any forward-looking statements. These factors include,
among other things, those listed under "Risk Factors" and elsewhere in this
prospectus. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "could," "expects," "intends,"
"plans," "anticipates," believes," "estimates," "predicts," "potential" or
"continue" or the negative of these terms or other comparable terminology.
Although we believe that the expectations reflected in forward-looking
statements are reasonable, we cannot provide any assurances about future
results, levels of activity, performance, or achievements.
------------------------
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
3
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY AND THE COMMON STOCK BEING SOLD IN THIS
OFFERING AND OUR FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS.
REALNAMES CORPORATION
RealNames has developed a new addressing system based on Internet Keywords
that simplifies navigation on the Internet. Internet Keywords are generally
intuitive, familiar words and phrases, such as company, product, brand and
personal names. They can be used instead of search engines, directories and
uniform resource locators, or URLs, to navigate directly from any point on the
Internet that recognizes Internet Keywords. The purpose of Internet Keywords is
to simplify Internet navigation for users and to allow companies to promote
their brands as direct connections to their web pages. Internet Keywords were
available to more than 60% of U.S. Internet users, as measured by August 1999
Media Metrix data. This is as a result of being integrated into search engines,
directories and portals such as AltaVista, DogPile, GO Network, LookSmart and
MSN. Furthermore, Internet Keyword functionality is integrated into Microsoft's
Internet Explorer 5.0, which Stat Market estimates, as of September 30, 1999, to
have a greater than 30% share of the installed base of web browsers. Some of our
current customers using Internet Keywords include Amazon.com, Beyond.com, eBay,
Eddie Bauer, Federal Express, Ford, Homestore.com, MGM, priceline.com and
Specialized Bicycles.
As Internet use continues to increase, the number of web pages is also
likely to increase. Network Solutions reported an increase in its cumulative net
registrations of domain names from approximately 1.0 million at June 30, 1997 to
approximately 5.3 million at June 30, 1999. In addition, International Data
Corporation, or IDC, expects the number of web pages worldwide to grow from 925
million in 1998 to 8 billion by 2002. As the number of web pages grows, the URLs
associated with those pages are becoming longer and more complex to remain
unique. As a result, URLs are becoming less intuitive and more difficult to
remember, making them an inefficient means of locating specific Internet
resources and reaching online customers, businesses and communities. For
example, Internet users that would like to navigate directly to the Honda Accord
web page through its URL must input the lengthy web address WWW.HONDA2000.COM/
MODELS/ACCORD_SEDAN/INDEX.HTML. Internet users have instead often turned to
search engines and directories. However, while search engines are extremely
useful for research on a particular topic, they traditionally have not been
efficient as direct navigation tools because they generate many results, only
one of which, if any, is the web page to which the user wants to navigate.
URLs have also generally been ineffective in promoting online brand
identity. The limitations of navigating with URLs have created a challenge for
companies seeking to bring their offline brands and identities onto the Internet
and have made it difficult for them to promote their online existence to
viewers, listeners and readers of their offline marketing activities. Just as
domain names replaced long, difficult to remember numerical addresses for email,
there is a need for something to replace long, difficult to remember URLs for
web pages. We believe that there is a clear market opportunity for a third party
that can build and manage an efficient global Internet navigation system that is
more intuitive and user-friendly and leverages well-developed offline brands and
identities.
The RealNames Service, using Internet Keywords, allows users to efficiently
navigate to the online location of companies, brands, products and people and
enables companies to leverage their well-developed offline brands and
identities. Internet Keywords operate on the RealNames platform, a new layer of
Internet infrastructure that is designed to provide an intuitive navigation
interface that hides complex and lengthy URLs. With the advent of Internet
Keywords, users that would like to navigate directly to the Honda Accord web
page can do so by simply typing "Honda Accord" in any Internet Keyword-enabled
environment. To avoid many of the problems of the current domain name system, we
manage the assignment of Internet Keywords with the goal of avoiding
misdirection of users and misappropriation of trademarks and trade names.
4
<PAGE>
Our objective is to establish Internet Keywords as the de facto standard for
Internet navigation and the RealNames platform as the standard for the
proliferation and use of Internet Keywords. In order to expand our reach and to
achieve ubiquity of access to Internet Keyword navigation, we intend to leverage
existing, and aggressively pursue additional, distribution relationships with
Internet browser providers, as well as providers of search, directory,
e-commerce, portal and content services worldwide. To drive user adoption, we
enter into co-marketing arrangements with some of our customers and offer free
Personal Keywords through several community web sites. In addition, we have
begun a significant marketing campaign to create awareness of Internet Keywords
and to incent users to adopt Internet Keywords. We also intend to grow our
customer base through a multi-tiered selling effort, to expand internationally,
to add functionality to the RealNames Service and to develop and promote policy
and technical standards for Internet Keyword navigation.
We were incorporated in Delaware in November 1996. Our principal executive
office is located at 2 Circle Star Way, 2(nd) Floor, San Carlos, California
94070, and our telephone number is (650) 298-8080.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered........................ shares
Common stock to be outstanding after this
offering.................................. shares
Use of proceeds............................. For general corporate purposes, including
expansion of operations, working capital,
product development and other corporate
expenses.
Proposed Nasdaq National Market symbol...... NAME
</TABLE>
The number of shares of common stock to be outstanding referenced above is
based on shares outstanding as of June 30, 1999 and includes 15,677,778 shares
of our Series C convertible preferred stock issued in August 1999. This number
excludes the following:
- - 1,351,833 shares of common stock issuable upon exercise of outstanding options
on June 30, 1999 at a weighted average exercise price of $.66 per share;
- - 595,453 shares of common stock reserved for future issuances under our stock
plans on June 30, 1999;
- - 8,500,000 shares of common stock reserved for future issuances under our stock
plans that were approved by our board of directors after June 30, 1999;
- - 1,271,735 shares of common stock issuable upon exercise of fully vested
warrants on June 30, 1999 at an exercise price of $2.09 per share;
- - 2,967,444 shares of common stock issuable upon exercise of unvested warrants
on June 30, 1999 at exercise prices ranging from $2.64 to $3.77 per share;
- - 2,924,991 shares of common stock reserved for issuance under an agreement to
issue warrants to purchase common stock on June 30, 1999 at exercise prices
ranging from $2.09 to $6.78 per share; and
- - shares we are required to offer to a stockholder under a previous
contractual commitment, concurrently with the completion of this offering at a
price of $ per share, assuming an initial public offering price of $
per share.
5
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
This summary financial data has been derived from the following:
- our audited financial statements and related notes for the period from
November 19, 1996, the date of our inception, to December 31, 1997 and the
year ended December 31, 1998 included elsewhere in this prospectus; and
- our unaudited financial statements for the six months ended June 30, 1998
and June 30, 1999 included elsewhere in this prospectus.
You should read the information set forth below in conjunction with our
financial statements and the related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
NOVEMBER 19, 1996 30,
(DATE OF INCEPTION) TO YEAR ENDED ----------------------
DECEMBER 31, 1997 DECEMBER 31, 1998 1998 1999
----------------------- ----------------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................................... $ -- $ 537 $ -- $ 1,059
Cost of revenues................................. -- 556 -- 702
------- ------- --------- -----------
Gross profit (loss).............................. -- (19) -- 357
Operating expenses:
Engineering and operations................... 1,000 1,165 345 1,859
Sales and marketing.......................... 81 2,458 667 3,495
General and administrative................... 103 1,640 314 1,752
Stock-based compensation..................... -- 691 103 4,465
------- ------- --------- -----------
Total operating expenses................... 1,184 5,954 1,429 11,571
------- ------- --------- -----------
Loss from operations............................. (1,184) (5,973) (1,429) (11,214)
Net loss......................................... (1,176) (5,879) (1,391) (11,044)
Net loss per share, basic and diluted............ $ (.31) $ (.40) $ (.09) $ (.75)
Weighted average shares, basic and diluted....... 3,768 14,742 14,737 14,820
Pro forma net loss per share, basic and diluted
(unaudited).................................... $ (.26) $ (.30)
Pro forma weighted average shares, basic and
diluted (unaudited)............................ 22,348 36,548
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
--------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................................... $ 4,058 $ 73,648
Working capital............................................................... 1,868 71,458
Total assets.................................................................. 9,226 78,816
Total stockholders' equity.................................................... 5,312 74,902
</TABLE>
The balance sheet data table set forth above summarizes our balance sheet
data as of June 30, 1999:
- on an actual basis;
- on a pro forma basis, giving effect to our sale of 15,667,778 shares of
Series C convertible preferred stock in August 1999 and the conversion of
all outstanding shares of preferred stock into shares of common stock upon
the closing of this offering; and
- on a pro forma as adjusted basis, giving effect to the sale of
shares of common stock in this offering at an assumed initial public
offering price of $ per share after deducting estimated underwriting
discounts and commissions and estimated offering expenses.
6
<PAGE>
RISK FACTORS
THIS OFFERING AND AN INVESTMENT IN OUR COMMON STOCK INVOLVE A HIGH DEGREE OF
RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND THE OTHER
INFORMATION IN THIS PROSPECTUS BEFORE INVESTING IN OUR COMMON STOCK. OUR
BUSINESS AND RESULTS OF OPERATIONS COULD BE SERIOUSLY HARMED IF ANY OF THE
FOLLOWING RISKS WERE TO MATERIALIZE. THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE DUE TO ANY OF THESE RISKS, AND YOU MAY LOSE ALL OR PART OF YOUR
INVESTMENT.
RISKS RELATED TO OUR BUSINESS
OUR SUCCESS IS HIGHLY UNCERTAIN BECAUSE OUR BUSINESS MODEL IS NOVEL AND
UNPROVEN AND WE HAVE OPERATED OUR BUSINESS FOR ONLY A SHORT PERIOD OF TIME.
Because we were incorporated in November 1996 and only began offering the
RealNames Service in March 1998, we have an extremely limited operating history
on which investors can evaluate our business and prospects. Specifically, we
only recently began generating revenues from the following sources:
- fixed-priced, annual Internet Keyword subscription fees in July 1998;
- price per visit Internet Keyword fees in January 1999;
- license fees for routing prefixes in the RealNames platform in June 1999;
and
- price per transaction Internet Keyword fees in August 1999.
Because we have not demonstrated our ability to generate significant
revenue, our business model is unproven, especially with respect to platform
license fees for routing prefixes from Keyword Providers. Keyword Providers are
companies to which we have assigned a unique routing prefix on the RealNames
platform allowing them to assign their own Internet Keywords using that prefix.
Keyword Providers generally pay us a license fee for access to our platform, and
we expect these fees will constitute the majority of our revenues for the
foreseeable future.
We believe that our business model is not only unproven but novel. We cannot
learn from the experience of similar companies, and as a result we have been
required to deploy our service, or a particular pricing model, and to learn from
our own experience. Given that we have very little history with deployment, we
have very limited insight into trends and uncertainties that may emerge and
affect our business. Internet Keywords may not achieve or sustain market
acceptance, the market for our services may develop more slowly than expected or
become saturated with competitors, or we may not be able to sustain or increase
our current pricing levels.
To achieve success, we must, among other things:
- change the behavior of a large base of Internet users from relying on
search engines and URLs to find a web page to relying on Internet Keywords
to navigate directly to a web page;
- maintain and add relationships with distribution partners that effectively
implement the RealNames Service;
- expand our base of paying customers that adopt Internet Keywords;
- ensure that our Internet Keywords meet the expectations of Internet users
in navigating to desired web pages;
- maintain our relationships with existing Keyword Providers and develop new
Keyword Provider relationships;
- persuade our customers to include Internet Keywords as part of their
offline and online marketing campaigns;
7
<PAGE>
- ensure our subscribers renew their Internet Keyword subscriptions;
- expand quickly into international markets;
- increase the number and effectiveness of resellers of subscriptions for
our Internet Keywords;
- develop and maintain a reputation as a trusted, neutral third party in our
industry and the Internet community;
- anticipate changes in, and adapt to, a new and developing market;
- respond effectively to competitive pressures;
- continue to enhance the functionality and services offered through the
RealNames platform; and
- attract, retain and motivate qualified personnel.
A potential investor in our common stock should carefully consider the risks
and difficulties frequently encountered by companies in an early stage of
development, as well as the risks we face due to our participation in a new and
rapidly evolving market, and our attempt to execute on a new and untested
business model. Our business model may not be successful, or we may not
successfully overcome the risks associated with this business model. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for more information on our limited operating history.
WE HAVE NEVER BEEN PROFITABLE, AND WE EXPECT SIGNIFICANT LOSSES AND
INCREASES IN OUR OPERATING EXPENSES FOR THE FORESEEABLE FUTURE.
We have never been profitable. We incurred net losses of approximately $1.2
million for the period from inception, November 19, 1996, to December 31, 1997,
$5.9 million in 1998 and $11.0 million for the six months ended June 30, 1999.
As of June 30, 1999, we had an accumulated deficit of $18.1 million. We expect
to have increasing net losses and negative cash flows for the foreseeable
future. This is due in part to significant revenue share arrangements with our
distribution partners, substantial marketing commitments and commissions paid to
our subscription resellers. The size of these net losses will also depend, in
part, on the rate of growth in our revenues from licenses fees and Internet
Keyword subscriptions, especially in proportion to the rate of growth in our
operating expenses. We intend to increase our operating expenses substantially
as we:
- increase our sales, marketing and other promotional efforts, including
implementation of aggressive co-marketing arrangements with our Keyword
Providers to promote awareness of Internet Keywords;
- continue to develop our technology and the RealNames platform;
- increase our general and administrative functions to support our growing
operations; and
- expand into international markets.
With these increased expenses, we will need to generate significant
additional revenues to achieve profitability. However, the sources from which we
expect to derive our most significant revenue are new and unproven and,
accordingly, are subject to unusually high risk. As a result, it is possible
that we will never achieve profitability. Even if we do achieve profitability,
we may not sustain or increase profitability on a quarterly or annual basis in
the future. If we do not achieve or sustain profitability in the future, then we
may be unable to continue our operations. Please see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for more
information about our current and expected losses and expected increases in
operating expenses.
8
<PAGE>
WE EXPECT OUR QUARTERLY OPERATING RESULTS TO FLUCTUATE SIGNIFICANTLY. IF WE
FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE
MARKET PRICE OF OUR COMMON STOCK IS LIKELY TO DECLINE.
We expect to experience significant fluctuations in our future quarterly
operating results due to a variety of factors, many of which are listed in "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Most of these factors are not within our control. As a
result, we believe that quarterly comparisons of our operating results are not
necessarily meaningful and that investors should not rely on the results of any
quarter as an indication of our future performance. In particular, revenue
growth in any quarter is not indicative of revenue growth to be expected in
future quarters.
We base our expenses in large part on our projections of our future
revenues. However, it is very difficult to forecast our revenues due to our
extremely limited operating history and unproven business model. Our revenues
are also difficult to forecast because we derive, and expect to continue to
derive, a significant portion of our revenues in any period from license fees
from a small number of Keyword Providers. Therefore, if we lose or have to defer
license fee revenue from one or more of these agreements in any period, we would
likely have a significant shortfall in revenue in that period. Because most of
our expenses are fixed in the short term, if our revenues are lower than we
project in a period, we likely will not be able to reduce spending
proportionally in the same period. As a result, any significant shortfall in
revenues in any period would likely have an immediate, negative impact on our
operating results and cash flows in that period.
We believe it is likely that, in the future, fluctuations in our quarterly
operating results will cause our operating results to fall below the
expectations of securities analysts and investors, which would likely cause the
price of our common stock to drop.
WE RELY ON RELATIONSHIPS WITH OUR DISTRIBUTION PARTNERS TO EXTEND THE REACH
OF THE REALNAMES SERVICE, AND THE FAILURE TO RETAIN THESE PARTNERS OR ADD NEW
DISTRIBUTION PARTNERS WOULD LIKELY HARM OUR BUSINESS.
To achieve success, we must maintain our relationships with our current
distribution partners and establish new distribution partnerships. Internet
Keywords are currently available to a large number of Internet users worldwide
as a result of our relationships with companies that distribute our Internet
Keywords through their Internet services or software applications. These
distribution partners implement our service in their browsers, portals, search
engines, directories or other web services, allowing users access to Internet
Keywords. Most of our distribution contracts, however, have a term of only two
years and may be canceled by the distributor without cause after as little as 30
days' notice. In addition, our contract with Microsoft does not require
Microsoft to implement our service in Internet Explorer 5.0 or its other
applications and services. Rather, Microsoft can implement the RealNames Service
at its sole discretion. As a result, if we are unable to offer value to our
partners during the term of these contracts, or if our partners choose a
competitor's service over our service, or if they decide to develop their own
services similar to ours, they likely will not renew, or may even terminate,
their contracts with us. If we do not obtain renewals of a sufficient number of
our distribution contracts, or if Microsoft chooses to discontinue the
implementation of our service into Internet Explorer 5.0 or its other
complementary products and services, the number of Internet users having access
to Internet Keywords will decrease, customers will be less likely to find the
service valuable and our business will be harmed. Even if our distribution
contracts are renewed, they may be renewed on terms, including revenue sharing
terms, less favorable than the original contract, or new distribution
relationships may be entered into on terms less favorable than current
distribution relationships. In either such event, our operating results would
likely be adversely impacted as it would be more costly or less profitable to
maintain those distribution relationships. In addition, if we do not establish
new distribution partnerships, we will not be able to extend the reach of the
RealNames Service, and we may not achieve success. In particular, some of the
companies we have targeted as potential distribution partners may see us as a
threat to their business models, which focus on driving traffic to, and keeping
users at, their web sites. As a result, these and other companies may
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choose not to enter into distribution relationships with us, which could reduce
or eliminate any growth of our business.
IF OUR DISTRIBUTION PARTNERS DO NOT EFFECTIVELY IMPLEMENT THE REALNAMES
SERVICE, IT MAY DISCOURAGE ADOPTION BY INTERNET USERS AND RESULT IN THE LOSS OF
CUSTOMERS.
It is our objective that the RealNames Service be implemented effectively by
each of our distribution partners. Effective implementation has several
components, including:
- recognition by the distribution partner of all Internet Keywords,
including those supplied by Keyword Providers, unpaid Internet Keywords,
foreign language Internet Keywords, and Personal Keywords provided to
individuals at no cost to identify personal web pages;
- prominent display of Internet Keywords among search and directory results;
- direct communication with our routers in order to ensure that the
distribution partner has accurate and up-to-date Internet Keyword data;
and
- a stable distribution platform with uninterrupted performance.
Many of our customers subscribe to Internet Keywords in the belief that
their Internet Keywords will be available through the command line of
widely-used Internet browsers or will be prominently displayed among search
results. Although we seek to ensure that our service is effectively implemented,
we must work with or persuade a number of our distribution partners to improve
their implementation of our service. However, some of our distribution partners,
including Microsoft, do not recognize all Internet Keywords, and some do not
communicate directly with our routers. As a result, these distribution partners
do not make available to their users all of the Internet Keywords in our master
database or do not make data updates to our master database immediately
available to their users. Moreover, some of our distribution partners do not
display Internet Keywords prominently among search results, which significantly
reduces the likelihood that such Internet Keywords will be used. One of our
distribution partners also recently experienced a significant interruption in
its service, which prevented the use of Internet Keywords through this partner's
service during the period of interruption. Failure to improve implementation
with these distribution partners, or poor implementation by future distribution
partners, could discourage adoption of our service by Internet users or reduce
its attractiveness to our customers, which could reduce our revenues, increase
our losses and otherwise harm our business.
OUR BUSINESS WILL NOT GROW IF WE ARE UNABLE TO CHANGE THE BEHAVIOR OF A
LARGE BASE OF INTERNET USERS AND CONVINCE THEM TO NAVIGATE THE INTERNET USING
INTERNET KEYWORDS.
We will be successful only if a large number of Internet users adopt our
Internet Keywords as the preferred method for Internet navigation. For years,
users seeking to navigate the Internet have relied primarily on search engines,
directories, bookmarks and hyperlinks without Internet Keyword functionality
rather than the command line of an Internet browser application. Those
relatively few users that have navigated from the browser command line have done
so using URLs. As a result, Internet users are accustomed to these traditional
ways of navigating the Internet and may not be aware of, or be willing to try, a
new and alternative navigation system. Even those willing to try Internet
Keywords may find it difficult to break old habits and adopt Internet Keywords
as their primary tool for navigation. It is difficult, therefore, to predict the
extent and rate of user adoption of our Internet Keywords. Widespread acceptance
of our Internet Keywords may not occur, particularly as traditional means of
navigation, such as search engines and directory services, become more precise
in their search results. If a large number of Internet users do not accept
Internet Keywords as the preferred method for Internet navigation, we may be
unable to establish or maintain distribution relationships and customers may be
unwilling to pay for Internet Keywords, in which case our revenues are likely to
decrease, our losses are likely to increase, and our business is unlikely to
grow.
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IF OUR INTERNET KEYWORDS DO NOT MEET THE EXPECTATIONS OF OUR USERS, WE WILL
BE UNABLE TO GROW OUR BUSINESS.
In order to be successful, we must ensure positive user experiences with
Internet Keywords. Specifically, Internet Keywords must quickly and reliably
direct users to the web sites to which they expect to be directed. Although
there are hundreds of millions of web pages, there are currently only
approximately 500,000 Internet Keywords in our database. As a result, users
might expect that certain words or phrases would be Internet Keywords, only to
be disappointed if such words or phrases are not Internet Keywords. Moreover,
the assignment of Internet Keywords is in some cases highly subjective.
Therefore, some Internet Keywords may direct users to a destination that does
not meet their own subjective expectation. The risk of not meeting user
expectations is particularly pronounced for generic terms and even for
non-generic words or terms if there are two or more equally likely expectations.
For example, "United" could serve as an Internet Keyword for United Airlines,
United Parcel Service, United Way, United Van Lines, United Artists or others.
In addition, regional and national differences in brand prominence and
familiarity may also make it difficult to satisfy user expectations in all
areas. We believe the risk of not meeting user expectations will be even more
difficult to manage as we expand our service into foreign language character
sets. In any of these cases, users' attempts to use intuitive words to find
common products or brands might produce results inconsistent with their
expectations, which might cause them to reduce or discontinue their use of
Internet Keywords.
We believe it is equally important to ensure maximum reliability, speed and
constant availability of our service. If the RealNames platform experiences
speed, reliability or availability problems, it would likely lead to slow,
inaccurate or no results and would frustrate users. The reliability of our
service depends in significant part on the efforts of customers, distributors
and Keyword Providers, over which we have little or no control. For example, if
our customers generally fail to report changes in web page locations and if we
are unable to detect these changes, Internet Keyword users will be frustrated by
dead links. Our distribution partners have also experienced, and are likely to
again experience, reliability problems which adversely impact the availability
of Internet Keywords to users. In addition, some of our distribution partners do
not directly communicate with our routers, which delays data updates to these
partners and may adversely impact a user's experience. Finally, a user's
experience will in some cases be dictated by our Keyword Providers, and we are
depending on our current and future Keyword Providers to manage and maintain
their keyword systems in a manner that meets user expectations. If we fail to
satisfy our users' expectations for any or all of the above reasons, we will be
unlikely to achieve the user adoption that we need to attract and retain
customers and distribution partners and to grow our business.
OUR SUCCESS DEPENDS ON OUR RELATIONSHIPS WITH A SMALL NUMBER OF KEYWORD
PROVIDERS.
Revenues from a small number of Keyword Providers, predominantly from
license fees, accounted for a substantial majority of our total revenues in the
quarter ended June 30, 1999. We expect that these revenues will continue to
comprise a majority of our total revenues for the foreseeable future. Our
agreements with Keyword Providers typically have a limited term and may be
cancelled prior to the end of the term. Further, we may not be able to maintain
our existing pricing levels for licenses with Keyword Providers. If additional
businesses do not enter into Keyword Provider license agreements with us, or if
current Keyword Providers cancel their existing license agreements or fail to
renew them upon expiration, or if pricing levels for licenses decline, our
business will not grow as expected and our revenue would likely decline. It may
be difficult to get additional Keyword Provider customers since the expense of
Internet Keywords is likely not included in their existing marketing budgets. We
may not be successful in convincing potential customers that they should divert
marketing dollars from other projects to Internet Keywords. In addition, we may
find that our current Keyword Provider customers had special circumstances or
particularly compelling reasons for adopting our navigation system. We may not
attract additional Keyword Provider customers that readily recognize the value
of, or see the need for, our navigation system. If we experience any of these
problems, it would likely result in lost or reduced revenue.
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Because we do not control the individual keyword systems of our Keyword
Provider customers, we rely on these customers to manage and maintain their
keyword systems in a manner that meets the expectations of users. Specifically,
we depend on these Keyword Providers to maintain Internet Keywords that deliver
users to the web pages they expect and to ensure that their systems are
reliable, fast and constantly available. Failure of our Keyword Provider
customers to maintain their systems in a manner that meets user expectations
could reflect poorly on our service and discourage user adoption of Internet
Keywords generally, which could limit or eliminate our ability to grow our
business.
OUR SUCCESS DEPENDS ON DERIVING REVENUE FROM THE SUBSCRIPTION AND RENEWAL OF
INTERNET KEYWORDS.
We rely on sales of subscriptions of Internet Keywords for a significant
portion of our revenue. Our fixed-priced Internet Keyword subscriptions
generally have terms of one year and can be renewed after that time. Similarly,
our price per visit, or PPV, and price per transaction, or PPT, subscriptions
are typically of a short duration and may generally be canceled without cause
before the end of the term. We may not be able to maintain our existing pricing
levels for fixed-priced annual subscriptions, PPV or PPT Internet Keyword
subscriptions. In particular, for our PPV and PPT Internet Keyword
subscriptions, which are negotiated on a case-by-case basis, we may agree to
below average pricing if we expect large traffic volume, much as a traditional
supplier would give a volume discount to a large customer. In addition, it may
be difficult to get additional Internet Keyword subscription customers since the
expense of Internet Keywords is likely not included in their existing marketing
budgets. We may not be successful in convincing potential customers that they
should divert marketing dollars from other projects to Internet Keywords.
Further, to ensure a positive user experience we have established hundreds of
thousands of Internet Keywords directing users to web pages hosted by many
businesses and organizations that have not yet subscribed for such Internet
Keywords, in essence allowing a "free ride" from which we derive no revenue. We
may never receive revenue from these companies and organizations, even if we
make them aware that their Internet Keywords may be removed from the RealNames
Service. If businesses and organizations do not subscribe for Internet Keywords
or cancel or fail to renew their Internet Keyword subscriptions, or if pricing
levels for such subscriptions decline, our results of operations and cash flow
would likely be harmed.
WE DEPEND ON THE EFFORTS OF OUR RESELLERS TO SELL INTERNET KEYWORD
SUBSCRIPTIONS.
In addition to sales from our own web site, we depend on the efforts of
reseller partners such as Network Solutions to sell annual, fixed-priced
Internet Keyword subscriptions and to provide qualified customer referrals.
These partners expand the availability of Internet Keywords by providing us
access to potential customers and allowing these potential customers to
subscribe to Internet Keywords from numerous locations on the web. As a result,
we must maintain our existing reseller relationships and continue to develop
additional reseller relationships in order to increase subscription sales and
customer acquisition. However, as we establish additional relationships with
Internet Keyword resellers, we face the risk that competition among our
resellers for Internet Keyword subscriptions will impede our ability to sign up
additional resellers or discourage our existing resellers from promoting the
sale of Internet Keyword subscriptions. Moreover, even if we are successful in
establishing widespread reseller relationships, our resellers may not adequately
promote our service so as to generate increased subscription sales. If we fail
to establish additional or maintain our current reseller relationships, or if
our resellers do not effectively promote and sell Internet Keyword
subscriptions, our revenue may decline, and our losses may increase.
WE WILL BE UNABLE TO GROW OUR BUSINESS IF OUR MARKETING EFFORTS ARE
UNSUCCESSFUL IN CREATING AWARENESS AND ENCOURAGING TRIAL AND ADOPTION OF
INTERNET KEYWORDS.
In order to ensure adoption of Internet Keywords on a significant scale, we
must, among other things, attract large numbers of new distribution partners,
customers and users. One crucial step in our achievement of these goals is
development of a strong identity for, and widespread recognition of, Internet
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Keywords and the RealNames brand. We need large numbers of people to associate
Internet Keywords with using familiar, intuitive words and phrases to link them
to their desired Internet destinations and to understand the benefits of our
approach to Internet navigation. To achieve this objective, we have begun a
major marketing campaign to increase awareness, trial and adoption of Internet
Keywords. However, our marketing efforts may not be successful. Among other
things, buying meaningful advertising space or time in most forms of popular
media is expensive, and this advertising space or time can be difficult to
obtain even if we can afford the expense. For example, television advertising
time for popular shows and events is often bought well in advance of airing.
Even if we are successful in purchasing meaningful advertising space or time in
popular media, our advertisements and promotions may not be effective in
creating awareness and encouraging trial and adoption of Internet Keywords. If
our marketing efforts are unsuccessful in creating awareness and encouraging
trial and adoption of Internet Keywords, we will be unable to grow our business.
OUR SUCCESS WILL DEPEND IN PART ON THE INCORPORATION OF INTERNET KEYWORDS
INTO TRADITIONAL ADVERTISING.
We believe that a large part of the value of Internet Keywords is the
ability to drive traffic to a company's web pages based on its brand equity
previously established through traditional advertising. We believe that as
companies include Internet Keywords as part of their traditional advertising, as
many companies do now with their domain names, demand for Internet Keywords by
other companies will increase. As a result, we believe that our success will
depend in part on our customers' incorporation of their Internet Keywords into
their traditional offline advertising. We must convince these customers and
their advertising agencies to incorporate Internet Keywords as part of their
marketing campaigns and to devote a portion of their marketing budgets to the
promotion of their Internet Keywords. We have little or no experience with this
process, and therefore we may not be successful in achieving these objectives.
Furthermore, we may find that some companies and brands prefer the ".com" label
provided by domain names as opposed to Internet Keywords to draw attention to
their web presence, especially if they are devoting significant resources
promoting such a label. If we are unable to convince customers to incorporate
Internet Keywords into their marketing campaigns, our ability to grow our
business will likely be limited.
IF WE CANNOT MAINTAIN THE STABILITY AND UNINTERRUPTED PERFORMANCE OF THE
REALNAMES PLATFORM, OUR BUSINESS WILL BE SEVERELY HARMED.
We depend heavily on our own internal computer and communication systems and
the integrity of the electronic systems supporting the Internet. It is important
that the RealNames platform handle Internet Keyword navigation requests within a
fraction of a second in order to provide a positive user experience. It is
equally important that the RealNames platform scale in size to handle millions
of Internet Keywords and that it handle an unlimited number of routers and
navigation requests without sacrificing speed or stability. Heavy stress placed
on the RealNames platform by increased navigation requests, a greater number of
Internet Keywords or additional routers could cause our systems to operate at
unacceptably low speeds or to fail. If our systems or any other systems in the
navigation process, such as those of our distribution partners, slow down
significantly or fail even for a short time, users could suffer delays which may
result in unsatisfactory user experiences, and may ultimately lead to the loss
of customers or reduced adoption of Internet Keywords by users. We have
experienced such system failures and degradation in the past, and we could
experience future system failures and degradations. The RealNames platform will
not operate appropriately if any of the following events occur:
- a subsystem, component or software failure;
- a power or telecommunications failure; or
- an earthquake, fire or other natural disaster.
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If any of the above events occur, we may not be able to prevent an extended
systems failure since we currently lack a complete disaster recovery system. Any
such system downtime or failure could discourage user adoption, result in loss
of customers or revenues and damage our distribution relationships, any of which
would harm our business.
GOVERNMENT REGULATION OF THE ASSIGNMENT AND USE OF INTERNET KEYWORDS COULD
SEVERELY HARM OUR BUSINESS.
It is possible that the U.S. government or other governments may attempt to
regulate the process of assigning and subscribing to Internet Keywords,
especially if we are perceived as inadequately managing the process. If
governments become involved in this process, we could encounter many
difficulties. For example, governments may adopt regulations and policies that
could:
- eliminate or severely restrict our role in the assignment of Internet
Keywords;
- create a public perception that we lack authority to continue in our role
in assigning Internet Keywords;
- create additional steps and procedures in our current and future
administration of the process;
- create general instability in the administration of Internet Keywords;
- adversely affect the pricing for Internet Keywords; or
- facilitate additional competition.
Regulations having any of these effects could severely harm our business.
IF WE FAIL TO ESTABLISH OURSELVES AS A NEUTRAL THIRD PARTY WITH REGARD TO
OUR DISTRIBUTION AND RESELLER PARTNERS, AS WELL AS OUR CUSTOMERS AND USERS, IT
IS LIKELY THAT WE WILL LOSE DISTRIBUTION AND RESELLER PARTNERS, USERS AND
CUSTOMERS.
Two important components of our business strategy are to expand our reach on
the Internet by establishing additional distribution and reseller relationships
and to grow our customer base. In order to effectively execute these elements of
our strategy, it is important that our distribution and reseller partners
perceive us as a neutral third party in setting the terms of our contracts. In
particular, distribution and reseller partners who offer similar reach may want
substantially similar terms from us, possibly on a retroactive basis as we sign
up additional partners. As a result, we may need to extend such terms in order
to establish as many strategic partnerships as possible, which could harm our
business or adversely impact our operating results to the extent such terms are
not favorable to us.
In addition, it is important that our customers, users and distribution
partners perceive us as a neutral third party in assigning Internet Keywords and
in maintaining the integrity of our Internet Keyword data. This process will be
particularly difficult for us if and when we assign so-called "generic" Internet
Keywords such as "cars" to a particular party. Even more than common brand
names, generic Internet Keywords could be appropriately assigned to multiple
parties, leading to potential conflict with customers, partners and potential
customers once assigned to only one party. If we are unable to establish
ourselves as a neutral third party, it is possible that we would lose users,
customers and distribution partners and lose the support of the Internet
community more generally.
RAPID GROWTH IN OUR OPERATIONS IS PLACING A SIGNIFICANT STRAIN ON OUR
RESOURCES, AND FAILURE TO MANAGE THIS GROWTH COULD DISRUPT OUR OPERATIONS.
We are currently experiencing a period of rapid expansion in our personnel,
infrastructure, facilities, relationships with third parties, assignment of
Internet Keywords, and the use of the RealNames Service. For example, the number
of our employees grew from 57 at December 31, 1998 to 137 at August 31, 1999. To
accommodate this growth, we recently moved a significant portion of our
operations to a new building,
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and we expect that we will need substantial additional space by April 2000. We
also intend to replace some manual tasks and procedures with a new accounting
system, better database reporting tools and improved planning, workflow and
reporting systems for our Internet Keyword assignment group and customer service
operation. We expect further significant expansion will be required to address
potential growth in the breadth of our service offerings, and we also plan to
expand the geographic scope of our customer base and operations. We also expect
to have to significantly expand our Internet Keyword assignment group and
customer service operation if we are successful in encouraging trial and
adoption of Internet Keywords. This expansion has placed, and will continue to
place, a significant strain on our managerial, financial and operational
resources. To effectively manage this expansion, we must continue to implement
and improve our operational, financial and management information systems. If we
do not manage our growth effectively, particularly the assignment of a much
greater number of Internet Keywords, our operations are likely to be disrupted,
which could result in lost revenue or increased operating expenses.
IF WE ARE UNABLE TO ENHANCE THE FUNCTIONALITY OF OUR CURRENT SERVICES OR
OFFER NEW SERVICES THROUGH THE REALNAMES PLATFORM, OUR BUSINESS MAY BE HARMED.
Our business model contemplates that we will make our service sufficiently
attractive to generate significant new and repeat business. As a result, we must
enhance the RealNames platform to ensure scalability, improve data quality and
add functionality. We are likely to incur substantial development or acquisition
costs as we attempt to achieve these goals. If we are unable to do so, our
customers may revert to traditional methods of reaching their customers on the
Internet or switch to other alternatives, including the service offerings of our
competitors.
As we strive to enhance the scalability, data quality and functionality of
the RealNames platform, we may experience the following difficulties:
- failing to hire and retain a sufficient number of skilled personnel to
allow us to respond to technological changes or evolving industry
standards in a timely or cost-effective manner;
- failing to improve the breadth of our Internet Keyword data, which would
result in words and phrases that users expect to be Internet Keywords not
being Internet Keywords;
- failing to improve the quality of our Internet Keyword data, which would
result in existing Internet Keywords directing users to web pages that do
not meet user expectations;
- encountering services or technologies developed by others that make our
services noncompetitive; and
- failing to identify market trends quickly enough to develop and market
services that adequately meet the changing preferences of our customers or
users.
NEW RELEASES OF THE REALNAMES SERVICE MAY CONTAIN ERRORS OR DEFECTS.
Our anticipated new releases of the RealNames Service will be complex and,
accordingly, may contain undetected errors or failures when new versions are
released. This may result in loss of, or delay in, market acceptance of the
RealNames Service. We have in the past discovered errors in new releases of the
RealNames Service after its introduction. We may in the future discover errors
in new releases of the RealNames Service after deploying it, which could result
in lost revenues and customer and partner frustration.
WE MAY NOT BE ABLE TO EFFECTIVELY COMPETE AGAINST OUR CURRENT AND POTENTIAL
COMPETITORS.
The market for the RealNames Service is new and rapidly evolving, and we
expect competition in and around this market to intensify in the future. While
we do not believe any of our competitors currently offer the functionality
offered by the RealNames Service, we face competition from several companies
that
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provide services and functionality similar to ours and that could in the future
seek to compete more directly with us.
We are aware of at least two other companies that offer, or have in the past
offered, services that enable the addressing of web pages other than by URLs. In
addition, America Online, or AOL, has developed its own set of AOL Keywords for
navigation within its own proprietary service. If we are unable to structure an
agreement with AOL to enable Internet Keywords within AOL's proprietary service,
the number of our potential users, partners and customers could be decreased. In
addition, AOL could develop a service or technology to extend AOL Keywords, or
otherwise offer a competing navigation service, outside its proprietary service
and on the broader Internet. In addition, if Internet Keywords become
increasingly prominent, other companies may enter our market with the specific
purpose of taking market share from us or limiting our growth. In particular,
providers of browsers, client applications, search engines, directories, portals
or content sites may implement their own keyword systems or technology, as AOL
has done, to serve their own users and customers directly. Also, our existing
distribution relationships, including our relationship with Microsoft, do not
preclude our distribution partners from developing and implementing their own
keyword or similar navigation systems or technology in the future.
Most of our potential competitors, including AOL, have longer operating
histories, greater name recognition, larger customer bases and significantly
greater financial, technical and marketing resources than we do. These potential
competitors would be able to devote greater resources to the development and
marketing of their service or technology if they do decide to compete with us.
Our competitors may develop services that are equal or superior to ours or that
achieve greater market acceptance. Our competitors may engage in more extensive
research and development, adopt more aggressive pricing policies and make more
attractive offers to existing and potential employees, distribution partners,
users and customers. Our competitors may also be able to bundle their keyword
services or technology with other services or technology that we do not offer,
thus making their package more attractive to customers and users. It is also
possible that some competitors would offer such a service or technology at no
charge to customers. In addition, competitors may establish cooperative
relationships among themselves or with third parties to better address the needs
of users and customers. As a result, it is possible that new competitors may
emerge and rapidly acquire significant market share.
In addition, to the extent Internet users continue to rely on search
engines, directories and hyperlinks without Internet Keyword functionality to
navigate the Internet, we compete against this navigation alternative. We
believe competition in this area is most pronounced with respect to the newer,
more direct methods of search such as Google and DirectHit.
Competition could result in loss of market share, lower pricing for our
service or increased operating expenses. In particular, if two or more keyword
systems were to become widely available and heavily promoted, users might become
confused and customers may be required to promote only one keyword. If our
Internet Keywords do not become the de facto standard, our business growth could
be limited.
OUR BUSINESS OPERATIONS COULD BE SIGNIFICANTLY DISRUPTED IF WE LOSE MEMBERS
OF OUR MANAGEMENT TEAM.
Our future performance will be substantially dependent on the continued
services of our senior management team and our ability to retain and motivate
them. As a result, the loss of the services of any of our officers or senior
managers could harm our ability to establish or maintain strategic
relationships, prevent us from expanding the RealNames Service and delay the
execution of our business plan. In particular, our success depends on the
continued services of Keith Teare, our founder, President and Chief Executive
Officer. Since our inception, Mr. Teare has been primarily responsible for
establishing our business plan and guiding its execution. In addition, Mr. Teare
has become a recognized figure in the area of Internet navigation. Because we
are in the early stages of executing our business plan, the loss of
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Mr. Teare's services would significantly hinder our chances of success.
Moreover, we do not have long-term employment agreements with any members of our
management team.
OUR BUSINESS OPERATIONS COULD BE SIGNIFICANTLY DISRUPTED IF WE FAIL TO
INTEGRATE THE MEMBERS OF OUR MANAGEMENT TEAM, MANY OF WHOM WE HAVE RECENTLY
HIRED.
We have recently hired a significant number of our executive officers to
manage the potential growth of our business. For example:
- our Chief Financial and Administrative Officer joined us full time in
August 1999;
- our Vice President of Sales joined us in June 1999; and
- our Vice President of Engineering and Operations joined us in March 1999.
These individuals did not replace existing executive officers; rather, they
were added to fill newly-created positions in response to our expanding
operations. These individuals and the other members of our executive management
have not previously worked together and are in the process of integrating as a
management team. If they are unable to work together effectively or to
successfully manage any growth we experience, our business could be
significantly disrupted.
IF WE ARE UNABLE TO HIRE AND RETAIN A SUFFICIENT NUMBER OF QUALIFIED
PERSONNEL, WE MAY NOT BE ABLE TO GROW AS WE EXPECT AND OUR BUSINESS COULD BE
HARMED.
To be successful in the future, we must be able to attract, hire, integrate
and retain highly skilled technical, sales and marketing, and other personnel.
Skilled personnel are in short supply, and this shortage is likely to continue
for the near future. As a result, competition for qualified personnel is
intense, particularly in the San Francisco Bay Area, and the industry turnover
rate is high. In addition, we believe that prospective employees that we target
after this offering may perceive that the stock option component of our
compensation package is not as valuable as it was prior to this offering, making
us less competitive in the market for new employees. We may also have to spend
significant amounts recruiting, hiring and retaining skilled personnel, which
could adversely impact our operating results. We have recently experienced
difficulty in hiring the personnel necessary to support the growth of our
business, and we expect to continue to experience these difficulties. If we do
not successfully manage our personnel requirements, we will not be able to
sustain or grow our business as expected and our business could be harmed.
IF WE DO NOT EXPAND INTO INTERNATIONAL MARKETS QUICKLY, WE MAY FACE
SIGNIFICANT COMPETITION ABROAD.
International expansion is an important part of our strategy to achieve
ubiquity of Internet Keywords on a truly global Internet. We will need to invest
rapidly and heavily to expand our worldwide presence by establishing local
operations in key international markets and developing distribution and reseller
relationships with providers of Internet browser, search, directory, portal and
content services in those markets. We will also need to devote substantial time
and resources to the development of localized foreign language databases. Any
delay in executing our strategy in these markets could allow potential local
competitors to copy our strategy and gain a foothold that would splinter the
market and potentially confuse users. A local competitor would likely have many
advantages over us, such as familiarity with the market and access to resources,
that could make it difficult or impossible for us to compete effectively.
AS WE ATTEMPT TO EXPAND OUR BUSINESS INTERNATIONALLY, WE WILL BECOME
INCREASINGLY SUSCEPTIBLE TO NUMEROUS INTERNATIONAL BUSINESS RISKS AND CHALLENGES
THAT COULD AFFECT OUR PROFITABILITY.
We believe that the global nature of the Internet requires any Internet
navigation system to function across all geographical boundaries. As a result,
we will be required to expand our operations, including our sales and marketing
efforts, into international markets. The costs of establishing and maintaining
local
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operations and relationships in key international markets will exceed the
revenues from those operations for the foreseeable future, and our international
operations may never be profitable. International operations are subject to
inherent risks and challenges that could affect our profitability, including:
- the need to develop new reseller relationships and distribution
partnerships;
- unexpected changes in international regulatory requirements and tariffs;
- difficulties in staffing and managing foreign operations;
- longer payment cycles;
- the lack of widespread use of credit cards in many countries;
- greater difficulty in accounts receivable collection;
- potential adverse tax consequences;
- price controls or other restrictions on foreign currency; and
- difficulties in obtaining export and import licenses.
To the extent we generate significant international revenues in the future,
any negative effects on our international business could harm our business. In
particular, gains and losses on the conversion of foreign payments into U.S.
dollars may contribute to fluctuations in our results of operations, and
fluctuating exchange rates could cause reduced revenues or gross margins from
non-dollar-denominated international revenues.
THIRD PARTIES HAVE CLAIMED, AND ARE LIKELY TO CLAIM IN THE FUTURE, THAT OUR
INTERNET KEYWORDS INFRINGE THEIR INTELLECTUAL PROPERTY RIGHTS.
From time to time in the ordinary course of business we have been, and we
expect to continue to be, subject to claims of alleged infringement of the
patents, trademarks and other intellectual property rights of third parties,
particularly in connection with the assignment of Internet Keywords. These
claims, and any resultant litigation, could subject us to significant liability
for damages or otherwise harm our business by being costly to defend or settle
and diverting resources and management's time and attention from the business.
For example, one company has brought a patent infringement claim against us.
Although we won a motion for summary judgment in this case, that judgment is
being appealed. Please see "Business--Legal Proceedings" for additional
information concerning this claim. If we lose the appeal, we could be prevented
from offering the RealNames Service. In addition, even if we prevail in this or
other cases, litigation could be time-consuming and expensive to defend, and
could result in the diversion of our time, attention and resources. Any claims
from third parties may also result in limitations on our ability to use the
intellectual property subject to these claims unless we are able to enter into
agreements with the third parties making these claims.
INFRINGEMENT OF OUR INTELLECTUAL PROPERTY RIGHTS COULD HARM OUR BUSINESS.
Third parties may infringe or misappropriate our proprietary rights, which
could harm our business. We have applied for a patent on "Navigating Network
Resources Based on Metadata" with the United States Patent and Trademark Office.
We have also applied for registered service mark status for, among others,
"RealNames" and "RealNames Service" in the United States. We have registered
"Real Name Service" as a servicemark with the European Union for international
protection. Despite these efforts, we may not be able to defend our proprietary
rights since the validity, enforceability and scope of protection of proprietary
rights in Internet-related industries is uncertain and still evolving. Because
we are devoting significant resources to building our brands, primarily
"RealNames," through media advertising campaigns, if we are unable to register
the trade and servicemarks for which we have applied, or if we are unable to
defend our intellectual property rights, our business may be harmed.
18
<PAGE>
A SIGNIFICANT AMOUNT OF OUR TIME AND ATTENTION MAY BE DIVERTED BY DISPUTES
AMONG THIRD PARTIES OVER THE ASSIGNMENT OF INTERNET KEYWORDS.
We have at times made decisions regarding the assignment of Internet
Keywords that have subsequently been challenged by others. These challenges
often involve disputes over trademarks and trade names, or between competitors.
We expect that these third-party challenges will increase in frequency if our
service becomes more widely adopted. We also believe the likelihood of disputes
is higher with respect to the assignment of generic terms such as "cars." These
disputes are sometimes difficult to resolve and may require substantial amounts
of management time and attention to address. This diversion may lead to reduced
efficiency in other aspects of our operations and increased operating expenses,
and may be exacerbated if we subsequently determine it is necessary to reassign
any Internet Keyword to another business.
FAILURE OF THE REALNAMES SERVICE OR THE PRODUCTS OR COMPUTER SYSTEMS OF OUR
CUSTOMERS OR PARTNERS TO RECOGNIZE THE YEAR 2000 COULD DISRUPT THE OPERATION OF
OUR BUSINESS AND TECHNICAL SYSTEMS
Many currently installed computer systems and software products are not
capable of distinguishing 21st century dates from 20th century dates. As a
result, beginning on January 1, 2000, computer systems and software used by many
companies and organizations in a wide variety of industries, including
technology, transportation, utilities, finance and telecommunications, will
produce erroneous results or fail unless they have been modified or upgraded to
process date information correctly. Our customers and distribution partners, as
well as users of the RealNames Service, may be among those companies,
organizations and persons adversely impacted by erroneous results or failures in
their systems. In addition, we face the possibility that our RealNames Service
will fail due to processing errors caused by inaccurate calculations with
respect to the Year 2000.
Year 2000 compliance efforts may involve significant time and expense, and
uncorrected problems could harm our business. Moreover, we may face claims based
on Year 2000 issues arising from the integration of multiple products within an
overall system. We may also experience reduced revenues and slower
implementation of our service as potential customers or partners focus on their
own Year 2000 compliance efforts. For a further discussion of Year 2000 issues,
please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Readiness Disclosure."
WE MAY INCUR NET LOSSES OR INCREASED NET LOSSES IF WE ARE REQUIRED TO RECORD
A SIGNIFICANT ACCOUNTING EXPENSE UPON THE ISSUANCE OR VESTING OF WARRANTS.
Under the terms of a December 1998 agreement with Network Solutions, we
agreed to issue warrants to purchase up to an aggregate of 4,196,726 shares of
our common stock if Network Solutions satisfies commercial milestones. As of
August 31, 1999, we had issued a warrant to purchase up to 1,271,735 shares of
our common stock to Network Solutions for satisfying some of these milestones.
This warrant was exercised in September 1999. In connection with the issuance of
this warrant, approximately $2.7 million was recorded as a charge to operations
during 1999. In the event additional milestones are met, we will be required to
record a significant non-cash accounting expense based upon the value of the
warrants at the time they are issued.
Under the terms of similar agreements entered into in January 1999 with
Inktomi and May 1999 with Infoseek, we issued performance-based warrants. We
issued Inktomi a warrant to purchase up to 2,119,560 shares of our common stock,
and we issued two warrants to Infoseek to purchase up to an aggregate of 847,884
shares of our common stock, of which warrants to purchase 423,942 shares of our
common stock have expired. These warrants vest and become exercisable if either
Inktomi or Infoseek satisfies their respective commercial milestones. In the
event these milestones are met, we will be required to record a significant
non-cash accounting expense based upon the value of the warrants in the period
in which the warrants vest and become exercisable. As of August 31, 1999, no
shares had vested under either the
19
<PAGE>
Inktomi warrant or the Infoseek warrant, although we expect that the Infoseek
warrant will begin to vest in December 1999. If we are required to record
non-cash accounting expenses related to any of the above warrants, we would
incur increased net losses for a given period, and this could seriously harm our
operating results and stock price. For more information about these warrants,
please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Description of Capital Stock--Warrants."
RISKS RELATED TO THE INTERNET INDUSTRY
DEMAND FOR THE REALNAMES SERVICE WILL NOT INCREASE IF THE INTERNET DOES NOT
CONTINUE TO GROW AND IMPROVE.
Acceptance of the RealNames Service depends substantially upon the
widespread adoption of the Internet for commerce, communications and access to
content and applications. As is typical in the case of an emerging industry
characterized by rapidly changing technology and evolving industry standards,
demand for and acceptance of recently introduced Internet services are subject
to a high level of uncertainty. In addition, critical issues concerning the
commercial use of the Internet remain unresolved and may affect the growth of
Internet use. The adoption of the Internet for commerce, communications and
access to content and applications, particularly by those companies that have
historically relied upon alternative means of commerce, communications and
access to content and applications, generally requires understanding and
acceptance of a new way of conducting business and exchanging information.
Moreover, widespread application of the Internet outside of the United States
will require reductions in the cost of Internet access to make it affordable to
the average consumer. To the extent that the Internet continues to experience an
increase in users, an increase in frequency of use or an increase in the amount
of data transmitted by users, we cannot guarantee that the Internet
infrastructure will be able to support the demands placed upon it. In addition,
the Internet could lose its viability as a commercial medium due to delays in
development or adoption of new standards or protocols required to handle
increased levels of Internet activity, or due to increased government
regulation. Changes in, or insufficient availability of, telecommunications or
similar services to support the Internet could also result in slower response
times and could adversely impact use of the Internet generally. If use of the
Internet does not continue to grow or grows more slowly than expected, or if the
Internet infrastructure, standards, protocols or complementary products,
services or facilities do not effectively support any growth that may occur,
demand for the RealNames Service will not grow as anticipated and may decline
significantly.
INCREASED GOVERNMENT REGULATION OF THE INTERNET AND LEGAL UNCERTAINTIES
COULD HARM OUR BUSINESS.
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could decrease the demand for the RealNames
Service, 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
liability for information retrieved from or transmitted over the Internet,
online content regulation, user privacy, taxation and the quality of products
and services. In addition, the growth and development of e-commerce may prompt
calls for more stringent consumer protection laws that may impose additional
burdens on e-commerce companies as well as companies like us that facilitate
e-commerce services.
We file tax returns in such states as required by law based on principles
applicable to traditional businesses. However, one or more states may seek to
impose additional income tax obligations or sales tax collection obligations on
out-of-state companies, such as ours, which facilitate e-commerce. A number of
proposals have been made at the state and local levels that could impose such
taxes on the sale of products and services through the Internet or the income
derived from such sales. These proposals, if adopted, could substantially impair
the growth of e-commerce and reduce or eliminate our opportunity to become
profitable.
20
<PAGE>
Legislation limiting the ability of the states to impose taxes on
Internet-based transactions has been enacted by the United States Congress.
However, this legislation, known as the Internet Tax Freedom Act, imposes only a
three-year moratorium, which commenced October 1, 1998 and ends on October 21,
2001, on state and local taxes on e-commerce, where such taxes are
discriminatory, and Internet access, unless such taxes were generally imposed
and actually enforced prior to October 1, 1998. It is possible that the tax
moratorium could fail to be renewed prior to October 21, 2001. Failure to renew
this legislation would allow various states to impose taxes on Internet-based
commerce. The imposition of such taxes could reduce or eliminate our ability to
become profitable.
In addition, we are not certain how our business may be affected by the
application of existing laws governing issues such as property ownership,
trademarks, trade names, copyrights, encryption and other intellectual property
issues, taxation, libel, personal privacy, obscenity, export or import matters
and other issues. The vast majority of such laws were adopted prior to the
advent of the Internet. As a result, they do not contemplate or address the
unique issues of the Internet and related technologies. Changes in laws intended
to address such issues could create uncertainty in the Internet market. Such
uncertainty could reduce demand for the RealNames Service or increase the cost
of doing business.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES
FOR INVESTORS PURCHASING SHARES IN THIS OFFERING.
Prior to this offering, you could not buy or sell our common stock publicly.
An active public market for our common stock may not develop or be sustained
after this offering. We will negotiate and determine the initial public offering
price with the representatives of the underwriters. The market price of our
common stock after this offering will likely vary from the initial public
offering price. You may be unable to sell your shares of our common stock at or
above the offering price. The market price of the common stock may fluctuate
significantly in response to the following factors, some of which are beyond our
control:
- variations in our quarterly operating results;
- changes in securities analysts' estimates of our financial performance or
in their buy/sell recommendations;
- changes in market valuations of similar companies;
- announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
- loss of a major distribution partner or customer or failure to complete
significant agreements with Keyword Providers;
- additions or departures of key personnel; and
- fluctuations in our stock market price and volume, which are particularly
common among highly volatile securities of software and Internet-based
companies.
WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR EXPECTED
STOCK PRICE VOLATILITY.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of their
securities. This risk is especially acute for us because technology companies
have experienced greater than average stock price volatility in recent years
and, as a result, have been subject to, on average, a greater number of
securities class action claims than companies in other industries. Due to the
potential volatility of our stock price, we may in the future be the target of
similar litigation. Securities litigation could result in substantial costs and
divert management's attention and resources.
21
<PAGE>
SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK COULD CAUSE OUR STOCK PRICE TO
FALL.
Our current stockholders hold a substantial number of shares, which they
will be able to sell in the public market in the near future. Sales of a
substantial number of shares of our common stock after this offering could cause
our stock price to fall. In addition, the sale of these shares could impair our
ability to raise capital through the sale of additional stock. You should read
"Shares Eligible for Future Sale" for a full discussion of shares that may be
sold in the public market in the future.
OUR CHARTER DOCUMENTS AND DELAWARE LAW WILL MAKE IT MORE DIFFICULT TO
ACQUIRE US AND MAY DISCOURAGE TAKE-OVER ATTEMPTS AND THUS DEPRESS THE MARKET
PRICE OF OUR STOCK.
Provisions of our certificate of incorporation and bylaws could make it more
difficult for a third party to acquire us, even if doing so would be beneficial
to our stockholders. For example, we have implemented the following provisions:
- a staggered board of directors;
- stockholder meetings may be called only by our board of directors, the
chairman of the board or the president;
- advance notice is required prior to stockholder proposals; and
- stockholders may not act by written consent.
Further, we have authorized preferred stock that is undesignated, making it
possible for our board of directors to issue preferred stock with voting or
other rights or preferences that could impede the success of any attempt to
change control of RealNames.
Provisions of Delaware law also could make it more difficult for a third
party to acquire us. Specifically, Section 203 of the Delaware General
Corporation Law may have an anti-takeover effect with respect to transactions
not approved in advance by the board of directors, including discouraging
attempts that might result in a premium over the market price for the shares of
common stock held by our stockholders.
CONTROL BY EXISTING STOCKHOLDERS MAY LIMIT YOUR ABILITY TO INFLUENCE THE
OUTCOME OF DIRECTOR ELECTIONS AND OTHER MATTERS REQUIRING STOCKHOLDER APPROVAL.
Upon completion of this offering, our executive officers, directors and
principal stockholders and their affiliates will own shares or
approximately % of the outstanding shares of common stock ( % if the
underwriters' over-allotment option is exercised in full), assuming an initial
public offering price of $ per share. These stockholders, if acting together,
would be able to control all matters requiring approval by our stockholders,
including the election of directors and the approval of mergers or other
business combination transactions. This concentration of ownership could have
the effect of delaying or preventing a change in our control or otherwise
discouraging a potential acquirer from attempting to obtain control of us. These
results could in turn have a negative effect on the market price of our common
stock or prevent our stockholders from realizing a premium over the market
prices for their shares of common stock. For information about the ownership of
common stock by our executive officers, directors and principal stockholders
please see "Principal Stockholders."
22
<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the shares of
common stock we are offering will be approximately $ million at an
assumed initial public offering price of $ per share after deducting
estimated underwriting discounts and commissions and estimated offering
expenses. If the underwriters fully exercise their over-allotment option, we
estimate that the net proceeds will be approximately $ million. Our primary
purposes of this offering are to obtain additional equity capital, create a
public market for our common stock, facilitate our future access to public
equity markets, provide liquidity to our existing stockholders and increase our
visibility in the marketplace.
We expect to use the net proceeds for general corporate purposes, including
working capital and capital expenditures. Specifically, we expect to use the
proceeds of this offering to satisfy our revenue share, marketing and facilities
commitments, to recruit and hire personnel in all operating areas, to expand
internationally, to recruit additional distribution partners, to establish
additional data centers and to aggressively market the RealNames Service. Please
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a description of our operating expenses and plans to increase
operating expenses as well as a description of our material commitments. The
amounts we actually expend for such general corporate purposes may vary
significantly and will depend on a number of factors, including the amount of
our future revenues and the other factors described under "Risk Factors."
Accordingly, we will have broad discretion in the allocation of the net proceeds
of this offering. A portion of the net proceeds may also be used to acquire or
invest in complementary businesses, technologies, product lines or products.
However, we have no current commitments with respect to any such acquisitions or
investments. Pending such uses, the net proceeds of this offering will be
invested in short term, interest-bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
currently intend to retain our future earnings to finance the growth of our
operations and development of our technology; therefore, we do not anticipate
declaring or paying cash dividends on our common stock for the foreseeable
future. Any future determination to declare or pay dividends will be at the
discretion of our board of directors and will be dependent upon our financial
condition, results of operations, capital requirements and such other factors as
our board of directors deems relevant.
PURCHASE RIGHTS
Under pre-existing contractual rights, several holders of our preferred
stock have rights to purchase up to an aggregate of shares of the
common stock to be sold in this offering at the initial public offering price.
However, the number of shares that may be purchased under this right may be
limited at the discretion of the underwriters. As a result, the number of shares
of common stock available to the general public will be reduced to the extent
such stockholders are able to purchase shares under these rights. Please see
"Underwriters."
In addition, under a pre-existing contractual right, a stockholder has the
right to invest $5 million in a private placement of shares of our common stock
at a price per share equal to 96.5% of the initial public offering price of this
offering. If the stockholder exercises this right, the private placement will
occur immediately following, and contingent upon, the closing of this offering.
The stockholder will have the right to purchase shares of our common
stock at $ per share, assuming an initial public offering price of $
per share.
23
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
- on an actual basis;
- on a pro forma basis, giving effect to our sale of 15,677,778 shares of
Series C convertible preferred stock in August 1999 and the conversion of
all outstanding shares of preferred stock into shares of common stock upon
the closing of this offering; and
- on a pro forma as adjusted basis, giving effect to the sale of
shares of common stock in this offering, at an assumed initial public
offering price of $ per share after deducting estimated underwriting
discounts and commissions and estimated offering expenses.
This information should be read in conjunction with our financial statements
and the related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Obligations under capital lease, net of current portion..................... $ 271 $ 271 $
---------- ----------- -----------
Stockholders' equity:
Convertible preferred stock, par value $.001 per share; 21,854,179 shares
authorized, 21,854,179 shares issued and outstanding, actual; no shares
authorized, issued or outstanding, pro forma and pro forma as
adjusted................................................................ 22 --
Preferred stock, par value $.001 per share; no shares authorized, issued
or outstanding, actual or pro forma; 10,000,000 shares authorized, no
shares issued and outstanding, pro forma as adjusted.................... -- --
Common stock, par value $.001 per share; 50,000,000 shares authorized,
19,473,214 shares issued and outstanding, actual; 100,000,000 shares
authorized, 57,005,171 shares issued and outstanding, pro forma;
200,000,000 shares authorized, shares issued and outstanding,
pro forma as adjusted................................................... 19 57
Additional paid-in capital.................................................. 41,607 112,081
Notes receivable from stockholders.......................................... (1,345) (2,245)
Unearned stock-based compensation........................................... (16,892) (16,892)
Accumulated deficit......................................................... (18,099) (18,099)
---------- ----------- -----------
Total stockholders' equity.............................................. 5,312 74,902
---------- ----------- -----------
Total capitalization.................................................. $ 5,583 $ 75,173 $
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
This table excludes the following shares:
- 1,351,833 shares of common stock issuable upon exercise of outstanding
options on June 30, 1999 at a weighted average exercise price of $.66 per
share;
- 595,453 shares of common stock reserved for future issuances under our
stock plans on June 30, 1999;
- 8,500,000 shares of common stock reserved for future issuance under our
stock plans that were approved by our board of directors after June 30,
1999;
24
<PAGE>
- 1,271,735 shares of common stock issuable upon exercise of fully vested
warrants on June 30, 1999 at an exercise price of $2.09 per share;
- 2,967,444 shares of common stock issuable upon exercise of unvested
warrants at exercise prices ranging from $2.64 to $3.77 per share;
- 2,924,991 shares of common stock reserved for issuance under our agreement
to issue warrants to purchase common stock on June 30, 1999 at exercise
prices ranging from $2.09 to $6.78 per share; and
- shares we are required to offer to a stockholder under a previous
contractual commitment, concurrently with the completion of this offering,
at a price of $ per share, assuming an initial public offering
price of $ per share.
25
<PAGE>
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was approximately
$74.9 million or $1.31 per share. Pro forma net tangible book value per share is
equal to the amount of our total tangible assets, after giving effect to the net
proceeds of our Series C preferred stock financing in August 1999, less our
total liabilities, divided by the number of outstanding shares of our common
stock assuming the conversion of all outstanding shares of our preferred stock,
including all Series C preferred stock issued in August 1999, into shares of
common stock.
New investors who purchase shares in this offering will be diluted to the
extent of the difference between the initial public offering price per share of
our common stock and the pro forma net tangible book value per share of our
common stock immediately after completion of this offering. After giving effect
to the issuance and sale of shares of common stock in this offering at an
assumed initial public offering price of $ per share after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses, our pro forma net tangible book value at June 30, 1999 would have been
$ or $ per share. This represents an immediate increase in pro forma
net tangible book value of $ per share to existing stockholders and an
immediate dilution in pro forma net tangible book value of $ per share to
new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................... $
Pro forma net tangible book value per share as of June 30, 1999............. $ 1.31
Increase in pro forma net tangible book value per share attributable to new
investors.................................................................
---------
Pro forma net tangible book value per share after this offering...............
---------
Dilution per share to new investors........................................... $
---------
---------
</TABLE>
The following table sets forth, as of June 30, 1999, the differences between
the existing stockholders and new investors who purchase shares of common stock
in this offering with respect to the number of shares of our common stock
purchased from us, total consideration paid and average price paid per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders......................... 57,005,171 % $ 90,426,000% $ 1.59
New investors.................................
------------ ----- ------------- ---------
-------------
Total..................................... 100.0% 100.0%
------------ ----- ------------- ---------
------------ ----- ------------- ---------
</TABLE>
This table excludes the following shares:
- 1,351,833 shares of common stock issuable upon exercise of outstanding
options on June 30, 1999 at a weighted average exercise price of $.66 per
share;
- 595,453 shares of common stock reserved for future issuances under our
stock plans on June 30, 1999;
- 8,500,000 shares of common stock reserved for future issuance under our
stock plans that were approved by our board of directors after June 30,
1999;
- 1,271,735 shares of common stock issuable upon exercise of fully vested
warrants on June 30, 1999 at an exercise price of $2.09 per share;
- 2,967,444 shares of common stock issuable upon exercise of unvested
warrants at exercise prices ranging from $2.64 to $3.77 per share;
26
<PAGE>
- 2,924,991 shares of common stock reserved for issuance under our agreement
to issue warrants to purchase common stock on June 30, 1999 at exercise
prices ranging from $2.09 to $6.78 per share; and
- shares we are required to offer to a stockholder under a previous
contractual commitment, concurrently with the completion of this offering,
at a price of $ per share, assuming an initial public offering
price of $ per share.
To the extent outstanding options or warrants are exercised, there will be
further dilution to new investors.
27
<PAGE>
SELECTED FINANCIAL DATA
In reading the selected financial data set forth below, you should refer to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and related notes included elsewhere in
this prospectus.
The statement of operations data for the period from our inception, November
19, 1996, to December 31, 1997 and the year ended December 31, 1998, and the
balance sheet data at December 31, 1997 and 1998 are derived from our financial
statements, which have been audited by PricewaterhouseCoopers LLP, independent
accountants, and are included elsewhere in this prospectus. The statement of
operations data for the six months ended June 30, 1998 and 1999 and the balance
sheet data at June 30, 1999 are derived from unaudited financial statements
included elsewhere in this prospectus. We have prepared this unaudited
information on the same basis as the audited financial statements and have
included all adjustments, consisting only of normal recurring adjustments, that
we consider necessary for a fair presentation of our financial position and
operating results for such periods. Historical results are not necessarily
indicative of future results, and the results for interim periods are not
necessarily indicative of results to be expected for the entire year.
<TABLE>
<CAPTION>
NOVEMBER 19, 1996
(DATE OF SIX MONTHS ENDED JUNE
INCEPTION) 30,
TO YEAR ENDED ---------------------
DECEMBER 31, 1997 DECEMBER 31, 1998 1998 1999
----------------- ----------------- --------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................ $ -- $ 537 $ -- $ 1,059
Cost of revenues.................................... -- 556 -- 702
------- ------- --------- ----------
Gross profit (loss)................................. -- (19) -- 357
Operating expenses:
Engineering and operations........................ 1,000 1,165 345 1,859
Sales and marketing............................... 81 2,458 667 3,495
General and administrative........................ 103 1,640 314 1,752
Stock-based compensation.......................... -- 691 103 4,465
------- ------- --------- ----------
Total operating expenses........................ 1,184 5,954 1,429 11,571
------- ------- --------- ----------
Loss from operations................................ (1,184) (5,973) (1,429) (11,214)
Interest income, net................................ 8 94 38 170
------- ------- --------- ----------
Net loss............................................ $ (1,176) $ (5,879) $ (1,391) $ (11,044)
------- ------- --------- ----------
------- ------- --------- ----------
Net loss per share, basic and diluted............... $ (.31) $ (.40) $ (.09) $ (.75)
------- ------- --------- ----------
------- ------- --------- ----------
Weighted average shares, basic and diluted.......... 3,768 14,742 14,737 14,820
------- ------- --------- ----------
------- ------- --------- ----------
Pro forma net loss per share, basic and diluted
(unaudited)....................................... $ (.26) $ (.30)
------- ----------
------- ----------
Pro forma weighted average shares, basic and diluted
(unaudited)....................................... 22,348 36,548
------- ----------
------- ----------
</TABLE>
See note 2 of notes to financial statements for a calculation of pro forma
net loss per share.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998 JUNE 30, 1999
--------- --------- -----------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................... $ 182 $ 11,290 $ 4,058
Working capital ............................................................ 66 10,713 1,868
Total assets................................................................ 268 12,883 9,226
Total stockholders' equity.................................................. 149 11,579 5,312
</TABLE>
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO
FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF REALNAMES, WHICH INVOLVE
RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER "RISK FACTORS," "BUSINESS"
AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
RealNames Corporation simplifies navigation on the Internet by connecting
people directly to specified web pages through the use of Internet Keywords.
From our inception on November 19, 1996 to December 31, 1997, we were in the
development stage, and our activities primarily related to raising capital,
recruiting personnel, conducting research and development activities, purchasing
operating assets, developing the RealNames platform and building our identity.
We first made the RealNames Service available through our web site in March 1998
and secured our first distribution partnership, with AltaVista, in May 1998. We
began recognizing revenue in July 1998.
We currently recognize revenue from Internet Keywords and banner
advertising. We have three different pricing models for Internet Keywords:
license fees for Keyword prefixes, amounts paid per visit or per completed
transaction when the user accesses the customer's web page using Internet
Keywords, and fixed-priced annual subscriptions to Internet Keywords. We first
recognized revenue from subscriptions in July 1998, from banner advertising in
August 1998, from per visit fees in January 1999 and from license fees in June
1999. Although revenue from banner advertising has constituted the largest
portion of our revenue to date, we expect banner advertising revenue to be the
least significant portion of our revenue in future periods.
Our international revenues have been immaterial through June 30, 1999. See
note 10 of notes to financial statements for more information on international
revenues.
INTERNET KEYWORD REVENUE FROM LICENSE FEES
One way we generate Internet Keyword revenue is from license fees for
routing prefixes in the RealNames platform. Routing prefixes enable our Keyword
Provider customers to use the RealNames platform to create and maintain their
own separate Internet Keyword systems. We recognize revenue from license fees
over the term of the agreement once we begin to provide service to the Keyword
Provider and collection of the resulting receivable is deemed to be probable.
Some of these licenses may be canceled by the Keyword Provider without cause
prior to the end of their term. Revenue from license fees in any period will
primarily be a function of the number of companies that desire to have their own
Internet Keyword systems and the amount that such customers are willing to pay
to license a prefix over a certain period. Revenue from license fees in any
period will also be a function of the timing of such licenses, whether such
licenses are cancelled or renewed and the effectiveness and growth of our sales
force targeting this market. These factors could cause revenue from license fees
to fluctuate significantly from quarter to quarter.
We only began generating revenue from license fees in June 1999, and our
sales force only has a few months of experience offering these licenses. As a
result, it is difficult to predict the size of this market, market demand,
cancellation rates and renewal rates.
We have historically agreed to spend money advertising with our Keyword
Provider customers, and we expect that we will continue to commit to spend money
advertising with, or on behalf of, our Keyword Provider customers. Our current
co-marketing arrangements require us to spend more than 50% of the expected
total license fees with our Keyword Provider customers. These expenditures are
accounted for as a sales and marketing expense and are recognized ratably as the
advertising services are provided to us over the term of the co-marketing
agreement. Generally our commitment to spend is higher in the initial
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quarters of the term of the agreement and lower in the later quarters of the
term of the agreement. These agreements may require us to spend money
advertising with our current Keyword Provider customers even if they cancel
their license agreements with us. Moreover, all of our Keyword Provider
customers recognize some revenue from banner advertising, and our commitment to
spend money on banner advertising or sponsorships with them will enable them to
recognize some revenue. We may experience difficulty obtaining Keyword Provider
customers, or generate lower license fees, in situations where we do not commit
to spend significant advertising dollars with the Keyword Provider customer.
Due to our extremely limited operating history with these Keyword Provider
agreements, it is difficult to predict market demand for these licenses. We may
find that our current Keyword Provider customers had special circumstances or
particularly compelling reasons for adopting our navigation system. We may not
attract additional Keyword Provider customers that readily recognize the value
of, or see the need for, our navigation system.
INTERNET KEYWORD REVENUE FROM PRICE PER VISIT/PRICE PER TRANSACTION FEES
We also generate Internet Keyword revenue from price per visit, or PPV, fees
from customers who pay us for each visit to one of their web pages through the
use of Internet Keywords. In addition, we generate Internet Keyword revenue from
price per transaction, or PPT, fees from customers who pay us for each eligible
transaction completed by a user delivered to one of their web pages through the
use of Internet Keywords. The majority of our PPV and PPT customers subscribe to
a large number of Internet Keywords that are hosted on the RealNames platform
but do not maintain their own Internet Keyword system. Some Keyword Provider
deals include a PPV or PPT component, in which case revenue from this component
is in addition to the license fees charged such customers. Revenue from PPV fees
is recognized when the visit takes place, and revenue from PPT fees is
recognized when the transaction is completed, provided in each case that there
are no significant obligations remaining and collection of the resulting
receivable is probable.
Revenue from PPV and PPT fees is partly a function of the number of users
who navigate using Internet Keywords, which itself is partly a function of the
number of distribution partners who effectively enable navigation using Internet
Keywords. Revenue from PPV and PPT fees is also a function of the number of
Internet Keywords we can sell and the price per visit or per transaction we
receive for them. Some of our Internet Keywords were purchased by advertising
agencies on behalf of their clients. Many of our PPV contracts limit the amount
that the customer must pay over the life of the contract regardless of the
number of visits. Although these caps have had no significant impact on revenue
from PPV or PPT fees to date, they may have an impact in the future. Finally, as
with revenue from license fees, revenue from PPV and PPT fees will be partly a
function of the size and experience of our sales force, which has only limited
experience with these types of sales.
Revenue from PPT fees to date has been attributable predominately to our
participation in the affiliate programs of e-commerce companies. Affiliate
programs are offered by many e-commerce businesses to incent companies or
individuals to drive traffic to their site. Revenue from PPT fees has been
insignificant to date and may continue to be insignificant.
As with our Keyword Provider customers, we may find that our current PPV and
PPT customers had special circumstances or particularly compelling reasons for
adopting our navigation system. We may not attract additional PPV or PPT
customers that readily recognize the value of, or see the need for, our
navigation system.
INTERNET KEYWORD REVENUE FROM ANNUAL SUBSCRIPTION FEES
Internet Keyword revenue from subscriptions is generally attributable to the
sale of annual subscriptions for Internet Keywords. Subscriptions are currently
priced at $100 per year, per Internet Keyword hosted on our system. In one
Keyword Provider relationship, we also share in the revenue from Internet
Keyword subscriptions sold by that Keyword Provider in its own Internet Keyword
system. We
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offer some companies the ability to buy a block of Internet Keywords from us at
a discount to the $100 price. These companies then offer the Internet Keywords
with their other services. Revenue from subscriptions is recognized ratably over
the term of the subscription.
Although Internet Keyword subscriptions are offered on our own web site,
sales of Internet Keyword subscriptions are predominately made through
resellers. In the first six months of 1999, 54% of our revenue from
subscriptions was attributable to our resellers. Revenue from subscriptions is
primarily a function of market demand, the number of resellers, the amount of
promotion and resources dedicated to the sale of subscriptions by these
resellers, price, the percentage of refunds and renewal rates. Reseller
commissions are accounted for as a sales and marketing expense and have
historically ranged from 25% to 40% in the first year of a subscription and 15%
in subsequent years. However, beginning in the first quarter of 2000, in order
to promote the sale of Internet Keyword subscriptions, we plan to offer our
resellers a 70% commission in the first year of a subscription, and and we plan
to continue to offer 15% in subsequent years.
BANNER ADVERTISING REVENUE
Banner advertising revenue is attributable to amounts paid to us for the
display of banner ads on web pages served by us. We typically serve a web page
of related Internet Keywords when a user on our site, or using an Internet
Keyword-enabled browser, types in words that do not precisely match an Internet
Keyword. We also serve web pages of related Internet Keywords when a user on the
sites of some distribution partners clicks on a RealNames hyperlink that does
not precisely match an Internet Keyword. Banner advertising revenue is
recognized ratably in the period in which the banners are displayed on these web
pages, provided that there are no significant obligations remaining and
collection of the resulting receivable is probable. Banner advertising revenue
is largely a function of the number of such web pages served, the percentage of
such pages on which our advertising agency is able to sell banner ads, the price
charged per banner ad (generally measured in price per 1,000 ads served, or
CPMs) and our revenue sharing arrangements. Most of our web pages are served to
users clicking on a RealNames hyperlink served by one of our distribution
partners. We share revenue from the banner ads presented on these pages with the
distribution partner.
2Can Media, an Internet advertising reseller that sells the banner
advertisements served on our website, accounted for 79% of our revenues for the
year ended December 31, 1998. AltaVista accounted for 21% of our revenues for
the six months ended June 30, 1999. All revenues derived from 2Can Media and
AltaVista during these periods were attributable to revenue share arrangements
for banner advertising. These revenues represented a relatively large part of
our total revenues for these periods as we did not begin recognizing Internet
Keyword revenue from price per visit fees and license fees until January 1999
and June 1999, respectively. We do not expect banner advertising revenue to
increase. In fact, it is our intention to minimize the number of times users get
web pages of related Internet Keywords, since these web pages are served only
when there is not an Internet Keyword that precisely matches the user's
navigation request. If we are successful, we would in turn minimize the number
of pages on which we could display banner advertising.
COST OF REVENUES
Cost of revenues consists of portions of revenue shared with our
distribution partners, depreciation of our system hardware, database management
costs, costs of hosting our routers, billing services costs, a portion of the
costs associated with the assignment of Internet Keywords and a portion of
customer service costs. We expect cost of revenues to increase sequentially each
quarter for the foreseeable future as we increase the size and scalability of
the RealNames platform, assign and service additional Internet Keywords and
expand internationally. Cost of revenues could increase as a percentage of total
revenue in any period due to the relatively fixed nature of router hosting,
Internet Keyword assignment and customer service costs. Moreover, we expect
costs of revenue to fluctuate in future quarters due to fluctuation in the
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mix of our Internet Keyword revenue streams, each of which has a different
revenue sharing component and places different demands on Internet Keyword
assignment and customer service and related costs.
In the future, we expect a more significant portion of our cost of revenues
will consist of amounts shared with distribution partners. We rely heavily on
our distribution partners to make Internet Keywords available to a broad base of
Internet users. In order to encourage this, we currently share approximately
half of our revenue from PPV and PPT fees with our distributors if the
distributor originated the visit or transaction giving rise to a PPV or PPT fee.
In addition, we currently expect to share a significant portion of our revenue
from license fees with our distribution partners. This amount will be shared
with our distribution partners ratably based on the proportion of total Internet
Keyword traffic they originate.
OPERATING EXPENSES
Engineering and operations expenses consist of salaries and related costs
for engineering (including research, design and development), operations and
non-direct customer service employees, depreciation of certain capital equipment
and the allocable portion of overhead expenses. Engineering and operations
expenses are expected to increase sequentially each quarter for the foreseeable
future as we add personnel in all departments to develop additional versions of
the RealNames Service, support expansion of operations, provide additional
non-direct customer support and expand internationally.
Sales and marketing expenses consist of reseller commissions on subscription
sales and salaries and related costs for employees in the sales, marketing,
business development and product management areas, including sales commissions
and bonuses, and the allocable portion of the overhead expenses. Sales and
marketing expenses also consist of expenses associated with consultants,
RealNames advertising, advertising on behalf of our Internet Keyword Provider
customers, promotion, marketing research, marketing programs, web site design,
public relations, trade shows and sales collateral. Sales and marketing expenses
are expected to increase sequentially each quarter for the foreseeable future,
due in large part to amounts we are committed to spend on advertising with our
Keyword Provider customers. Sales and marketing expenses are also expected to
increase for the foreseeable future due to significant promotion of Internet
Keywords by us and to support the promotion of Internet Keywords by our
customers, especially the use of Internet Keywords in traditional media. Sales
and marketing expenses are also expected to increase as we add additional sales
and marketing personnel and expand internationally.
General and administrative expenses consist of salaries and related costs
for employees in the financial, accounting, administrative, legal, human
resources and facilities areas and the allocable portion of overhead expenses,
as well as costs associated with professional services, insurance and bad debt.
General and administrative expenses are expected to increase sequentially each
quarter for the foreseeable future as we incur costs associated with being a
public company, support growth in other departments and expand internationally.
STOCK-BASED COMPENSATION EXPENSE
We have recorded stock-based compensation expense of $691,000 for the year
ended December 31, 1998 and $1.8 million for the six months ended June 30, 1999
as a result of stock options granted during those periods to employees and
non-employees. In addition, we have recorded additional stock-based compensation
for options granted in July and August of 1999. Unearned stock-based
compensation expense for employee options is being amortized over the vesting
period of the options, generally four years, on a graded vesting method, which
results in a larger share of the compensation expense being amortized earlier in
the expected vesting period of the option.
The total unamortized unearned stock-based compensation recorded for all
option grants through September 30, 1999 of $13.2 million will be amortized as
follows: $5.0 million for the remainder of the year ending December 31, 1999;
$4.9 million for the year ending December 31, 2000; $2.4 million for the year
ending December 31, 2001; $896,000 for the year ending December 31, 2002 and
thereafter.
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We have issued performance-based warrants or agreed to issue warrants based
on performance to purchase up to 7,164,170 shares of our common stock to some of
our distribution and reseller partners, of which warrants to purchase 473,442
shares have expired without being exercised. These warrants vest, and in some
cases are issued, upon the achievement of commercial milestones. At June 30,
1999, 1,271,735 shares of common stock underlying these performance-based
warrants had vested, resulting in a stock-based compensation expense of $2.7
million for the three months then ended. No other warrants to the partners had
vested, nor were we committed to issue additional warrants, at June 30, 1999, as
none of the required milestones had been achieved as of that date. However, to
the extent that additional milestones are achieved and the related warrants vest
or are issued, this will result in additional stock-based compensation based on
the fair value of the common stock underlying the warrants at that time. We
expect that some of the shares underlying these warrants will commence vesting
in December 1999.
This stock-based compensation charge is subject to substantial increase or
decrease in future quarters based upon future changes in the trading price of
our common stock. See notes 5 and 10 of notes to financial statements for a
further discussion of the performance-based warrants and their accounting
treatment.
EXPECTED LOSSES
Because we were incorporated in November 1996 and only began offering the
RealNames Service in March 1998 and selling Internet Keyword subscriptions in
June 1998, we have an extremely limited operating history on which investors can
evaluate our business and prospects. We have not demonstrated our revenue and
income potential, and our business model is unproven, especially with respect to
license fees and PPV and PPT fees, which we expect will constitute the majority
of our Internet Keyword revenues in the near future. We have very limited
insight into trends and uncertainties which may emerge and affect our business.
Internet Keywords may not achieve or sustain market acceptance, or the market
for the RealNames Service may develop more slowly than expected or become
saturated with competitors, or we may not be able to sustain or increase our
pricing levels.
We have never been profitable. We incurred net losses of approximately $1.2
million for the period of inception, November 19, 1996, to December 31, 1997,
$5.9 million for 1998 and $11.0 million for the six months ended June 30, 1999.
As of June 30, 1999, we had an accumulated deficit of $18.1 million. We expect
to have increasing net losses and negative cash flows for the foreseeable
future. Specifically, we expect operating and net losses in 1999 to be much
greater than our operating and net losses in 1998, and we expect operating and
net losses in 2000 to be several times larger than operating and net losses in
1999. We expect significant operating and net losses in 2001 as well. The actual
size of these operating and net losses will depend, in part, on the rate of
growth of our revenues and on the level of our operating expenses. We intend to
substantially increase our operating expenses as stated above. With these
increased expenses, we will need to generate significant additional revenues to
achieve profitability; however, the sources from which we expect to derive our
most significant revenue in the future are new and unproven and, accordingly,
are subject to an unusually high risk. Consequently, it is possible that we will
never achieve profitability, and even if we do achieve profitability, that we
may not sustain or increase profitability on a quarterly or annual basis in the
future. If we do not achieve or sustain profitability in the future, then we may
be unable to continue our operations.
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RESULTS OF OPERATIONS
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited statement of operations data for
each of the last six quarters ended June 30, 1999. In the opinion of management,
this information has been prepared substantially on the same basis as the
audited consolidated financial statements appearing elsewhere in this
prospectus, and all necessary adjustments, consisting only of normal recurring
adjustments, have been included in the amounts shown below to present fairly the
unaudited quarterly results of operations data. The quarterly data should be
read in conjunction with our audited financial statements and the related notes
appearing elsewhere in this prospectus. The operating results for any quarter
should not be considered indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1998 1998 1998 1998 1999 1999
----------- --------- --------- --------- ----------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................................... $ -- $ -- $ 261 $ 276 $ 326 $ 733
Cost of revenues.................................. -- -- 284 272 258 444
----- --------- --------- --------- ----------- ---------
Gross profit (loss)............................... -- -- (23) 4 68 289
Operating expenses:
Engineering and operations...................... 113 232 238 582 750 1,109
Sales and marketing............................. 165 502 687 1,104 895 2,600
General and administrative...................... 136 178 317 1,009 857 895
Stock-based compensation........................ 3 100 296 292 692 3,773
----- --------- --------- --------- ----------- ---------
Total operating expenses.................... 417 1,012 1,538 2,987 3,194 8,377
----- --------- --------- --------- ----------- ---------
Loss from operations.............................. (417) (1,012) (1,561) (2,983) (3,126) (8,088)
Interest income, net.............................. 4 34 26 30 101 69
----- --------- --------- --------- ----------- ---------
Net loss.......................................... $ (413) $ (978) $ (1,535) $ (2,953) $ (3,025) $ (8,019)
----- --------- --------- --------- ----------- ---------
----- --------- --------- --------- ----------- ---------
</TABLE>
We began generating revenues in the quarter ended September 30, 1998, and
total revenues have increased in each successive quarter. While Internet Keyword
revenue has increased each successive quarter, revenue from banner advertising
has decreased each successive quarter. Internet Keyword revenues from
subscription fees increased each quarter. The increase in Internet Keyword
revenue in the quarter ended March 31, 1999 was also attributable to the
commencement of Internet Keyword revenue from PPV fees. The increase in Internet
Keyword revenue in the quarter ended June 30, 1999 was primarily attributable to
the commencement of Internet Keyword revenue from license fees, and, to a lesser
extent, an increase in Internet Keyword revenue from PPV fees.
Cost of revenues, which we first recorded in September 1998, were relatively
constant from the third quarter of 1998 through the quarter ended March 31,
1999. Cost of revenues increased to $444,000 for the quarter ended June 30, 1999
primarily as a result of an increase in customer service personnel hired in the
first two quarters of 1999.
Total operating expenses have increased significantly over the last six
quarters due to our growth in all operating areas. Engineering and operations
expense increased for each of the last six quarters as we added additional
engineering and operations personnel and incurred increased depreciation and
amortization associated with capital equipment purchases. Sales and marketing
expense has also increased over each of the last six quarters except for the
quarter ended March 31, 1999. The decrease in sales and marketing expenses in
this quarter was attributable to reduced expenditures for marketing and
tradeshows. Sales and marketing expenses almost tripled for the quarter ended
June 30, 1999 due primarily to the
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addition of sales and marketing employees and co-marketing expenditures with our
Keyword Providers. General and administrative expenses have also generally
increased over the last six quarters other than from the quarter ended December
31, 1998 to the quarter ended March 31, 1999. General and administrative
expenses were particularly high in the quarter ended December 31, 1998 due to
legal expenses of approximately $344,000 related to a patent litigation case.
Stock-based compensation expense has also generally increased over the last six
quarters.
SIX MONTHS ENDED JUNE 30, 1998 AND 1999
REVENUES. Revenues were approximately $1.1 million for the six months ended
June 30, 1999. There were no revenues for the six months ended June 30, 1998.
Revenues for the six months ended June 30, 1999 were primarily attributable to
Internet Keyword revenue from license fees and fixed-priced subscriptions and
from banner advertising revenue, and to a lesser extent, Internet Keyword
revenue from PPV fees.
COST OF REVENUES. Cost of revenues was $702,000 for the six months ended
June 30, 1999. There was no associated cost of revenues for the six months ended
June 30, 1998. Cost of revenues for the six months ended June 30, 1999 was
attributable to revenue shared with distribution partners from PPV fees and due
to costs associated with the assignment of Internet Keywords and database
management, hosting of our routers and billing services.
ENGINEERING AND OPERATIONS EXPENSES. Engineering and operations expenses
increased from $345,000 for the six months ended June 30, 1998 to approximately
$1.9 million for the six months ended June 30, 1999. The increase in engineering
and operation expenses was attributable to salaries and related costs for
additional engineering, operations and customer service employees, depreciation
of certain capital equipment and the allocable portion of overhead expenses for
those additional employees.
SALES AND MARKETING EXPENSES. Sales and marketing expenses increased from
$667,000 for the six months ended June 30, 1998 to $3.5 million for the six
months ended June 30, 1999. This increase was primarily attributable to the
addition of sales, marketing and business development employees and related
overhead costs and to co-marketing expenditures with our Keyword Providers
incurred in the quarter ended June 30, 1999. Additionally, sales and marketing
expenses increased due to reseller commissions on Internet Keyword subscription
sales and greater marketing and public relations costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased from $314,000 for the six months ended June 30, 1998 to $1.8 million
for the six months ended June 30, 1999. This increase was primarily attributable
to the addition of employees and the associated overhead expenses. Recruiting
expenses and legal fees related to patent litigation and various distribution
and customer agreements were also responsible for the increase.
STOCK-BASED COMPENSATION EXPENSE. Stock-based compensation expense
increased from $103,000 for the six months ended June 30, 1998 to $4.5 million
for the six months ended June 30, 1999. The increase was primarily attributable
to the granting of additional stock options after June 30, 1998 and the issuance
of a fully-vested warrant for 1,271,735 shares of common stock to Network
Solutions. This warrant was exercised in September 1999. See notes 5 and 10 of
notes to financial statements for a further discussion of the warrant issued to
Network Solutions and its accounting treatment.
INTEREST INCOME, NET. Interest income, net, increased from $38,000 for the
six months ended June 30, 1998 to $170,000 for the six months ended June 30,
1999. The increase was primarily attributable to interest income on higher
average investable cash balances due to the net proceeds from our Series B
preferred stock financing in December 1998.
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INCEPTION PERIOD FROM NOVEMBER 19, 1996 TO DECEMBER 31, 1997 AND THE YEAR
ENDED DECEMBER 31, 1998
REVENUES. Revenues were $537,000 for the year ended December 31, 1998.
There were no revenues in the inception period, from November 19, 1996 to
December 31, 1997. Revenues in the year ended December 31, 1998 were primarily
attributable to banner advertising revenues, and, to a much lesser extent,
Internet Keyword revenue from subscriptions.
COST OF REVENUES. Cost of revenues of $556,000 for the year ended December
31, 1998 was primarily attributable to salaries and related costs for Internet
Keyword assignment and database management employees, costs of hosting of our
routers, billing services costs and banner advertising commissions. There was no
cost of revenues in the inception period.
ENGINEERING AND OPERATIONS EXPENSES. Engineering and operations expenses
increased from $1.0 million for the inception period to $1.2 million for the
year ended December 31, 1998. The increase was primarily attributable to the
hiring of additional engineering and operations employees, recruiting expenses
and relocation incentives.
SALES AND MARKETING EXPENSES. Sales and marketing expenses increased from
$81,000 for the inception period to $2.5 million for the year ended December 31,
1998. The increase was primarily attributable to the hiring of additional sales,
marketing, and business development employees, sales commissions, development of
public relations, tradeshow participation and other marketing efforts.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased from $103,000 for the inception period to $1.6 million for the year
ended December 31, 1998. The increase was primarily attributable to the hiring
of additional human resources, finance and facilities personnel and legal fees
related to patent litigation and customer and distributor contracts.
STOCK-BASED COMPENSATION EXPENSE. Stock-based compensation expense was
$691,000 for the year ended December 31, 1998. There was no such charge in the
corresponding prior period.
INTEREST INCOME, NET. Interest income, net, increased from $8,000 for the
inception period to $94,000 for the year ended December 31, 1998. The increase
was primarily attributable to interest income on higher investable cash balances
due to our Series A preferred stock financing in March 1998.
INCOME TAXES. No provision for federal and state income taxes was recorded
as we have incurred net operating losses from inception through June 30, 1999.
As of December 31, 1998, we had approximately $5.1 million of federal and state
net operating loss carryforwards which expire in varying amounts beginning in
2005. Due to the uncertainty regarding the ultimate utilization of the net
operating loss carryforwards, we have not recorded any benefit for losses and a
valuation allowance has been recorded for the entire amount of the net deferred
tax asset. In addition, sales of our stock, including shares sold in this
offering, may further restrict our ability to utilize our net operating loss
carryforwards. Please see note 7 of notes to financial statements for more
information on our income taxes and tax credits.
FACTORS AFFECTING OPERATING RESULTS
Our revenues, cost of revenues, operating expenses and operating results may
vary significantly from quarter to quarter. The fluctuations may be due to a
number of factors, many of which are beyond our control. These factors include:
- the size of our revenue share arrangements with our distribution partners;
- the size of our co-marketing commitments with our customers;
- the rate at which we increase our operating expenses as we expand our
sales, marketing and promotional efforts, develop our technology and
platform, increase our general and administrative functions and expand
into international markets;
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- whether we maintain, increase, lose or are required to defer revenue from
license agreements with our Keyword Providers;
- whether we maintain, lose or add relationships with distribution partners
which make the RealNames Service available to their users;
- the effectiveness of our distribution partners implementation of the
RealNames Service; and
- the effectiveness of our marketing campaigns in driving user adoption of
Internet Keywords.
Because of the above factors, our quarterly revenue and operating results
are difficult to forecast, and we believe that period-to-period comparisons of
our operating results will not necessarily be meaningful and should not be
relied on as an indication of our future performance.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations primarily through the
private sale of equity securities and, to a lesser extent, bank and investor
borrowings. As of June 30, 1999, we had raised approximately $17.6 million in
cash from the issuance of common and preferred stock. As of June 30, 1999, we
had approximately $4.1 million of cash and cash equivalents. In addition, we
have a $1.2 million capital lease line with a leasing company, of which
approximately $800,000 was available as of June 30, 1999.
Net cash used in operating activities was $1.2 million and $4.7 million for
the six months ended June 30, 1998 and 1999, respectively, and was $341,000 and
$4.3 million for the inception period and in the year ended December 31, 1998,
respectively. In each period, cash used by operating activities was primarily a
result of a net loss.
Net cash used in investing activities was $437,000 and $2.8 million for the
six months ended June 30, 1998 and 1999, respectively, and was $97,000 and
$957,000 for the inception period and in the year ended December 31, 1998,
respectively. Cash used in investing activities in each period was primarily
related to purchases of property and equipment and, in all periods but the
inception period, the purchase of letters of credit as security for our credit
card payment facility and our facilities operating lease.
Net cash provided by financing activities of $3.7 million for the six months
ended June 30, 1998 was primarily attributable to the net proceeds from the
issuance of Series A preferred stock in March 1998. Net cash provided by
financing activities of $295,000 for the six months ended June 30, 1999 was
primarily attributable to proceeds from the exercise of a warrant for preferred
stock. Net cash provided by financing activities of $620,000 for the inception
period resulted from the issuance of common stock. Net cash provided by
financing activities of $16.3 million for the year ended December 31, 1998
consisted primarily of net proceeds from the issuance of Series A preferred
stock in March 1998 and Series B preferred stock in December 1998. In August
1999, we raised $70.5 million in net proceeds from the sale of our Series C
preferred stock, including notes receivable of $890,000.
Our deferred revenue balance consists of the unamortized portion of our
Internet Keyword revenue from subscriptions. Subscription fees are collected at
the time the subscription is initiated, and revenue is recognized over the
12-month period of the subscription.
Material commitments consist of our obligations with our Keyword Provider
customers to spend a defined amount of advertising dollars with them, our
equipment loan facility and our facilities leases. See note 4 of notes to
financial statements for a further explanation of our facilities leases
commitments and note 10 for a description of our equipment loan facility. As of
June 30, 1999, our total commitment to spend advertising dollars with our
Keyword Provider customers was approximately $14.6 million, of which $543,000
was due and payable at that date. In addition, we expect to commit to spend
several million dollars for advertising Internet Keywords in television, radio,
print and other traditional media. We anticipate that we will experience an
increase in our advertising commitments as well as in our capital expenditures
and lease commitments consistent with our anticipated growth in operations,
infrastructure
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and personnel. We expect the capital expenditures for the balance of 1999 will
be at least $4.2 million and that capital expenditures for 2000 will be at least
$17.6 million. In particular, we anticipate incurring capital expenditures in
connection with the addition of data centers, establishment of redundant parts
of our infrastructure for backup and disaster recovery and expansion
internationally, including international data centers and offices.
We currently anticipate that we will continue to experience significant
growth in our operating expenses for the foreseeable future related to entering
new markets for the RealNames Service, increasing engineering and operations
personnel and infrastructure, increasing our sales and marketing operations,
developing new distribution partners, leasing additional space, improving our
operational and financial systems and broadening our customer support
capabilities. Such operating expenses will be a material use of our cash
resources, including a large portion of the net proceeds of this offering.
Although we believe that the net proceeds of this offering, together with our
existing cash and cash equivalents and available credit facilities, will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures for at least the next twelve months, it is possible that such
resources will not be adequate and that additional funds will be needed either
during or after such 12-month period.
YEAR 2000 READINESS DISCLOSURE
Many currently installed computer systems and software products are unable
to distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies and governmental agencies may need
to be upgraded to comply with such Year 2000 requirements or risk system failure
or miscalculations causing disruptions of normal business activities.
OUR STATE OF READINESS
We are engaged in an ongoing assessment of the Year 2000 readiness of all
our relevant operating, financial and administrative systems, including the
hardware and software that support the RealNames Service and our information
technology, or IT, and non-IT systems. Our assessment plan consists of:
- quality assurance testing of our internally developed proprietary
software;
- contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related to the
delivery of the RealNames Service to our users;
- contacting vendors of third-party systems;
- assessing repair and replacement requirements and implementing appropriate
procedures; and
- creating contingency plans in the event of Year 2000 failures.
We are currently reviewing our Year 2000 readiness and developing a plan for
verifying the proper operation of our internally developed software. All
essential vendors have indicated that they are Year 2000 compliant. In the few
cases where a vendor has indicated that it is not Year 2000 compliant, we have
determined that any possible resulting problems are small and the costs of
remediation, if any, are small.
All of our third-party hardware and software vendors for critical systems
have provided written statements to us, or have posted them to their public web
sites, indicating that they are Year 2000 compliant. We read the assurances and
the documentation backing up those assurances that third parties have provided
regarding their Year 2000 compliance. We then evaluated the assurances and
documentation against our experience and knowledge to determine the credibility
of the third party's assurances that it is Year 2000 compliant. If we were to
determine that the third-party assurances were not adequate, which to date has
not occurred, then we would make additional requests for assurances and
documentation and do our own testing of the third party's product. Our review of
the internal systems of third parties with whom we have material relationships
is ongoing.
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COSTS TO ADDRESS YEAR 2000 ISSUES
We do not separately account for Year 2000 related expenses but estimate
that our expenses incurred to date to address Year 2000 issues have not been
material. Although we have not completed our assessment of our Year 2000
readiness, we do not expect to incur expenses in excess of $100,000 in
connection with any required future remediation efforts. If these costs are
higher than we anticipate, it could adversely impact our operating results.
RISKS ASSOCIATED WITH YEAR 2000 ISSUES
We are not currently aware of any Year 2000 compliance problems relating to
the RealNames Service or our IT or non-IT systems that would have a material
adverse effect on our business, results of operations and financial condition,
despite our efforts to detect and correct such problems. However:
- we may discover Year 2000 compliance problems in our network or other
software that will require substantial revisions or replacements;
- third-party hardware or software incorporated into the RealNames platform
or our material IT and material non-IT systems may need to be revised or
replaced, which could be time consuming and expensive; and
- the failure to adequately address Year 2000 compliance issues in the
RealNames Service or in our IT or non-IT systems could result in claims of
mismanagement, misrepresentation or breach of contract and bring about
litigation, which could be costly to defend.
Any of the above scenarios, if not quickly remedied, could result in
significant lost revenues, increased expenses and business interruptions.
In addition, we cannot guarantee that Internet access companies,
governmental agencies, utility companies, third-party service providers and
others not within our control will be Year 2000 compliant. The failure of such
entities to be Year 2000 compliant could result in a failure beyond our control,
such as a prolonged Internet, telecommunications or electrical failure, which
could prevent us from operating the RealNames Service.
CONTINGENCY PLAN
Because our needs for hardware and software continually change, we are
engaged in an ongoing Year 2000 compliance assessment. We have not identified
any significant non-compliance issues with the RealNames Service that have not
already been corrected.
The information set forth above and elsewhere in this prospectus relating to
Year 2000 issues constitute "Year 2000 Readiness Disclosures," as such term is
defined by the Year 2000 Information and Readiness Disclosure Act of 1998,
enacted October 19, 1998 (Public Law 105-271, 112 Stat. 2386).
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-1, or SOP 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," which provides guidance on accounting
for the cost of computer software developed or obtained for internal use. SOP
98-1 is effective for financial statements for fiscal years beginning after
December 15, 1998. The adoption of SOP 98-1 does not have a material impact on
our financial statements.
In April 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-5, or SOP 98-5, "Reporting on the Costs of Start-Up Activities."
This standard requires companies to expense the costs of start-up activities and
organization costs as incurred. In general, SOP 98-5 is effective for fiscal
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years beginning after December 15, 1998. The adoption of SOP 98-5 does not have
a material impact on our financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, or SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes new standards of
accounting and reporting for derivative instruments and hedging activities. SFAS
133 requires that all derivatives be recognized at fair value in the statement
of financial position, and that the corresponding gains or losses be reported
either in the statement of operations or as a component of comprehensive income,
depending on the type of hedging relationship that exists. SFAS 133 will be
effective for fiscal years beginning after June 15, 2000. We are currently
evaluating the implementation of SFAS 133.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
At the present time, we provide the RealNames Service to clients primarily
in the United States. As a result, it is unlikely that our financial results
will be directly affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in foreign markets. However, we
currently anticipate significant expansion of our international operations, at
which time our financial results could be directly affected by factors such as
changes in foreign currency exchange rates or weak economic conditions in
foreign markets. All of our sales are currently denominated in U.S. dollars. Our
exposure to market risk for changes in interest rates relates primarily to the
increase or decrease in the amount of interest income we can earn on our
investment portfolio and on the increase or decrease in the amount of interest
expense we must pay with respect to our outstanding debt instruments. The risk
associated with fluctuating interest expense is limited, however, to the
exposure related to those debt instruments and credit facilities which are tied
to market rates. We currently do not plan to use derivative financial
instruments in our investment portfolio. We plan to ensure the safety and
preservation of our invested principal funds by limiting default risk, market
risk and reinvestment risk. We plan to mitigate default risk by investing in
high-credit quality securities.
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BUSINESS
OVERVIEW
RealNames has developed a new addressing system, the RealNames Service,
based on Internet Keywords that simplifies navigation on the Internet. Internet
Keywords are generally intuitive, familiar words and phrases, such as company,
product, brand and personal names. They can be used instead of traditional
search engines, directories and Uniform Resource Locators, or URLs, to navigate
from any point on the Internet that recognizes Internet Keywords. Internet
Keywords are designed to allow companies to leverage and promote their brands as
direct connections to their web pages. Internet Keywords operate on the
RealNames platform. Internet Keywords were available to more than 60% of U.S.
Internet users, as measured by August 1999 Media Metrix data. This is as a
result of being integrated into search engines, directories and portals such as
AltaVista, DogPile, GO Network, LookSmart, and MSN. In addition, Internet
Keyword functionality is integrated into Microsoft's Internet Explorer 5.0,
which Stat Market estimates to have a greater than 30% share of the current
installed base of web browsers as of September 30, 1999. Some of our current
customers using Internet Keywords include Amazon.com, Beyond.com, eBay, Eddie
Bauer, Federal Express, Ford, Homestore.com, MGM, priceline.com and Specialized
Bicycles.
INDUSTRY BACKGROUND
THE GROWTH OF THE INTERNET
The Internet has rapidly become a widely-accepted, global medium for
communicating, sharing data and conducting business. The number of Internet
users worldwide has increased dramatically in recent years. According to
International Data Corporation, or IDC, the number of Internet users worldwide
grew from approximately 14 million in 1995 to approximately 142 million in 1998,
and it is expected to grow to 399 million by 2002. IDC estimates that the
non-U.S. Internet user share will grow from 56% at December 31, 1998 to 65% by
2003. Internet growth is being driven by faster and less expensive Internet
access, more widespread use of computers in the home and office, improvements in
Internet infrastructure and increased public awareness of the benefits of the
Internet. Internet users are also spending an increasing portion of their day
online. For example, according to Media Metrix, from August 1998 to August 1999,
average online usage days per month increased from 10 to 12.
As Internet use continues to increase, the number of web sites and web pages
within those sites is also likely to increase. Network Solutions reported an
increase in its cumulative net registrations of domain names from approximately
1.0 million at June 30, 1997 to approximately 5.3 million at June 30, 1999. IDC
expects the number of web pages worldwide to grow from 925 million in 1998 to 8
billion by 2002.
THE EVOLUTION OF INTERNET NAVIGATION
The dramatic growth in the number of Internet users and web pages has
increased the need for efficient navigation of the Internet. Internet navigation
involves a user who is seeking a specific Internet destination.
Internet navigation has advanced significantly over the past 25 years.
Beginning in 1974, the Internet infrastructure consisted solely of Internet
Protocol, or IP, addresses. These addresses are composed of a series of numbers
separated by periods, for example, 216.86.225.84. This system permitted
extremely precise addressing, but was not intuitive to use.
In 1984, the Domain Name System, or DNS, addressing system was established
with the primary purpose of allowing for user-friendly email addresses, such as
[email protected], to run on top of IP addresses. As a result, users no
longer had to remember a numeric address, but could identify an email address by
a word or company name. DNS proved to be very effective as a platform for email,
which used the Simple Mail Transfer Protocol, or SMTP, but was difficult to use
for locating other Internet resources.
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By the early 1990s, Hypertext Transfer Protocol, or HTTP, was developed,
leading to the creation and proliferation of web pages. In order to enable
Internet users to locate these web pages and other Internet resources, an
addressing system based on URLs was developed. URLs extend domain names with
prefixes and suffixes to create unique physical addresses. For example, a
company with the domain name REALNAMES.COM could now assign an address to a
particular web page by extending its domain name to create a URL such as
HTTP://CUSTOMER.REALNAMES.COM/ENG_CORPORATE_REALNAMESHOMEPAGE.ASP.
The following diagram shows the evolution of Internet navigation from IP
addresses to URLs.
[Graphic depicting the evolution of Internet navigation from Internet
Protocol, or IP, addressing, to Domain Name System, or DNS, addressing, to
Uniform Resource Locator, or URL, addressing. Graphic includes applicable
examples of each type of addressing system and arrows directing such evolution.]
LIMITATIONS OF EXISTING MEANS OF INTERNET NAVIGATION
While the domain name is a simple way of creating an email address, the
domain name and its extension, the URL, is a relatively complex way of creating
an address for web pages. As companies add web pages to the Internet, they must
layer more and more prefixes and suffixes to their domain names to create URLs
identifying those web pages. As a result, URLs have become less intuitive and
more difficult to remember, making them an inefficient means of locating
specific Internet resources, such as web pages, and reaching online customers,
businesses and communities. In addition to being complicated and difficult to
remember, URLs impose several other limitations on Internet navigation:
- URLS ARE PHYSICAL ADDRESSES ONLY. If a web page with a specified URL is
moved to another physical location and users are not redirected to the new
URL, bookmarks and hyperlinks to the old URL will cause users to encounter
error messages, effectively losing the location of the desired web site.
- URLS CANNOT USE ANY CHARACTERS NOT FOUND ON A STANDARD U.S. KEYBOARD. This
represents a significant limitation since users utilizing different
international character sets, such as the Japanese character set Kanji,
represent a rapidly growing segment on the Internet. This limitation
affects not only foreign consumers but foreign businesses which face a
major obstacle in trying to link foreign brands with English-based URLs in
their print, radio and television advertising.
- DOMAIN NAME REGISTRATION IS NOT WELL REGULATED. As a result, domain names
and URLs are not necessarily representative of their owners. For example,
an unrelated third party had rights to the domain name ALTAVISTA.COM until
it was purchased by AltaVista.
Because of these limitations, users rarely rely on URLs to navigate the
Internet. More often, users rely on search engines, embedded hyperlinks and
directories to navigate. While search engines and directories are extremely
useful for research on a particular topic, they traditionally have not been
efficient as direct
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navigation tools because they generate many results, only one of which, if any,
is the site to which the user wants to navigate. Even when the desired site is
included in the search results, it may be difficult to find among a large set of
results.
BUSINESSES ARE CHALLENGED TO INTEGRATE OFFLINE AND ONLINE MARKETING
STRATEGIES
The Internet is improving the way companies deliver goods and services
because it is generally an efficient way to reach, interact with and learn about
current and potential customers. As a result, many companies are stimulating the
purchase of goods and services over the Internet through online and offline
marketing programs. Although online marketing programs are expected to grow
significantly, we anticipate that offline marketing programs will continue to be
much larger than online marketing programs for the foreseeable future. For
example, although we believe, based on industry sources, that online advertising
will grow from $1.5 billion in 1998 to $8.9 billion in 2002, offline advertising
was approximately $300 billion in 1998. In addition, many companies are now
recognizing offline advertising as a highly effective way to reach users and
drive traffic to the Internet.
Many companies have found it challenging to integrate their offline
advertising spending with their online fulfillment of goods and services. Most
companies have focused their marketing programs on the branding of a single
domain name which generally represents the physical location of their home page.
As they focus their efforts on promoting a single domain name, much of the
branding and identity they have built up in the offline world are difficult to
transfer to the Internet. In many cases, a company is unable to obtain a domain
name that matches its well-known company brand name. For example, United
Airlines has the domain name UAL.COM. Even when a company's domain name matches
its brand name, the current addressing system makes it difficult to directly
market the web pages of specific products or subsidiaries of a company. For
example, Internet users that would like to navigate directly to the Honda Accord
web page must either input the lengthy URL
WWW.HONDA2000.COM/MODELS/CARS/ACCORD_SEDAN/INDEX.HTML, sort through lengthy
search results after searching for "Honda," or navigate through a series of
links from the Honda homepage. As a result, companies and brands have had
difficulty finding ways to bring a viewer, reader or listener of offline media
to a specific web page, making it difficult to couple offline branding with
online fulfillment.
MARKET OPPORTUNITY
URLs have generally proven to be an ineffective way for users to navigate
the Internet. In addition, the limitations of navigating with URLs have created
a problem for companies seeking to bring their offline brands and identities
onto the Internet and a significant challenge in promoting their online
existence to viewers, listeners and readers of their offline marketing
activities. Just as domain names replaced long, difficult to remember numerical
IP addresses for email, there is a need for something to replace long, difficult
to remember URLs for web pages and other Internet resources. We believe that
there is a clear market opportunity for a third party that can build and manage
an efficient, global Internet navigation system that is more intuitive to users
and leverages companies' well-developed offline brands and identities.
THE REALNAMES SOLUTION
The RealNames Service simplifies navigation on the Internet by allowing
users to connect directly to specified web pages through the use of Internet
Keywords. Internet Keywords are generally intuitive, familiar words and phrases.
They allow a web user to navigate to a web page from any navigation point on the
web that recognizes Internet Keywords, including the browser command line, the
search box, the directory listing and the hyperlink. Internet Keywords also
allow companies to leverage and promote their brands as direct connections to
their web pages. We believe this will enable Internet Keywords to be an integral
part of a global Internet infrastructure.
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Internet Keywords operate on the RealNames platform, which is a new layer of
Internet infrastructure that is designed to facilitate navigation in multiple
languages from any location on the Internet. As of August 1999, this platform
was available to more than 60% of U.S. Internet users, as measured by Media
Metrix, as a result of being integrated into search engines, directories and
portals such as AltaVista, DogPile, GO Network, LookSmart, and MSN. Furthermore,
Internet Keyword functionality is integrated into Microsoft's Internet Explorer
5.0, which Stat Market estimates, as of September 30, 1999, to have a greater
than 30% share of the current installed base of web browsers. We believe that
the use of Internet Keywords offers a number of benefits, including the
following:
INTERNET KEYWORDS MAKE DIRECT NAVIGATION EASIER FOR THE USER. Internet
Keywords are designed to allow users to navigate the Internet using simple,
intuitive words and phrases. A consumer generally requires no additional
knowledge other than a company's name, brand or product name to get to a desired
web page. Similarly, an Internet user can navigate directly to an individual's
personal web page by knowing his or her Personal Keyword. In addition,
international users can navigate the web using their own character set. Internet
Keywords also complement a search experience by providing direct navigation and
search results in one integrated environment. Internet Keywords generally appear
prominently within the search results of Internet Keyword-enabled search
engines. Furthermore, the RealNames platform provides a simple means of
preventing dead links. If the location of a web page is changed, a customer only
needs to report this change to us once to update all pre-existing Internet
Keyword links.
INTERNET KEYWORDS LEVERAGE ESTABLISHED BRANDS AND OFFLINE MARKETING TO DRIVE
ONLINE FULFILLMENT. Many companies seeking to provide goods and services over
the Internet have substantial investments in their brand and product names. An
Internet Keyword leverages these investments by allowing companies to use their
brands, many of which may be household names, as the means by which customers
interact with the company and its products on the web. We believe Internet
Keyword users are more likely to be pre-qualified customers because they are
purposefully navigating towards a specific destination on the web using a brand
or product name as the Internet Keyword to get there.
Internet Keywords also enable native web brands, such as Amazon.com, to more
efficiently use their growing investments in traditional offline media by
allowing for the promotion of specific products or web pages through the use of
simple and intuitive Internet Keywords. In addition, international businesses,
whose brands are often expressed in character sets not found on a standard
keyboard, may bring these brands to the web using Internet Keywords. This might
otherwise be impossible through traditional URL addressing.
THE REALNAMES PLATFORM ENHANCES NAVIGATION BY PROVIDING A NEW LAYER OF
INTERNET INFRASTRUCTURE. The RealNames platform is a new layer of
infrastructure between the user interface and the Internet Protocol layer of the
Internet. The RealNames platform consists of software routers, tracking and
reporting services and subscription services. Just as the Domain Name System
enabled the creation of user-friendly email addresses that hide complicated IP
addresses, the RealNames platform is designed to provide an intuitive navigation
interface that hides complex and lengthy URLs, as shown by the following
diagram.
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[Graphic depicting the evolution of Internet Navigation from IP addressing,
to DNS addressing, to URL addressing, to Internet Keywords. Graphic includes
applicable examples of each type of addressing or navigation system and arrows
directing such evolution.]
The RealNames platform is based on a distributed network of high-speed
servers. This distributed computing architecture enables scalability and high
performance as the network grows and is designed to be extensible to platforms
other than Transmission Control Protocol/Internet Protocol and devices other
than personal computers. The RealNames platform supports independent Internet
Keyword systems such as those maintained by eBay, Homestore.com and Tickets.com
by routing users to these systems by use of a prefix that is recognized by the
RealNames platform. These independent Keyword Providers combine the prefix, such
as "eBay," with a suffix, such as "Beanie Babies" or "Star Wars," to create
their own unique Internet Keywords.
INTERNET KEYWORDS ARE ASSIGNED TO PROVIDE A POSITIVE USER
EXPERIENCE. Rather than assigning Internet Keywords on a simple first-come,
first-served basis, we require that the assignment of each Internet Keyword
undergo an approval process intended to ensure a positive navigation experience
for Internet users. In order to ensure a successful user experience, an Internet
Keyword for which users have clear expectations, such as "Coca Cola" or "Ford
Explorer," will be assigned only to the owner of the expected Internet
destination. In addition, in order to maintain this same quality control after
the initial assignment, we do not allow customers to transfer or reassign
Internet Keywords. Our approval process also involves the use of individuals
with specific knowledge of certain markets and languages, such as using native
Germans for the assignment of German Internet Keywords. In addition, we have
formed a policy advisory board consisting of industry experts with whom we
consult on specific disputes and the future direction of our policy initiatives.
STRATEGY
Our objective is to establish Internet Keywords as the de facto standard for
Internet navigation and the RealNames platform as the standard for the
proliferation and use of Internet Keywords. The key elements of our growth
strategy include the following:
EXPAND INTERNET KEYWORD AVAILABILITY. To achieve ubiquity of access to
Internet Keyword navigation, we intend to leverage existing, and aggressively
pursue additional, distribution relationships with providers of search,
directory, e-commerce, portal and content services worldwide, as well as with
vendors of client-based software applications such as browsers and plug-ins.
Through our existing distribution relationships, we estimate that Internet
Keywords are available to over 60% of Internet users in the United States.
Internet Keyword navigation is currently integrated into:
- the browser command lines of Microsoft's Internet Explorer 5.0 and
NeoPlanet;
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- portals, such as AltaVista, GO Network and MSN;
- directory services, such as LookSmart; and
- search services, such as Cyber Networks and DogPile.
Our goal is to establish distribution partnerships to integrate Internet
Keyword navigation into all browser and other complementary third-party client
applications. We are also developing a means to embed Internet Keywords into
content sites, including articles and other text, by integrating our technology
into web publishing tools. This would enable content sites to provide hyperlinks
to the companies and products represented by those Internet Keywords. We believe
that the use of hyperlinks constitutes a significant portion of web user
navigation.
DRIVE USER ADOPTION. Widespread user adoption is critical to establishing
Internet Keywords as a de facto standard for Internet navigation. We are
conducting a significant marketing campaign, both online and offline, to drive
user awareness, trial and adoption of Internet Keywords.
To further promote the use of Internet Keywords, we enter into co-marketing
agreements with some of our customers, through which we commit to purchase
advertising on those customers' web sites. Through these co-marketing
agreements, we also commit funds to key customers for online and offline
co-marketing initiatives in promotions and traditional media, such as
television, print and radio advertising.
We also offer free Personal Keywords to members of qualifying community web
sites in order to facilitate widespread awareness, trial and adoption of
Internet Keywords. Personal Keywords are Internet Keywords available to
individuals for personal home pages and tend to be personal names or nicknames.
GROW OUR CUSTOMER BASE. We intend to aggressively grow our customer base
through a multi-tiered selling effort. We plan to significantly expand our
direct sales force to sign up additional major customers. In addition, we intend
to leverage the sales forces of our partners to promote the RealNames Service
and to provide referrals to our direct sales force.
We are committed to building a subscription reseller channel to grow our
subscription sales. Current resellers include the following:
- domain name registrars, such as Network Solutions;
- Internet Service Providers, or ISPs, such as MindSpring; and
- third-party providers to local merchant and member groups, such as
Ticketmaster Online-CitySearch.
We also maintain an affiliate program whereby other web sites can resell
Internet Keyword subscriptions.
EXPAND INTERNATIONALLY. In response to the rapid international growth of
the Internet, we intend to invest to significantly expand our worldwide
presence. The RealNames platform was developed from inception to accommodate
multi-language functionality, and today we maintain Internet Keywords in more
than 40 languages. We have expertise in the assignment of Internet Keywords for
a number of these languages and have developed localized Internet Keyword
databases for four of these languages. As demand grows for Internet Keywords
outside the United States, we intend to provide "on-the-ground" assignment
expertise. To expand our reach in markets outside the United States, we intend
to establish distribution and reseller relationships with local providers of
Internet browser, search, directory, portal and content services in key
international markets. Today, we have distribution relationships with AltaVista
and Fireball in Germany and British Telecom in the United Kingdom. Further, we
intend to deploy a global network infrastructure, including routers and data
centers, to increase speed and service quality around the world.
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IMPROVE THE USER EXPERIENCE. Our mission is to make the Internet easily
navigable through the use of Internet Keywords. To do so, we strive for maximum
reliability, speed and uptime of our system. We seek to ensure high data
quality, including daily implementation of a process for correcting bad links or
other errors. We also intend to improve the user experience by developing a
technology that will enable the RealNames platform to improve its ability to
generate relevant Internet Keyword results based on an analysis of prior
unsuccessful navigation events.
CONTINUE TO DEVELOP AND PROMOTE POLICY STANDARDS FOR INTERNET KEYWORD
NAVIGATION. To promote self-regulation in approving and assigning Internet
Keywords, we have established a policy advisory board to provide external
guidance on the Internet Keyword assignment process. The main responsibilities
of this organization are to advise us on policies regarding the assignment of
Internet Keywords, advise us on specific disputes regarding Internet Keyword
assignment, and to consult with us on the future direction of our policy
initiatives.
CONTINUE TO DEVELOP AND PROMOTE TECHNICAL STANDARDS FOR INTERNET KEYWORD
NAVIGATION. We intend to maintain an active role in the Internet Engineering
Task Force and World Wide Web Consortium to promote the adoption of open
standards for provision of Internet Keywords to the global user community. To
this end, we have publicly released the public interface for addressing our
routers. The publication of this public interface is intended to foster
development of Internet Keyword-enabled software application by third party
developers.
THE REALNAMES SERVICE
Our service simplifies navigation on the Internet by connecting people
directly to specific web pages through the use of Internet Keywords.
HOW USERS NAVIGATE WITH INTERNET KEYWORDS
Users seeking to navigate the Internet often type words, names, aliases or
phrases into the browser command line or search box. We refer to these as
navigation requests. A user seeking a specific web destination can initiate a
navigation request using Internet Keywords through any navigation point on the
web that recognizes Internet Keywords, including the browser command line, the
search box, the directory listing, the hyperlink and other web applications.
When a user's navigation request precisely matches a recognized Internet
Keyword, the user can navigate directly to the specific web destination:
- when the navigation request is made through an Internet Keyword-enabled
browser such as Microsoft's Internet Explorer 5.0 or NeoPlanet, the user
is automatically taken to the specific web destination; and
- when the navigation request is made through an Internet Keyword-enabled
search or directory environment, such as AltaVista, MSN, GO Network or
LookSmart, the user is served an Internet Keyword hyperlink which, when
clicked upon, takes the user directly to the specific web destination. In
most cases, the Internet Keyword hyperlink is prominently displayed with
the other search results and is clearly identified as an Internet Keyword
from RealNames. An example is AltaVista, as depicted on the following
page.
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[Graphic depicting the implementation of the RealNames Service within one of
our distribution partner's web sites. Graphic includes the web page of our
distribution partner with results of a search query. The RealNames result is
listed first within search results as is standard with this distribution
partner's implementation and an arrow pointing to such result.]
When a user's navigation request does not precisely match a recognized
Internet Keyword, the RealNames Service generates a list of all related Internet
Keywords and a brief description of the corresponding web pages. The user's
navigation experience varies depending upon the specific navigation environment.
- In some environments, the user's navigation request is prominently
displayed as a hyperlink. When this hyperlink is clicked upon, the user is
taken to a separate page that lists related Internet Keyword hyperlinks
and brief descriptions of the corresponding web pages;
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- In other environments, the related Internet Keyword hyperlinks are
included among the other results generated by the search or directory
provider, and may or may not include a description of the web pages; and
- In still other environments, the related Internet Keyword results are not
displayed by the search or directory provider.
If the user clicks upon a related Internet Keyword hyperlink, the user is taken
directly to the specific web destination assigned to that Internet Keyword.
HOW BUSINESSES USE INTERNET KEYWORDS
Most businesses can benefit from the use of Internet Keywords. Leading
e-commerce companies, such as our current customers eBay and Tickets.com, that
want to host their own Internet Keyword systems using the RealNames platform can
become Keyword Providers. Large brand marketers that have multiple brands,
products or services, such as our current customers MGM and the Ford Motor
Company, may want to become Corporate Account customers and have a large number
of Internet Keywords, priced on a per visit or per transaction basis. Small and
medium-sized businesses that simply want to be found more easily on the Internet
may subscribe to individual fixed-priced Internet Keywords. We also participate
in the affiliate programs of a number of e-commerce companies. In these cases,
we route potential customers to these companies' web sites via Internet Keywords
and collect a percentage of qualified purchases made by these customers.
KEYWORD PROVIDERS
Keyword Providers are customers that are assigned a unique routing prefix on
the RealNames platform. This unique routing prefix allows a Keyword Provider to
use the RealNames platform to create and maintain its own separate Internet
Keyword system and to assign Internet Keywords to particular URLs within this
environment. Users can navigate to the Internet Keyword systems of these Keyword
Providers in any navigation environment that supports the routing prefixes,
which currently include AltaVista, Infoseek and LookSmart. Keyword Providers pay
us as follows:
- a license fee for a routing prefix in the RealNames platform;
- for each visit to their Internet Keyword system routed by the RealNames
platform;
- for each eligible transaction; or
- some combination of the above. If a Keyword Provider sells subscriptions
into its own Internet Keyword system, we may also share in this
subscription revenue.
CORPORATE ACCOUNT CUSTOMERS
Corporate Account customers generally request a significant number of
appropriate Internet Keywords which are hosted on the RealNames platform.
Corporate Account customers pay us for each visit to, or each eligible
transaction conducted on, their site through the use of Internet Keywords. We
provide tracking and reporting services to all of our Corporate Account
customers.
INTERNET KEYWORD SUBSCRIPTION CUSTOMERS
An Internet Keyword also enables small and medium-sized businesses to be
found easily and directly. As with larger companies, Internet Keywords allow
these businesses to leverage the familiarity of their name or brand as a tool
for direct navigation. These companies subscribe to Internet Keywords for an
annual fee per Internet Keyword through one of our resellers or directly from
our web site. Customers are provided with online support to track the
effectiveness of their Internet Keyword and can obtain detailed tracking
information about the visitors delivered to their site.
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AFFILIATE PROGRAMS
We participate in the affiliate programs of over 750 e-commerce companies.
Through the use of Internet Keywords, users can intuitively navigate directly to
web pages of these companies. Pursuant to the terms of their affiliate programs,
these e-commerce companies pay us a flat fee for, or a percentage of, any
eligible transaction conducted by a visitor delivered to their site through an
Internet Keyword.
TECHNOLOGY AND INFRASTRUCTURE
The RealNames platform is comprised of three key components, each of which
is supported through services:
- our Internet Keywords Database, which stores all of our Internet Keyword
information. Customers and resellers can input and modify Internet Keyword
information through our Subscription Services;
- our routers, with which customers, users and distributors interact through
our Routing Services; and
- our Statistics Database, with which customers, resellers and distributors
interact through our Tracking and Reporting Services.
The following diagram illustrates how the customers, users and distributors
interface with the RealNames platform.
[Graphic depicting how customers, users and distributors interface with the
RealNames platform. Graphic includes arrows showing the direction of interaction
through the Internet Keywords Database, routers and the Statistics Database and
the various services offered, including Subscription Services, Routing Services
and Tracking and Reporting Services.]
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THE INTERNET KEYWORDS DATABASE AND SUBSCRIPTION SERVICES
At the center of the RealNames platform is a large relational database
called the Internet Keywords Database. This database is the master repository of
all Internet Keywords and associated information about companies, products and
services. The database is designed for speed and maximum data throughput.
The Internet Keywords Database stores information using UNICODE strings, a
technology that enables Internet Keywords to be expressed in any language.
Today, Internet Keywords exist in over 40 languages, including English, French,
German, Arabic, Mandarin, Cantonese, Korean and Japanese.
The Internet Keywords Database has been designed with a Hypertext Mark-up
Language, or HTML, front-end presentation layer which is responsible for the
generation of web interfaces to the Subscription and Tracking and Reporting
Services. The HTML front-end implements a three-tier architecture with a strict
separation between the back-end components and the presentation layer. This
separation is critical as it gives RealNames the flexibility to support a
variety of web interfaces in any character set and language, enabling our
partners to offer our services customized for their unique environments.
Our Subscription Services provide the core functionality for Internet
Keyword customers to input their information into the Internet Keywords Database
and to update this information as it changes over time. Customers are presented
with an easy and intuitive web interface through which they enter their contact
and billing information, the desired Internet Keywords and detailed information
about the web page associated with the Internet Keywords.
Our subscription protocol is based on HTTP and Extensible Mark-up Language,
or XML. It has been designed to allow resellers and Keyword Providers to build
and deploy their own web interface to the subscription services. The
subscription protocol provides a flexible Application Programming Interface, or
API, to the Internet Keywords Database that partners can build upon.
In addition, we provide services that allow customers to manage their
Internet Keywords. Through these services, a customer can determine the URLs to
which their Internet Keywords are assigned, change this assignment if the web
page is moved or change the description of their Internet Keywords. Furthermore,
these services allow Keyword Provider customers to enforce the policies for
Internet Keyword assignment within their own Internet Keyword system.
ROUTERS AND ROUTING SERVICES
RealNames routers enable users to navigate the Internet using Internet
Keywords. RealNames routers consist of high performance servers and routing
tables. Routing tables are separate databases of Internet Keywords which are
continuously updated and synchronized with the master Internet Keywords
Database. The Routing Services allow developers to incorporate Internet Keyword
navigation into their applications.
The following are key attributes of the routers and the Routing Services:
- PROVIDES HIGH PERFORMANCE AND SCALABILITY. The RealNames platform was
designed with high performance and scalability in mind. Accordingly, we
made an early design decision to physically separate our routers from our
master Internet Keywords Database. This physical separation has several
benefits:
- Unlike a system where all the servers access a centralized database
for routing instructions, our routers do not directly access the
master Internet Keywords Database, but instead access their own
separate routing tables. This prevents the master Internet Keywords
Database from becoming a traffic bottleneck. We synchronize the data
in the routing tables with the master Internet Keyword Database
through a live update service. The live update service is a
sophisticated messaging and queuing system that propagates the
changes from the master Internet Keywords Database to the routing
tables in real-time.
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- Since the routers and the master Internet Keywords Database are
independent, they do not have to reside in the same physical
location. Instead, our routers can be deployed in strategic locations
in order to reduce the distance between our routers and Internet
Keyword users, which minimizes response time. Today, we have routers
deployed on the West and East Coasts of the United States, as well as
in Germany, which access our master Internet Keywords Database in
California.
- In each location, our routers are organized in groups, or clusters,
of parallel servers. Router clustering allows us to distribute and
balance navigation requests across all machines within a single
cluster. Router clustering also enables us to handle increased
traffic by simply adding additional servers to the cluster and
provides fault-tolerance or fail-over. When a server fails for any
reason, navigation requests are automatically redirected to other
functioning servers in the cluster. The defective machine may then be
removed and serviced with no interruption of routing capabilities.
- ENSURES FAST INTERNET KEYWORD RETRIEVAL. Our search and directory service
distribution partners impose rigorous performance requirements on our
routers in order to guarantee that their servers will not be slowed down.
We have developed proprietary indexing technology that enables our routers
to host millions of Internet Keywords while at the same time providing for
fast lookup of Internet Keywords. Currently, using this proprietary
indexing technology, our routers can handle millions of daily navigation
requests with an average server response time of 5 milliseconds, which is
approximately 50 times faster than a typical search engine.
- ENABLES SIMPLE INTEGRATION. Our client libraries are a set of highly
portable object-oriented APIs that simplify the integration of the Routing
Services into client applications such as web browsers or search and
directory services. The client libraries allow third-party developers to
integrate Internet Keyword-based navigation services within their new
applications and devices. Our client libraries run on several operating
systems such as Windows NT, Linux, Solaris and Digital Unix. In addition,
we have publicly released the public interface to address our routers. We
believe that by making this public interface available to application
developers, it will foster independent development of client-based
applications that interact with our Routing Services.
THE STATISTICS DATABASE AND TRACKING AND REPORTING SERVICES
The Tracking and Reporting Services measure all uses of Internet Keywords as
they occur. When a router receives a navigation request, it immediately notifies
our Tracking Services. The information sent by the routers to the Tracking
Service includes the following:
- the Internet Keyword used;
- the URL to which the user is directed;
- the time of the navigation request;
- the origin of the navigation request; and
- the domain of the origin.
The Tracking Service then aggregates and stores this information into our
Statistics Database. Our customers may use our Reporting Service to access the
Statistics Database and generate detailed reports regarding the use of their
Internet Keywords. These reports are accessible through a web interface.
The Tracking and Reporting Services also implement the billing functionality
from Internet Keywords for which we receive a price per visit fee. The billing
service uses both the usage information from the Statistics Database and the
pricing model stored in the Internet Keywords Database to automatically compute
the monthly usage charges and generate an appropriate invoice.
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SALES AND MARKETING
We offer the RealNames Service to our customers through a direct sales
organization, as well as through channel partners. Our sales efforts are focused
by the type of customer, as follows:
- KEYWORD PROVIDERS. Our strategic accounts sales force focuses on selling
licenses to routing prefixes on the RealNames platform to customers with
dynamic web sites that want to provide their own Internet Keywords and
manage their own Internet Keyword system. Strategic accounts salespeople
generally initiate discussions with high level business development or
marketing executives, and sales cycles can range from one to six months.
- CORPORATE ACCOUNT CUSTOMERS--PRICE PER VISIT OR PRICE PER TRANSACTION
INTERNET KEYWORDS. Our Corporate Account direct sales force focuses on
soliciting price per visit, or PPV, or price per transaction, or PPT,
Internet Keyword subscriptions from Corporate Account customers. The
target companies for Corporate Accounts are large brand marketers and
leading Internet content and e-commerce companies. The sales cycle for
Corporate Account customers can range from one week to three months.
During this time, our Corporate Account sales force works with the
potential customer to select the appropriate Internet Keywords that will
maximize traffic to the desired web pages. Because many of our target
Corporate Accounts employ advertising agencies to advise them on Internet
media buys, we maintain relationships with, and will continue to focus
significant sales and marketing efforts on, advertising agencies.
- ANNUAL SUBSCRIPTION CUSTOMERS. We offer fixed-priced annual subscriptions
of Internet Keywords to those small and medium-sized businesses whose web
site traffic is not sufficient to require a PPV-or PPT-based subscription.
Because of the large volume of annual subscriptions, we offer these
Internet Keywords either directly through the registration page on our web
site or through our channel sales and affiliate programs. Our Internet
Keyword subscription resellers include leading Internet service providers,
web-hosting companies and domain name registrars, both in the United
States and internationally. Internet Keyword subscriptions complement
their domain name sales and Internet services. These resellers are
involved in joint marketing programs and are offered comprehensive
training and support. We have also established an affiliate program that
provides an opportunity for small companies and individuals to establish a
hyperlink to our subscription interface and receive a referral fee for
each paid Internet Keyword subscription that originates from their web
site.
Our primary marketing objective is to build awareness and drive adoption of
Internet Keywords. We intend to generate increased familiarity and usage of
Internet Keywords by end users and companies, which may generate momentum for
the category and product. To accomplish these goals, we have adopted a parallel
advertising strategy. We have launched an aggressive advertising and marketing
communications program that focuses on generating end user education, awareness
and trial. At the same time, we are supplementing these efforts with cooperative
marketing initiatives designed to encourage our customers to include Internet
Keywords in both their online and offline marketing campaigns. We also purchase
online advertising on our Keyword Providers' web sites in order to educate
Internet users as to the availability and benefits of using Internet Keywords.
In addition, we offer free Personal Keywords for personal web sites through
qualified Internet community sites.
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CUSTOMERS
KEYWORD PROVIDERS
As of September 30, 1999, we had entered into agreements with the following
Keyword Providers:
<TABLE>
<S> <C> <C>
About.com First Source Jobs.com
British Furniture.com MP3.com
Telecom Homestead Millenium Internet (MovieWeb)
DVD Express Homestore.com (Realtor.com) Tickets.com
eBay iAtlas Tunes.com
EMusic.com
</TABLE>
None of our Keyword Provider customers accounted for more than 10% of our
total revenue for the year ended December 31, 1998 or the six months ended June
30, 1999.
INTERNET KEYWORD CUSTOMERS
Below is a list of some of our Internet Keyword customers that we charge on
a price per visit basis:
<TABLE>
<CAPTION>
TELECOMMUNICATIONS CONSUMER/
AUTO FINANCIAL/REAL ESTATE AND TECHNOLOGY PACKAGED GOODS ENTERTAINMENT PORTAL/CONTENT
- ----- --------------------------- ------------------- ------------------ ------------- --------------------
<S> <C> <C> <C> <C> <C>
Ford AllState Insurance Fluke Federal Express eMusic American Banker
Mazda Countrywide Home Loans Hitachi GE Fastv Buena Vista (Disney)
Volvo Homestore.com (Realtor.com) Kiplinger's Taxcut Pharmacia & Upjohn Housenet.com Deja.com
Insweb.com Nintendo Smartscrubs MTV Intelligent Life
MarketWatch.com Nokia IPRG Sprint Business Virgin.net MGM
Net.Bank Quantum Wyeth Ayerst SportsLine USA
Strong Capital Management Segasoft StarMedia Network
VeriSign TheStreet.com
Won.net Variety
women.com
</TABLE>
None of our Internet Keyword customers that we charge on a price per visit
basis accounted for more than 10% of our total revenue for the year ended
December 31, 1998 or the six months ended June 30, 1999.
STRATEGIC RELATIONSHIPS
We believe that development of strategic relationships with leading Internet
companies is critical to the ubiquity and acceptance of Internet Keywords and
ultimately the success of our business model. We are developing worldwide
marketing and distribution relationships in each of the following areas:
INTERNET KEYWORD DISTRIBUTION PARTNERS
We have established strategic relationships with a number of companies in
order to make Internet Keywords available to as many users as possible. Our
Internet Keyword distribution partners include leading Internet search,
directory and portal services, and vendors of client-based software applications
such as browsers and plug-ins and vendors of Internet-connected hardware devices
such as Internet terminals.
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The following is a list of our Internet Keyword distribution partners with
whom we have agreements as of September 30, 1999:
<TABLE>
<CAPTION>
SEARCH, DIRECTORY AND PORTAL PARTNERS BROWSER AND OTHER APPLICATIONS AND PRODUCTS
- ---------------------------------------------- ----------------------------------------------
<S> <C>
About.com Brodia Shopping Console
AltaVista Guru.net
British Telecom Microsoft Internet Explorer 5.0
Cyber411 (C4.com) NeoPlanet Browser
DogPile NetPliance
Epicentric NetZero ZeroPort
Fireball.de
iAtlas
Inktomi
LookSmart
MSN
GO Network
</TABLE>
INTERNET KEYWORD SUBSCRIPTION RESELLERS
We have established relationships with a number of companies to solicit
applications for Internet Keyword subscriptions on our behalf. These companies
include domain name registrars, web hosting companies and ISPs that have entered
into reseller agreements with us. Many of our search partners also solicit
referrals for Internet Keyword subscriptions from their web sites. In addition,
through our agreement with Network Solutions, we have also established Internet
Keyword reseller relationships with a number of Network Solutions' ISP and web
hosting partners.
These relationships allow us to leverage the sales channels and customer
bases of our many partners in order to drive subscription growth and the rapid
adoption of Internet Keywords, both domestically and internationally. We
generally pay Internet Keyword subscription resellers a commission for each
Internet Keyword subscription that originates from their web site. We also
intend to integrate the service offerings of several of our partners directly
with our back-end subscription database to facilitate the process of obtaining
an Internet Keyword. For example, a customer who applies for merchant web
hosting services would be able to simultaneously register a domain name and
subscribe to an Internet Keyword through a single registration interface.
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The following is a list of companies with which we have entered into
Internet Keyword reseller agreements as of September 30, 1999:
<TABLE>
<S> <C>
AltaVista Internet Domain Registrars
AltaVista Germany LookSmart
British Telecom MSN LinkExchange
Constructors NetBenefit UK
Cyber411 (C4.com) NetNames UK
Domain Direct Network Solutions
Enames Ticketmaster Online-CitySearch
Fireball.de
Homestore.com
</TABLE>
In addition, through our agreement with Network Solutions, we have
established reseller relationships with the following companies as of September
30, 1999:
<TABLE>
<S> <C>
Dynaweb Superb Internet
Innerhost Teleport
MindSpring Virtual Exchange Network
Net//Works Web Hosting Virtual Servers
SurfChina
</TABLE>
COMMUNITY WEB SITE PARTNERS
As part of our strategy to increase user adoption of Internet Keywords, we
offer free Personal Keywords to members of qualifying Internet community sites
that provide free email, web hosting, site-building tools and other Internet
services to individuals. We have established relationships with several of these
community web sites to make our free Personal Keywords available to their users
either by providing hyperlinks to our web site or by integrating our back-end
subscription processing system with their registration services in a "one-click"
program. Through these relationships, we expect to increase user awareness and
adoption of Internet Keywords. Our community web site partners currently include
Homestead, Fortune City and GO Network.
KEYWORD APPROVAL POLICY
Our mission is to provide better and simpler Internet navigation for all
users. It is our intention to manage a neutral, third-party Internet Keyword
subscription service which eliminates many of the problems of the current Domain
Name System.
Keyword analysts in our customer service and support organization review all
requested Internet Keywords in accordance with our approval policy. The
underlying philosophy of our approval policy is to eliminate, or significantly
mitigate, the potential for a negative user experience. To that end, all
Internet Keyword requests are evaluated against two general criteria:
- no intentional misdirection of users by providing web site content which
is inconsistent with the generally accepted meaning of the requested
Internet Keyword; and
- no cybersquatting--the subscription of Internet Keywords with the
intention of transferring them for a profit.
Customers whose Internet Keyword requests are not initially approved are
provided with suggestions for alternative Internet Keywords or are permitted to
submit alternative requests for review. All Internet Keyword decisions are
reviewed by supervisors prior to the communication of a decision to the
customer.
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In recognition of the fact that the Internet Keyword review process involves
human judgment and the potential for error, we have formed a policy advisory
board comprised of a group of Internet industry experts that provides advice on
specific Internet Keyword decisions. The policy advisory board also advises us
in the event disputes arise between third-parties over the assignment of
Internet Keywords, and provides guidance in the future direction of our policy
initiatives.
CUSTOMER SERVICE AND SUPPORT
Our customer service and support organization is responsible for the
resolution of general, billing and technical questions from Internet Keyword
customers, Keyword Providers and users of the RealNames Service. Domestic and
international customers from both our reseller channels and our direct sales
channels are serviced through this organization.
Customers have 24-hour online access to their accounts through the RealNames
web site, where they can manage the specific names and routing of their Internet
Keywords, as well as check their current traffic statistics. In addition,
Internet Keyword customers, Keyword Providers and users can reach customer
service personnel through both email and a toll-free number. Our goal is to
respond to all customer service inquiries within an average of 24 hours.
Our staff is currently available five days a week for 12 hours per day and
services customers in seven different languages. In order to meet the needs of
our growing international customer base, as well as our Personal Keyword
customers, we intend to implement a 24-hour, seven-day-a-week operation in the
year 2000. As we expand our international service, we intend to decentralize our
service and support functions and establish a local presence in selected
international markets.
PRODUCT DEVELOPMENT
We believe that strong product development capabilities are essential to our
strategy of enhancing our core technology, developing additional applications
incorporating that technology and maintaining the competitiveness of our service
offerings. The RealNames platform is in a constant state of development. The
goal of our product development effort is to increase the size of the Internet
Keyword database while maintaining the performance of the RealNames platform and
extending its functionality. Our President and Chief Executive Officer, Chief
Technology Officer and senior engineering personnel participate in our product
development effort.
Current product development efforts are focused on the following:
- making the public interface to our routers available to the public in
order to foster development of Internet-Keyword enabled software
applications by third party developers;
- developing intelligent data acquisition technology that will enable the
RealNames platform to improve its ability to generate relevant results
based on an analysis of prior unsuccessful navigation events, which will
increase the quality of our Internet Keyword data; and
- integrating our technology into web publishing tools, enabling content
sites to embed Internet Keywords into articles and other text.
We have made substantial investments in product development and related
activities. As of August 31, 1999, there were 10 employees dedicated to product
development, and we continue to actively recruit highly qualified computer
scientists, engineers and software developers with expertise and degrees in the
areas of software engineering. Through this mix of personnel, we strive to
create and maintain an environment of rapid innovation and product release. Our
product development expenses were $1.0 million, including a non-cash charge of
$705,000 for the transfer of technology from the founders, in our inception
period from November 19, 1996 until December 31, 1997, $1.2 million during the
year ended December 31, 1998 and $1.9 million during the six months ended June
30, 1999. To date we have not
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capitalized any software development costs. We expect to continue to devote
substantial resources to our product development activities.
COMPETITION
The market for the RealNames service is new and rapidly evolving, and we
expect competition in and around this market to intensify in the future. While
we do not believe any of our competitors currently offer the functionality
offered by the RealNames platform, we face competition from several companies
that provide services and functionality similar to ours and that could in the
future seek to compete more directly with us.
We are aware of at least two other companies that offer, or have in the past
offered, services that enable the addressing of web pages other than URLs. In
addition, AOL has developed its own set of AOL Keywords for navigation within
its own proprietary service. If we are unable to structure an agreement with AOL
to enable Internet Keywords within AOL's proprietary service, the number of our
potential users, partners and customers could be decreased. In addition, AOL
could develop a service or technology to extend AOL Keywords, or otherwise offer
a competing navigation service, outside its proprietary service and on the
broader Internet. In addition, if Internet Keywords become increasingly
prominent, other Internet companies may enter our market with the specific
purpose of taking market share from us or limiting our growth. In particular,
providers of browsers, client applications, search engines, directories, portals
or content sites may implement their own keyword systems or technology, as AOL
has done, to serve their own users and customers directly. Also, our existing
distribution relationships, including our relationship with Microsoft, do not
preclude our distribution partners from developing and implementing their own
keyword or similar navigation systems or technology in the future.
Most of our potential competitors, including AOL, have longer operating
histories, greater name recognition, larger customer bases and significantly
greater financial, technical and marketing resources than we do. These potential
competitors would be able to devote greater resources to the development and
marketing of their service or technology if they decide to compete with us. Our
competitors may develop services that are equal or superior to ours or that
achieve greater market acceptance. Our competitors may also engage in more
extensive research and development, adopt more aggressive pricing policies and
make more attractive offers to existing and potential employees, distribution
partners, users and customers. Our competitors may also be able to bundle their
keyword services or technology with other services or technology that we do not
offer, thus making their package more attractive to customers and users. It is
also possible that some competitors would offer such a service or technology at
no charge to our customers. Our competitors may develop services that are equal
to or superior to ours or that achieve greater market acceptance. In addition,
competitors may establish cooperative relationships among themselves or with
third parties to better address the needs of users and customers. As a result,
it is possible that new competitors may emerge and rapidly acquire significant
market share.
In addition, to the extent Internet users continue to rely on search
engines, directories and hyperlinks without Internet Keyword functionality to
navigate the Internet, we compete against this navigation alternative. We
believe competition in this area is most pronounced with respect to the newer,
more direct methods of search such as Google and Direct Hit.
Competition could result in loss of market share, lower pricing for our
service or increased operating expenses. In particular, if two or more keyword
systems were to become widely available and heavily promoted, users might become
confused and customers may be required to promote only one keyword. If our
Internet Keywords do not become the de facto standard, our business growth could
be limited.
We believe that our success in competing with our competitors will depend on
various factors, many of which are outside of our control. These factors
include:
- the ease of use, speed, reliability and accuracy of the RealNames Service;
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- the timing and market acceptance of new and enhanced features to the
RealNames Service; and
- our ability to establish Internet Keywords as a de facto standard for
Internet navigation.
INTELLECTUAL PROPERTY
Our ability to compete and continue to provide technological innovation is
substantially dependent upon internally developed technology and our ability to
protect such technology and other proprietary rights. We rely on a combination
of copyright, trade secret and trademark law to protect our technology, our data
and our business, although we believe that other factors such as the
technological and creative skills of our personnel, new product developments,
frequent product and feature enhancements and reliable product support and
maintenance are more essential to maintaining a technology leadership position.
We have also applied for registered servicemark status for, among others,
"RealNames" and "RealNames Service" and our logo and service marks in the United
States. We have registered "Real Name Service" as a trademark with the European
Union for international protection. In addition, we generally enter into
confidentiality and nondisclosure agreements with our employees, consultants,
customers and corporate partners. We also control access to and distribution of
our technology, documentation and other proprietary information. Despite these
efforts, we may not be able to defend our proprietary rights since the validity,
enforceability and scope of protection of proprietary rights in Internet-related
industries is uncertain and still evolving. Because we are devoting significant
resources to building our brands, primarily "RealNames," through media
advertising campaigns, if we are unable to register the trade and service marks
for which we have applied, or if we are unable to defend our intellectual
property rights, our business may be harmed.
We attempt to avoid infringing known proprietary rights of third parties in
our product development efforts. However, we do not regularly conduct
comprehensive patent searches to determine whether the technology used in our
products infringes patents held by third parties. There are many issued patents
as well as patent applications in the Internet-related industries. Because
patent applications in the U.S. are not publicly disclosed until the patent is
issued, patent applications may have been filed which relate to our services. In
addition, our competitors and other companies as well as research and academic
institutions have conducted research for many years in the Internet-related
industries, and this research should lead to the filing of further patent
applications. If we were to discover that our products violated or potentially
violated third party proprietary rights, we might not be able to obtain licenses
to continue offering those products without substantial reengineering. Any
reengineering effort may not be successful, nor can we be certain that any
licenses would be available on commercially reasonable terms.
Substantial litigation regarding intellectual property rights exists in the
Internet-related industries, and we expect we may be increasingly subject to
third-party infringement claims as the number of competitors in our industry
segments grows and the functionality of services and products in different
Internet-related industries overlaps. Any third-party infringement claims could
be time-consuming to defend, result in costly litigation, divert management's
attention, time and resources, cause service delays or require us to enter into
royalty or licensing agreements. Any royalty or licensing arrangements, if
required, may not be available on terms acceptable to us, if at all. A
successful claim of infringement against us and our failure or inability to
license the infringed or similar technology could have a material adverse effect
on our business, financial condition and results of operations.
EMPLOYEES
As of August 31, 1999, we had a total of 137 employees, including 31 in
research and development, 35 in sales and marketing, 29 in customer support and
Internet Keyword assignment, 13 in business development and 20 in administration
and finance. As of August 31, 1999, we also employed 36 temporary employees. All
these employees were located in the United States. None of our employees is
represented
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by a collective bargaining agreement, nor have we experienced any work stoppage.
We consider our relations with our employees to be good.
Our future operating results depend in significant part on the continued
service of our key technical, sales and senior management personnel, none of
whom is bound by an employment agreement. Our future success also depends on our
continuing ability to attract and retain highly qualified technical, sales and
senior management personnel. We have experienced difficulty in recruiting
qualified technical, sales and senior management personnel, and we expect to
experience these difficulties in the future. If we are unable to hire and retain
qualified personnel in the future, this inability could seriously harm our
business.
FACILITIES
Our engineering, operations, customer support, Internet Keyword assignment
and administrative personnel occupy an office of approximately 25,000 square
feet in San Carlos, California, under a lease that expires in February 2006. Our
sales, marketing and business development personnel occupy an office of
approximately 26,000 square feet in Redwood City, California, under a lease that
expires in May 2000. We will need to lease additional space by April 2000 and
are currently searching for suitable facilities. In addition, we lease sales and
support offices in the metropolitan area of New York and lease facilities to
host routers and data centers in New Jersey and Germany.
LEGAL PROCEEDINGS
From time to time, we are involved in legal proceedings and litigation
arising in the ordinary course of business. As of the date of this prospectus,
except as described below, we are not a party to any litigation or other legal
proceeding that, in our opinion, could severely harm our business.
On July 17, 1998, a third party brought an action against us in the United
States District Court for the Eastern District of Virginia, alleging that our
service infringed its U.S. Patent No. 5,764,906. On January 8, 1999, the
District Court granted our motion for summary judgment on the issues of claim
construction and non-infringement. On January 12, 1999, the Court entered
judgment in our favor. The plaintiff has appealed the case to the United States
Court of Appeals for the Federal Circuit. The appeal is currently pending. If
the District Court's summary judgment ruling were overturned on appeal, we could
be prevented from offering the RealNames service, which is currently our only
source of revenue.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers, directors and key employees of RealNames, and their
ages as of August 31, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Keith W. Teare....................................... 44 Chairman of the Board of Directors, President and
Chief Executive Officer
James N. Strawbridge................................. 38 Executive Vice President, Chief Financial and
Administrative Officer
Edward F. West....................................... 46 Executive Vice President, Strategic Business
Development
Barbara Gore......................................... 39 Senior Vice President, Marketing
Susan M. Rotella..................................... 41 Senior Vice President, Customer Operations
Robert S. Bowman..................................... 25 Vice President, Engineering and Operations
Jeffrey Stevenson.................................... 35 Vice President, Sales
Nicolas Popp......................................... 36 Chief Technology Officer
Anthony J. Gould..................................... 37 Director of Finance and Corporate Controller
William Elkus........................................ 48 Director
John Fisher.......................................... 40 Director
Jean Marie Hullot.................................... 45 Director
Robert Korzeniewski.................................. 42 Director
Robert J. Loarie..................................... 56 Director
</TABLE>
- ------------------------
KEITH W. TEARE co-founded RealNames in November 1996 and has served as
Chairman of the Board, President and Chief Executive Officer since that time.
From August 1994 to November 1996, Mr. Teare also co-founded and served as Chief
Technical Officer at The Easynet Group, an Internet Service Provider. In August
1994, Mr. Teare founded Cybercafe, an Internet company, and has served on its
board of directors since that time. Mr. Teare holds a B.A. in Sociology and
Political Science from the University of Kent at Canterbury, England.
JAMES N. STRAWBRIDGE has served as Executive Vice President, Chief Financial
and Administrative Officer since July 1999. Prior to joining RealNames, Mr.
Strawbridge was a partner with the law firm of Wilson Sonsini Goodrich & Rosati
from February 1995 to July 1999 and was an associate with the firm from October
1987 to January 1995. Mr. Strawbridge served as a director of RealNames from
December 1997 to March 1998. Mr. Strawbridge holds a B.S. in Industrial
Engineering and Operations Research from Virginia Tech and a J.D. from the
University of Virginia.
EDWARD F. WEST has served as Executive Vice President, Strategic Business
Development since March 1999. He joined RealNames in May 1998 as Executive Vice
President, Sales and Marketing. Prior to joining RealNames, from June 1996 to
March 1998, Mr. West co-founded and served as Chief Operating Officer and
Executive Vice President of Development at Softbank Interactive Marketing, an
Internet marketing services company. From June 1995 to June 1996, Mr. West
co-founded and served as President of Network 1.0, an Internet and marketing
services company. Mr. West also founded and served as President and Publisher of
Consumer Direct Access, Inc., a directory publishing company, from January 1991
to May 1995. Mr. West holds an A.B. in Architecture and Urban Planning from
Princeton University and an M.B.A. from Harvard Business School.
BARBARA GORE has served as Senior Vice President, Marketing since May 1999.
Ms. Gore joined RealNames as Vice President, Business and Product Development in
October 1998. Prior to joining RealNames, from July 1998 to September 1998, Ms.
Gore served as President of The BizDev Group, an
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Internet consulting company. From July 1995 to January 1998, Ms. Gore served as
a Publisher for Netscape Communications Corporation, an Internet company. Ms.
Gore also served as Vice President of Sales at Lycos, an Internet company, from
May 1995 to July 1995. Ms. Gore holds a B.S. in Advertising from the University
of Florida.
SUSAN M. ROTELLA has served as Senior Vice President, Customer Operations
since June 1999. Ms. Rotella joined RealNames as Vice President, Subscription
Sales and Marketing in July 1998. Prior to joining RealNames, from May 1997 to
January 1998, Ms. Rotella served on a contract basis as Director, Product
Management at SBC Directory Operations, the yellow pages advertising division of
Southwestern Bell. From February 1993 to June 1996, Ms. Rotella held various
positions at AirTouch Communications, a wireless communications company,
including most recently as Director, Investor Relations. Ms. Rotella holds a
B.B.A. in Public Accounting from the Hofstra University School of Business and
an M.B.A. from the University of Michigan.
ROBERT S. BOWMAN has served as Vice President, Engineering and Operations
since March 1999. Prior to joining RealNames, from February 1999 to March 1999,
Mr. Bowman served as a consultant for a number of Internet companies. From
October 1995 to February 1999, Mr. Bowman held various positions at Exodus
Communications, an Internet and computer networking company, including most
recently as Director of Network Technology. From September 1994 to October 1995,
Mr. Bowman served as a consultant for a number of Internet companies.
JEFFREY STEVENSON has served as Vice President, Sales since June 1999. Prior
to joining RealNames, from November 1998 to June 1999, Mr. Stevenson served as
Senior Director of Business Development for International Network Services, a
computer networking company. From July 1997 to November 1998 Mr. Stevenson
served as Director of Business Development at VitalSigns Software, a software
company. From July 1995 to July 1997, Mr. Stevenson served in OEM Strategic
Business Development at Netscape Communications. From May 1993 to July 1995, Mr.
Stevenson held various positions at NetManage, a software company, including
most recently as Director of Major Accounts. Mr. Stevenson holds a B.S. in
Electrical/Electronic Engineering from California State University, Chico.
NICOLAS POPP has served as Chief Technical Officer since March 1999. Mr.
Popp joined RealNames as Vice President, Engineering in May 1997. Prior to
joining RealNames, from March 1997 to April 1997, Mr. Popp served as Web Objects
Software Manager at Apple Computer, a computer company. Mr. Popp served as a Web
Objects Software Manager from August 1995 to March 1997, and as Manager of
Applications Tools Software from January 1994 to April 1995, at NeXT Software, a
computer software company. Mr. Popp holds a B.S. in Robotics and an M.S. in
Aeronautics from Stanford University and a B.S. in Aeronautics from Ecole
Nationale Superieure De L'aeronautique et Espace, France.
ANTHONY J. GOULD has served as Director of Finance and Corporate Controller
since July 1999. Prior to joining RealNames, from November 1988 to July 1999,
Mr. Gould held various positions at Bay Area Banc Shares, a bank holding
company, including most recently as Chief Operating and Financial Officer. Mr.
Gould holds a B.B.A. in Finance from the University of Wisconsin, Eau Claire and
an M.B.A. from California State University, Hayward.
WILLIAM ELKUS has served as a director of RealNames since March 1998. Mr.
Elkus is a Managing Member of idealab Capital Partners, a venture capital
investment company, which he joined in March 1998. Prior to joining idealab
Capital Partners, from January 1994 to December 1997, Mr. Elkus was a Managing
Director of Klein Investment Group, LP, an investment banking company. Mr. Elkus
also serves as a director of GoTo.com, an Internet advertising company, and
serves as a director of several private companies. Mr. Elkus holds a S.B. and
S.M. from Massachusetts Institute of Technology and a J.D. from Harvard Law
School.
JOHN FISHER has served as a director of RealNames since March 1998. Mr.
Fisher is a Managing Director of Draper Fisher Jurvetson, a venture capital
investment company, which he joined in 1991.
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Mr. Fisher also serves as a director of Wit Capital Corporation, an investment
banking company, and serves as a director of several private companies. Mr.
Fisher holds a B.A. from Harvard College and an M.B.A. from Harvard Business
School.
JEAN MARIE HULLOT co-founded RealNames in November 1996 and has served as a
director of RealNames since that time. Prior to joining RealNames, Mr. Hullot
served as Chief Technology Officer at NeXT Software from 1994 to June 1996. Mr.
Hullot holds an M.A. and a Ph.D. in Computer Science from the University of
Paris.
ROBERT KORZENIEWSKI has served as a director of RealNames since December
1998. Mr. Korzeniewski is Chief Financial Officer and acting Chief Operating
Officer of Network Solutions, an Internet company which he joined in March 1996.
Prior to joining Network Solutions, from 1987 to October 1997, Mr. Korzeniewski
held a variety of senior financial positions with SAIC, a systems engineering
company. Mr. Korzeniewski is a Certified Public Accountant and holds a B.S. in
Business Administration from Salem State College.
ROBERT J. LOARIE has served as a director of RealNames since August 1999.
Since August 1992, Mr. Loarie has been a Principal of, and since December 1997,
a Managing Director of Morgan Stanley Dean Witter, an investment banking
company. Since August 1992, Mr. Loarie has also served as a managing member of
several venture capital investment partnerships affiliated with Morgan Stanley
Dean Witter. Mr. Loarie also serves as a director of Adaptec, a computer
peripherals company, and Evolving Systems, a telecommunications software
company. Mr. Loarie holds a B.S. from the Illinois Institute of Technology and
an M.B.A. from Harvard Business School.
The board of directors elects executive officers on an annual basis.
Executive officers serve until their successors have been duly elected and
qualified. There are no family relationships among any of our directors or
executive officers.
Under a voting agreement that we have with a number of our stockholders, the
following stockholders or their affiliated entities have appointed a member to
our board of directors:
- idealab Capital Partners, whose representative on our board is Mr. Elkus;
- Draper Fisher Jurvetson, whose representative on our board is Mr. Fisher;
- Network Solutions, whose representative on our board is Mr. Korzeniewski;
and
- Morgan Stanley Dean Witter Venture Partners, whose representative on our
board is Mr. Loarie.
This voting agreement will terminate upon completion of this offering.
BOARD COMPOSITION
Our board of directors is comprised of six individuals. Each director is
currently elected for a period of one year at our annual meeting of stockholders
and serves until the next annual meeting or until his or her successor is duly
elected and qualified. However, upon the completion of this offering, our board
will be reorganized into a classified board, whereby our directors will be
divided into three classes with overlapping three-year terms as follows:
- Class I directors will include and , and their
terms will expire at the first annual meeting of stockholders following
this offering;
- Class II directors will include and , and their
terms will expire at the second annual meeting of stockholders following
this offering; and
- Class III directors will include and , and their
terms will expire at the third annual meeting of stockholders following
this offering.
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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 an equal number of directors.
BOARD COMMITTEES
Our board of directors currently has two standing committees, an audit
committee and a compensation committee.
AUDIT COMMITTEE. The board established an audit committee in April 1999,
which currently consists of Messrs. Loarie and Korzeniewski. The audit committee
has the following responsibilities:
- make such examinations as are necessary to monitor our corporate financial
reporting and the internal and external audits;
- provide to the board the results of its examinations and recommendations
derived from such examinations;
- outline to the board improvements made, or to be made, in internal
accounting controls;
- nominate independent auditors; and
- provide such additional information and materials as it may deem necessary
to make the board aware of significant financial matters that require
board attention.
COMPENSATION COMMITTEE. The board established a compensation committee in
April 1999, which currently consists of Messrs. Elkus and Fisher. The
compensation committee has the following responsibilities:
- review our executive compensation policy;
- administer our stock purchase and stock option plans; and
- make recommendations to the board regarding such matters.
DIRECTOR COMPENSATION
Our directors currently do not receive any cash compensation for their
services as members of the board of directors or any committees, but directors
are reimbursed for reasonable expenses incurred in connection with attendance of
board or committee meetings. In addition, our non-employee directors are
eligible to participate in our 1999 Director Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to April 1999, all compensation decisions were made by the board of
directors. In April 1999, the board established a compensation committee
consisting of Messrs. Elkus and Fisher. No interlocking relationship exists
between our board of directors or compensation committee and the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past. For a discussion of transactions
that the compensation committee members or their affiliates have entered into
with RealNames, please see "Related Party Transactions."
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EXECUTIVE COMPENSATION
The following table sets forth information concerning total compensation
received by our chief executive officer and each of our most highly compensated
executive officers in 1998 whose salary and bonus was more than $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------------
-------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS COMPENSATION
- ---------------------------------------- --------- -------- --------------------- ----------------
<S> <C> <C> <C> <C>
Keith W. Teare ......................... $ 123,461 -- -- --
President, Chief Executive Officer and
Chairman of the Board
Edward F. West ......................... $ 87,115 $ 50,000 750,000 --
Executive Vice President, Strategic
Business Development
Nicolas Popp ........................... $ 132,688 -- 100,000 $ 43,200
Chief Technology Officer
</TABLE>
Other compensation for Mr. Popp represents a loan, along with imputed
interest, made to Mr. Popp in September 1997, which was forgiven in September
1998. For more information on this loan, please see "Related Party
Transactions."
OPTIONS GRANTED IN 1998
The following table sets forth information concerning stock options granted
in 1998 to the executive officers included in the summary compensation table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTIONS TERM
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION ----------------------
NAME GRANTED IN FISCAL YEAR PER SHARE DATE 5% 10%
- --------------------------------- ----------- ----------------- ----------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Keith W. Teare................... 0 -- -- -- -- --
Edward F. West................... 750,000 22.5% $ .10 05/19/08
Nicolas Popp..................... 100,000 3.0% $ .20 10/14/08
</TABLE>
The options in this table are incentive stock options granted under our 1997
Stock Plan and have exercise prices equal to the fair market value of our common
stock on the date of grant. These options have ten-year terms and currently vest
monthly over a period of four years as determined by our board of directors. The
figures representing percentages of total options granted to employees in the
last fiscal year are based on a total of 3,330,500 options granted to our
employees under our 1997 Stock Plan in 1998.
These options were, for the most part, exercised through our early exercise
program which allows our stockholders to purchase shares of common stock
underlying unvested options, subject to our repurchase right. Stockholders may
purchase these early exercise shares with cash, check, promissory note or other
shares of our common stock.
Under the rules of the SEC, the amounts in the last two columns represent
the hypothetical gain or option spread that would exist for the options in this
table if the assumed initial public offering price of our common stock
appreciates at assumed annual rates of 5% or 10% over the ten-year terms of such
options.
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Annual compounding results in total appreciation of 63% (at 5% per year) and
159% (at 10% per year). If the price of our common stock were to increase at
such rates from the assumed initial public offering price of $ per share
over the next 10 years, the resulting stock price at 5% would be $ per
share and at 10% would be $ per share. The 5% and 10% assumed annual rates
of appreciation are specified in SEC rules and do not represent our estimate or
projection of future stock price growth. We do not necessarily agree that this
method can properly determine the value of an option.
In September 1999, we granted Mr. Teare an option to purchase 724,414 shares
of our common stock at an exercise price equal to $6.05 per share. This price
represents 110% of the fair market value of our common stock at the time of
grant. This option vests monthly over four years.
In 1999, we granted Mr. West options to purchase an aggregate of 100,000
shares of our common stock at exercise prices ranging from $.25 to $3.50 per
share, the fair market value at the time of grant.
1998 YEAR-END OPTION VALUES
The following table sets forth information, as to the executive officers
included in the summary compensation table, concerning the number of shares
subject to both exercisable and unexercisable stock options as of December 31,
1998. Also reported are values for in-the-money options that represent the
positive spread between the respective exercise prices of these options and the
assumed initial public offering price of $ per share. No options were
exercised by the executive officers included in the summary compensation table
in 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Keith W. Teare.......................... -- --
Edward F. West.......................... 750,000 --
Nicolas Popp............................ 100,000 --
</TABLE>
STOCK PLANS
1997 STOCK PLAN
As of August 31, 1999, options to purchase 7,108,088 shares of common stock
granted under the 1997 Stock Plan had been exercised, options to purchase
1,281,334 shares of common stock at a weighted average exercise price of $.30
per share were outstanding, and 410,578 shares of common stock were reserved for
future grant.
The 1997 Stock Plan will terminate immediately prior to this offering. As a
result, no options will be granted under the plan after this offering. However,
the termination of this plan will not affect any outstanding options granted
under the plan, all of which will remain outstanding until exercised or until
they terminate or expire. Options granted under the 1997 Stock Plan are subject
to terms substantially similar to those described below with respect to options
to be granted under our new 1999 Stock Plan.
1999 STOCK PLAN
The board of directors adopted the 1999 Stock Plan in October 1999 and the
stockholders approved the 1999 Stock Plan in 1999. The 1999 Stock
Plan provides for the grant of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code, as amended, or the Code, to employees
and for the grant of nonstatutory stock options and stock purchase rights to
employees, directors and consultants.
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NUMBER OF SHARES OF COMMON STOCK AVAILABLE UNDER THE 1999 PLAN. As of
October 5, 1999, a total of 3,500,000 shares of common stock were reserved for
issuance under the 1999 Stock Plan. Also reserved under this plan will be any
additional shares reserved under the 1997 Stock Plan that were not issued and
that are not subject to outstanding grants on , 1999, the effective
date of the 1999 Stock Plan and any shares issued under the 1997 Stock Plan that
are forfeited or repurchased by RealNames or that are issuable upon exercise of
options that expire or become unexercisable for any reason without having been
exercised in full. In addition, shares that:
- are subject to issuance upon exercise of an option granted under the 1999
Stock Plan that cease to be subject to that option for any reason other
than exercise of the option;
- have been issued in connection with the exercise of an option granted
under the 1999 Stock Plan that are subsequently forfeited or repurchased
by RealNames at the original purchase price; or
- are subject to an award granted under a restricted stock purchase
agreement under the 1999 Stock Plan that are subsequently forfeited or
repurchased by RealNames at the original issue price;
will again be available for grant and issuance under the 1999 Stock Plan.
Moreover, the 1999 Stock Plan provides for annual increases in the number of
shares available for issuance under the plan, on the first day of each new
fiscal year of RealNames, effective beginning with RealNames' fiscal year 2001,
equal to the LOWEST of (1) 4% of the outstanding shares of common stock on the
first day of the fiscal year, (2) 6,000,000 shares of common stock OR (3) a
lesser amount as the board of directors may determine.
ADMINISTRATION OF THE 1999 PLAN. The board of directors or a committee of
the board, as applicable, the plan administrator, administers the 1999 Plan. In
the case of options intended to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code, the committee will consist of
two or more "outside directors" within the meaning of Section 162(m) of the
Code. The plan administrator has the power to determine the terms of the options
or stock purchase rights granted, including the exercise price, the number of
shares subject to each option or stock purchase right, the exercisability of the
options and the form of consideration payable upon exercise.
OPTIONS. The plan administrator determines the exercise price of
nonstatutory stock options granted under the 1999 Stock Plan, but with respect
to nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the exercise
price must at least be equal to the fair market value of the common stock on the
date of grant. The exercise price of all incentive stock options granted under
the 1999 Stock Plan must be at least equal to the fair market value of the
common stock on the date of grant and the term of such option may not exceed ten
years. With respect to any participant who owns stock possessing more than 10%
of the voting power of all classes of RealNames' outstanding capital stock, the
exercise price of any incentive stock option granted must equal at least 110% of
the fair market value on the grant date and the term of such incentive stock
option must not exceed five years. The plan administrator determines the term of
all other options.
No optionee may be granted an option to purchase more than 1,500,000 shares
in any fiscal year. In connection with his or her initial service, an optionee
may be granted an option to purchase up to an additional 1,500,000 shares, which
will not count against the yearly limit set forth in the previous sentence.
An optionee generally must exercise an option granted under the 1999 Stock
Plan at the time set forth in the optionee's option agreement after termination
of the optionee's status as an employee, director or consultant of RealNames.
Generally, in the case of the optionee's termination by death or disability, the
option will remain exercisable for 12 months. In all other cases, the option
will generally remain exercisable for a period of three months. However, an
option may never be exercised later than the expiration of the option's term.
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STOCK PURCHASE RIGHTS. The plan administrator determines the exercise price
of stock purchase rights granted under the 1999 Stock Plan. In the case of stock
purchase rights, unless the plan administrator determines otherwise, the
restricted stock purchase agreement entered into in connection with the exercise
of the stock purchase right will grant RealNames a repurchase option that
RealNames may exercise upon the voluntary or involuntary termination of the
purchaser's service with RealNames for any reason, including death or
disability. The purchase price for shares RealNames repurchases pursuant to
restricted stock purchase agreements will generally be the original price paid
by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to RealNames. The repurchase option will lapse at a rate that the plan
administrator determines.
TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. An optionee generally
may not transfer options and stock purchase rights granted under the 1999 Stock
Plan and only the optionee may exercise an option and stock purchase right
during his or her lifetime.
ADJUSTMENTS UPON MERGER OR ASSET SALE. The 1999 Stock Plan provides that if
RealNames merges with or into another corporation or sells all or substantially
all of its assets, the successor corporation will assume or substitute each
option or stock purchase right. If the outstanding options or stock purchase
rights are not assumed or substituted, the plan administrator will provide
notice to the optionee that he or she has the right to exercise the option or
stock purchase right as to all of the shares subject to the option or stock
purchase right, including shares which would not otherwise be exercisable, for a
period of 15 days from the date of the notice. The option or stock purchase
right will terminate upon the expiration of the 15-day period.
AMENDMENT AND TERMINATION OF THE 1999 STOCK PLAN. Unless terminated sooner,
the 1999 Stock Plan will terminate automatically in 2009. In addition, the board
of directors has the authority to amend, suspend or terminate the 1999 Stock
Plan, provided that no such action may affect any share of common stock
previously issued and sold or any option previously granted under the 1999 Stock
Plan.
1999 EMPLOYEE STOCK PURCHASE PLAN
The board of directors adopted the employee stock purchase plan, or the
Purchase Plan, in October 1999 and the stockholders approved the Purchase Plan
in 1999. The Purchase Plan provides for the sale of RealNames' common
stock to eligible employees.
NUMBER OF SHARES OF COMMON STOCK AVAILABLE UNDER THE PURCHASE PLAN. A total
of 1,000,000 shares of common stock will be made available for sale. In
addition, the Purchase Plan provides for annual increases in the number of
shares available for issuance under the Purchase Plan on the first day of each
fiscal year, beginning with the RealNames' fiscal year 2001, equal to the LOWEST
of (1) 2% of the outstanding shares of common stock on the first day of the
fiscal year, (2) 3,000,000 shares of common stock OR (3) a lesser amount as the
board of directors may determine.
ADMINISTRATION OF THE PURCHASE PLAN. The board of directors or a committee
appointed by the board of directors administers the Purchase Plan. The board of
directors or its committee has full and exclusive authority to interpret the
terms of the Purchase Plan and determine eligibility.
ELIGIBILITY TO PARTICIPATE. Employees are eligible to participate if they
are customarily employed by RealNames or any participating subsidiary for at
least 20 hours per week and more than five months in any calendar year. However,
an employee may not be granted an option to purchase stock under the Purchase
Plan if such employee, immediately after grant, owns stock possessing 5% or more
of the total combined voting power or value of all classes of the capital stock
of RealNames. The Purchase Plan permits eligible employees to purchase common
stock through payroll deductions up to a maximum of $25,000 for all purchases
ending within the same calendar year.
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OFFERING PERIODS AND CONTRIBUTIONS. The Purchase Plan, which is intended to
qualify under Section 423 of the Code, contains consecutive, overlapping
24-month offering periods. Each offering period includes four 6-month purchase
periods. The offering periods generally start on the first trading day on or
after February 1 and August 1 of each year, except for the first such offering
period which will commence on the first trading day on or after the effective
date of this offering and will end on the last trading day on or before July 31,
2001.
The Purchase Plan permits participants to purchase common stock through
payroll deductions of up to 15% of the participant's "compensation."
Compensation is defined as the participant's base straight time gross earnings,
commissions and bonuses. The maximum number of shares a participant may purchase
during a single offering period is 5,000 shares.
PURCHASE OF SHARES. Amounts deducted and accumulated by the participant are
used to purchase shares of common stock at the end of each six-month purchase
period. The price of stock purchased under the Purchase Plan is 85% of the lower
of the fair market value of the common stock at the beginning of an offering
period or after a purchase period ends. If the fair market value at the end of a
purchase period is less than the fair market value at the beginning of the
offering period, participants will be withdrawn from the current offering period
following their purchase of shares on the purchase date and will be
automatically re-enrolled in a new offering period. Participants may end their
participation at any time during an offering period, and they will be paid their
payroll deductions to date. Participation ends automatically upon termination of
employment with RealNames.
TRANSFERABILITY OF RIGHTS. A participant may not transfer rights granted
under the Purchase Plan other than by will, the laws of descent and distribution
or as otherwise provided under the Purchase Plan.
ADJUSTMENTS UPON MERGER OR ASSET SALE. The Purchase Plan provides that, if
RealNames merges with or into another corporation or sells all or substantially
all of its assets, a successor corporation may assume or substitute for each
outstanding option. If the successor corporation refuses to assume or substitute
for the outstanding options, the offering period then in progress will be
shortened, and a new exercise date will be set.
AMENDMENT AND TERMINATION OF THE PURCHASE PLAN. The Purchase Plan will
terminate in 2009. However, the board of directors has the authority to amend or
terminate the Purchase Plan, except that, subject to certain exceptions
described in the Purchase Plan, no such action may adversely affect any
outstanding rights to purchase stock under the Purchase Plan.
1999 DIRECTOR OPTION PLAN
The board of directors adopted the 1999 Director Option Plan, or the
Director Plan, in October 1999 and the stockholders initially approved the 1999
Stock Plan in 1999. The Director Plan provides for the periodic
grant of nonstatutory stock options to non-employee directors.
NUMBER OF SHARES AVAILABLE UNDER THE DIRECTOR PLAN. As of October 5, 1999,
a total of 500,000 shares were reserved for issuance under the Director Plan. No
options have been granted as of yet under the Director Plan.
OPTIONS. All grants of options to non-employee directors under the Director
Plan are automatic. When a non-employee director first becomes a non-employee
director, except for those directors who became non-employee directors by
ceasing to be employee directors, he or she receives an option to purchase
40,000 shares. This same grant is available to those directors that are
non-employee directors on the effective date of this Director Plan. All
non-employee directors who have been directors for at least six months receive
an option to purchase 20,000 shares on each date of the annual stockholders
meeting held after 1999.
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All options granted under the Director Plan have a term of ten years, have
an exercise price equal to fair market value on the date of grant, are only
exercisable while the non-employee director remains a director of RealNames and
become exercisable as to 25% of the shares subject to the option on each
anniversary of the date of grant provided the non-employee director remains a
director on such dates.
An optionee must exercise an option granted under the Director Plan at the
time set forth in the optionee's option agreement after termination of the
optionee's status as a non-employee director of RealNames. In the case of the
optionee's termination by death or disability, the option will remain
exercisable for 12 months. In all other cases, the option will remain
exercisable for a period of three months. However, an option may never be
exercised later than the expiration of the option's term.
TRANSFERABILITY OF OPTIONS. A non-employee director may not transfer
options granted under the Director Plan other than by will or the laws of
descent and distribution. Only a non-employee director may exercise the option
during his or her lifetime.
ADJUSTMENTS UPON MERGER OR AN ASSET SALE. The Director Plan provides that
if RealNames merges with or into another corporation or sells all or
substantially all of its assets, the successor corporation shall assume or
substitute each option. If such assumption or substitution occurs, the options
shall continue to be exercisable according to the same terms as before the
merger or sale of substantially all of RealNames' assets. Following such
assumption or substitution, if a non-employee director is terminated other than
by voluntary resignation, the option shall become fully exercisable and remain
exercisable for a period of three months, unless termination is due to the
director's death or disability, in which case the option will remain exercisable
for 12 months. If the outstanding options are not assumed or substituted for,
the board of directors shall notify each non-employee director that he or she
has the right to exercise the option as to all shares subject to the option for
a period of 30 days following the date of the notice. The option will terminate
upon the expiration of the 30-day period.
AMENDMENT AND TERMINATION OF THE DIRECTOR PLAN. Unless terminated sooner,
the Director Plan will terminate automatically in 2009. The board of directors
has the authority to amend, alter, suspend, or discontinue the Director Plan,
but no such action may affect any share of common stock previously issued or
sold or the rights of any non-employee director under any grant made under the
Director Plan.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by Delaware law, our certificate of incorporation eliminates
the personal liability of our directors for monetary damages for breach of their
fiduciary duty as a director, except for liability for any of the following:
- any breach of the director's duty of loyalty to RealNames or to its
stockholders;
- acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which a director derives an improper personal
benefit.
Our certificate of incorporation also provides that if Delaware law is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors after our stockholders approve the certificate
of incorporation, then the liability of our directors shall be eliminated or
limited to the fullest extent permitted by the amended Delaware law.
In addition, as permitted by Delaware law, our bylaws provide for the
following:
- we must indemnify our directors and executive officers to the fullest
extent permitted by Delaware law;
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- we may indemnify our other officers, employees and agents to the fullest
extent permitted by the Delaware law; and
- we must advance all expenses, as incurred, to our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law, subject to limited exceptions.
We believe that indemnification under our bylaws covers at least negligence
and gross negligence on the part of an indemnified party.
We have also entered into separate indemnification agreements with each of
our directors and executive officers. These agreements provide for, among other
things, the following:
- we must indemnify the director or officer against expenses, including
attorney's fees, judgments, fines and settlements paid by the individual
in connection with any action, suit or proceeding arising out of the
individual's status or service as a director or officer of RealNames,
other than liabilities arising from willful misconduct or conduct that is
knowingly fraudulent or deliberately dishonest; and
- we must advance expenses incurred by the individual in connection with any
proceeding against the individual with respect to which he or she may be
entitled to indemnification by us.
We believe that our certificate of incorporation and bylaw provisions and
indemnification agreements are necessary to attract and retain qualified persons
as directors and officers. Following completion of this offering, we also will
maintain directors' and officers' liability insurance.
The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also have the effect of reducing the likelihood of derivative litigation
against directors and officers, even though such an action, if successful, might
otherwise benefit us and our stockholders. Furthermore, a stockholder's
investment may be adversely affected to the extent we pay the costs of
settlement and damage awards against directors and officers pursuant to these
indemnification provisions.
We are not aware of any pending litigation or proceeding involving any of
our directors, officers, employees or agents where indemnification will be
sought, required or permitted. Furthermore, we are not aware of any threatened
litigation or proceeding that might result in a claim for indemnification.
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RELATED PARTY TRANSACTIONS
SALE OF COMMON STOCK TO THE FOUNDERS
In November 1996, we sold 620 shares of our common stock at a price per
share of $1,000 to the co-founders of RealNames, including 510 shares of common
stock to Keith Teare and 110 shares of common stock to Keith Young. Messrs.
Teare and Young paid for these shares with promissory notes, secured by the
purchased shares. These notes were paid in full in April and September 1997.
Effective September 17, 1997, our certificate of incorporation was amended to
effect, among other things, a stock split whereby each issued and outstanding
share of our common stock was reconstituted as and converted into 10,000 shares
of common stock.
In September 1997, we issued and sold 7,050,000 shares of our common stock
at a price of $.10 per share to our founders and consultants in exchange for
certain technologies held by these individuals, including 4,900,000 shares to
Keith Teare, 1,200,000 shares to Jean Marie Hullot, 475,000 shares to Brian
Russell, a co-founder of RealNames, and 475,000 shares to Brian Teare, brother
of Keith Teare.
In September 1997, we issued and sold an aggregate of 1,487,000 shares of
our common stock at a price of $.10 per share to individuals, including 537,000
shares to Jean Marie Hullot, 400,000 shares to Nicolas Popp, and 400,000 shares
to Gene McPherson, spouse of Keith Teare. The purchasers paid for these shares
with promissory notes secured by the purchased shares. The notes were due and
payable in full on December 31, 1998, although we had the option to forgive the
balance on such notes if the stockholder remained an employee, director or
consultant of the company as of September 19, 1998. We forgave these promissory
notes in September 1998.
In May 1998, Keith Teare granted Edward West an option to purchase 750,000
shares of common stock held by him, at an exercise price of $.45 per share, in
connection with Mr. West's employment as our Executive Vice President, Sales and
Marketing. Mr. West exercised this option in full in August 1999. He paid a
portion of the aggregate exercise price to Keith Teare in cash and executed a
promissory note for the remainder.
PREFERRED STOCK FINANCINGS
In March 1998, we issued and sold an aggregate of 8,869,179 shares of our
Series A preferred stock at a price of $.451 per share. From December 1998 to
June 30, 1999, we issued and sold an aggregate of 12,985,000 shares of our
Series B preferred stock at a price of $1.00 per share. In August 1999, we
issued and sold an aggregate of 15,677,778 shares of our Series C preferred
stock at a price of $4.50 per share. The following table summarizes the shares
of capital stock purchased by executive officers, directors and five-percent
stockholders and their affiliates in these transactions:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
PREFERRED PREFERRED PREFERRED
INVESTOR STOCK STOCK STOCK
- --------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Entities and individuals affiliated with Draper Fisher Jurvetson........... 4,323,725 2,565,000 1,835,556
Entities affiliated with idealab Capital Partners.......................... 4,434,590 2,630,000 1,422,570
Network Solutions.......................................................... -- 4,240,000 1,555,556
Entities affiliated with Morgan Stanley Dean Witter Venture Partners....... -- -- 1,869,999
Morgan Stanley Dean Witter Equity Funding.................................. -- -- 907,778
Jeffrey Stevenson.......................................................... -- -- 200,000
Robert S. Bowman........................................................... -- -- 88,889
Barbara Gore............................................................... -- -- 9,811
Susan West, mother of Edward F. West....................................... -- -- 5,657
Nicolas Popp............................................................... -- -- 5,657
Susan M. Rotella........................................................... -- -- 5,657
</TABLE>
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In January 1998, we borrowed $300,000 from Keith Teare under a convertible
promissory note. We repaid this note plus interest in March 1998.
In November 1998, we borrowed $125,000 from entities affiliated with Draper
Fisher Jurvetson and $125,000 from entities affiliated with idealab Capital
Partners under convertible promissory notes. These notes were converted into
shares of our Series B preferred stock at a price of $1.00 per share at the time
of our Series B preferred stock financing.
AGREEMENT WITH NETWORK SOLUTIONS
On December 8, 1998, we entered into a sales representative and distribution
agreement with Network Solutions, Inc., or NSI, as amended by agreements dated
February 18, 1999 and May 25, 1999. Robert Korzeniewski, one of our directors,
is an executive officer of NSI. In consideration of NSI's obligations under the
sales representative and distribution agreement, we agreed to issue warrants to
NSI to purchase up to 4,196,726 shares of our common stock upon the achievement
of commercial milestones based on the number of Internet Keywords sold by NSI or
its affiliates and for each distribution agreement we enter into with specified
companies. On June 2, 1999, in connection with the closing of the strategic
agreement with Microsoft, we issued to NSI a fully exercisable warrant to
purchase 1,271,735 shares of our common stock at a price of $2.09 per share.
This warrant was exercised in September 1999.
LOANS TO EXECUTIVE OFFICERS
In May 1998, Keith Teare borrowed $270,000 from us pursuant to a promissory
note bearing 8% annual interest, due and payable in full on December 31, 1998.
In October 1999, we extended the maturity date of this note until December 31,
2001.
In July 1999, Mr. Strawbridge exercised options to purchase 550,000 shares
of our common stock for an aggregate exercise price of $687,500. Mr. Strawbridge
paid the aggregate exercise price with promissory notes. In March, July and
September 1999, Mr. West exercised options to purchase 850,000 shares of our
common stock for an aggregate exercise price of $206,250. Mr. West paid the
aggregate exercise price with promissory notes. In March and July 1999, Ms. Gore
exercised options to purchase 400,000 shares of our common stock for an
aggregate exercise price of $106,250. Ms. Gore paid the aggregate exercise price
with promissory notes. In March 1999, Ms. Rotella exercised option to purchase
100,000 shares of our common stock for an aggregate exercise price of $22,500.
Ms. Rotella paid the aggregate exercise price with promissory notes. In March
1999, Mr. Bowman exercised options to purchase 411,288 shares of our common
stock for an aggregate exercise price of $102,822. Mr. Bowman paid the aggregate
exercise price with promissory notes. In July 1999, Mr. Stevenson exercised
options to purchase 234,792 shares of our common stock for an aggregate exercise
price of $293,490 and in August 1999, Mr. Stevenson purchased 200,000 shares of
our Series C preferred stock for an aggregate purchase price of $900,000. Mr.
Stevenson paid the aggregate exercise price for his options and $899,800 of the
aggregate purchase price for our Series C preferred stock with promissory notes.
In March 1999, Mr. Popp exercised options to purchase 100,000 shares of our
common stock for an aggregate exercise price of $20,000. Mr. Popp paid the
aggregate exercise price with promissory notes.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of our common stock as of August 31, 1999, and as adjusted to reflect
the sale of the shares of common stock to be sold in this offering, by the
following persons and entities:
- each person or entity who owns beneficially 5% or more of our outstanding
common stock;
- each of the members of our board of directors;
- each of our executive officers included in the summary compensation table;
and
- all members of our board of directors and executive officers as a group.
Under rules promulgated by the SEC, the number and percentage of shares
beneficially owned is determined in accordance with Rule 13d-3 of the Securities
and Exchange Act of 1934, as amended, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under this rule,
beneficial ownership includes (1) any shares as to which the individual or
entity has voting power or investment power and (2) any shares which the
individual or entity has the right to acquire within 60 days of August 31, 1999
through the exercise of any stock option, warrant, or other right. Unless
otherwise indicated in the footnotes, each person or entity has sole voting and
investment power (or shares such powers with his or her spouse) with respect to
the shares shown as beneficially owned. Except as otherwise noted, the address
of each person listed on the table is c/o RealNames Corporation, Two Circle Star
Way, Second Floor, San Carlos, California 94070-1350.
The percentage of common stock outstanding as of August 31, 1999 is based on
59,387,045 shares of common stock outstanding on that date, assuming that all
outstanding preferred stock has been converted into common stock.
<TABLE>
<CAPTION>
PERCENT
BENEFICIALLY OWNED
SHARES ------------------------
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------------------------------------------------------------ ------------ ----------- -----------
<S> <C> <C> <C>
Keith W. Teare(1)............................................................. 9,650,000 16.25
John Fisher and
entities and individuals affiliated with Draper Fisher Jurvetson(2)......... 8,724,281 14.69
William Elkus and
entities affiliated with idealab Capital Partners(3)........................ 8,487,160 14.29
Robert Korzeniewski and
Network Solutions, Inc.(4).................................................. 7,067,291 11.65
Robert J. Loarie(5)........................................................... 1,869,999 3.15
Jean Marie Hullot(6).......................................................... 1,737,000 2.92
Edward F. West(7)............................................................. 1,600,000 2.69
Nicolas Popp(8)............................................................... 505,657 *
All executive officers and directors as a group (13 persons) (9).............. 42,813,353 70.23
</TABLE>
- ------------------------
* Less than 1% beneficially owned.
(1) This number includes 9,250,000 shares held by Mr. Teare and 400,000 shares
held by Gene McPherson, spouse of Mr. Teare and Vice President, Marketing of
RealNames, of which 183,334 shares are subject to repurchase at cost by
RealNames within 60 days of August 31, 1999 in the event of Ms. McPherson's
termination of employment with the Company.
(2) This number includes:
- 6,819,847 shares held by Draper Fisher Associates Fund IV, L.P.;
- 1,094,583 shares held by Draper Fisher Jurvetson Fund V, L.P.;
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- 513,322 shares held by Draper Fisher Partners IV, L.L.C.;
- 88,750 shares held by Draper Fisher Jurvetson Partners V, L.L.C.;
- 66,667 shares held by Tim Draper. Mr. Draper is either a managing member
of the entities listed above or a managing member of the general partner
of the entities listed above;
- 66,667 shares held by John Fisher, a director of the Company. Mr. Fisher
is either a managing member of the entities listed above or a managing
member of the general partner of each of the Draper Fisher Jurvetson
entities listed above;
- 66,667 shares held by Steven Jurvetson. Mr. Jurvetson is either a managing
member of the entities listed above or a managing member of the general
partner of the entities listed above;
- 6,667 shares held by The Fonstad Living Trust Dated March 26, 1999. Ms.
Fonstad is either a member of the entities listed above or a member of the
general partner of the entities listed above and has shared voting and
investment power with respect to the shares held by the trust; and
- 1,111 shares held by Warren Packard. Mr. Packard is either a member of the
entities listed above or a member of the general partner of the entities
listed above.
Mr. Fisher disclaims beneficial ownership of the shares held by the Draper
Fisher Jurvetson entities and each of their general partners, except to the
extent of his pecuniary interest arising from his membership interest in the
general partner of these entities. The address of these individuals and entities
is 400 Seaport Court, Suite 250, Redwood City, California, 94063.
(3) This number includes:
- 5,150,279 shares held by idealab Capital Partners I-A, L.P.; and
- 3,336,881 shares held by idealab Capital Partners I-B, L.P.
Mr. Elkus, a managing member of idealab! Capital Management I, LLC, the
general partner of each of the idealab Capital Partners entities, disclaims
beneficial ownership of the shares held by the idealab Capital Partners entities
except to the extent of his pecuniary interest arising from his membership
interest in the general partner of these entities. The address of these entities
and of Mr. Elkus is 130 West Union Street, Pasadena, California, 91103.
(4) This number includes 5,795,556 shares, and a warrant to purchase 1,271,735
shares, held by Network Solutions, of which Mr. Korzeniewski is the Chief
Financial Officer. Mr. Korzeniewski disclaims beneficial ownership of shares
held by Network Solutions, Inc., except to the extent of his pecuniary
interest therein. The address of Mr. Korzeniewski and of Network Solutions,
Inc. is 505 Huntman Park Drive, Herndon, Virginia, 20170.
(5) This number includes:
- 1,640,559 shares held by Morgan Stanley Venture Partners III, L.P.;
- 157,523 shares held by Morgan Stanley Venture Investors III, L.P.; and
- 71,917 shares held by The Morgan Stanley Venture Partners Entrepreneur
Fund, L.P.
The institutional managing member of the general partner of Morgan Stanley
Dean Witter Venture Partners is a wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co., the parent of Morgan Stanley & Co. Incorporated. Mr. Loarie is a
managing member of the general partner of Morgan Stanley Dean Witter Venture
Partners. Mr. Loarie disclaims beneficial ownership of the shares held by Morgan
Stanley Dean Witter Venture Partners, except to the extent of his proportionate
interest therein. The address for Mr. Loarie and the Morgan Stanley Dean Witter
Venture partners entities is c/o Morgan Stanley Dean Witter Venture Partners,
1221 Avenue of the Americas, New York, New York 10020. In addition, Morgan
Stanley Dean Witter Equity Funding, Inc., an affiliate of Morgan Stanely Dean
Witter Venture Partners and Morgan Stanley & Co. Incorporated, owns 907,778
shares.
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(6) This number includes 279,688 shares subject to repurchase at cost by
RealNames within 60 days of August 31, 1999 in the event of Mr. Hullot's
resignation from the board of directors or termination of consulting
relationship with the Company.
(7) This number includes 850,000 shares issued upon exercise of options under
our 1997 Stock Plan, of which 513,543 shares can be repurchased by RealNames
at cost within 60 days of August 31, 1999 in the event of termination of Mr.
West's employment with RealNames.
(8) This number includes 100,000 shares issued upon exercise of option granted
pursuant to our 1997 Stock Plan and 400,000 shares of common stock purchased
from RealNames, of which 87,500 shares are subject to repurchase at cost by
RealNames within 60 days of August 31, 1999 in the event of termination of
Mr. Popp's employment or consulting relationship with RealNames.
(9) This number includes the shares beneficially owned by the persons and
entities described in the footnotes above as well as (a) 2,014,187 shares
held by officers not listed on this table, of which 1,491,394 shares are
subject to repurchase at cost by RealNames in the event of termination of
employment with RealNames, and (b) options to purchase 250,000 shares held
by officers not listed on this table, of which options to purchase 193,750
are unvested, but exercisable subject to RealNames' repurchase option.
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DESCRIPTION OF CAPITAL STOCK
Following the completion of this offering, our authorized capital stock will
consist of 200,000,000 shares of common stock, par value $.001 per share, and
10,000,000 shares of preferred stock, par value $.001 per share.
COMMON STOCK
As of August 31, 1999, there were 59,387,045 shares of common stock
outstanding that were held of record by approximately 189 stockholders after
giving effect to the conversion of our preferred stock into common stock at a
one-to-one ratio and assuming no exercise or conversion of outstanding
convertible securities after August 31, 1999. There will be shares
of common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise or conversion of outstanding convertible
securities after August 31, 1999, after giving effect to the sale of the shares
of common stock offered hereby.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably any dividends that may be declared from time to time
by the board of directors out of funds legally available for that purpose. In
the event of a liquidation, dissolution or winding up of RealNames, the holders
of common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior rights of preferred stock, if any, then
outstanding. The common stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
available to the common stock. All outstanding shares of common stock are fully
paid and non-assessable.
PREFERRED STOCK
Upon the closing of this offering, each outstanding share of preferred stock
will be converted into shares of common stock. See note 5 of notes to financial
statements for a description of this preferred stock.
Effective upon the completion of this offering, we will be authorized to
issue 10,000,000 shares of undesignated preferred stock. The board of directors
will have the authority to issue the undesignated preferred stock in one or more
series and to determine the powers, preferences and rights and the
qualifications, limitations or restrictions granted to or imposed upon any
wholly unissued series of undesignated preferred stock, and to fix the number of
shares constituting any series and the designation of a series, without any
further vote or action by the stockholders. The issuance of preferred stock may
have the effect of delaying, deferring or preventing a change in control of
RealNames without further action by the stockholders and may adversely affect
the voting and other rights of the holders of common stock. At present, we have
no plans to issue any shares of preferred stock.
WARRANTS
As of August 31, 1999, warrants were outstanding to purchase an aggregate of
4,239,179 shares of common stock at exercise prices ranging from $2.09 to $3.77
per share. See note 5 of notes to financial statements.
REGISTRATION RIGHTS OF STOCKHOLDERS
The holders of 37,531,957 shares of common stock or their transferees are
entitled to rights to register these shares, called "registrable securities,"
under the Securities Act. These rights are provided under the terms of an
agreement between RealNames and the holders of registrable securities. Subject
to limitations in this agreement, the holders of the registrable securities may
require, on two occasions at any time after
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six months from the effective date of this offering, or three occasions in the
case of the holders of common stock issued on conversion of Series B preferred
stock, that we use commercially reasonable efforts to register the registrable
securities for public resale, provided that the proposed aggregate offering
price is in excess of $5,000,000. In addition, the holders of the registrable
securities may require, on one occasion in any 12-month period, that we register
their shares for public resale on Form S-3, provided we are eligible to use Form
S-3 and provided further that the aggregate value of the securities to be
registered is at least $3,000,000. If we register any of our common stock,
either for our own account or for the account of other security holders, the
holders of registrable securities are entitled to include their shares of common
stock in the registration. A holder's right to include shares in an underwritten
registration is subject to the ability of the underwriters to limit the number
of shares included in this offering. All fees, costs and expenses of these
registrations must be borne by RealNames and all selling expenses (including
underwriting discounts, selling commissions and stock transfer taxes) relating
to registrable securities must be borne by the holders of the securities being
registered.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND CHARTER PROVISIONS
The provisions of Delaware law, our certificate of incorporation and our
bylaws described below may have the effect of delaying, deferring or
discouraging another person from acquiring control of our company.
DELAWARE LAW
We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents certain
Delaware corporations from engaging, under limited circumstances, in a "business
combination," which includes a merger or sale of more than 10% of the
corporation's assets, with any "interested stockholder," or a stockholder who
owns 15% or more of the corporation's outstanding voting stock, as well as
affiliates and associates of stockholders, for three years following the date
that the stockholder became an "interested stockholder" unless:
- the transaction is approved by the board prior to the date the "interested
stockholder" attained that status:
- upon the closing of the transaction that resulted in the stockholder's
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced; or
- on or subsequent to the date the "business combination" is approved by the
board and authorized at an annual or special meeting of stockholders by at
least two-thirds of the outstanding voting stock that is not owned by the
"interested stockholder."
A Delaware corporation may opt out of this provision with an express
provision in its original certificate of incorporation or an express provision
in its certificate of incorporation or bylaws resulting from a stockholder's
amendment approved by at least a majority of the outstanding voting shares.
However, we have not opted out of this provision. Section 203 could prohibit or
delay mergers or other takeover or change-in-control attempts and, accordingly,
may discourage attempts to acquire us.
CHARTER AND BYLAW PROVISIONS
Our amended and restated certificate of incorporation provides that,
concurrently with the effectiveness of this registration statement, our board of
directors will be reorganized into a classified board, whereby our directors
will be divided into three classes. The directors in each class will serve for a
three-year term, with our stockholders electing one class each year. For more
information on the classification of our board, please see "Management--Board
Composition." This system of electing and removing directors may tend to
discourage a third-party from making a tender offer or otherwise
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attempting to obtain control of us, because it generally makes it more difficult
for stockholders to replace a majority of the directors.
Our bylaws provide that any action required or permitted to be taken by our
stockholders at an annual meeting or a special meeting of the stockholders may
only be taken if it is properly brought before the meeting, including having
provided required notice. Our stockholders may not take any action by written
consent instead of by a meeting. Our certificate of incorporation provides that
our board of directors may issue preferred stock with voting or other rights
without stockholder action. Our bylaws provide that special meetings of the
stockholders may only be called by our board, the chairman of our board, our
chief executive officer or our president.
Our bylaws provide that we will indemnify officers and directors against
losses that they may incur in investigations and legal proceedings resulting
from their services to us, which may include services in connection with
takeover defense measures. These provisions may have the effect of preventing
changes in our management.
NASDAQ NATIONAL MARKET LISTING
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the trading symbol "NAME."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Harris Trust and
Savings Bank.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Therefore, future sales of substantial amounts of our common stock could
negatively affect the market price of our common stock. Furthermore, since only
a limited number of shares will be available for sale after this offering
because of contractual and legal restrictions on the resale of our outstanding
shares as described below, sales of substantial amounts of our common stock
after these restrictions lapse could have a negative effect on the market price.
After this offering, we will have outstanding shares of common
stock, assuming no exercise of options and warrants after August 31, 1999. Of
these shares, all of the shares sold in this offering will be freely
tradable without restriction or further registration under the Securities Act,
unless these shares are purchased by our affiliates. The remaining
shares of common stock held by existing shareholders are restricted securities.
Restricted securities may be sold in the public market only if they are
registered or they qualify for an exemption from registration under Rules 144 or
701 under the Securities Act, which rules are summarized below.
As a result of the contractual and legal restrictions described below, the
shares of common stock that constitute restricted securities will be
available for sale in the public market as follows:
- shares on , 1999, the date of this prospectus;
- shares on , 1999, 90 days after date of this
prospectus;
- shares on , 1999, 120 days after date of this
prospectus;
- shares on , 1999, 180 days after date of this
prospectus; and
- shares upon .
LOCK-UP AGREEMENTS
All of our executive officers and directors and some of our stockholders and
option holders have agreed not to (1) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of common stock or
any securities convertible into or exercisable or exchangeable for common stock
or (2) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common stock,
for a period of 180 days after the date of this prospectus, subject to some
exceptions. However, Morgan Stanley & Co. Incorporated may in its sole
discretion, at any time without notice, release all or any portion of the shares
subject to these restrictions.
RULE 144
SHARES HELD FOR LESS THAN TWO YEARS. In general, under Rule 144 as
currently in effect, beginning 90 days after the date of this prospectus, a
person who has beneficially owned shares of our common stock for at least one
year would be entitled to sell within any three-month period a number of shares
that is not more than the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks before a notice of the sale
on Form 144 is filed.
In order for stockholders to sell their shares under Rule 144, they must
also comply with manner of sale provisions and notice requirements and there
must be current public information available about us.
80
<PAGE>
SHARES HELD FOR MORE THAN TWO YEARS. Under Rule 144(k), a person may sell
their shares without complying with the provisions of Rule 144 if they meet the
following two requirements:
- they have beneficially owned the shares for at least two years; and
- they have not been an affiliate of RealNames at any time during the 90
days before a sale.
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect, any
of our employees, directors, consultants or advisors who purchase shares from us
under a stock option plan or other written agreement, prior to the date when we
become subject to the reporting requirements of the Exchange Act, can resell
those shares 90 days after the effective date of this offering in reliance on
Rule 144, but without complying with some of the restrictions, including the
holding period, contained in Rule 144.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 37,531,957 shares of our
common stock will be entitled to rights with respect to the registration of
their shares under the Securities Act. Please see "Description of Capital
Stock--Registration Rights" for a more detailed description of these
registration rights. Immediately upon the effectiveness of such a registration,
these shares become freely tradable without restriction under the Securities
Act.
STOCK OPTIONS
Immediately after this offering we intend to file registration statements
under the Securities Act covering shares of common stock issued and
outstanding, subject to outstanding options or reserved for issuance under our
stock plans. See "Management--Stock Plans" for a more detailed description of
our stock plans. Each year as the number of shares reserved for issuance under
our 1999 Stock Plan increases, we will file amendments to the registration
statements in order to register the additional shares. When the lock-up
agreements described above expire, these vested options will become freely
tradable. This registration statement is expected to be filed and become
effective as soon as practicable after the effective date of this offering.
Accordingly, shares registered under that registration statement will, subject
to vesting provisions and Rule 144 volume limitations applicable to our
affiliates, be available for sale in the open market immediately after the
180-day lock-up agreements expire.
81
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date hereof, the underwriters named below, for whom Morgan
Stanley & Co. Incorporated, BancBoston Robertson Stephens Inc., Hambrecht &
Quist LLC, PaineWebber Incorporated and Wit Capital Corporation are acting as
representatives, have severally agreed to purchase, and RealNames has agreed to
sell to the underwriters, severally, the respective number of shares of our
common stock indicated opposite the names of the underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---------------------------------------------------------------------------------- -----------
<S> <C>
Morgan Stanley & Co. Incorporated.................................................
BancBoston Robertson Stephens Inc.................................................
Hambrecht & Quist LLC.............................................................
PaineWebber Incorporated..........................................................
Wit Capital Corporation...........................................................
-----------
Total.........................................................................
-----------
-----------
</TABLE>
The underwriters are offering the shares of common stock subject to their
acceptance of the shares from RealNames and subject to prior sale. The
underwriting agreement provides that the obligations of the several underwriters
to pay for and accept delivery of the shares of common stock offered by this
prospectus are subject to the approval of certain legal matters by their counsel
and to certain other conditions. The underwriters are obligated to take and pay
for all of the shares of common stock offered by us in this offering, other than
those covered by the over-allotment option described below, if any such shares
are taken. Discover Brokerage Direct, Inc., an affiliate of Morgan Stanley & Co.
Incorporated, is acting as a selected dealer in connection with the offering,
and together with Wit Capital, will be distributors of shares of common stock
over the Internet to their respective eligible account holders.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price.
Any underwriter may allow, and such dealers may reallow, a concession not in
excess of $ a share to other underwriters or to certain dealers. After
the initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representatives.
RealNames has granted to the underwriters an option, exercisable for 30 days
from the date of this prospectus, to purchase up to an aggregate of
additional shares of common stock at the public offering price listed on the
cover page of this prospectus, less underwriting discounts and commissions. The
underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
common stock offered hereby. To the extent the option is exercised, each
underwriter will become obligated, subject to certain conditions, to purchase
about the same percentage of the additional shares of common stock as the number
listed next to the underwriter's name in the preceding table bears to the total
number of shares of common stock listed next to the names of all underwriters in
the preceding table. If the underwriters' option is exercised in full, the total
price to the public would be $ , the total underwriters' discounts
and commissions would be $ and total proceeds to RealNames would be
$ .
The underwriters have informed RealNames that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
82
<PAGE>
RealNames has applied to list the common stock on the Nasdaq National Market
under the symbol "NAME."
At the request of RealNames, the underwriters have reserved for sale, at the
initial offering price, up to shares offered by us in this offering for
our directors, officers, employees, business associates and related persons. In
addition, the underwriters have agreed to reserve shares of common stock
for certain holders of our preferred stock pursuant to preemptive rights held by
those holders. The number of shares of common stock available for sale to the
general public will be reduced to the extent such persons purchase such reserved
shares. Any reserved shares which are not so purchased will be offered by the
underwriters to the general public on the same basis as the other shares offered
hereby.
RealNames, our directors and executive officers and certain of our
stockholders and option holders have agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, he,
she or it will not, during the period ending 180 days after the date of this
prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend or otherwise transfer or dispose of directly
or indirectly, any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock;
whether any transaction described above is to be settled by delivery of common
stock or such other securities, in cash or otherwise.
The restrictions described in the previous paragraph do not apply to:
- the sale of shares to the underwriters;
- the issuance by RealNames of shares of common stock upon the exercise of
an option or a warrant or the conversion of a security outstanding on the
date of this prospectus of which the underwriters have been advised in
writing; or
- transactions by any person other than RealNames relating to shares of
common stock or other securities acquired in open market transactions
after the completion of the offering of the shares.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering, if the syndicate repurchases previously
distributed common stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the common stock above independent market
levels. The underwriters are not required to engage in these activities, and may
end any of these activities at any time.
RealNames and the underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
In August 1999, RealNames sold 15,677,778 shares of Series C preferred stock
in a private placement. Affiliates of Morgan Stanley & Co. Incorporated,
BancBoston Robertson Stephens Inc., Hambrecht & Quist LLC and PaineWebber
Incorporated, each of which is acting as one of the underwriters in this
offering, purchased 2,777,777 shares, 111,111 shares, 333,333 shares and 11,111
shares, respectively, of Series C preferred stock, which are convertible into
2,777,777 shares, 111,111 shares, 333,333 shares and
83
<PAGE>
11,111 shares, respectively, of common stock, on the same terms as the other
purchasers of Series C preferred stock. Robert J. Loarie, a director of
RealNames, is a managing director of Morgan Stanley & Co. Incorporated.
The National Association of Securities Dealers, Inc. approved the membership
of Wit Capital on September 4, 1997. Since that time, Wit Capital has acted as a
managing underwriter on one offering, a co-manager on 44 offerings, and a dealer
on 84 offerings. John Fisher, a director of RealNames, is a director of Wit
Capital, and entities affiliated with Draper Fisher Jurveston, stockholders of
RealNames, are stockholders of Wit Capital. Other than this relationship and its
participation in this offering, Wit Capital has no relationship with RealNames
or any of its founders or significant stockholders.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiations
between RealNames and the representatives. Among the factors to be considered in
determining the initial public offering price will be:
- the future prospects of RealNames and its industry in general;
- sales, earnings and certain other financial and operating information of
RealNames in recent periods; and
- the price-earnings ratios, price-sales ratios, market prices of securities
and certain financial and operating information of companies engaged in
activities similar to those of RealNames.
The estimated initial public offering price range set forth on the cover
page of this preliminary prospectus is subject to change as a result of market
conditions and other factors.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered in this
offering will be passed upon by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Legal matters in connection with this
offering will be passed upon for the underwriters by Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP.
As of the date of this prospectus, an investment partnership associated with
Wilson Sonsini Goodrich & Rosati, as well as individual attorneys of this firm,
beneficially owned an aggregate of 155,364 shares of our common stock.
EXPERTS
The financial statements as of December 31, 1997 and 1998 and for the period
from November 19, 1996 (date of inception), to December 31, 1997 and the year
ended December 31, 1998 included in this prospectus have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
84
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act of 1933 with respect to the shares of common stock to be sold in
this offering. Although this prospectus is part of the registration statement,
it does not contain all of the information set forth in the registration
statement and the related exhibits and schedules thereto. For further
information with respect to us and the common stock to be sold in this offering,
we refer you to the registration statement and the exhibits and schedules filed
with the registration statement. Statements contained in this prospectus as to
the contents of any contract or any other document referred to are not
necessarily complete, and, in each instance, we refer you to the copy of such
contract or other document filed as an exhibit to the registration statement. A
copy of the registration statement, and the related exhibits and schedules, may
be inspected without charge at the public reference facilities maintained by the
SEC in the following locations:
- Room 1024, 450 Fifth Street, N. W., Washington, D.C. 20549;
- Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and
- Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of all or any part of the registration statement may be obtained from
such offices upon the payment of the fees prescribed by the SEC. The public may
obtain information on the operations of the public reference facilities in
Washington, D.C. by calling the SEC at 1-800-SEC-0330. The SEC maintains a web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The web
site is located at WWW.SEC.GOV.
85
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PAGE
---------
Report of Independent 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>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
RealNames Corporation (formerly Centraal Corporation):
In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of RealNames Corporation (formerly
Centraal Corporation) at December 31, 1997 and 1998, and the results of its
operations and its cash flows for the period from November 19, 1996 (date of
inception) to December 31, 1997 and for the year ended December 31, 1998, in
conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
San Jose, California
March 12, 1999, except for Note 10,
as to which the date is October 5, 1999.
F-2
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
---------------- JUNE 30, STOCKHOLDERS'
1997 1998 1999 EQUITY
------- ------- ----------- JUNE 30,
(UNAUDITED) 1999
-------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 182 $11,290 $ 4,058
Accounts receivable, net of allowance for doubtful accounts of $0 in
1997, $6 in 1998 and $28 in 1999.................................. -- 213 800
Notes receivable from related party................................. -- 270 270
Prepaid expenses and other current assets........................... 3 244 383
------- ------- -----------
Total current assets.............................................. 185 12,017 5,511
Property and equipment, net......................................... 83 741 2,940
Restricted cash..................................................... -- 125 775
------- ------- -----------
Total assets.................................................... $ 268 $12,883 $ 9,226
------- ------- -----------
------- ------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 44 $ 467 $ 1,528
Accrued liabilities................................................. 75 540 1,228
Deferred revenue.................................................... -- 297 794
Current portion of obligations under capital lease.................. -- -- 93
------- ------- -----------
Total current liabilities......................................... 119 1,304 3,643
Obligations under capital lease, net of current portion............. -- -- 271
------- ------- -----------
Total liabilities............................................... 119 1,304 3,914
------- ------- -----------
Commitments and contingencies (Note 4)
Stockholders' equity:
Convertible preferred stock, $0.001 par value:
Authorized shares: zero in 1997, 21,854,179 in 1998 and 1999 and
none pro forma
Issued and outstanding shares: none in 1997, 21,604,179 in 1998,
21,854,179 in 1999 and none pro forma............................. -- 22 22 $ --
(Liquidation value $33,470 at December 31, 1998)
Preferred stock, $0.001 par value:
Authorized shares: 10,000,000 pro forma
Issued and outstanding shares: none in 1997, 1998, 1999 and pro
forma............................................................. -- -- -- --
Common stock $0.001 par value:
Authorized shares: 50,000,000 in 1997, 1998 and 1999 and 200,000,000
pro forma
Issued and outstanding shares: 14,737,000 in 1997, 14,837,000 in
1998, 19,473,214 in 1999 and 57,005,171 pro forma................. 15 15 19 57
Additional paid-in capital............................................ 1,459 20,842 41,607 112,081
Notes receivable from stockholders.................................... (149) -- (1,345) (2,245)
Unearned stock-based compensation..................................... -- (2,245) (16,892) (16,892)
Accumulated deficit................................................... (1,176) (7,055) (18,099) (18,099)
------- ------- ----------- -------------
Total stockholders' equity........................................ 149 11,579 5,312 74,902
------- ------- ----------- -------------
Total liabilities and stockholders' equity...................... $ 268 $12,883 $ 9,226 $74,902
------- ------- ----------- -------------
------- ------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 19,
1996 (DATE
OF
INCEPTION) SIX MONTHS ENDED
TO YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, ----------------------------
1997 1998 1998 1999
------------ ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues............................................. $ -- $ 537 $ -- $ 1,059
Cost of revenues..................................... -- 556 -- 702
------------ ------------- ------------- -------------
Gross profit (loss).................................. -- (19) -- 357
Operating expenses:
Engineering and operations......................... 1,000 1,165 345 1,859
Sales and marketing................................ 81 2,458 667 3,495
General and administrative......................... 103 1,640 314 1,752
Stock-based compensation........................... -- 691 103 4,465
------------ ------------- ------------- -------------
Total operating expenses......................... 1,184 5,954 1,429 11,571
------------ ------------- ------------- -------------
Loss from operations................................. (1,184) (5,973) (1,429) (11,214)
Interest income, net................................. 8 94 38 170
------------ ------------- ------------- -------------
Net loss............................................. $ (1,176) $ (5,879) $ (1,391) $ (11,044)
------------ ------------- ------------- -------------
------------ ------------- ------------- -------------
Net loss per share, basic and diluted................ $ (0.31) $ (0.40) $ (0.09) $ (0.75)
------------ ------------- ------------- -------------
------------ ------------- ------------- -------------
Weighted average shares, basic and diluted........... 3,768,042 14,742,000 14,737,000 14,819,637
------------ ------------- ------------- -------------
------------ ------------- ------------- -------------
Pro forma net loss per share, basic and diluted
(unaudited)........................................ $ (0.26) $ (0.30)
------------- -------------
------------- -------------
Pro forma weighted average shares, basic and diluted
(unaudited)........................................ 22,348,233 36,548,133
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
------------------ ------------------ PAID-IN FROM
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS
---------- ------ ---------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock at $0.10 per
share for notes receivable -- $-- 6,200,000 $ 6 $ 614 $ (620)
Payment of notes receivable from
stockholders.......................... -- -- -- -- -- 620
Issuance of common stock at $0.10 per
share for notes receivable............ -- -- 1,487,000 2 147 (149)
Issuance of common stock at $0.10 per
share in exchange for technology...... -- -- 7,050,000 7 698 --
Net loss................................ -- -- -- -- -- --
---------- ------ ---------- ------ ---------- ------------
Balances, December 31, 1997............. -- -- 14,737,000 15 1,459 (149)
Issuance of common stock through
exercise of stock options for cash.... -- -- 100,000 10 --
Issuance of Series A convertible
preferred stock for cash, net of
issuance cost of $53.................. 8,869,179 9 -- -- 3,938 --
Issuance of Series B convertible
preferred stock for cash, net of
issuance cost of $74.................. 12,609,550 13 -- -- 12,523 --
Conversion of notes payable into Series
B convertible preferred stock......... 125,450 -- -- -- 125 --
Forgiveness of notes receivable for
common stock.......................... -- -- -- -- -- 149
Unearned compensation related to grants
of stock options...................... -- -- -- -- 1,764 --
Warrants granted to sales
representatives....................... -- -- -- -- 1,023 --
Amortization of unearned stock-based
compensation-options.................. -- -- -- -- -- --
Net loss................................ -- -- -- -- -- --
---------- ------ ---------- ------ ---------- ------------
Balances, December 31, 1998............. 21,604,179 22 14,837,000 15 20,842 --
Issuance of common stock through
exercise of stock options for cash and
notes receivable...................... -- -- 4,752,714 4 1,429 (1,369)
Repurchase of common stock.............. -- -- (116,500) -- (26) 24
Exercise of warrant..................... 250,000 -- -- -- 250 --
Unearned compensation related to grants
of stock options...................... -- -- -- -- 5,322 --
Warrants granted to sales
representatives....................... -- -- -- -- 13,790 --
Amortization of unearned stock-based
compensation-options.................. -- -- -- -- -- --
Amortization of unearned stock-based
compensation-warrants................. -- -- -- -- -- --
Net loss................................ -- -- -- -- -- --
---------- ------ ---------- ------ ---------- ------------
Balances, June 30, 1999 (unaudited)..... 21,854,179 $22 19,473,214 $19 $41,607 $(1,345)
---------- ------ ---------- ------ ---------- ------------
---------- ------ ---------- ------ ---------- ------------
<CAPTION>
UNEARNED TOTAL
STOCK-BASED ACCUMULATED STOCKHOLDERS'
COMPENSATION DEFICIT EQUITY
------------ ----------- -------------
<S> <C> <C> <C>
Issuance of common stock at $0.10 per
share for notes receivable $ -- $ -- $ --
Payment of notes receivable from
stockholders.......................... -- -- 620
Issuance of common stock at $0.10 per
share for notes receivable............ -- -- --
Issuance of common stock at $0.10 per
share in exchange for technology...... -- -- 705
Net loss................................ -- (1,176) (1,176)
------------ ----------- -------------
Balances, December 31, 1997............. -- (1,176) 149
Issuance of common stock through
exercise of stock options for cash.... -- -- 10
Issuance of Series A convertible
preferred stock for cash, net of
issuance cost of $53.................. -- -- 3,947
Issuance of Series B convertible
preferred stock for cash, net of
issuance cost of $74.................. -- -- 12,536
Conversion of notes payable into Series
B convertible preferred stock......... -- -- 125
Forgiveness of notes receivable for
common stock.......................... -- -- 149
Unearned compensation related to grants
of stock options...................... (1,764) -- --
Warrants granted to sales
representatives....................... (1,023) -- --
Amortization of unearned stock-based
compensation-options.................. 542 -- 542
Net loss................................ -- (5,879) (5,879)
------------ ----------- -------------
Balances, December 31, 1998............. (2,245) (7,055) 11,579
Issuance of common stock through
exercise of stock options for cash and
notes receivable...................... -- -- 64
Repurchase of common stock.............. -- -- (2)
Exercise of warrant..................... -- -- 250
Unearned compensation related to grants
of stock options...................... (5,322) -- --
Warrants granted to sales
representatives....................... (13,790) -- --
Amortization of unearned stock-based
compensation-options.................. 2,196 -- 2,196
Amortization of unearned stock-based
compensation-warrants................. 2,669 -- 2,669
Net loss................................ -- (11,044) (11,044)
------------ ----------- -------------
Balances, June 30, 1999 (unaudited)..... $(16,892) $(18,099) $ 5,312
------------ ----------- -------------
------------ ----------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 19,
1996 (DATE OF SIX MONTHS ENDED
INCEPTION) TO YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, --------------------
1997 1998 1998 1999
------------- ------------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................. $ (1,176) $ (5,879) $ (1,391) $ (11,044)
Adjustments to reconcile net loss to net cash used in operating
activities:
Provision for doubtful accounts........................................ -- 6 -- 22
Depreciation and amortization.......................................... 14 173 44 329
Amortization of unearned stock-based compensation...................... -- 542 103 4,465
Write-off of technology................................................ 705 -- -- --
Forgiveness of notes receivable from stockholders...................... -- 149 -- --
Changes in operating assets and liabilities:
Accounts receivable.................................................. -- (219) -- (609)
Prepaid expenses and other current assets............................ (3) (241) (216) (139)
Accounts payable..................................................... 44 423 176 1,061
Accrued liabilities.................................................. 75 465 13 688
Deferred revenue..................................................... -- 297 97 497
------------- ------------- --------- ---------
Net cash used in operating activities.............................. (341) (4,284) (1,174) (4,730)
------------- ------------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment.................................... (97) (831) (412) (2,145)
Restricted cash.......................................................... -- (125) (25) (650)
------------- ------------- --------- ---------
Net cash used in investing activities.............................. (97) (956) (437) (2,795)
------------- ------------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of repurchases............... -- 10 -- 62
Repayment of notes receivable from stockholders.......................... 620 -- -- --
Capital lease payments................................................... -- -- -- (19)
Proceeds from exercise of warrant........................................ -- -- -- 250
Issuance of note receivable to related party............................. -- (570) (270) --
Proceeds from repayment of note receivable to related party.............. -- 300 -- --
Proceeds from notes payable.............................................. -- 250 -- --
Repayments of notes payable.............................................. -- (125) -- --
Proceeds from issuance of convertible preferred stock, net of issuance
costs.................................................................. -- 16,483 3,947 --
------------- ------------- --------- ---------
Net cash provided by financing activities.......................... 620 16,348 3,677 293
------------- ------------- --------- ---------
Net increase (decrease) in cash and cash equivalents....................... 182 11,108 2,066 (7,232)
Cash and cash equivalents, beginning of period............................. -- 182 182 11,290
------------- ------------- --------- ---------
Cash and cash equivalents, end of period................................... $ 182 $ 11,290 $ 2,248 $ 4,058
------------- ------------- --------- ---------
------------- ------------- --------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Taxes paid............................................................... $ 1 $ 1 $ -- $ --
------------- ------------- --------- ---------
------------- ------------- --------- ---------
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:
Issuance of common stock in exchange for technology...................... $ 705 $ -- $ -- $ --
------------- ------------- --------- ---------
------------- ------------- --------- ---------
Issuance of common stock in exchange for notes receivable................ $ 769 $ -- $ -- $ 1,345
------------- ------------- --------- ---------
------------- ------------- --------- ---------
Issuance of convertible preferred stock for conversion of promissory
notes.................................................................. $ -- $ 125 $ -- $ --
------------- ------------- --------- ---------
------------- ------------- --------- ---------
Unearned stock-based compensation........................................ $ -- $ 2,787 $ 552 $ 19,112
------------- ------------- --------- ---------
------------- ------------- --------- ---------
Assets acquired under capital leases..................................... $ -- $ -- $ -- $ 383
------------- ------------- --------- ---------
------------- ------------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS
NOTE 1--FORMATION AND BUSINESS OF THE COMPANY:
RealNames Corporation (formerly Centraal Corporation), or "the Company", was
incorporated in the state of Delaware on November 19, 1996 originally under the
name Go, Inc. The Company has developed an addressing system based on Internet
Keywords that simplifies navigation on the Internet.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES
Preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make certain 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.
UNAUDITED INTERIM RESULTS
The accompanying interim financial statements as of June 30, 1999 and for
the six months ended June 30, 1998 and 1999 are unaudited. The unaudited interim
financial statements have been prepared on the same basis as the annual
financial statements and, in the opinion of management, reflect all adjustments,
which include only normal recurring adjustments, necessary to present fairly in
all material respects the Company's financial position as of June 30, 1999 and
results of operations and its cash flows for the six months ended June 30, 1998
and 1999. The financial data and other information disclosed in these notes to
financial statements related to these periods are unaudited. The results for the
six months ended June 30, 1999 are not necessarily indicative of the results to
be expected for the year ending December 31, 1999.
REVENUE RECOGNITION
The Company recognizes revenue from Internet Keywords and banner
advertising. The Company has three different pricing models for Internet
Keywords: license fees for keyword prefixes, amounts paid per visit or per
completed transaction when users access the customer's web site through the
RealNames Service and fixed price annual subscriptions to Internet Keywords.
The Company generates Internet Keyword revenue from, among other things,
license fees from their Keyword Provider customers, who use the RealNames
platform through their routing prefixes, to create and maintain their own
separate Internet Keyword systems. These license agreements generally grant the
customer a non-exclusive license to the RealNames software and Internet Keyword
database as well as post-contract customer support, including technical support
and in some cases software updates from the Company. The Company does not have
separate vendor specific objective evidence of pricing for the license or
post-contract customer support elements of the contract and, in accordance with
Statement of Position 97-2 (SOP 97-2), "Software Revenue Recognition," as
modified, the Company recognizes the Internet Keyword revenue from license fees
ratably over the contract period once the Company delivers the software to the
customer and collection of the resulting receivable is deemed to be probable.
The Company and the Keyword Provider customers generally enter into a
co-marketing agreement at the time of entering into the license agreement,
whereby the Company commits to spend significant sums of money with the customer
for advertising services. The co-marketing commitment, which is more than
F-7
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
50% of the expected license fees from the license agreement, is classified as a
sales and marketing expense and recognized ratably as the services are provided
over the term of the agreement.
Internet Keyword revenues from price per visit, or PPV, fees are
attributable to customers who pay for each visit to one of their web pages
through the use of Internet Keywords. Internet Keyword revenues from price per
transaction, or PPT, fees are attributable to customers who pay for each
eligible transaction completed by a user delivered to one of their web pages
through the use of Internet Keywords. Internet Keyword revenues from PPV fees
are recognized when the visit takes place, and Internet Keyword revenue from PPT
fees are recognized when the transaction is completed, provided in each case
that there are no significant obligations remaining and collection of the
resulting receivable is probable.
Internet Keyword revenues from subscription fees are attributable to the
sale of annual subscriptions for Internet Keywords and are recognized ratably
over the term of the subscription.
Banner advertising revenue is recognized ratably in the period in which the
banners are displayed on certain web pages, provided that there are no
significant obligations remaining and collection of the resulting receivable is
probable.
RESEARCH AND DEVELOPMENT
Costs incurred in the research, design and development of products are
expensed as incurred until technological feasibility has been established. To
date, the establishment of technological feasibility of the Company's products
and general release substantially coincide. As a result, the Company has not
capitalized any software development costs since such costs have not been
significant.
ADVERTISING EXPENSE
The Company accounts for advertising costs as expense in the period in which
they are incurred. Advertising expense for the period from November 19, 1996
(date of inception) to December 31, 1997, for the year ended December 31, 1998,
and for the six months ended June 30, 1998 and 1999, was $0, $507,000, $160,000
and $776,000 respectively.
INCOME TAXES
Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current year and
deferred tax assets and liabilities for the future tax consequences of events
that have been recognized in the Company's financial statements or tax returns.
The measurement of current and deferred tax assets and liabilities are based on
provisions of the enacted tax law; the effects of future changes in tax laws or
rates are not anticipated. The measurement of deferred tax assets is reduced, if
necessary, by the amount of any tax benefits that, based on available evidence,
are not expected to be realized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for cash and cash equivalents, accounts receivables,
notes receivable and accounts payable approximate fair value based upon their
short maturities.
F-8
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents and accounts
receivable.
The Company's cash and cash equivalents are deposited with two major
financial institutions in the United States. At times, such deposits may be in
excess of the amount of insurance provided on such deposits. The Company has not
experienced any losses on its deposits of cash and cash equivalents.
At December 31, 1998, 2Can Media, an Internet advertising reseller,
accounted for 98% of the total accounts receivable. At June 30, 1999, AltaVista
accounted for 27% of the total accounts receivable.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original or
remaining maturities of three months or less at the date of purchase to be cash
equivalents.
The Company maintained $125,000 of restricted cash in a deposit account at
December 31, 1998 and $775,000 of restricted cash in deposit accounts at June
30, 1999, supporting letters of credit required for the Company's credit card
facility and facilities operating lease.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated on a straight-line
method over the estimated useful lives of the related assets, generally three
years. Leasehold improvements are amortized on a straight-line basis over the
shorter of the lease term or the estimated useful life of the asset.
Maintenance and repairs are charged to expense as incurred. When assets are
sold or retired, the cost and related accumulated depreciation are removed from
the accounts and any resulting gain or loss is included in operations.
STOCK-BASED COMPENSATION
The Company has adopted the disclosure provisions of Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-based Compensation." The Company has elected to
continue accounting for stock-based compensation issued to employees using
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and, accordingly, pro forma disclosures required under SFAS No.
123 have been presented.
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force
Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services."
NET LOSS PER SHARE AND PRO FORMA NET LOSS PER SHARE
Basic and diluted net loss per share are computed using the weighted average
number of common shares outstanding. Common share equivalents consisting of
options, warrants and convertible preferred stock were not included in the
computation of diluted net loss per share because their effect would be
F-9
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
antidilutive. Common share equivalents totaled 425,000, 25,058,245, 10,120,179,
and 28,088,351, at December 31, 1997, 1998 and June 30, 1998 and 1999,
respectively.
Unaudited pro forma net loss per share has been computed as described in the
preceding paragraph and also gives effect, even if antidilutive, to common
equivalent shares from convertible preferred stock that will automatically
convert upon the closing of the Company's initial public offering (using the
as-if-converted method) as if the shares had been outstanding from their
original date of issue.
At December 31, 1998 and June 30, 1999, 75,000 and 4,629,964 shares of
common stock were subject to repurchase, respectively, by the Company at cost.
A reconciliation of the numerator and denominator used in the calculation of
historical and pro forma net loss per share, basic and diluted, is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 19, 1996
(DATE OF
INCEPTION) YEAR ENDED SIX MONTHS ENDED
TO DECEMBER 31, ----------------------------
DECEMBER 31, 1997 1998 JUNE 30, 1998 JUNE 30, 1999
----------------- ----------------- ------------- -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Historical:
Numerator:
Net loss................................... $ (1,176) $ (5,879) $ (1,391) $ (11,044)
----------------- ----------------- ------------- -------------
Denominator:
Weighted average common shares
outstanding.............................. 3,768,042 14,757,000 14,737,000 17,323,860
Weighted average unvested common shares
subject to repurchase.................... -- (15,000) -- (2,504,223)
----------------- ----------------- ------------- -------------
Denominator for basic and diluted
calculation.............................. 3,768,042 14,742,000 14,737,000 14,819,637
----------------- ----------------- ------------- -------------
----------------- ----------------- ------------- -------------
Net loss per share, basic and diluted...... $ (0.31) $ (0.40) $ (0.09) $ (0.75)
----------------- ----------------- ------------- -------------
----------------- ----------------- ------------- -------------
Pro forma:
Shares used above:........................... 14,742,000 14,819,637
Pro forma adjustment to reflect the effect of
the assumed conversion of preferred stock:
Series A convertible preferred stock....... 6,803,754 8,869,179
Series B convertible preferred stock....... 802,479 12,859,317
----------------- -------------
Weighted average shares used in computing pro
forma basic and diluted net loss per share
(unaudited)................................ 22,348,233 36,548,133
----------------- -------------
----------------- -------------
Pro forma net loss per share, basic and
diluted (unaudited)...................... $ (0.26) $ (0.30)
----------------- -------------
----------------- -------------
</TABLE>
F-10
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
Upon the closing of the Company's initial public offering, all outstanding
Series A, Series B and Series C convertible preferred stock (See Note 10) will
be converted automatically into common stock. The pro forma effect of this
conversion has been presented as a separate column in the Company's balance
sheet, assuming that the Series C convertible preferred stock had been issued
and this conversion had occurred as of June 30, 1999.
COMPREHENSIVE INCOME
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income,"
which establishes standards for reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. There
was no difference between the Company's net loss and its total comprehensive
loss for the period from November 19, 1996 (date of inception) to December 31,
1997, for the year ended December 31, 1998, or for the six months ended June 30,
1998 or 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-1, or SOP 98-1, "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use," which provides guidance on accounting
for the cost of computer software developed or obtained for internal use. SOP
98-1 is effective for financial statements for fiscal years beginning after
December 15, 1998. The Company believes that the adoption of SOP 98-1 does not
have a material impact on its financial statements.
In April 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-5, or SOP 98-5, "Reporting on the Costs of Start-Up Activities."
This standard requires companies to expense the costs of start-up activities and
organization costs as incurred. In general, SOP 98-5 is effective for fiscal
years beginning after December 15, 1998. The Company believes the adoption of
SOP 98-5 does not have a material impact on its financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, or SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes new standards of
accounting and reporting for derivative instruments and hedging activities. SFAS
133 requires that all derivatives be recognized at fair value in the statement
of financial position, and that the corresponding gains or losses be reported
either in the statement of operations or as a component of comprehensive income,
depending on the type of hedging relationship that exists. SFAS 133 will be
effective for fiscal years beginning after June 15, 2000. The Company is
currently evaluating the implementation of SFAS 133.
F-11
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--BALANCE SHEET COMPONENTS:
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1997 1998 1999
--------- --------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Computer equipment............................................. $ 97 $ 771 $ 1,913
Furniture and fixtures......................................... -- 126 773
Leasehold improvements......................................... -- 31 770
--------- --------- -----------
97 928 3,456
Less accumulated depreciation and amortization................. (14) (187) (516)
--------- --------- -----------
$ 83 $ 741 $ 2,940
--------- --------- -----------
--------- --------- -----------
</TABLE>
Property and equipment includes costs of $383,000 and accumulated
depreciation of $45,000 for assets under capital leases at June 30, 1999.
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1997 1998 1999
--------- --------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Compensation................................................... $ 9 $ 262 $ 319
Accrued legal fees............................................. 62 201 26
Marketing and advertising...................................... -- -- 543
Other.......................................................... 4 77 340
--------- --------- -----------
$ 75 $ 540 $ 1,228
--------- --------- -----------
--------- --------- -----------
</TABLE>
NOTE 4--COMMITMENTS AND CONTINGENCIES:
The Company leases its office space under operating lease agreements. In
December 1998, the Company entered into a lease for its corporate office. The
corporate office facility lease expires in February 2006. The Company also has a
sales office facility with a lease term of less than one year.
Future annual minimum lease payments under operating leases at December 31,
1998 are as follows (in thousands):
<TABLE>
<S> <C>
1999................................................................ $ 692
2000................................................................ 770
2001................................................................ 770
2002................................................................ 770
2003................................................................ 770
More than 5 years................................................... 1,669
---------
Total minimum lease payments........................................ $ 5,441
---------
---------
</TABLE>
F-12
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Rent expense was $24,000 and $204,000 for the period from November 19, 1996
(date of inception) to December 31, 1997 and year ended December 31, 1998,
respectively. Rent expense was $100,000 and $321,000 for the six months ended
June 30, 1998 and 1999, respectively.
LITIGATION
On July 17, 1998, a third party brought an action against the Company in the
United States District Court for the Eastern District of Virginia, alleging that
the RealNames System infringed its U.S. Patent No. 5,764,906. On January 8,
1999, the U.S. District Court Judge granted the Company's motion for summary
judgment of non-infringement. On January 12, 1999, the Court entered judgment in
the Company's favor. On February 11, 1999, the plaintiff filed a Notice of
Appeal to the United States Court of Appeals for the Federal Circuit from the
entry of judgment in favor of the Company. The appeal is currently pending.
Management believes, based on the advice of counsel and the decision of the
U.S. District Court, that the Company has meritorious defenses to the
allegations contained in the plaintiff's complaint. As a result, the Company
believes that this matter is unlikely to have a material adverse effect on its
results of operations or financial condition. However, due to the nature of
litigation generally and because the lawsuit brought by the plaintiff is now in
appeal, management cannot ascertain the availability of injunctive relief or
other equitable remedies or estimate the total expenses, possible damages or
settlement value, if any, that may ultimately be incurred in connection with the
plaintiff's suit.
NOTE 5--STOCKHOLDERS' EQUITY:
COMMON STOCK
Each share of common stock is entitled to one vote. The holders of common
stock are entitled to receive dividends whenever funds are legally available and
declared by the board of directors, subject to the prior rights of holders of
all classes of stock. No dividends have been declared or paid as of December 31,
1998.
STOCK SPLIT
In conjunction with the restatement of the Certificate of Incorporation on
September 15, 1997, the Company's stockholders authorized a 10,000 for 1 stock
split of common stock. All share data, including stock option plan information,
is stated to reflect the split.
F-13
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--STOCKHOLDERS' EQUITY: (CONTINUED)
CONVERTIBLE PREFERRED STOCK
Under the Company's Amended and Restated Certificate of Incorporation, the
Company's preferred stock is issuable in series and the board of directors is
authorized to determine the rights, preferences and terms of each series. At
December 31, 1998, the amounts, terms and liquidation values of Series A and
Series B convertible preferred stock are as follows:
<TABLE>
<CAPTION>
SHARES COMMON STOCK
SHARES ISSUED AND RESERVED FOR
AUTHORIZED OUTSTANDING CONVERSION
---------- ----------- ------------ LIQUIDATION
VALUE
-----------
(IN
THOUSANDS)
<S> <C> <C> <C> <C>
Series A............................................................ 8,869,179 8,869,179 8,869,179 $ 8,000
Series B............................................................ 12,985,000 12,735,000 12,985,000 25,470
---------- ----------- ------------ -----------
21,854,179 21,604,179 21,854,179 $ 33,470
---------- ----------- ------------ -----------
---------- ----------- ------------ -----------
</TABLE>
REDEMPTION
Neither the Series A nor Series B convertible preferred stock is redeemable.
CONVERSION
Each share of Series A and Series B convertible preferred stock is
convertible into such number of shares of common stock as is determined by
dividing $0.451 and $1.00, respectively, by the conversion price at the time in
effect for each such share of preferred stock. The conversion price was $0.451
and $1.00 per share for Series A and Series B convertible preferred stock,
respectively, at December 31, 1998. Conversion is either at the option of the
holder or is automatic upon the closing date of a public offering of the
Company's common stock for which the price per share is not less than $5.00 per
share and the aggregate offering price is not less than $20.0 million.
LIQUIDATION
In the event of any liquidation, dissolution, or winding up of the Company,
either voluntary or involuntary, the holders of the then outstanding Series A
and Series B convertible preferred stock are entitled to receive, prior and in
preference to any distribution of any of the assets of the Company to the
holders of the common stock, the amount of $0.902 and $2.00 per share,
respectively, plus all declared but unpaid dividends for such shares. If, upon
occurrence of such event, the assets and funds distributed among the holders of
the preferred stock are insufficient to permit the payment to such holders of
the full preferential amount, then the entire assets and funds of the Company
legally available for distribution are to be distributed ratably among the
holders of the preferred stock in proportion to the preferential amount each
such holder is otherwise entitled to receive.
After payments to holders of preferred stock of amounts to which they are
entitled, all assets of the Company that remain legally available for
distribution shall be distributed ratably among the holders of common stock.
F-14
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--STOCKHOLDERS' EQUITY: (CONTINUED)
VOTING
Each share of preferred stock entitles the holder to voting rights equal to
the number of shares of common stock into which it is convertible.
DIVIDENDS
The holders of Series A and B convertible preferred stock are entitled to
receive dividends, out of any assets legally available, prior and in preference
to any declaration or payment of any dividend on the common stock of the
Company, at the rate of $0.0361 and $0.08, respectively, per share per annum.
Such dividends are payable when, as and if declared by the board of directors,
and are not cumulative. At December 31, 1998, no dividends have been declared or
paid.
WARRANTS
NETWORK SOLUTIONS, INC.--AGREEMENT TO ISSUE WARRANTS
In December 1998, the Company entered into a sales representative agreement
with Network Solutions, Inc., allowing Network Solutions, Inc. to act as the
Company's sales representative and solicit subscriptions for the Company's
Internet Keyword service. As part of the sales representative agreement, the
Company granted Network Solutions, Inc. the right to obtain warrants to purchase
up to 4,196,726 shares of the Company's common stock upon attainment of four
milestones. The agreement allows for acceleration of the issuance of the
warrants upon the Company filing a Registration Statement for a public offering
of the Company's common stock provided certain milestones have been met. The
warrants expire on December 31, 2001. The following table summarizes the shares
underlying each milestone and the related range of exercise prices:
<TABLE>
<CAPTION>
RANGE OF SHARES RANGE OF
UNDERLYING WARRANTS EXERCISE PRICE
----------------------- ----------------
<S> <C> <C>
Milestone 1........................................ 423,912 $1.65 to $2.64
Milestone 2........................................ 847,824 $1.65 to $4.23
Milestone 3........................................ 1,271,735 $1.65 to $6.78
Milestone 4........................................ 1,271,735 - 4,196,726 $1.65 to $6.78
</TABLE>
Milestones 1, 2 and 3 are based on the number of subscriptions that are sold
by Network Solutions, Inc. Milestone 4 is earned for each agreement signed by
the Company with a major internet portal (of which there are five defined in the
agreement), subject to issuing warrants to purchase a maximum of 4,196,726
shares under this agreement.
Using the Black-Scholes option pricing model and a term of three years and
expected volatility of 60%, the initial fair value of the warrants underlying
the agreement on the effective date of the agreement approximated $1.0 million,
which is being amortized to stock-based compensation expense immediately as the
warrants are issued and vest.
The shares underlying the milestones will be remeasured at each subsequent
balance sheet date until the milestones are achieved and the warrants vest and
such remeasurement could result in increases or decreases from the initial fair
value, which may be substantial. As of December 31, 1998, none of the warrants
had been issued as none of the milestones had been reached.
F-15
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--STOCKHOLDERS' EQUITY: (CONTINUED)
STOCK ISSUED IN EXCHANGE FOR TECHNOLOGY
In September 1997, the Company issued 7,050,000 shares of common stock to
founders and consultants in exchange for certain technologies held by these
individuals. Accordingly, the Company recorded an expense of $705,000 for the
period ended December 31, 1997 as part of engineering and operations expense,
which reflected the stock's deemed fair value.
NOTES RECEIVABLE
In November 1996, the Company entered into promissory notes receivable for
the issuance of common stock to the founders. The promissory notes receivable
for $620,000 were in exchange for the issuance of 6,200,000 shares of common
stock and bore interest at 10% per annum. The notes were paid in full in April
and September 1997.
In September 1997, the Company entered into promissory notes receivable for
the issuance of common stock with four stockholders. The promissory notes
receivable for $149,000 were in exchange for the issuance of 1,487,000 shares of
common stock and bore interest at 8% per annum. The Company forgave the
promissory notes in September 1998. Accordingly, the Company recorded $149,000
of stock-based compensation expense.
NOTES PAYABLE
In November 1998, the Company entered into promissory notes payable with
four stockholders totaling $250,000. These notes bore interest at 8% per annum
and had conversion rights upon the Company's next equity financing. In
connection with the Company's issuance of Series B convertible preferred stock
in December 1998, the Company issued 125,450 shares of Series B convertible
preferred stock and repaid the balance of $125,000 to satisfy the promissory
notes payable balance.
All outstanding shares of the Company's common stock issued in connection
with the promissory notes receivable have been issued under restricted stock
purchase agreements, under which the Company has the option to repurchase issued
shares of common stock. The Company's repurchase rights generally lapse at a
rate of 1/4 one year subsequent to the date of purchase and 1/48 per month
thereafter. At December 31, 1998, outstanding common shares subject to
repurchase totaled 1,022,312.
The Company also has the right of first refusal for any common shares
purchased under these agreements that are no longer subject to the Company's
repurchase right should a holder desire to sell or transfer such common shares.
This right expires upon the Company's initial public offering of stock.
STOCK OPTION PLAN
In 1997, the Company adopted the 1997 Stock Plan, or the Plan, under which
3,000,000 shares of the Company's common stock were reserved for issuance to
employees, directors and consultants. As of December 31, 1998, the Company had
reserved 5,800,000 shares of common stock for issuance under the Plan. Options
granted under the Plan may be incentive stock options or non-statutory stock
options. Incentive stock options may only be granted to employees.
F-16
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--STOCKHOLDERS' EQUITY: (CONTINUED)
The Plan is administered by the board of directors or by a committee
appointed by the board of directors which identifies optionees and determines
the terms of options granted, including the exercise price, number of shares
subject to the option grant and the exercisability thereof.
Options granted under the Plan generally begin vesting one year after the
vesting commencement date, with 1/4 of the shares subject to the option becoming
vested at that time and an additional 1/48 of the shares becoming vested each
month thereafter.
The exercise price of incentive stock options and non-statutory stock
options shall be no less than 100% and 85%, respectively, of the fair market
value per share of the Company's common stock on the grant date as determined by
the board of directors. If an individual owns stock representing more than 10%
of the outstanding shares, the exercise price of each share shall be at least
110% of fair market value, as determined by the board of directors. The term of
the options is generally ten years.
Activity under the Plan is as follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-----------------------------------------------------------
WEIGHTED
SHARES AGGREGATE AVERAGE
AVAILABLE NUMBER EXERCISE PRICE EXERCISE EXERCISE PRICE
FOR GRANT OF SHARES PER SHARE PRICE PER SHARE
--------------- ----------- -------------- ------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Shares reserved at Plan
inception........................ 3,000,000
Options granted.................... (425,000) 425,000 $0.10 $ 43 $ 0.10
--------------- ----------- -------------
Balances, December 31, 1997........ 2,575,000 425,000 $0.10 43 $ 0.10
Shares reserved.................... 2,800,000
Options granted.................... (3,454,066) 3,454,066 $0.10 - $0.25 611 $ 0.18
Options exercised.................. -- (100,000) $0.10 (10) $ 0.10
Options canceled................... 108,000 (108,000) $0.10 - $0.25 (21) $ 0.20
--------------- ----------- -------------
Balances, December 31, 1998........ 2,028,934 3,671,066 $0.10 - $0.25 623 $ 0.17
Shares reserved.................... 1,000,000
Options granted.................... (2,844,877) 2,844,877 $0.25 - $1.25 1,803 $ 0.63
Options exercised.................. -- (4,752,714) $0.10 - $1.25 (1,434) $ 0.30
Options canceled................... 411,396 (411,396) $0.10 - $0.75 (98) $ 0.24
--------------- ----------- -------------
Balances, June 30, 1999
(unaudited)...................... 595,453 1,351,833 $0.10 - $1.25 $ 894 $ 0.66
--------------- ----------- -------------
--------------- ----------- -------------
</TABLE>
F-17
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--STOCKHOLDERS' EQUITY: (CONTINUED)
The following table summarizes information with respect to stock options
outstanding and currently exercisable by exercise price at December 31, 1998:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS OPTIONS CURRENTLY EXERCISABLE
- ------------------------------------------------------------------------------- -------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE
EXERCISE PRICE NUMBER REMAINING CONTRACTUAL EXERCISE PRICE OPTIONS EXERCISE PRICE
PER SHARE OUTSTANDING LIFE (YEARS) PER SHARE EXERCISABLE PER SHARE
- -------------------- ----------- ------------------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
$0.10 1,407,900 9.24 $ 0.10 123,000 $ 0.10
$0.20 1,687,666 9.69 $ 0.20 57,667 $ 0.20
$0.25 575,500 9.96 $ 0.25 8,750 $ 0.25
----------- -------
$0.10 - $0.25 3,671,066 189,417
----------- -------
----------- -------
</TABLE>
The following table summarizes information with respect to stock options
outstanding and currently exercisable at June 30, 1999 (unaudited):
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS OPTIONS CURRENTLY EXERCISABLE
- ------------------------------------------------------------------------------- -------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE
EXERCISE PRICE NUMBER REMAINING CONTRACTUAL EXERCISE PRICE OPTIONS EXERCISE PRICE
PER SHARE OUTSTANDING LIFE (YEARS) PER SHARE EXERCISABLE PER SHARE
- -------------------- ----------- ------------------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
$0.10 78,000 8.73 $ 0.10 29,625 $ 0.10
$0.20 140,666 9.18 $ 0.20 20,384 $ 0.20
$0.25 312,333 9.56 $ 0.25 45,416 $ 0.25
$0.75 494,834 9.81 $ 0.75 18,435 $ 0.75
$1.25 326,000 9.88 $ 1.25 1,041 $ 1.25
----------- -------
1,351,833 114,901
----------- -------
----------- -------
</TABLE>
The weighted average fair value at the date of grant for options granted
during November 19, 1996 (date of inception) to December 31, 1997, the year
ended December 31, 1998, and the six months ended June 30, 1999 was $0.03, $0.04
and $0.15 per share respectively.
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following assumptions used for grants:
<TABLE>
<CAPTION>
SIX MONTHS
NOVEMBER 19, 1996 ENDED JUNE
(DATE OF INCEPTION) YEAR ENDED 30, 1999
TO DECEMBER 31, DECEMBER 31 -------------
1997 1998
------------------- ------------- (UNAUDITED)
<S> <C> <C> <C>
Risk-free interest rate................. 5.74% - 6.21% 4.60% - 5.69% 4.90% - 5.73%
Expected life of option................. 6 years 6 years 6 years
Expected dividends...................... -- -- --
</TABLE>
For financial reporting purposes, the Company has determined that the deemed
fair value on the date of grant of certain stock options granted in 1998 and
1999 was in excess of the exercise price of the options. The difference of $1.8
million and $5.3 million for the year ended December 31, 1999 and six months
F-18
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--STOCKHOLDERS' EQUITY: (CONTINUED)
ended June 30, 1999, respectively is considered unearned stock based
compensation and amortized over the vesting period of the options on a graded
vesting method.
Had compensation cost for the Plan been determined based on the fair value
of the options granted in the six months ended June 30, 1999 consistent with the
provisions of SFAS No. 123, the pro forma net loss would have been reported as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
NOVEMBER 19, 1996 SIX MONTHS
(DATE OF ENDED JUNE
INCEPTION) YEAR ENDED 30, 1999
TO DECEMBER 31, DECEMBER 31, -------------
1997 1998
----------------- ------------ (UNAUDITED)
<S> <C> <C> <C>
Net loss--as reported........................ $ (1,176) $ (5,879) $ (11,044)
Net loss--pro forma.......................... $ (1,178) $ (5,917) $ (11,107)
Net loss per share--as reported.............. $ (0.31) $ (0.40) $ (0.75)
Net loss per share--pro forma................ $ (0.31) $ (0.40) $ (0.75)
</TABLE>
Such pro forma disclosures may not be representative of future compensation
cost because options generally vest over several years and additional grants are
made each year.
NOTE 6--RELATED PARTY TRANSACTIONS
In May 1998, the Company entered into a promissory note receivable with an
officer. The unsecured promissory note receivable of $270,000 bears interest at
7.25% per annum and was payable in full on December 31, 1998. Also in May 1998,
a founder and officer of the Company granted an officer of the Company an option
to purchase 750,000 shares of common stock held by the founder, at an exercise
price of $0.45 per share. The grant was in connection with the officer's
employment agreement. At December 31, 1998 this option had not been exercised.
NOTE 7--INCOME TAXES:
At December 31, 1998, the Company had approximately $5.1 million in both
federal and state net operating loss carryforwards available to offset future
taxable income, if any. In addition, the Company had federal and state tax
credits of approximately $63,000 and $31,000, respectively, to offset future tax
liabilities, if any. These operating loss carryforwards and credits will expire
between 2002 and 2018, if not utilized beforehand.
For federal and state tax purposes, a portion of the Company's net operating
loss carryforwards may be subject to certain limitations on utilization in case
of a change in ownership, as defined by federal and
F-19
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--INCOME TAXES: (CONTINUED)
state tax law. Temporary differences which give rise to significant portions of
the deferred tax assets at December 31, 1997 and 1998 are as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Net operating loss carryforwards........................................... $ 103 $ 2,040
Research and development credits........................................... 18 94
Other...................................................................... 74 173
--------- ---------
Net deferred tax asset..................................................... 195 2,307
Less: valuation allowance.................................................. (195) (2,307)
--------- ---------
$ -- $ --
--------- ---------
--------- ---------
</TABLE>
The Company has recorded a 100% valuation allowance as it is more likely
than not that the deferred tax asset will not be realized. The valuation
allowance increased by $195,000 and $2.1 million in the period from November 19,
1996 (date of inception) to December 31, 1997 and 1998, respectively.
NOTE 8--SIGNIFICANT CUSTOMER AND GEOGRAPHIC INFORMATION:
The Company has adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," effective for fiscal years beginning after
December 31, 1997.
The Company has one reportable segment. Management uses one measurement of
profitability for its business.
The Company had no revenue for the period from November 19, 1996 (date of
inception) to December 31, 1997. 2Can Media, an Internet advertising reseller,
accounted for 79% of revenues for the year ended December 31, 1998. AltaVista
accounted for 21% of the Company's revenues for the six months ended June 30,
1999.
The Company markets its product primarily from its operations in the United
States. International revenues are to customers in Asia Pacific and Europe. For
the year ended December 31, 1998, the Company had $419,000 and $118,000 from
sales in the United States and foreign locations, respectively. For the six
months ended June 30, 1999, the Company had $892,000 and $167,000 from sales in
the United States and foreign locations, respectively. Revenue to any one
foreign country did not exceed 10% of total revenue in 1998 and for the six
months ended June 30, 1999.
NOTE 9--EMPLOYEE BENEFIT PLAN:
The Company has a 401(k) retirement plan, "retirement plan", which covers
substantially all employees. Eligible employees may make salary deferral (before
tax) contributions up to a specified maximum. The Company, at its discretion,
may make additional matching contributions on behalf of the participants of the
retirement plan. As of December 31, 1998, the Company has not made any
contributions to the retirement plan.
F-20
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--SUBSEQUENT EVENTS:
INKTOMI CORPORATION--WARRANT AGREEMENT
In January 1999, the Company entered into a licensing and sales
representative agreement with Inktomi Corporation, allowing Inktomi Corporation
to act as the Company's sales representative and solicit subscriptions for the
Company's Internet Keyword service. As part of the sales representative
agreement, the Company granted Inktomi Corporation a warrant to purchase up to
2,119,560 shares of the Company's common stock which vests and becomes
exercisable upon the attainment of various milestones. The milestones are based
on the implementation of the Company's services with certain pre-defined
partners of Inktomi Corporation. The warrant provides for the acceleration of
vesting of shares of common stock upon the Company filing a Registration
Statement for a public offering of the Company's common stock if certain
milestones have been met. No warrants shall vest after January 31, 2001 or, if
sooner, upon the filing of a Registration Statement for a public offering of the
Company's common stock. The warrant expires on April 30, 2001. At June 30, 1999,
none of the shares underlying the warrant had vested. Using the Black-Scholes
option pricing model and assuming a term of two years and expected volatility of
60%, the initial fair value of the warrants on the effective date of the
agreement approximated $718,000.
INFOSEEK CORPORATION--WARRANT AGREEMENT
In May 1999, the Company entered into a sales representative agreement with
Infoseek Corporation, allowing Infoseek Corporation to act as the Company's
sales representative and solicit subscriptions for the Company's Internet
Keyword service. Also as part of the sales representative agreement, the Company
granted Infoseek Corporation warrants to purchase up to 847,884 shares of the
Company's common stock at an exercise price of $3.00 per share upon the
attainment of certain performance milestones. The warrant expires on May 5,
2004. At June 30, 1999, none of the shares underlying the warrant had vested.
Using the Black-Scholes option pricing model and assuming a term of five years
and expected volatility of 60%, the initial fair value of the warrants on the
effective date of the agreement approximated $1.5 million. In September 1999,
423,942 of the shares underlying these warrants had expired unexercised.
NETWORK SOLUTIONS, INC.--WARRANT AGREEMENT
At June 30, 1999, milestone 4 specified in the Network Solutions, Inc.
warrant agreement had been achieved, and accordingly the Company issued a
warrant for 1,271,735 shares of common stock, resulting in a stock-based
compensation expense of $2.7 million.
REMEASUREMENT OF WARRANTS
At June 30, 1999, the shares underlying the remaining warrants were
remeasured using the deemed fair market value of the Company's common stock of
$3.60 per share. This remeasurement resulted in an increase to the fair value of
the warrant for Network Solutions, Inc. of $7.8 million in the six months ended
June 30, 1999, bringing the total fair value of the warrant to $8.8 million as
of June 30, 1999. Additionally, this remeasurement also resulted in increases in
the fair value of the Inktomi and Infoseek warrants at June 30, 1999 to $4.2
million and $1.8 million, respectively. The remaining unearned stock-based
compensation of $12.1 million underlying all warrants at June 30, 1999 will be
expensed as the shares underlying the warrants begin to vest. The shares
underlying the warrant will be remeasured at each subsequent balance sheet date
until the milestones are achieved and the warrants vest and such remeasurement
could result in increases or decreases from the initial fair value, which could
be substantial.
F-21
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--SUBSEQUENT EVENTS: (CONTINUED)
EQUIPMENT LOAN FACILITY
In February 1999, the Company obtained a $1.2 million equipment loan
facility with a financial institution. Borrowings under this agreement are
collateralized by the assets purchased under this equipment loan facility. The
line of credit bears interest at an effective rate of 17.5% and expires in 36
months from the base term commencement date.
1997 STOCK PLAN
On May 17, 1999, the board of directors authorized an increase of 1,000,000
in the number of shares reserved under the 1997 Stock Plan to 6,800,000 shares
of common stock.
NAME CHANGE
In August 1999, Centraal Corporation changed its name to RealNames
Corporation.
SERIES C CONVERTIBLE PREFERRED STOCK
In August 1999, the Company issued 15,677,778 shares of Series C convertible
preferred stock at $4.50 per share for consideration of approximately $70.5
million. The Series C convertible preferred stock has similar rights and
privileges as the Series A and B convertible preferred stock. The holders of
Series C convertible preferred stock are entitled to receive dividends of $0.36
per share per annum when declared by the board of directors and $9.00 per share
upon liquidation, dissolution or winding up. Each share of Series C convertible
preferred stock converts automatically into one share of common stock upon the
closing of a firm commitment underwritten public offering of the Company's
common stock for which the price per share is not less than $6.75 per share and
the aggregate offering price is not less than $35.0 million.
In connection with this equity financing, certain holders of the Series C
convertible preferred stock have the right to purchase up to $5.0 million of the
Company's common stock in a private placement immediately following and
contingent upon the closing of an initial public offering ("IPO"), at a price
per share equal to 96.5% of the per share price at which shares are offered to
the public in the IPO.
OPTION GRANTS AND EXERCISES
In August 1999, an officer of the Company exercised his option to purchase
750,000 shares of common stock held by a founder.
In September 1999, the board of directors granted a founder and officer an
option to purchase 724,414 shares of common stock at an exercise price equal to
110% of the fair market value of the Company's common stock at the date of
grant. The option vests monthly over four years.
STOCK-BASED COMPENSATION
The Company has recorded additional stock-based compensation for options
granted in July, August and September of 1999. Unearned stock-based compensation
expense for employee options is being amortized over the life of the options,
generally four years, on a graded vesting method, which results in a larger
share of the compensation expense being amortized earlier in the expected life
of the option.
F-22
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--SUBSEQUENT EVENTS: (CONTINUED)
The total unamortized unearned stock-based compensation recorded for all
option grants through September 30, 1999 of $13.2 million will be amortized as
follows: $5.0 million for the remainder of the year ending December 31, 1999;
$4.9 million for the year ending December 31, 2000; $2.4 million for the year
ending December 31, 2001; and $890,000 for the year ending December 31, 2002 and
thereafter.
OPERATING LEASE AGREEMENT
In September 1999, the Company entered into a sublease operating lease for
office space. The term of the sublease agreement is eight months with rental
payments of $91,913 per month.
OCTOBER 5, 1999 BOARD RESOLUTIONS
On October 5, 1999, in a meeting of the board of directors the following
resolutions were adopted subject to shareholder approval:
1999 STOCK PLAN
Approval of the 1999 Stock Plan under which 3,500,000 shares of the
Company's common stock are reserved for issuance to employees, directors
and consultants, plus an annual increase during the term of the plan
beginning January 1, 2001 equal to the lesser of 6,000,000 shares, 4% of
the outstanding shares on such date, or an amount determined by the board
of directors. The terms and conditions of options granted under the 1999
Stock Plan are similar to those granted under the 1997 Stock Plan.
AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The filing of an Amended and Restated Certificate of Incorporation which
authorizes the Company to increase the number of authorized common shares
to 200,000,000 and create 10,000,000 shares of undesignated preferred
stock.
1999 DIRECTOR OPTION PLAN
The creation of a 1999 Director Option Plan under which 500,000 shares of
common stock have been reserved for issuance to non-employee directors of
the Company. Options granted under this plan have a term of ten years and
vest over a four year period from the date of grant. The exercise price
of these options shall be the fair market value as determined by the
board of directors or closing sales price as quoted on any established
stock exchange or market system.
EMPLOYEE STOCK PURCHASE PLAN
The creation of an Employee Stock Purchase Plan under which 1,000,000
shares have been reserved for issuance plus an annual increase during the
term of this plan beginning January 1, 2001 equal to the lesser of
3,000,000 shares, 2% of the outstanding shares on such date, or an amount
determined by the board of directors. The 1999 Employee Stock Purchase
Plan contains successive 24-month offering periods and the price of stock
purchased under the plan is 85% of the lower of the fair value of the
common stock either at the beginning of the six-month exercise period or
at the end.
F-23
<PAGE>
REALNAMES CORPORATION
(FORMERLY CENTRAAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--SUBSEQUENT EVENTS: (CONTINUED)
INITIAL PUBLIC OFFERING
The authorization of the filing of a registration statement for an
underwritten public offering of the Company's common stock.
CO-MARKETING COMMITMENTS
The Company has entered into co-marketing agreements with Keyword Provider
customers to spend advertising dollars with them. As of June 30, 1999 the
Company's total commitment to spend advertising dollars approximated $13.7
million of which $543,000 was due and payable at that date.
F-24
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the costs and expenses, other than
underwriting discounts and commissions, incurred and to be incurred by the
Registrant in connection with the issuance and distribution of the securities
registered in this offering. All amounts are estimates except the Securities and
Exchange Commission ("SEC") registration fee and the National Association of
Securities Dealers, Inc. ("NASD") filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................... $ 19,460
NASD filing fee.................................................... 7,500
Nasdaq National Market listing fee................................. 1,000
Printing fees and expenses......................................... *
Legal fees and expenses............................................ *
Accounting fees and expenses....................................... *
Director and officer liability insurance........................... *
Blue sky fees and expenses......................................... *
Transfer agent and registrar fees.................................. *
Miscellaneous...................................................... *
---------
Total.......................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be disclosed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware (the "DGCL") provides
that a Delaware corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that any such person is or was a director, officer, employee or agent of
such corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such officer or director acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
A Delaware corporation may indemnify officers and directors against expenses
(including attorneys' fees) in connection with the defense or settlement of an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses (including attorney's fees) which such officer or director actually and
reasonably incurred. The foregoing description is qualified in its entirety by
reference to the more detailed provisions of Section 145 of the DGCL.
Section 102 of the DGCL allows a Delaware corporation to eliminate or limit
the personal liability of a director to the corporation or to any of its
stockholders for monetary damage for a breach of fiduciary duty as a director,
except in the case where the director (i) breaches such person's duty of loyalty
to the corporation or its stockholders, (ii) fails to act in good faith, engages
in intentional misconduct or
II-1
<PAGE>
knowingly violates a law, (iii) authorizes the payment of a dividend or approves
a stock purchase or redemption in violation of Section 174 of the DGCL or (iv)
obtains an improper personal benefit.
In accordance with the DGCL, the Registrant's Certificate of Incorporation
contains a provision to limit the personal liability of its directors for
monetary damages for breach of their fiduciary duty to the fullest extent
permitted by the DGCL now, or as it may hereafter be amended.
In addition, as permitted by the DGCL, the Registrant's Bylaws provide that
(i) the Registrant is required to indemnify its directors and officers and
persons serving in such capacities in other business enterprises at the
Registrant's request, to the fullest extent permitted by Delaware law; (ii) the
Registrant may indemnify its employees and agents to the maximum extent
permitted by Delaware law; (iii) the Registrant is required to advance expenses
incurred by its directors and officers in connection with defending a proceeding
(except that a director or officer must undertake to repay any advances if it
should ultimately be determined that the director or officer is not entitled to
indemnification); (iv) the rights conferred in the Bylaws are not exclusive; and
(v) the Registrant may not retroactively amend the Bylaw provisions in a way
that adversely affects any director or officer.
The Registrant maintains insurance covering its directors and officers
against certain liabilities incurred by them in their capacities as such,
including among other things, certain liabilities under the Securities Act of
1933, as amended (the "Securities Act"). The Registrant also intends to enter
into indemnification agreements with its directors and officers prior to the
closing of this offering that provide the maximum indemnity allowed to directors
and officers by the DGCL and the Registrant's Bylaws.
The Underwriting Agreement provides for indemnification by the Underwriters
of the Registrant and its directors and officers who sign this Registration
Statement against certain liabilities, including liabilities under the
Securities Act.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
EXHIBIT
DOCUMENT NUMBER
- ------------------------------------------------------------------------------------ -----------
<S> <C>
Form of Underwriting Agreement...................................................... 1.1
Certificate of Incorporation of Registrant.......................................... 3.1
Bylaws of Registrant................................................................ 3.2
Form of Indemnification Agreement to be entered into by the Registrant with each of
its directors and officers........................................................ 10.5
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since our inception in November 1996 we issued and sold the following
unregistered securities.
1. In November 1996, we issued and sold 620 shares of common stock to our
founders for an aggregate purchase price of $620,000. In September 1997, we
effected a 10,000 for 1 stock split.
2. In September 1997, we issued and sold 8,537,000 shares of common stock to
our founders for an aggregate consideration price of $853,700, of which
$705,000 was settled by the transfer of technology to us and $148,700 was
settled with promissory notes.
3. In March 1998, we issued and sold 8,869,179 shares of our Series A
convertible preferred stock to our investors for an aggregate purchase
price of $4,000,000.
4. In November 1998 we issued convertible promissory notes to our investors
for an aggregate purchase price of $250,000. In December 1998, we repaid
$124,550 of the principal of these notes and the remaining principal amount
was converted into 125,450 shares of our Series B convertible preferred
stock.
II-2
<PAGE>
5. In December 1998, we issued for cash 12,609,550 shares of our Series B
convertible preferred stock to our investors for an aggregate purchase
price of $12,610,000.
6. In December 1998, we issued a warrant to an investor to purchase up to
250,000 shares of Series B convertible preferred stock at an exercise price
of $1.00 per share. This warrant was exercised in full in March 1999.
7. In August 1999, we issued and sold 15,677,778 shares of our Series C
convertible preferred stock to certain investors for an aggregate purchase
price of $70,550,001 which includes a promissory note of $899,800.
8. In June 1999, we issued a warrant to one of our corporate partners to
purchase up to 1,271,735 shares of our common stock at an exercise price of
$2.09 per share. This warrant was exercised in full in September 1999.
9. In January 1999, we issued a warrant to one of our corporate partners to
purchase up to 2,119,560 shares of our common stock. The warrant shares
vest if milestones are reached and the exercise price of the warrant shares
depends on the date on which the milestones are reached.
10. In May 1999, we issued two warrants to one of our corporate partners to
purchase up to 847,884 shares of our common stock at an exercise price of
$3.00 per share. The warrant shares vest if milestones are reached.
11. From November 1996 through August 1999 we issued an aggregate of 9,023,317
shares of common stock to our employees and consultants pursuant to options
granted under our 1997 Stock Plan at exercise prices ranging from $.10 to
$3.50 per share.
The sales of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b)
of the Securities Act as transactions by an issuer not involving a public
offering or transactions pursuant to compensatory benefit plans and contracts
relating to compensation as provided under such Rule 701. The recipients of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates and warrants issued in such transactions. All recipients had
adequate access, through their relationships with us, to information about the
Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation to be filed and become effective upon the
closing of this offering.
3.2 Form of Amended Bylaws to become effective upon the closing of this offering.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2(*) Specimen Stock Certificate.
5.1(*) Opinion of Wilson Sonsini Goodrich & Rosati, with respect to the securities being issued.
10.1 1997 Stock Plan and form of agreement.
10.2 1999 Stock Plan and form of agreement.
10.3 1999 Employee Stock Purchase Plan and form of agreement.
10.4 1999 Director Option Plan.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
10.5 Form of Indemnification Agreement entered into between RealNames and each of its directors and
officers.
<C> <S>
10.6 Office Lease dated December 16, 1998 between RealNames and Circle Star Center Associates, L.P.
10.7 Office Sublease dated September 1, 1999 between RealNames and Broadvision, Inc.
10.8+ License and Marketing Agreement dated June 2, 1999 between Microsoft Corporation and RealNames.
10.9+ RealNames Sales Representative Agreement dated December 8, 1999 between Network Solutions, Inc. and
RealNames and Amendment No. 1 dated February 18, 1999 and Amendment No. 2 dated May 25, 1999.
10.10+ RealNames Service Agreement dated April 1, 1999 between RealNames and AltaVista.
10.11 Second Amended and Restated Investor Rights Agreement dated August 6, 1999 among RealNames and the
Investors.
10.12 Promissory Note dated May 29, 1998 between the Company and Keith Teare, as amended on October 4,
1999.
10.13 Offer letter dated April 17, 1997 from RealNames to Nicolas Popp.
10.14 Offer letter dated May 10, 1999 from RealNames to Edward West.
10.15(*) Form of Restricted Stock Purchase Agreement between RealNames and certain executive officers.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.2(*) Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit 5.1).
24.1 Power of Attorney (filed herewith on the signature page of this Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
+ Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
(*) To be filed by amendment.
(**) Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing, as specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered hereunder, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-4
<PAGE>
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of the 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) For the purpose 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 such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Carlos, State of
California, on the 6th day of October 1999.
REALNAMES CORPORATION
By: /s/ JAMES N. STRAWBRIDGE
--------------------------------------
Name: James N. Strawbridge
Title: Executive Vice President,
Chief Financial and
Administrative Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
each of Keith W. Teare, James N. Strawbridge and Richard Steele or any of them,
each acting alone, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for such person and in his name, place
and stead, in any and all capacities, in connection with this Registration
Statement, including to sign and file in the name and on behalf of the
undersigned as director or officer of the Registrant (i) any and all amendments
or supplements (including any and all stickers and post-effective amendments) to
this Registration Statement, with all exhibits thereto, and other documents in
connection therewith, and (ii) any and all additional registration statements,
and any and all amendments thereto, relating to the same offering of securities
as those that are covered by this Registration Statement that are filed pursuant
to Rule 462(b) under the Securities Act of 1933, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
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 BY THE FOLLOWING PERSONS ON OCTOBER 6,
1999 IN THE CAPACITIES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
/s/ KEITH W. TEARE Chairman of the Board of
- ------------------------------ Directors, President and
Keith W. Teare Chief Executive Officer
(PRINCIPAL EXECUTIVE
OFFICER)
/s/ JAMES N. STRAWBRIDGE Executive Vice President,
- ------------------------------ Chief Financial and
James N. Strawbridge Administrative Officer
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
/s/ WILLIAM ELKUS Director
- ------------------------------
William Elkus
</TABLE>
II-6
<PAGE>
<TABLE>
<C> <S>
/s/ JOHN FISHER Director
- ------------------------------
John Fisher
/s/ JEAN MARIE HULLOT Director
- ------------------------------
Jean Marie Hullot
/s/ ROBERT KORZENIEWSKI Director
- ------------------------------
Robert Korzeniewski
/s/ ROBERT J. LOARIE Director
- ------------------------------
Robert J. Loarie
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------ ----------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation to be filed and become effective upon the
closing of this offering.
3.2 Form of Amended Bylaws to become effective upon the closing of this offering.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2(*) Specimen Stock Certificate.
5.1(*) Opinion of Wilson Sonsini Goodrich & Rosati, with respect to the securities being issued.
10.1 1997 Stock Plan and form of agreement.
10.2 1999 Stock Plan and form of agreement.
10.3 1999 Employee Stock Purchase Plan and form of agreement.
10.4 1999 Director Option Plan.
10.5 Form of Indemnification Agreement entered into between RealNames and each of its directors and
officers.
10.6 Office Lease dated December 16, 1998 between RealNames and Circle Star Center Associates, L.P.
10.7 Office Sublease dated September 1, 1999 between RealNames and Broadvision, Inc.
10.8+ License and Marketing Agreement dated June 2, 1999 between Microsoft Corporation and RealNames.
10.9+ RealNames Sales Representative Agreement dated December 8, 1999 between Network Solutions, Inc. and
RealNames and Amendment No. 1 dated February 18, 1999 and Amendment No. 2 dated May 25, 1999.
10.10+ RealNames Service Agreement dated April 1, 1999 between RealNames and AltaVista.
10.11 Second Amended and Restated Investor Rights Agreement dated August 6, 1999 among RealNames and the
Investors.
10.12 Promissory Note dated May 29, 1998 between the Company and Keith Teare, as amended on October 4,
1999.
10.13 Offer letter dated April 17, 1997 from RealNames to Nicolas Popp.
10.14 Offer letter dated May 10, 1999 from RealNames to Edward West.
10.15(*) Form of Restricted Stock Purchase Agreement between RealNames and certain executive officers.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.2(*) Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit 5.1).
24.1 Power of Attorney (filed herewith on the signature page of this Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
+ Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
(*) To be filed by amendment.
(**) Previously filed.
<PAGE>
EXHIBIT 1.1
_______________ SHARES
REALNAMES CORPORATION
COMMON STOCK, PAR VALUE $0.001
UNDERWRITING AGREEMENT
__________, 1999
<PAGE>
_____________, 1999
Morgan Stanley & Co. Incorporated
BancBoston Robertson Stephens Inc.
Hambrecht & Quist LLC
PaineWebber Incorporated
Wit Capital Corporation
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
RealNames Corporation, a Delaware corporation (the "COMPANY"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "UNDERWRITERS") ______________ shares of its Common Stock, par value
$0.001 (the "FIRM SHARES"). The Company also proposes to issue and sell to the
several Underwriters not more than an additional ______________ shares of its
Common Stock, par value $0.001 (the "ADDITIONAL SHARES") if and to the extent
that you, as Managers of the offering, shall have determined to exercise, on
behalf of the Underwriters, the right to purchase such shares of common stock
granted to the Underwriters in Section 2 hereof. The Firm Shares and the
Additional Shares are hereinafter collectively referred to as the "SHARES." The
shares of Common Stock, par value $0.001 of the Company to be outstanding after
giving effect to the sales contemplated hereby are hereinafter referred to as
the "COMMON STOCK."
The Company has filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement, including a prospectus,
relating to the Shares. The registration statement as amended at the time it
becomes effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the
term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462
Registration Statement.
Morgan Stanley & Co. Incorporated ("Morgan Stanley") has
agreed to reserve a portion of the Shares to be purchased by it under this
Agreement for sale to the Company's directors, officers, employees and business
associates and other parties related to the Company (collectively,
"Participants"), as set forth in the Prospectus under the heading "Underwriters"
(the "Directed Share Program"). The Shares to be sold by Morgan Stanley and its
affiliates pursuant to the Directed Share Program are referred to hereinafter as
the "Directed Shares." Any Directed Shares not orally confirmed for purchase by
any Participants by the end of the business
2
<PAGE>
day on which this Agreement is executed will be offered to the public by the
Underwriters as set forth in the Prospectus.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) The Registration Statement, when it became effective,
did not contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (ii) the Registration Statement and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material respects
with the Securities Act and the applicable rules and regulations of the
Commission thereunder and (iii) the Prospectus does not contain and, as amended
or supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
paragraph do not apply to statements or omissions in the Registration Statement
or the Prospectus based upon information relating to any Underwriter furnished
to the Company in writing by such Underwriter through you expressly for use
therein.
(c) The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole; all of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are owned directly
by the Company, free and clear of all liens, encumbrances, equities or claims.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
3
<PAGE>
(f) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance
of the Shares have been duly authorized and are validly issued, fully paid and
non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will not
be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will not
contravene any provision of applicable law or the certificate of incorporation
or by-laws of the Company or any agreement or other instrument binding upon the
Company or any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except such
as may be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement).
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed as required.
(l) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment thereto,
or filed pursuant to Rule 424 under the Securities Act, complied when so filed
in all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be required to register as an "investment company"
as such term is defined in the Investment Company Act of 1940, as amended.
(n) The Company and its subsidiaries (i) are in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection
4
<PAGE>
of human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(o) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties) which
would, singly or in the aggregate, have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
(p) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require the Company
to file a registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such securities
with the Shares registered pursuant to the Registration Statement.
(q) The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the Government of Cuba
or with any person or affiliate located in Cuba.
(r) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (1) the Company and
its subsidiaries have not incurred any material liability or obligation, direct
or contingent, nor entered into any material transaction not in the ordinary
course of business; (2) the Company has not purchased any of its outstanding
capital stock, nor declared, paid or otherwise made any dividend or distribution
of any kind on its capital stock other than ordinary and customary dividends;
and (3) there has not been any material change in the capital stock, short-term
debt or long-term debt of the Company and its subsidiaries, except in each case
as described in the Prospectus.
(s) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries, in each case except as described in the
Prospectus.
5
<PAGE>
(t) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all material patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names currently employed by
them in connection with the business now operated by them, and neither the
Company nor any of its subsidiaries has received any notice of infringement of
or conflict with asserted rights of others with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a material adverse affect on the Company and its
subsidiaries, taken as a whole.
(u) No material labor dispute with the employees of the Company
or any of its subsidiaries exists, except as described in the Prospectus, or, to
the knowledge of the Company, is imminent; and the Company is not aware of any
existing, threatened or imminent labor disturbance by the employees of any of
its principal suppliers, manufacturers or contractors that could have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(v) The Company and its subsidiaries are insured by the insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; neither the Company nor any of its subsidiaries has been refused any
insurance coverage sought or applied for; and neither the Company nor any of its
subsidiaries has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole, except as described in the Prospectus.
(w) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse effect on
the Company and its subsidiaries, taken as a whole, except as described the
Prospectus.
(x) The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that
(1) transactions are executed in accordance with management's general or
specific authorizations; (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (3) access to assets
is permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(y) The Company has reviewed its operations and that of its
subsidiaries to evaluate the extent to which the business or operations of the
Company or any of its subsidiaries will be affected by the Year 2000 Problem
(that is, any significant risk that computer hardware or software applications
used by the Company and its subsidiaries will not,
6
<PAGE>
in the case of dates or time periods occurring after December 31, 1999, function
at least as effectively as in the case of dates or time periods occurring prior
to January 1, 2000); as a result of such review, (i) the Company has no reason
to believe, and does not believe, that (A) there are any issues related to the
Company's preparedness to address the Year 2000 Problem that are of a character
required to be described or referred to in the Registration Statement or
Prospectus which have not been accurately described in the Registration
Statement or Prospectus and (B) the Year 2000 Problem will have a material
adverse effect on the condition, financial or otherwise, or on the earnings,
business or operations of the Company and its subsidiaries, taken as a whole, or
result in any material loss or interference with the business or operations of
the Company and its subsidiaries, taken as a whole; and (ii) the Company
reasonably believes, after due inquiry, that the suppliers, vendors, customers
or other material third parties used or served by the Company and such
subsidiaries are addressing or will address the Year 2000 Problem in a timely
manner, except to the extent that a failure to address the Year 2000 Problem by
any supplier, vendor, customer or material third party would not have a material
adverse effect on the condition, financial or otherwise, or on the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.
(z) The Registration Statement, the Prospectus and any
preliminary prospectus comply, and any amendments or supplements thereto will
comply, with any applicable laws or regulations of foreign jurisdictions in
which the Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share Program.
(aa) No consent, approval, authorization or order of, or
qualification with, any governmental body or agency, other than those obtained,
is required in connection with the offering of the Directed Shares in any
jurisdiction where the Directed Shares are being offered.
(bb) The Company has not offered, or caused Morgan Stanley or its
affiliates to offer, Shares to any person pursuant to the Directed Share Program
with the specific intent to unlawfully influence (i) a customer or supplier of
the Company to alter the customer's or supplier's level or type of business with
the Company, or (ii) a trade journalist or publication to write or publish
favorable information about the Company or its products.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $______ a share (the "PURCHASE PRICE").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to _______________
Additional Shares at the Purchase Price. If you, on behalf of the Underwriters,
elect to exercise such option, you shall so notify the Company in writing not
later than 30 days after the date of this Agreement, which notice shall specify
the number of Additional Shares to be purchased by the Underwriters and the date
on which such shares are to
7
<PAGE>
be purchased. Such date may be the same as the Closing Date (as defined below)
but not earlier than the Closing Date nor later than ten business days after the
date of such notice. Additional Shares may be purchased as provided in Section 4
hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
purchased, each Underwriter agrees, severally and not jointly, to purchase the
number of Additional Shares (subject to such adjustments to eliminate fractional
shares as you may determine) that bears the same proportion to the total number
of Additional Shares to be purchased as the number of Firm Shares set forth in
Schedule I hereto opposite the name of such Underwriter bears to the total
number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder or (B) the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$_____________ a share (the "PUBLIC OFFERING PRICE") and to certain dealers
selected by you at a price that represents a concession not in excess of $______
a share under the Public Offering Price, and that any Underwriter may allow, and
such dealers may reallow, a concession, not in excess of $_____ a share, to any
Underwriter or to certain other dealers.
4. PAYMENT AND DELIVERY. Payment for the Firm Shares shall be made
to the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on ____________, 1999, or at
such other time on the same or such other date, not later than _________, 19__,
as shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "CLOSING DATE".
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 2 or at such other time on the same or on such other
date, in any event not later than _______, 1999, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the "OPTION CLOSING DATE".
8
<PAGE>
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of
the Company to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than [_____] (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement) that, in your judgment, is material and adverse and that makes it, in
your judgment, impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of the
Company, to the effect set forth in Section 5(a)(i) above and to the effect that
the representations and warranties of the Company contained in this Agreement
are true and correct as of the Closing Date and that the Company has complied
with all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation ("Wilson
Sonini"), outside counsel for the Company, dated the Closing Date, to the effect
that:
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(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own its property and
to conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(ii) each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole;
(iii) the authorized capital stock of the Company conforms
as to legal matters to the description thereof contained in the Prospectus;
(iv) the shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly issued, fully
paid and non-assessable;
(v) all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(vi) the Shares have been duly authorized and, when issued
and delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will not
be subject to any preemptive or similar rights;
(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will not
contravene any provision of applicable law or the certificate of incorporation
or by-laws of the Company or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon the Company or any of its
subsidiaries that is material to the Company and its subsidiaries, taken as a
whole, or, to the best of such counsel's knowledge, any judgment, order or
decree of any governmental body, agency or court having jurisdiction over the
Company or any subsidiary, and no consent, approval, authorization or order of,
or qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement,
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except such as may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares;
(ix) the statements (A) in the Prospectus under the captions
"Management - Employee Benefit Plans," "Certain Relationships and Related
Transactions," "Description of Capital Stock" and "Underwriters" and (B) in the
Registration Statement in Items 14 and 15, in each case insofar as such
statements constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information called for with respect to
such legal matters, documents and proceedings and fairly summarize the matters
referred to therein;
(x) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject that are required to be described
in the Registration Statement or the Prospectus and are not so described or of
any statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required;
(xi) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be required to register as an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended;
(xii) the Company and its subsidiaries (A) are in compliance
with any and all applicable Environmental Laws, (B) have received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (C) are in compliance with all terms
and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries, taken as a
whole; and
(xiii) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included therein as to which
such counsel need not express any opinion) comply as to form in all material
respects with the Securities Act and the applicable rules and regulations of the
Commission thereunder, (B) has no reason to believe that (except for financial
statements and schedules and other financial and statistical data as to which
such counsel need not express any belief) the Registration Statement and the
prospectus included therein at the time the Registration Statement became
effective contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading and (C) has no reason to believe that (except
for financial statements and schedules and other financial and statistical data
as to which such counsel need not express any belief) the Prospectus contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
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(d) The Underwriters shall have received on the Closing Date an
opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
("Gunderson Dettmer"), counsel for the Underwriters, dated the Closing Date,
covering the matters referred to in Sections 5(c)(vi), 5(c)(vii), 5(c)(ix) (but
only as to the statements in the Prospectus under "Description of Capital Stock"
and "Underwriters") and 5(c)(xiii) above.
With respect to Section 5(c)(xiii) above, Wilson Sonsini and Gunderson
Dettmer may state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto and review and discussion of the
contents thereof, but are without independent check or verification, except as
specified.
The opinion of Wilson Sonsini described in Section 5(c) above shall be
rendered to the Underwriters at the request of the Company and shall so state
therein.
(e) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters, from
Pricewaterhouse Coopers LLP, independent accountants, containing statements and
information of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus; PROVIDED
that the letter delivered on the Closing Date shall use a "cut-off date" not
earlier than the date hereof.
(f) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and certain shareholders, officers and directors
of the Company relating to sales and certain other dispositions of shares of
Common Stock or certain other securities, delivered to you on or before the date
hereof, shall be in full force and effect on the Closing Date.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.
6. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, six (6) signed copies of
the Registration Statement (including exhibits thereto) and for delivery to each
other Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and to furnish to you in New York City, without charge, prior
to 10:00 a.m. New York City time on the business day next succeeding the date of
this Agreement and during the period mentioned in Section 6(c) below, as many
copies of the Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
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(b) Before amending or supplementing the Registration Statement
or the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to which
you reasonably object, and to file with the Commission within the applicable
period specified in Rule 424(b) under the Securities Act any prospectus required
to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters the
Prospectus is required by law to be delivered in connection with sales by an
Underwriter or dealer, any event shall occur or condition exist as a result of
which it is necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if, in the opinion of counsel for
the Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the Commission and
furnish, at its own expense, to the Underwriters and to the dealers (whose names
and addresses you will furnish to the Company) to which Shares may have been
sold by you on behalf of the Underwriters and to any other dealers upon request,
either amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement covering the
twelve-month period ending December 31, 2000 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the Company's
counsel and the Company's accountants in connection with the registration and
delivery of the Shares under the Securities Act and all other fees or expenses
in connection with the preparation and filing of the Registration Statement, any
preliminary prospectus, the Prospectus and amendments and supplements to any of
the foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) the cost of printing or producing any Blue
Sky or Legal Investment memorandum in connection with the offer and sale of the
Shares under state securities laws and all expenses in connection with the
qualification of the Shares for offer and sale under state securities laws as
provided in Section 6(d) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky or Legal Investment
memorandum, (iv) all filing fees and the reasonable fees and disbursements of
counsel to the Underwriters incurred in connection with the review and
qualification of the offering of the Shares by the
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National Association of Securities Dealers, Inc., (v) all fees and expenses in
connection with the preparation and filing of the registration statement on Form
8-A relating to the Common Stock and all costs and expenses incident to listing
the Shares on the Nasdaq National Market, (vi) the cost of printing certificates
representing the Shares, (vii) the costs and charges of any transfer agent,
registrar or depositary, (viii) the costs and expenses of the Company relating
to investor presentations on any "road show" undertaken in connection with the
marketing of the offering of the Shares, including, without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging
expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the road
show, (ix) all fees and disbursements of counsel incurred by the Underwriters in
connection with the Directed Share Program and stamp duties, similar taxes or
duties or other taxes, if any, incurred by the Underwriters in connection with
the Directed Share Program, and (x) all other costs and expenses incident to the
performance of the obligations of the Company hereunder for which provision is
not otherwise made in this Section. It is understood, however, that except as
provided in this Section, Section 7 entitled "Indemnity and Contribution", and
the last paragraph of Section 10 below, the Underwriters will pay all of their
costs and expenses, including fees and disbursements of their counsel, stock
transfer taxes payable on resale of any of the Shares by them and any
advertising expenses connected with any offers they may make.
(g) To place stop transfer orders on any Directed Shares that
have been sold to Participants subject to the three month restriction on sale,
transfer, assignment, pledge or hypothecation imposed by NASD Regulation, Inc.
under its Interpretative Material 2110-1 on free-riding and withholding to the
extent necessary to ensure compliance with the three month restrictions.
(h) To comply with all applicable securities and other
applicable laws, rules and regulations in each jurisdiction in which the
Directed Shares are offered in connection with the Directed Share Program.
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7. INDEMNITY AND CONTRIBUTION. (a) The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 7(a) or 7(b), such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to Section 7(a), and by the Company, in the case of
parties indemnified pursuant to Section 7(b). The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
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from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) To the extent the indemnification provided for in Section
7(a) or 7(b) is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Shares or (ii) if the allocation provided by
clause 7(d)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Company on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the Shares. The relative fault of the Company on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be
just or equitable if contribution pursuant to this Section 7 were determined by
PRO RATA allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in Section 7(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such
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indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 7 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Shares.
8. DIRECTED SHARE PROGRAM INDEMNIFICATION. (a) The Company agrees to
indemnify and hold harmless Morgan Stanley and its affiliates and each person,
if any, who controls Morgan Stanley or its affiliates within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
("Morgan Stanley Entities"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) (i) caused by any untrue statement or alleged untrue
statement of a material fact contained in any material prepared by or with the
consent of the Company for distribution to Participants in connection with the
Directed Share Program, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; (ii) caused by the failure of any Participant
to pay for and accept delivery of Directed Shares that the Participant has
agreed to purchase; or (iii) related to, arising out of, or in connection with
the Directed Share Program other than losses, claims, damages or liabilities (or
expenses relating thereto) that are finally judicially determined to have
resulted from the bad faith or gross negligence of Morgan Stanley Entities. In
case any proceeding (including any governmental investigation) shall be
instituted involving any Morgan Stanley Entity in respect of which indemnity may
be sought pursuant to Section 8(a), the Morgan Stanley Entity seeking indemnity
shall promptly notify the Company in writing and the Company, upon request of
the Morgan Stanley Entity, shall retain counsel reasonably satisfactory to the
Morgan Stanley Entity to represent the Morgan Stanley Entity and any other the
Company may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Morgan Stanley Entity shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Morgan Stanley Entity unless (I) the Company shall have agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Company and the Morgan
Stanley Entity and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
Company shall not, in respect of the legal expenses of the Morgan Stanley
Entities in connection with any
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proceeding or related proceedings the same jurisdiction, be liable for the fees
and expenses of more than one separate firm (in addition to any local counsel)
for all Morgan Stanley Entities. Any such firm for the Morgan Stanley Entities
shall be designated in writing by Morgan Stanley. The Company shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Company agrees to indemnify the Morgan Stanley Entities from
and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time a Morgan Stanley Entity
shall have requested the Company to reimburse it for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
Company agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into more
than 30 days after receipt by the Company of the aforesaid request and (ii) the
Company shall not have reimbursed the Morgan Stanley Entity in accordance with
such request prior to the date of such settlement. The Company shall not,
without the prior written consent of Morgan Stanley, effect any settlement of
any pending or threatened proceeding in respect of which any Morgan Stanley
Entity is or could have been a party and indemnity could have been sought
hereunder by such Morgan Stanley Entity, unless such settlement includes an
unconditional release of the Morgan Stanley Entities from all liability on
claims that are the subject matter of such proceeding.
(c) To the extent the indemnification provided for in Section
8(a) is unavailable to a Morgan Stanley Entity or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then the Company, in
lieu of indemnifying the Morgan Stanley Entity thereunder, shall contribute to
the amount paid or payable by the Morgan Stanley Entity as a result of such
losses, claims, damages or liabilities (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand and the
Morgan Stanley Entities on the other hand from the offering of the Directed
Shares or (ii) if the allocation provided by clause 8(c)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 8(c)(i) above but also the
relative fault of the Company on the one hand and of the Morgan Stanley Entities
on the other hand in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and of the Morgan Stanley Entities on the other hand in connection with
the offering of the Directed Shares shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Directed Shares (before
deducting expenses) and the total underwriting discounts and commissions
received by the Morgan Stanley Entities for the Directed Shares, bear to the
aggregate Public Offering Price of the Shares. If the loss, claim, damage or
liability is caused by an untrue or alleged untrue statement of a material fact,
the relative fault of the Company on the one hand and the Morgan Stanley
Entities on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement or the omission or
alleged omission relates to information supplied by the Company or by the Morgan
Stanley Entities and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(d) The Company and the Morgan Stanley Entities agree that it
would not be just or equitable if contribution pursuant to this Section 8 were
determined by PRO RATA allocation (even if the Morgan Stanley Entities were
treated as one entity for such purpose) or by
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any other method of allocation that does not take account of the equitable
considerations referred to in Section 8(c). The amount paid or payable by the
Morgan Stanley Entities as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by the Morgan Stanley Entities in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, no Morgan Stanley Entity shall be required to
contribute any amount in excess of the amount by which the total price at which
the Directed Shares distributed to the public were offered to the public exceeds
the amount of any damages that such Morgan Stanley Entity has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any Morgan Stanley Entity at law or in equity.
(e) The indemnity and contribution provisions contained in this
Section 8 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Morgan Stanley Entity or the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Directed Shares.
9. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
10. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I bears to the
aggregate number of Firm Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
19
<PAGE>
failed or refused to purchase on such date; PROVIDED that in no event shall the
number of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 10 by an amount in excess of
one-ninth of such number of Shares without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail
or refuse to purchase Firm Shares and the aggregate number of Firm Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Firm Shares to be purchased, and arrangements satisfactory to you and
the Company for the purchase of such Firm Shares are not made within 36 hours
after such default, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter or the Company. In any such case either you or
the Company shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
20
<PAGE>
11. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
13. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Very truly yours,
REALNAMES CORPORATION
By:
---------------------------
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
BancBoston Robertson Stephens Inc.
Hambrecht & Quist LLC
PaineWebber Incorporated
Wit Capital Corporation
Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By:
-----------------------------
Name:
Title:
<PAGE>
SCHEDULE I
NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
Morgan Stanley & Co. Incorporated
BancBoston Robertson Stephens Inc.
Hambrecht & Quist LLC
PaineWebber Incorporated
Wit Capital Corporation
[NAMES OF OTHER UNDERWRITERS]
-----------------
Total ........
-----------------
-----------------
S-1
<PAGE>
Exhibit A
[FORM OF LOCK-UP LETTER]
E-1
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
REALNAMES CORPORATION
(Incorporated November 19, 1996)
RealNames Corporation (the "corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"General Corporation Law"), hereby certifies as follows:
1. That the corporation was originally incorporated on November
19, 1996 under the name Go Inc., pursuant to the General Corporation Law.
2. Pursuant to Sections 242 and 245 of the General Corporation
Law, this Amended and Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of
Incorporation of the corporation.
3. The text of the Certificate of Incorporation is hereby amended
and restated in its entirety as follows:
"ONE. The name of the corporation is RealNames Corporation (the
"corporation").
TWO. The address of the corporation's registered office in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle, Delaware 19801. The name of its registered agent at such address is
The Corporation Trust Company.
THREE. The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law.
FOUR. The corporation is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares of Common Stock that the corporation is authorized to issue
is 200,000,000, with a par value of $0.001 per share. The total number of
shares of Preferred Stock that the corporation is authorized to issue is
42,531,957, with a par value of $0.001 per share, 8,869,179 of which are
designated "Series A Preferred Stock," 12,985,000 of which are designated
"Series B Preferred Stock" and 15,677,778 of which are designated "Series C
Preferred Stock" and 10,000,000 of which are undesignated.
The undesignated 10,000,000 shares of Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is authorized to
determine the number of shares of any such series. The Board of Directors is
also authorized to determine or alter the powers, designations, preferences,
rights and restrictions to be imposed upon any wholly unissued series of
Preferred Stock and, within the limits and restrictions stated in any resolution
or resolutions of the Board of Directors originally fixing the number of shares
constituting any series, to increase (but not above the total
<PAGE>
number of authorized shares of the class) or decrease (but not below the
number of shares of such series then outstanding) the number of shares of any
series subsequent to the issue of shares of that series.
The corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if
at any time the number of shares of Common Stock remaining unissued and
available for issuance upon conversion of the Preferred Stock shall not be
sufficient to permit conversion of the Preferred Stock.
The relative rights, preferences, privileges and restrictions granted
to or imposed upon the respective classes and series of the shares of capital
stock or the holders thereof are as set forth below.
SECTION 1. DIVIDENDS. The holders of the Series A Preferred Stock,
the Series B Preferred Stock and the Series C Preferred Stock shall be
entitled to receive, out of any funds legally available therefor,
noncumulative dividends in an amount equal to $0.0361, $0.08 and $0.36 per
share per annum, respectively, when and if declared by the corporation's
board of directors. No dividend shall be paid on the Common Stock in any
year, other than dividends payable solely in capital stock, until all
dividends for such year have been declared and paid on the Preferred Stock,
and no dividends on the Common Stock shall be paid unless, in addition to the
preferential dividend above, the amount of such dividend on the Common Stock
is also paid on the Preferred Stock on an as-converted to Common Stock basis.
SECTION 2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding
up of the corporation, prior and in preference to any distribution of any of
the assets or funds of the corporation to the holders of the Common Stock by
reason of their ownership of such stock, (i) the holders of Series A
Preferred Stock shall be entitled to receive for each outstanding share of
Series A Preferred Stock then held by them an amount equal to $0.902 plus
declared but unpaid dividends on such share (as adjusted for any
recapitalizations, stock combinations, stock dividends, stock splits and the
like), (ii) the holders of Series B Preferred Stock shall be entitled to
receive for each outstanding share of Series B Preferred Stock then held by
them an amount equal to $2.00 plus declared but unpaid dividends on such
share (as adjusted for any recapitalizations, stock combinations, stock
dividends, stock splits and the like) and (iii) the holders of Series C
Preferred Stock shall be entitled to receive for each outstanding share of
Series C Preferred Stock then held by them an amount equal to $9.00 plus
declared but unpaid dividends on such share (as adjusted for any
recapitalizations, stock combinations, stock dividends, stock splits and the
like). The Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock shall rank on parity as to the receipt of the
respective preferential amounts for each such series upon the occurrence of
such event. If, upon the occurrence of a liquidation, dissolution or winding
up, the assets and funds of the corporation legally available for
distribution to stockholders by reason of their ownership of stock of the
corporation shall be insufficient to permit the payment to such holders of
Preferred Stock of the full aforementioned preferential amounts, then the
entire assets and funds of the corporation legally
<PAGE>
available for distribution to stockholders by reason of their ownership of
stock of the corporation shall be distributed ratably among the holders of
Preferred Stock in proportion to the preferential amount each such holder is
otherwise entitled to receive.
(b) Upon a liquidation, dissolution or winding up of the
corporation, and after payment to the holders of Preferred Stock of the
amounts to which they are entitled pursuant to Section 2(a), all assets and
funds of the corporation that remain legally available for distribution to
stockholders by reason of their ownership of stock of the corporation shall
be distributed ratably among the holders of Common Stock in proportion to the
number of shares of Common Stock held by each such holder.
(c) A merger, consolidation or reorganization of this
corporation with or into any other entity or entities, or a sale of all or
substantially all of the assets of this corporation, or a series of related
similar such transactions in which the holders of this corporation's capital
stock prior to the consummation of such event hold less than 50% of the
voting power of the surviving entity, shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Article Four, Section 2.
(d) If any of the assets of this corporation are to be
distributed under this Section 2, or for any other purpose, in a form other
than cash, then the board of directors shall be empowered to, and shall
promptly determine the value of the assets to be distributed to the holders
of Preferred Stock or Common Stock. This corporation shall, upon receipt of
such determination, give prompt written notice of the determination to each
holder of shares of Preferred Stock or Common Stock.
SECTION 3. CONVERSION.
The holders of Preferred Stock shall have conversion rights as follows:
(a) RIGHT TO CONVERT. Each share of Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the corporation or any
transfer agent for such Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the
applicable Original Issue Price of such share of Preferred Stock by the
Conversion Price (the "Conversion Price") at the time in effect for a share
of such series of Preferred Stock. The Original Issue Price per share of
Series A Preferred Stock is $0.451. The Conversion Price per share of Series
A Preferred Stock initially shall be $0.451, subject to adjustment from time
to time as provided below. The Original Issue Price per share of Series B
Preferred Stock is $1.00. The Conversion Price per share of Series B
Preferred Stock initially shall be $1.00, subject to adjustment from time to
time as provided below. The Original Issue Price per share of Series C
Preferred Stock is $4.50. The Conversion Price Per Share of Series C
Preferred Stock initially shall be $4.50, subject to adjustment from time to
time as provided below.
(b) AUTOMATIC CONVERSION. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price upon the closing of a
<PAGE>
firm commitment 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 to the public involving gross proceeds to
the Company of not less than $35,000,000 at a per share offering price of at
least $6.75 (as adjusted for any recapitalizations, stock combinations, stock
dividends, stock splits and the like). Each share of a particular series of
Preferred Stock shall be automatically converted into shares of Common Stock
at the then effective Conversion Price upon the date specified in a written
consent signed by the holders of not less than two-thirds of the outstanding
shares of that series of Preferred Stock, voting separately as a series.
(c) MECHANICS OF CONVERSION. No fractional shares of Common
Stock shall be issued upon conversion of Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
corporation shall pay cash equal to such fraction multiplied by the then
effective conversion ratio (a quotient determined by dividing the applicable
Original Issue Price of such series of Preferred Stock by the applicable
Conversion Price of such series of Preferred Stock). Before any holder of
Preferred Stock shall be entitled to convert the same into shares of Common
Stock pursuant to Section 3(a), such holder shall surrender the certificate
or certificates therefor, duly endorsed, at the office of the corporation or
of any transfer agent for such Preferred Stock, and shall give written notice
by mail, postage prepaid, to the corporation at its principal corporate
office, of the election to convert the same, and such conversion shall be
deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Preferred Stock to be converted. In
the event of an automatic conversion pursuant to Section 3(b), the
outstanding shares of Preferred Stock shall be converted automatically
without any further action by the holder of such shares and whether or not
the certificates representing such shares are surrendered to the corporation
or the transfer agent for such Preferred Stock; and the corporation shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such automatic conversion unless the certificates evidencing
such shares of Preferred Stock are either delivered to the corporation or the
transfer agent for such Preferred Stock as provided above, or the holder
notifies the corporation or the transfer agent for such Preferred Stock that
such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the corporation to indemnify the corporation from
any loss incurred by it in connection with such certificates. The corporation
shall, as soon as practicable thereafter, issue and deliver to such address
as the holder may direct, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled. If the
conversion is in connection with a public offering of securities described in
Section 3(b)(i), the conversion shall be conditioned upon the closing with
the underwriters of the sale of securities pursuant to such offering, and the
conversion shall not be deemed to have occurred until immediately prior to
the closing of such sale of securities.
(d) STATUS OF CONVERTED STOCK. In the event any shares of
Preferred Stock shall be converted pursuant to this Section 3, the shares so
converted shall be canceled and shall not be reissued by the corporation.
(e) ADJUSTMENT OF CONVERSION PRICE OF PREFERRED STOCK. The
Conversion Price of each series of Preferred Stock shall be subject to
adjustment from time to time as follows:
<PAGE>
(i) ADJUSTMENTS FOR SUBDIVISIONS OR COMBINATIONS OF
COMMON STOCK. In the event the outstanding shares of Common Stock shall be
subdivided by stock split, stock dividend or otherwise, into a greater number
of shares of Common Stock, the Conversion Price of each series of Preferred
Stock then in effect shall, concurrently with the effectiveness of such
subdivision, be proportionately decreased. In the event the outstanding
shares of Common Stock shall be combined or consolidated into a lesser number
of shares of Common Stock, the Conversion Price of each series of Preferred
Stock then in effect shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased.
(ii) ADJUSTMENTS FOR STOCK DIVIDENDS AND OTHER
DISTRIBUTIONS. In the event the corporation makes, or fixes a record date
for the determination of holders of Common Stock entitled to receive, any
distribution (excluding repurchases of securities by the corporation not made
on a pro rata basis) payable in property or in securities of the corporation
other than shares of Common Stock, and other than as otherwise adjusted for
in this Section 3 or as provided for in Section 1 in connection with a
dividend, then and in each such event the holders of Preferred Stock shall
receive, at the time of such distribution, the amount of property or the
number of securities of the corporation that they would have received had
their Preferred Stock been converted into Common Stock on the date of such
event.
(iii) ADJUSTMENTS FOR REORGANIZATIONS, RECLASSIFICATIONS
OR SIMILAR EVENTS. If the Common Stock shall be changed into the same or a
different number of shares of any other class or classes of stock or other
securities or property, whether by capital reorganization, reclassification
or otherwise, then each share of Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock of the
corporation deliverable upon conversion of such shares of Preferred Stock
shall have been entitled upon such reorganization, reclassification or other
event.
(iv) ADJUSTMENTS FOR DILUTING ISSUES. In addition to the
adjustment of the Conversion Prices as provided above, the respective
Conversion Prices of the Series A Preferred Stock, the Series B Preferred
Stock and the Series C Preferred Stock shall be subject to further adjustment
from time to time as follows:
(A) SPECIAL DEFINITIONS.
(1) "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities.
(2) "Original Issue Date" shall mean the
date on which the first share of Series C Preferred Stock was first issued.
(3) "Convertible Securities" shall mean
securities convertible into or exchangeable for Common Stock, either directly
or indirectly.
(4) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (or, pursuant to Section
3(e)(iv)(C) deemed to be issued) by the
<PAGE>
corporation after the Original Issue Date other than shares of Common Stock
issued (or, pursuant to Section 3(e)(iv)(C) deemed to be issued):
i) upon conversion of shares of
Preferred Stock;
ii) to employees, consultants, or
directors, but not exceeding 2,358,493 shares of Common Stock (net of
repurchases thereof by the Company and the expiration of unexercised options)
including without limitation upon the exercise of Options outstanding as of
the Original Issue Date;
iii) to equipment lessors, banks,
financial institutions or similar entities in a transaction approved by the
vote of two-thirds of the members of the board of directors, the principal
purpose of which is other than the raising of capital through the sale of
equity securities of the corporation;
iv) as a dividend or other
distribution in connection with which an adjustment to the Conversion Price
is made pursuant to Section 3(e)(i), (ii) or (iii);
v) in the corporation's initial
public offering of Common Stock pursuant to effective registration statement
under the Securities Act of 1933, as amended;
vi) in a merger or acquisition that
is approved by the board of directors;
vii) pursuant to any transaction
approved by the vote of two-thirds of the members of the board of directors
primarily for the purpose of (A) a joint venture, technology licensing or
research and development activity, (B) distribution or manufacture of the
corporation's products or services, or (C) any other transaction involving a
corporate partner that is primarily for a purpose other than raising capital;
or
viii) any shares issued, issuable or,
pursuant to Section 3(e)(iv)(C), deemed to be issued, if the holders of a
majority of the then outstanding shares of each series of Preferred Stock
consent in writing that such shares shall not constitute Additional Shares of
Common Stock.
(B) NO ADJUSTMENT OF CONVERSION PRICE. No
adjustment to a Conversion Price shall be made pursuant to Section
3(e)(iv)(D) unless the consideration per share for an Additional Share of
Common Stock issued (or, pursuant to Section 3(e)(iv)(C), deemed to be
issued) by the corporation is less than such Conversion Price in effect on
the date of, and immediately prior to, such issue, and provided that any such
adjustment shall not have the effect of increasing such Conversion Price to
an amount which exceeds the applicable Conversion Price existing immediately
prior to such adjustment.
<PAGE>
(C) DEEMED ISSUE OF ADDITIONAL SHARES OF
COMMON STOCK. Except as otherwise provided in Section 3(e)(iv)(A) or
3(e)(iv)(B), in the event the corporation at any time or from time to time
after the Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of any holders of
any class of securities entitled to receive any such Options or Convertible
Securities, then the maximum number of shares (as set forth in the instrument
relating thereto without regard to any provisions contained therein for a
subsequent adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock issued as of the time
of such issue or, in case such a record date shall have been fixed, as of the
close of business on such record date, provided that in any such case in
which additional shares of Common Stock are deemed to be issued:
(1) no further adjustment in any
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase or decrease in the consideration payable to the corporation, or
increase or decrease in the number of shares of Common Stock issuable, upon
the exercise, conversion or exchange thereof, any Conversion Price computed
upon the original issue thereof or upon the occurrence of a record date with
respect thereto, and any subsequent adjustments based thereon, shall, upon
any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease;
(3) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, any Conversion Price computed
upon the original issue thereof or upon the occurrence of a record date with
respect thereto, and any subsequent adjustments based thereon, shall, upon
such expiration, be recomputed as if:
i) in the case of Convertible
Securities or Options for Common Stock, the only Additional Shares of Common
Stock issued were shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities, and the consideration received therefor was the consideration
actually received by the corporation for the issue of all such Options,
whether or not exercised, plus the consideration actually received by the
corporation upon such exercise, or for the issue of all such Convertible
Securities, whether or not converted or exchanged, plus the additional
consideration, if any, actually received by the corporation upon such
conversion or exchange; and
ii) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such Options and
the consideration received by the corporation for the Additional Shares of
Common Stock deemed to have been then issued was the consideration actually
<PAGE>
received by the corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the
corporation upon the issue of the Convertible Securities with respect to
which such Options were actually exercised;
(4) no readjustment pursuant to Section
3(e)(iv)(C)(2) or (3) above shall have the effect of increasing a Conversion
Price to an amount which exceeds such Conversion Price as it existed
immediately prior to the original adjustment with respect to the issuance of
such Options or Convertible Securities, as adjusted for any Additional Shares
of Common Stock issued (or, pursuant to Section 3(e)(iv)(C), deemed to be
issued) between such original adjustment date and such readjustment date;
(5) in the case of any Options which
expire by their terms not more than 30 days after the date of issue thereof,
no adjustment of a Conversion Price shall be made until the expiration or
exercise of all such Options; and
(6) in the case of any Option or
Convertible Security with respect to which the maximum number of shares of
Common Stock issuable upon exercise or conversion or exchange thereof is not
determinable, no adjustment to a Conversion Price shall be made until such
number becomes determinable.
(D) ADJUSTMENT OF CONVERSION PRICE UPON
ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. Subject to the limitation set
forth in Section 3(e)(iv)(B) above, if Additional Shares of Common Stock are
issued (or, pursuant to Section 3(e)(iv)(C), deemed to be issued) without
consideration or for a consideration per share (computed on an as-converted
to Common Stock basis) less than a Conversion Price in effect on the date of,
and immediately prior to, such issue (a "Dilutive Issue"), then and in such
event, such Conversion Price shall be reduced, concurrently with such issue,
to a price (calculated to the nearest cent) determined by multiplying such
Conversion Price by a fraction, (x) the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of shares of Common Stock which the aggregate consideration
received by the corporation for the total number of Additional Shares of
Common Stock so issued would purchase at such Conversion Price, and (y) the
denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued. For the purposes of this
Section 3(e)(iv)(D), all shares of Common Stock issuable upon exercise of
outstanding Options, upon conversion of outstanding Convertible Securities
and upon conversion of Convertible Securities following exercise of
outstanding Options therefor, shall be deemed to be outstanding, and
immediately after any Additional Shares of Common Stock are deemed issued
pursuant to Section 3(e)(iv)(C), such Additional Shares of Common Stock shall
be deemed to be outstanding.
(E) DETERMINATION OF CONSIDERATION. For
purposes of this Section 3(e)(iv), the consideration received by the
corporation for any Additional Shares of Common Stock issued (or, pursuant to
Section 3(e)(iv)(C), deemed to be issued) shall be computed as follows:
(1) CASH AND PROPERTY. Such
consideration shall:
<PAGE>
i) insofar as it consists of
cash, be computed at the aggregate amount of cash received by the corporation
after deducting any commissions paid by the corporation with respect to such
issuance;
ii) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time
of such issuance, as determined in good faith by the board of directors of
the corporation; and
iii) if Additional Shares of
Common Stock are issued (or, pursuant to Section 3(e)(iv)(C), deemed to be
issued) together with other shares or securities or other assets of the
corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (i) and (ii)
above, as determined in good faith by the board of directors of the
corporation.
(2) OPTIONS AND CONVERTIBLE SECURITIES.
The consideration received by the corporation for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 3(e)(iv)(C), relating to
Options and Convertible Securities, shall be the sum of (x) the total amount,
if any, received or receivable by the corporation as consideration for the
issue of such Options or Convertible Securities, plus (y) the minimum
aggregate amount of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the corporation upon
the exercise of such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities.
(F) CERTIFICATE AS TO ADJUSTMENTS. Upon the
occurrence of each adjustment or readjustment of a Conversion Price pursuant
to this Section 3, the corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
each holder of Preferred Stock to which such adjustment pertains a
certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
corporation shall, upon the written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Prices at the time in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time
would be received upon the conversion of such holder's Preferred Stock.
SECTION 4. VOTING.
(a) GENERAL. Except as otherwise required by law, each
holder of Preferred Stock shall be entitled to the number of votes equal to
the number of shares of Common Stock into which the shares of Preferred Stock
so held could be converted at the record date for determination of the
stockholders entitled to vote, or, if no such record date is established, at
the date such vote is taken or any written consent of stockholders is
solicited. Except as required by law or as otherwise set forth herein
(including without limitation Section 4(b)), all shares of all series of
Preferred Stock and all shares of Common Stock shall vote together as a
single class. Fractional votes by the holders of
<PAGE>
Preferred Stock shall not, however, be permitted, and any fractional voting
rights shall (after aggregating all shares into which shares of Preferred
Stock held by each holder could be converted) be rounded down to the nearest
whole number.
(b) ELECTION OF DIRECTORS. The authorized number of
directors of the corporation shall be set forth in the Bylaws of the
corporation and may be increased or decreased by an amendment to such Bylaws
in accordance with their provisions. For so long as at least 4,434,590
shares of Series A Preferred Stock remain outstanding (as adjusted for
recapitalizations, stock combinations, stock dividends, stock splits and the
like), the holders of shares of Series A Preferred Stock, voting separately
as a class, shall be entitled to elect two (2) directors of the corporation
at each election of directors (and to fill any vacancies with respect
thereto). For so long as at least 6,492,500 shares of Series B Preferred
Stock remain outstanding (as adjusted for recapitalizations, stock
combinations, stock dividends, stock splits and the like), the holders of
shares of Series B Preferred Stock, voting separately as a class, shall be
entitled to elect one (1) director of the corporation at each election of
directors (and to fill any vacancies with respect thereto). For so long as
at least 7,777,778 shares of Series C Preferred Stock remain outstanding (as
adjusted for recapitalizations, stock combinations, stock dividends, stock
splits and the like), the holders of Series C Preferred Stock, voting
separately as a class, shall be entitled to elect one (1) director of the
corporation at each election of directors (and to fill any vacancies with
respect thereto). The holders of shares of Common Stock shall be entitled to
elect two (2) directors at each election of directors (and to fill any
vacancies with respect thereto). All remaining directors, if any, shall be
elected by a vote of the holders of shares of Preferred Stock and Common
Stock voting together on as-converted to Common Stock basis.
(c) APPROVAL BY HOLDERS OF SERIES A PREFERRED STOCK. The
corporation shall not, without first obtaining the approval of the holders of
not less than a majority of the then outstanding shares of Series A Preferred
Stock:
(i) authorize, create or issue any shares of any
class or series of stock having any preference or priority superior to or on
parity with any such preference or priority of the Series A Preferred Stock;
(ii) take any action resulting in the repurchase or
redemption of shares of Common Stock or Preferred Stock of the corporation,
except as set forth in Section 5 hereof or in the Second Amended and Restated
Investor Rights Agreement dated on or about August 6, 1999 among the
corporation and the purchasers of its Preferred Stock or in the Second
Amended and Restated Right of First Refusal and Co-Sale Agreement dated on or
about August 6, 1999 among the corporation, purchasers of its Preferred Stock
and certain holders of the corporation's Common Stock;
(iii) amend or repeal any provision of, or add any
provision to, the corporation's Certificate of Incorporation if such action
would adversely alter or change in any material respect the rights,
preferences, privileges, or restrictions of the Series A Preferred Stock;
<PAGE>
(iv) effect (x) a consolidation, reorganization or
merger of the corporation with or into any other corporation, which would
result in the stockholders of the corporation immediately prior to such
consolidation, reorganization or merger owning less than 50% of the voting
power of the surviving corporation after such consolidation, reorganization
or merger or (y) a sale or other disposition of more than 50% of the assets
of the corporation in one or a series of related transactions; provided,
however, that the provisions of this Section 4(c)(iv) shall not apply if such
consolidation, merger, reorganization or sale or other disposition of assets
would provide for aggregate per share consideration to each holder of shares
of Series A Preferred Stock on an as converted to Common Stock basis,
assuming conversion of all outstanding shares of Preferred Stock, of at least
$1.804 (as adjusted for any recapitalizations, stock combinations, stock
dividends, stock splits and the like);
(v) increase the number of authorized shares of
Preferred Stock; or
(vi) pay any dividends on its Common Stock.
(d) APPROVAL BY HOLDERS OF SERIES B PREFERRED STOCK. The
corporation shall not, without first obtaining the approval of the holders of
not less than a majority of the then outstanding shares of Series B Preferred
Stock:
(i) authorize, create or issue any shares of any
class or series of stock having any preference or priority superior to or on
parity with any such preference or priority of the Series B Preferred Stock;
(ii) take any action resulting in the repurchase or
redemption of shares of Common Stock or Preferred Stock of the corporation,
except as set forth in Section 5 hereof or in the Second Amended and Restated
Investor Rights Agreement dated on or about August 6, 1999 among the
corporation and the purchasers of its Preferred Stock or in the Second
Amended and Restated Right of First Refusal and Co-Sale Agreement dated on or
about August 6, 1999 among the corporation, purchasers of its Preferred Stock
and certain holders of the corporation's Common Stock;
(iii) amend or repeal any provision of, or add any
provision to, the corporation's Certificate of Incorporation if such action
would adversely alter or change in any material respect the rights,
preferences, privileges, or restrictions of the Series B Preferred Stock;
(iv) effect (x) a consolidation, reorganization or
merger of the corporation with or into any other corporation, which would
result in the stockholders of the corporation immediately prior to such
consolidation, reorganization or merger owning less than 50% of the voting
power of the surviving corporation after such consolidation, reorganization
or merger or (y) a sale or other disposition of more than 50% of the assets
of the corporation in one or a series of related transactions; provided,
however, that the provisions of this Section 4(d)(iv) shall not apply if such
consolidation, merger, reorganization or sale or other disposition of assets
would provide for aggregate per share consideration to each holder of Series
B Preferred Stock on an as converted to Common Stock basis, assuming
conversion of all outstanding shares of Preferred Stock, of at least
<PAGE>
$2.50 (as adjusted for any recapitalizations, stock combinations, stock
dividends, stock splits and the like);
(v) increase the number of authorized shares of
Preferred Stock; or
(vi) pay any dividends on its Common Stock.
(e) APPROVAL BY HOLDERS OF SERIES C PREFERRED STOCK. The
corporation shall not, without first obtaining the approval of the holders of
not less than a majority of the then outstanding shares of Series C Preferred
Stock:
(i) authorize, create or issue any shares of any
class or series of stock having any preference or priority superior to or on
parity with any such preference or priority of the Series C Preferred Stock;
(ii) take any action resulting in the repurchase or
redemption of shares of Common Stock or Preferred Stock of the corporation,
except as set forth in Section 5 hereof or in the Second Amended and Restated
Investor Rights Agreement dated on or about August 6, 1999 among the
corporation and the purchasers of its Preferred Stock or in the Second
Amended and Restated Right of First Refusal and Co-Sale Agreement dated on or
about August 6, 1999 among the corporation, purchasers of its Preferred Stock
and certain holders of the corporation's Common Stock;
(iii) amend or repeal any provision of, or add any
provision to, the corporation's Certificate of Incorporation if such action
would adversely alter or change in any material respect the rights,
preferences, privileges, or restrictions of the Series C Preferred Stock;
(iv) effect (x) a consolidation, reorganization or
merger of the corporation with or into any other corporation, which would
result in the stockholders of the corporation immediately prior to such
consolidation, reorganization or merger owning less than 50% of the voting
power of the surviving corporation after such consolidation, reorganization
or merger or (y) a sale or other disposition of more than 50% of the assets
of the corporation in one or a series of related transactions; provided,
however, that the provisions of this Section 4(e)(iv) shall not apply if such
consolidation, merger, reorganization or sale or other disposition of assets
provides for aggregate per share consideration to each holder of Series C
Preferred Stock of at least $9.00 (as adjusted for any recapitalizations,
stock combinations, stock dividends, stock splits and the like);
(v) increase the number of authorized shares of
Preferred Stock; or
(vi) pay any dividends on its Common Stock.
SECTION 5. CONSENT TO DISTRIBUTIONS. Each holder of Preferred Stock
shall be deemed to have consented, for purposes of Sections 502, 503 and 506
of the California Corporations Code and Sections 1 and 2 of this Article
Four, to distributions made by the corporation in connection with the
repurchase of shares of Common Stock from employees, officers, directors or
consultants of the
<PAGE>
corporation in connection with the termination of their employment or
services pursuant to agreements or arrangements approved by the board of
directors of the corporation.
SECTION 6. REACQUIRED SHARES. Any shares of Preferred Stock
purchased or otherwise acquired by the corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the board of
directors, subject to the conditions and restrictions on issuance set forth
herein.
SECTION 7. WAIVER OF RIGHTS, PREFERENCES OR PRIVILEGES.
(a) Any right, preference or privilege of the Series A
Preferred Stock may be waived by a majority of the outstanding shares of
Series A Preferred Stock voting on an as converted to Common Stock basis, and
such waiver shall be binding on all holders of Series A Preferred Stock.
(b) Any right, preference or privilege of the Series B
Preferred Stock may be waived by a majority of the outstanding shares of
Series B Preferred Stock voting on an as converted to Common Stock basis, and
such waiver shall be binding on all holders of Series B Preferred Stock.
(c) Any right, preference or privilege of the Series C
Preferred Stock may be waived by a majority of the outstanding shares of
Series C Preferred Stock voting on an as converted to Common Stock basis, and
such waiver shall be binding on all holders of Series C Preferred Stock.
FIVE. The corporation is to have perpetual existence.
SIX. Effective upon the effective date of the registration of any
class of securities of the corporation pursuant to the requirements of the
Securities Exchange Act of 1934, as amended (the "Effective Date"):
(a) the directors of the corporation shall be divided into three
classes as nearly equal in size as is practicable, hereby designated Class I,
Class II and Class III. The term of office of the initial Class I directors
shall expire at the first regularly-scheduled annual meeting of the
stockholders following the Effective Date; the term of office of the initial
Class II directors shall expire at the second annual meeting of the
stockholders following the Effective Date; and the term of office of the
initial Class III directors shall expire at the third annual meeting of the
stockholders following the Effective Date. At each annual meeting of
stockholders, commencing with the first regularly-scheduled annual meeting of
stockholders following the Effective Date, each successor elected as a
director of a Class whose term shall have expired at such annual meeting
shall be elected to hold office until the third annual meeting next
succeeding his or her election and until his or her respective successor
shall have been duly elected and qualified.
(b) no action that is required or permitted to be taken by the
stockholders of the corporation at any annual or special meeting of
stockholders may be effected by written consent of stockholders in lieu of a
meeting of stockholders.
<PAGE>
SEVEN. In furtherance and not in limitation of the powers conferred
by statute, the board of directors of the corporation is expressly authorized
to make, alter, amend or repeal the Bylaws of the corporation.
EIGHT. Elections of directors need not be by written ballot unless
the Bylaws of the corporation shall so provide.
NINE. The number of directors which constitute the whole Board of
Directors of the corporation shall be designated in the Bylaws of the
corporation and may be fixed from time to time by 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). At each annual meeting of stockholders,
directors of the corporation shall be elected to hold office until the
expiration of the term for which they are elected and until their successors
have been duly elected and qualified; except that if any such election shall
not be so held, such election shall take place at a stockholders' meeting
called and held in accordance with the General Corporation Law.
TEN. Vacancies occurring on the Board of Directors for any reason and
newly created directorships resulting from an increase in the authorized
number of directors may be filled only by vote of a majority of the remaining
members of the Board of Directors, although less than a quorum, at any
meeting of the Board of Directors or by unanimous written consent of the
Board of Directors. A person so elected by the Board of Directors to fill a
vacancy or newly created directorship shall hold office until the next
election of the Class for which such director shall have been chosen and
until his or her successor shall have been duly elected and qualified.
ELEVEN. Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws of the corporation may provide. The books
of the corporation may be kept outside of the State of Delaware at such place
or places as may be designated from time to time by the board of directors of
the corporation or in the Bylaws of the corporation.
TWELVE.
(a) To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director
of the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach fiduciary duty as a director.
(b) The corporation shall indemnify to the fullest extent permitted
by law any person made or threatened to be made a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he, his testator or intestate is or was a director,
officer or employee of the corporation or any predecessor of the corporation
or serves or served at any other enterprise as a director, officer or
employee at the request of the corporation or any predecessor to the
corporation.
<PAGE>
(c) Neither any amendment nor repeal of this Article TWELVE, nor
the adoption of any provision of this corporation's Certificate of
Incorporation inconsistent with this Article TWELVE, shall eliminate or
reduce the effect of this Article TWELVE, in respect of any matter occurring,
or any action or proceeding accruing or arising or that, but for this Article
TWELVE, would accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.
THIRTEEN. Advance notice of new business and stockholder
nominations for the election of directors shall be given in the manner and to
the extent provided in the Bylaws of the corporation.
FOURTEEN The corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
4. The foregoing amendment and restatement of the Certificate of
Incorporation has been duly approved by the board of directors of the
corporation in accordance with the provisions of Sections 242 and 245 of the
General Corporation Law.
5. The foregoing amendment and restatement of the Certificate of
Incorporation has been duly approved by the written consent of the
stockholders in accordance with Sections 228 and 245 of the General
Corporation Law. The total number of outstanding shares of Common Stock of
the corporation is [21,855,088]. The total number of outstanding shares of
Series A Preferred Stock of the corporation is 8,869,179. The total number
of shares of Series B Preferred Stock of the corporation is 12,985,000. The
total number of shares of Series C Preferred Stock of the corporation is
15,677,778. The number of shares held by stockholders who consented to this
amendment in writing equaled or exceeded the required percentage. The
percentages required were (i) more than 50% of the outstanding shares of
Series A Preferred Stock, (ii) more than 50% of the outstanding shares of
Series B Preferred Stock, (iii) more than 50% of the outstanding shares of
Series B Preferred Stock, and (iv) more than 50% of the outstanding shares of
capital stock of the corporation voting as one class on an as-converted to
Common Stock basis. Pursuant to Section 228 of the General Corporation Law,
prompt written notice of this amendment and restatement has been given to all
stockholders who did not consent to this amendment.
<PAGE>
IN WITNESS WHEREOF, the corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by Keith W. Teare, its
Chief Executive Officer, and attested to by Richard Steele, its Secretary,
this ___ day of ____________ ___, 1999.
REALNAMES CORPORATION
--------------------------------------
Keith Teare
President and Chief Executive Officer
ATTEST:
- --------------------------------
Richard Steele
Secretary
<PAGE>
Exhibit 3.2
AMENDED BYLAWS
OF
REALNAMES CORPORATION
Adopted on
____________,1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I CORPORATE OFFICES . . . . . . . . . . . . . . . . . . . . . . 1
1.1 EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . 1
1.2 REGISTERED OFFICE. . . . . . . . . . . . . . . . . . . . . 1
1.3 OTHER OFFICES. . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II MEETINGS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . 1
2.1 PLACE OF MEETINGS. . . . . . . . . . . . . . . . . . . . . 1
2.2 ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . 1
2.3 SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . 2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE . . . . . . . 4
2.7 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 ADJOURNED MEETING; NOTICE. . . . . . . . . . . . . . . . . 4
2.9 VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT. . . . . 5
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING
CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.12 PROXIES. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE. . . . . . . . . . . 7
2.15 INSPECTORS OF ELECTION . . . . . . . . . . . . . . . . . . 7
ARTICLE III DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 NUMBER OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 8
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS . . . . . . . . . 8
3.4 RESIGNATION AND VACANCIES. . . . . . . . . . . . . . . . . 9
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE . . . . . . . . .10
3.6 FIRST MEETINGS . . . . . . . . . . . . . . . . . . . . . .10
3.7 REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . .10
3.8 SPECIAL MEETINGS; NOTICE . . . . . . . . . . . . . . . . .11
3.9 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.10 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . .11
3.11 ADJOURNED MEETING; NOTICE. . . . . . . . . . . . . . . . .12
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING. . . . .12
3.13 FEES AND COMPENSATION OF DIRECTORS . . . . . . . . . . . .12
3.14 APPROVAL OF LOANS TO OFFICERS. . . . . . . . . . . . . . .12
3.15 REMOVAL OF DIRECTORS . . . . . . . . . . . . . . . . . . .12
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE IV COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . .13
4.1 COMMITTEES OF DIRECTORS. . . . . . . . . . . . . . . . . .13
4.2 COMMITTEE MINUTES. . . . . . . . . . . . . . . . . . . . .13
4.3 MEETINGS AND ACTION OF COMMITTEES. . . . . . . . . . . . .13
ARTICLE V OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.1 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . .14
5.2 ELECTION OF OFFICERS . . . . . . . . . . . . . . . . . . .14
5.3 SUBORDINATE OFFICERS . . . . . . . . . . . . . . . . . . .14
5.4 REMOVAL AND RESIGNATION OF OFFICERS. . . . . . . . . . . .14
5.5 VACANCIES IN OFFICES . . . . . . . . . . . . . . . . . . .15
5.6 CHAIRMAN OF THE BOARD. . . . . . . . . . . . . . . . . . .15
5.7 PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . . .15
5.8 VICE PRESIDENT . . . . . . . . . . . . . . . . . . . . . .15
5.9 SECRETARY. . . . . . . . . . . . . . . . . . . . . . . . .15
5.10 CHIEF FINANCIAL OFFICER. . . . . . . . . . . . . . . . . .16
5.11 ASSISTANT SECRETARY. . . . . . . . . . . . . . . . . . . .16
5.12 AUTHORITY AND DUTIES OF OFFICERS . . . . . . . . . . . . .16
ARTICLE VI INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . .16
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. . . . . . . . .17
6.2 INDEMNIFICATION OF OTHERS. . . . . . . . . . . . . . . . .17
6.3 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . .18
6.4 SAVINGS CLAUSE . . . . . . . . . . . . . . . . . . . . . .18
6.5 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT
OF EXPENSES. . . . . . . . . . . . . . . . . . . . . . . .18
ARTICLE VII RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . .18
7.1 MAINTENANCE AND INSPECTION OF RECORDS. . . . . . . . . . .18
7.2 INSPECTION BY DIRECTORS. . . . . . . . . . . . . . . . . .19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS . . . . . . . . . . . . .19
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS . . . . . .19
ARTICLE VIII GENERAL MATTERS. . . . . . . . . . . . . . . . . . . . . .19
8.1 CHECKS . . . . . . . . . . . . . . . . . . . . . . . . . .19
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS . . . . .20
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES . . . . . . . . . .20
8.4 SPECIAL DESIGNATION ON CERTIFICATES. . . . . . . . . . . .20
8.5 LOST CERTIFICATES. . . . . . . . . . . . . . . . . . . . .21
8.6 TRANSFER AGENTS AND REGISTRARS . . . . . . . . . . . . . .21
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
8.7 CONSTRUCTION; DEFINITIONS. . . . . . . . . . . . . . . . .21
8.8 DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . .21
8.9 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . .22
8.10 SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . .22
8.11 TRANSFER OF STOCK. . . . . . . . . . . . . . . . . . . . .22
8.12 STOCK TRANSFER AGREEMENTS. . . . . . . . . . . . . . . . .22
8.13 REGISTERED STOCKHOLDERS. . . . . . . . . . . . . . . . . .22
ARTICLE IX AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . .22
ARTICLE X DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . .23
ARTICLE XI CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . .23
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES. . . . . . . .23
11.2 DUTIES OF CUSTODIAN. . . . . . . . . . . . . . . . . . . .24
</TABLE>
-iii-
<PAGE>
AMENDED BYLAWS
OF
REALNAMES CORPORATION
ARTICLE I
CORPORATE OFFICES
1.1 EFFECTIVE DATE
These bylaws shall become effective upon the effective date of the
registration of any class of securities of the corporation pursuant to the
requirements of the Securities Exchange Act of 1934, as amended (the "Effective
Date").
1.2 REGISTERED OFFICE
The registered office of the corporation shall be at 1209 Orange Street,
in the City of Wilmington, County of New Castle, State of Delaware. The name of
the registered agent of the corporation at such location is The Corporation
Trust Company.
1.3 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the 10th of
June in each year at 10:00 a.m. Pacific Time. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding
<PAGE>
full business day. At the meeting, directors shall be elected and any other
proper business may be transacted if brought before the meeting in accordance
with Section 2.5 hereof.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
Except as otherwise provided by the General Corporation Law of Delaware
or the certificate of incorporation notices of all meetings with stockholders
shall be sent or otherwise given in accordance with Section 2.6 of these bylaws
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. The notice shall
specify the place, date and hour of the meeting and (i) in the case of a special
meeting, the purpose or purposes for which the meeting is called, and no
business other than that specified in the notice may be transacted or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the
stockholders. The notice of any meeting at which directors are to be elected
shall include the name of any nominee or nominees who, at the time of the
notice, the board intends to present for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
(a) To be properly brought before an annual meeting,
nominations for the election of directors or other business must be (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the board of directors, (ii) otherwise properly brought before
the meeting by or at the direction of the board of directors or (iii) otherwise
properly brought before the meeting by a stockholder in accordance with
Section 2.5(b). To be properly brought before a special meeting, nominations
for the election of directors or other business must be specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the board
of directors.
(b) For business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the secretary of the corporation. To be timely, a stockholder's
notice shall be delivered to the secretary at the principal executive offices of
the Corporation not later 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
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. A
stockholder's notice to the secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before
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the annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the corporation's
books, of the stockholder proposing such business, (iii) the class and number
of shares of the corporation which are beneficially owned by the stockholder,
(iv) any material interest of the stockholder in such business and (v) any
other information that is required to be provided by the stockholder pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in his capacity as a proponent to a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect
to a stockholder proposal in the proxy statement and form of proxy for a
stockholder's meeting, stockholders must provide notice as required by the
regulations promulgated under the Exchange Act. Notwithstanding anything in
these bylaws to the contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in this Section
2.5. The chairman of the annual meeting shall, if the facts warrant,
determine and declare at the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this Section 2.5,
and, if he or she should so determine, he or she shall so declare at the
meeting that any such business not properly brought before the meeting shall
not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the board of directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the board of directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the board of directors, shall be made pursuant to
timely notice in writing to the secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 2.5. Such stockholder's notice
shall set forth (i) as to such stockholder giving notice, the information
required to be provided pursuant to paragraph (b) of this Section 2.5; and (ii)
as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder and (E) any other information relating to such person
that is required to be disclosed in solicitations of proxies for elections of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act (including without limitation such person's written
consent to being named in the proxy statement, if any, as a nominee and to
serving as a director if elected). At the request of the board of directors,
any person nominated by a stockholder for election as a director shall furnish
to the secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these bylaws, and if he should so determine, he shall so declare at the meeting,
and the defective nomination shall be disregarded.
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2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic, telefacsimile or other
written communication. Notices not personally delivered shall be sent charges
prepaid and shall be addressed to the stockholder at the address of that
stockholder appearing on the books of the corporation or given by the
stockholder to the corporation for the purpose of notice. Notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by telegram, telefacsimile or other means of written
communication. If any notice addressed to a stockholder at the address of that
stockholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
stockholder on written demand of the stockholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. Where a separate vote by a class or classes is required, a
majority, present in person or by proxy, of the shares of such class or classes
entitled to take action with respect to that vote on that matter shall
constitute a quorum. If, however, such quorum is not present or represented at
any meeting of the stockholders, then either (i) the chairman of the meeting or
(ii) the holders of a majority of the shares represented at the meeting and
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting in accordance with Section 2.8 hereof. When a
quorum is present at any meeting, the vote of the holders of a majority of the
stock having voting power present in person or represented by proxy shall decide
any question brought before such meeting, unless the question is one upon which,
by express provision of the laws of the State of Delaware or of the certificate
of incorporation or these bylaws, a different vote is required, in which case
such express provision shall govern and control the decision of the question.
If a quorum be initially present, the stockholders may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 ADJOURNED MEETING; NOTICE
Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by (i) the chairman of the meeting
or (ii) the vote of the holders of a
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majority of the shares represented at that meeting and entitled to vote
thereat, either in person or by proxy. In the absence of a quorum, no other
business may be transacted at that meeting except as provided in Section 2.7
of these bylaws.
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, 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 that
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.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation
or these bylaws, each stockholder shall be entitled to one vote for each share
of capital stock held by such stockholder. Any stockholder entitled to vote on
any matter may vote part of the shares in favor of the proposal, refrain from
voting the remaining shares, or may vote them against the proposal; but, if the
stockholder fails to specify the number of shares which the stockholder is
voting affirmatively, it will be conclusively presumed that the stockholder's
approving vote is with respect to all shares which the stockholder is entitled
to vote.
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of stockholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of stockholders. All such waivers, consents,
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect
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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 shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action, and in such event only stockholders of record on the date so
fixed are entitled to notice and to vote, notwithstanding any transfer of any
shares on the books of the corporation after the record date.
If the board of directors does not so fix a record date:
(i) 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.
(ii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.12 PROXIES
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission, telefacsimile or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
2.13 ORGANIZATION
The president, or in the absence of the president, the chairman of the
board, and in the absence of the chairman of the board, the vice presidents, in
order of their rank as fixed by the board of directors, shall call the meeting
of the stockholders to order, and shall act as chairman of the meeting. In the
absence of the president, the chairman of the board, and all of the vice
presidents, the stockholders shall appoint a chairman for such meeting. The
chairman of any meeting of stockholders shall determine the order of business
and the procedures at the meeting, including such matters as the regulation of
the manner of voting and the conduct of business. The date and time of the
opening and closing of the polls for each matter upon which the stockholders
will vote at the meeting shall be announced at the meeting. The secretary of
the corporation shall act as secretary of all meetings of the stockholders, but
in the absence of the secretary at any meeting of the stockholders, the chairman
of the meeting may appoint any person to act as secretary of the meeting.
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2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders or
the books of the corporation, or to vote in person or by proxy at any meeting of
stockholders and of the number of shares held by each such stockholder.
2.15 INSPECTORS OF ELECTION
The corporation may, and to the extent required by law, shall, in advance
of any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The corporation may designate one or
more persons as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting may, and to the extent required by law, shall,
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability. Every vote taken by ballots shall be
counted by an inspector or inspectors appointed by the chairman of the meeting.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
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(f) determine and certify the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
to any limitations in the certificate of incorporation or these bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board of
directors.
3.2 NUMBER OF DIRECTORS
The board of directors shall consist of six (6) members. The number of
directors may be changed by an amendment to this bylaw, duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation. No reduction of the authorized number of
directors shall have the effect of removing any director before that director's
term of office expires. If for any cause, the directors shall not have been
elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these bylaws.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall hold
office until the expiration of the term for which elected and until a successor
has been elected and qualified; except that if any such election shall not be so
held, such election shall take place at a stockholder's meeting called and held
in accordance with the General Corporation Law of Delaware.
The directors of the corporation shall be divided into three classes
as nearly equal in size as is practicable, hereby designated Class I, Class
II and Class III. The term of office of the initial Class I directors shall
expire at the first regularly-scheduled annual meeting of the stockholders
following the Effective Date, the term of office of the initial Class II
directors shall expire at the second annual meeting of the stockholders
following the Effective Date and the term of office of the initial Class III
directors shall expire at the third annual meeting of the stockholders
following the Effective Date. At each annual meeting of stockholders,
commencing with the first regularly-scheduled annual meeting of stockholders
following the Effective Date, each of the successors elected to replace the
directors of a Class whose term shall have expired at such annual meeting
shall be elected to hold office until the third annual meeting next
succeeding his or her election and until his or her respective successor
shall have been duly elected and qualified. If the number of directors is
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hereafter changed, any newly created directorships or decrease in
directorships shall be so apportioned among the classes as to make all
classes as nearly equal in number as is practicable, provided that no
decrease in the number of directors constituting the board of directors shall
shorten the term of any incumbent director.
Directors need not be stockholders unless so required by the certificate
of incorporation or these bylaws, wherein other qualifications for directors may
be prescribed.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, only
a majority of the board of directors then in office, including those who have so
resigned (until the effective date of such resignation), shall have the power to
fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next annual meeting of the stockholders and until a successor has been
elected and qualified.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting
from any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled only by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of
stock or series thereof are entitled to elect one or more directors by the
provisions of the certificate of incorporation, vacancies and newly created
directorships of such class or classes or series may be filled only by a
majority of the directors elected by such class or classes or series thereof
then in office, or by a sole remaining director so elected. In the event that
no directors elected by such class or classes of stock or series remain, the
majority of the other directors then in office, although less than a quorum, or
a sole remaining director may fill such vacancy or vacancies.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
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of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent 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 office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held
at such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
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3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least two (2) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least four (4) hours before the time of the holding of
the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. If the meeting is to be held at the principal executive
office of the corporation the notice need not specify the place of the meeting.
Moreover, a notice of special meeting need not state the purpose of such
meeting, and, unless indicated in the notice thereof, any and all business may
be transacted at a special meeting.
3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute, by the certificate of incorporation
or by these bylaws. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
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3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A 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
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee Such action by written consent shall have the same force
and effect as a unanimous vote of the board of directors.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
3.14 APPROVAL OF 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
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty 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 this Section 3.14 shall be deemed to deny,
limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
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ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist
of one or more of the directors of the corporation. The board may designate
one or more directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee. In the
absence or disqualification of a 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. Any such committee, to the extent provided in the
resolution of the board of directors or in the bylaws of the corporation,
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
that may require it; but no such committee shall have the power or authority
to (i) amend the certificate of incorporation (except that a committee may,
to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or
classes or any other series of the same or any other class or classes of
stock of the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware, (iii)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock or to
adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.7
(regular meetings), Section 3.8 (special meetings and notice), Section 3.9
(quorum), Section 3.10 (waiver of notice), Section 3.11 (adjournment and
notice of adjournment), and Section 3.12 (action without a meeting), with
such changes in the context of those bylaws as are
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necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular
meetings of committees may also be called by resolution of the board of
directors and that notice of special meetings of committees shall also be
given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a chief financial officer. The corporation may
also have, at the discretion of the board of directors, a chairman of the
board, one or more assistant vice presidents, assistant secretaries, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
bylaws, shall be chosen by the board of directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to
appoint, such other officers and agents as the business of the corporation
may require, each of whom shall hold office for such period, have such
authority, and perform such duties as are provided in these bylaws or as the
board of directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by
the board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall
not be necessary to make it effective. Any resignation is without prejudice
to the rights, if any, of the corporation under any contract to which the
officer is a party.
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5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled
by the board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and
perform such other powers and duties as may from time to time be assigned to
him by the board of directors or as may be prescribed by these bylaws. If
there is no president, then the chairman of the board shall also be the chief
executive officer of the corporation and shall have the powers and duties
prescribed in Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and
shall, subject to the control of the board of directors, have general
supervision, direction, and control of the business and the officers of the
corporation. He shall preside at all meetings of the shareholders and, in
the absence or nonexistence of a chairman of the board, at all meetings of
the board of directors. He shall have the general powers and duties of
management usually vested in the office of president of a corporation and
shall have such other powers and duties as may be prescribed by the board of
directors or these bylaws.
5.8 VICE PRESIDENT
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform
all the duties of the president and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of
directors, these bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and shareholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if
special, how authorized and the notice given), the names of those present at
directors' meetings or committee meetings, the number of shares present or
represented at shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names
of all
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shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law
or by these bylaws. He shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by these
bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of
the properties and business transactions of the corporation, including
accounts of its assets, liabilities, receipts, disbursements, gains, losses,
capital, retained earnings, and shares. The books of account shall at all
reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the board of directors. He shall
disburse the funds of the corporation as may be ordered by the board of
directors, shall render to the president and directors, whenever they request
it, an account of all of his transactions as chief financial officer and of
the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the board of directors
or these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of
the secretary and shall perform such other duties and have such other powers
as the board of directors or the stockholders may from time to time prescribe.
5.12 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from
time to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
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6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware as the same now exists
or may hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually
and reasonably incurred in connection with any threatened, pending or
completed action, suit, or proceeding in which such person was or is a party
or is threatened to be made a party by reason of the fact that such person is
or was a director or officer of the corporation. For purposes of this
Section 6.1, a "director" or "officer" of the corporation shall mean any
person (i) who is or was a director or officer of the corporation, (ii) who
is or was serving at the request of the corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise
or (iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
The corporation shall be required to indemnify a director or officer
in connection with an action, suit, or proceeding (or part thereof) initiated
by such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
board of directors of the corporation.
The corporation shall pay the expenses (including attorney's fees)
incurred by a director or officer of the corporation entitled to
indemnification hereunder in defending any action, suit or proceeding
referred to in this Section 6.1 in advance of its final disposition;
provided, however, that payment of expenses incurred by a director or officer
of the corporation in advance of the final disposition of such action, suit
or proceeding shall be made only upon receipt of an undertaking by the
director or officer to repay all amounts advanced if it should ultimately be
determined that the director or officer is not entitled to be indemnified
under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the corporation's Certificate of
Incorporation, these bylaws, agreement, vote of the stockholders or
disinterested directors or otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending or completed action,
suit, or proceeding, in which such person was or is a party or is threatened
to be made a party by reason of the fact that such person is or was an
employee or agent of the corporation. For purposes of this Section 6.2, an
"employee" or "agent" of
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the corporation (other than a director or officer) shall mean any person
(i) who is or was an employee or agent of the corporation, (ii) who is or was
serving at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise or (iii)
who was an employee or agent of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of
such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of the General Corporation Law of Delaware.
6.4 SAVINGS CLAUSE
If this Article VI or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each director, officer, employee or agent of the
corporation against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement with respect to any action, suit, proceeding
or investigation, whether civil, criminal or administrative, and whether
internal or external, including a grand jury proceeding and an action or suit
brought by or in the right of the corporation, to the full extent permitted
by any applicable portion of this Article that shall not have been
invalidated, or by any other applicable law.
6.5 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VI shall, unless otherwise prided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record
of its shareholders listing their names and addresses and the number and
class of shares held by each shareholder, a copy of these bylaws as amended
to date, accounting books, and other records.
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Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose
the corporation's stock ledger, a list of its stockholders, and its other
books and records and to make copies or extracts therefrom. A proper purpose
shall mean a purpose reasonably related to such person's interest as a
stockholder. In every instance where an attorney or other agent is the
person who seeks the right to inspection, the demand under oath shall be
accompanied by a power of attorney or such other writing that authorizes the
attorney or other agent to so act on behalf of the stockholder. The demand
under oath shall be directed to the corporation at its registered office in
Delaware or at its principal place of business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine
whether a director is entitled to the inspection sought. The Court may
summarily order the corporation to permit the director to inspect any and all
books and records, the stock ledger, and the stock list and to make copies or
extracts therefrom. The Court may, in its discretion, prescribe any
limitations or conditions with reference to the inspection, or award such
other and further relief as the Court may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
chief financial officer, the secretary or assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent, and exercise
on behalf of this corporation all rights incident to any and all shares of
any other corporation or corporations standing in the name of this
corporation. The authority granted herein may be exercised either by such
person directly or by any other person authorized to do so by proxy or power
of attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts,
other orders for payment of money, notes or other
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evidences of indebtedness that are issued in the name of or payable to the
corporation, and only the persons so authorized shall sign or endorse those
instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the
agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not
apply to shares represented by a certificate until such certificate is
surrendered to the corporation. Notwithstanding the adoption of such a
resolution by the board of directors, every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the corporation
by the chairman or vice-chairman of the board of directors, or the president
or vice-president, and by the chief financial officer, or the secretary or an
assistant secretary of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer, transfer agent or registrar at the date of
issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total
amount of the consideration to be paid therefor and the amount paid thereon
shall be stated. Upon the declaration of any dividend on fully paid shares,
the corporation shall declare a dividend upon partly paid shares of the same
class, but only upon the basis of the percentage of the consideration
actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the 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 shall be set
forth in full or summarized on the face or back of the certificate that the
corporation shall issue to represent such class or series of
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stock; provided, however, that, except as otherwise provided in Section 202
of the General Corporation Law of Delaware, in lieu of the foregoing
requirements there may be set forth on the face or back of the certificate
that the corporation shall issue to represent such class or series of stock a
statement that the corporation will furnish without charge to each
stockholder who so requests the powers, the designations, the preferences,
and the 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.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 TRANSFER AGENTS AND REGISTRARS
The board of directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, each of which shall be an
incorporated bank or trust company, either domestic or foreign, which shall be
appointed at such times and places as the requirements of the corporation may
necessitate and the board of directors may designate.
8.7 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.8 DIVIDENDS
The directors of the corporation, subject to any restrictions contained
in the certificate of incorporation, may declare and pay dividends upon the
shares of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
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8.9 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.10 SEAL
This corporation may have a corporate seal which may be adopted or
altered at the pleasure of the Board of directors, and may use the same by
causing it or a facsimile thereof, to be impressed or affixed or in any
manner reproduced.
8.11 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate, and record the transaction in
its books.
8.12 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any
agreement with any number of shareholders 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 General Corporation Law of Delaware.
8.13 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, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of another person, whether or not it
shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted,
amended or repealed by the stockholders entitled to vote; provided, however,
that the corporation may, in its certificate of incorporation, confer the
power to adopt, amend or repeal bylaws upon the directors. The fact that
such power has been so conferred upon the directors shall not divest the
stockholders of the power, nor limit their power to adopt, amend or repeal
bylaws.
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ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of
directors of the corporation that the corporation should be dissolved, the
board, after the adoption of a resolution to that effect by a majority of the
whole board at any meeting called for that purpose, shall cause notice to be
mailed to each stockholder entitled to vote thereon of the adoption of the
resolution and of a meeting of stockholders to take action upon the
resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation
entitled to vote thereon votes for the proposed dissolution, then a
certificate stating that the dissolution has been authorized in accordance
with the provisions of Section 275 of the General Corporation Law of Delaware
and setting forth the names and residences of the directors and officers
shall be executed, acknowledged, and filed and shall become effective in
accordance with Section 103 of the General Corporation Law of Delaware. Upon
such certificate's becoming effective in accordance with Section 103 of the
General Corporation Law of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution
consent in writing, either in person or by duly authorized attorney, to a
dissolution, no meeting of directors or stockholders shall be necessary. The
consent shall be filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such consent's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved. If the consent is signed by an
attorney, then the original power of attorney or a photocopy thereof shall be
attached to and filed with the consent. The consent filed with the Secretary
of State shall have attached to it the affidavit of the secretary or some
other officer of the corporation stating that the consent has been signed by
or on behalf of all the stockholders entitled to vote on a dissolution; in
addition, there shall be attached to the consent a certification by the
secretary or some other officer of the corporation setting forth the names
and residences of the directors and officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may
appoint one or more persons to be custodians and, if the corporation is
insolvent, to be receivers, of and for the corporation when:
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(i) at any meeting held for the election of directors
the stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification
of their successors; or
(ii) the business of the corporation is suffering or
is threatened with irreparable injury because the directors are so divided
respecting the management of the affairs of the corporation that the required
vote for action by the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
(iii) the corporation has abandoned its business and
has failed within a reasonable time to take steps to dissolve, liquidate or
distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but
the authority of the custodian shall be to continue the business of the
corporation and not to liquidate its affairs and distribute its assets,
except when the Court of Chancery otherwise orders and except in cases
arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law
of Delaware.
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CERTIFICATE OF ADOPTION OF AMENDED BYLAWS
OF
REALNAMES CORPORATION
CERTIFICATE BY SECRETARY OF ADOPTION BY BOARD OF DIRECTORS' VOTE
The undersigned hereby certifies that she is the duly elected,
qualified, and acting Secretary of RealNames Corporation and that the
foregoing Amended Bylaws, comprising of 24 pages, were submitted to the Board
of Directors on ________ __, 1999, and recorded in the minutes thereof and
were ratified by the unanimous vote of all of the members of the Board of
Directors.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this ____
day of ________ 1999.
---------------------------------------
Richard Steele
Secretary
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Exhibit 10.1
CENTRAAL CORPORATION
1997 STOCK PLAN, AS AMENDED
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as
shall be administering the Plan in accordance with Section 4 hereof.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws
of any other country or jurisdiction where Options or Stock Purchase Rights
are granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by
the Board in accordance with Section 4 hereof.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means Centraal Corporation, a Delaware
corporation.
(h) "CONSULTANT" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services to such
entity.
(i) "DIRECTOR" means a member of the Board of Directors of the
Company.
(j) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
<PAGE>
(k) "EMPLOYEE" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the
Company. A Service Provider shall not cease to be an Employee in the case of
(i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary,
or any successor. For purposes of Incentive Stock Options, no such leave may
exceed ninety days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration of a
leave of absence approved by the Company is not so guaranteed, on the 181st
day of such leave any Incentive Stock Option held by the Optionee shall cease
to be treated as an Incentive Stock Option and shall be treated for tax
purposes as a Nonstatutory Stock Option. Neither service as a Director nor
payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or
system for the last market trading day prior to the time of determination, as
reported in THE WALL STREET JOURNAL or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for
the Common Stock on the last market trading day prior to the day of
determination; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith
by the Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "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.
(q) "OPTION" means a stock option granted pursuant to the Plan.
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(r) "OPTION AGREEMENT" means a written or electronic
agreement between the Company and an Optionee evidencing the terms and
conditions of an individual Option grant. The Option Agreement is subject to
the terms and conditions of the Plan.
(s) "OPTION EXCHANGE PROGRAM" means a program whereby
outstanding Options are exchanged for Options with a lower exercise price.
(t) "OPTIONED STOCK" means the Common Stock subject to an
Option or a Stock Purchase Right.
(u) "OPTIONEE" means the holder of an outstanding Option or
Stock Purchase Right granted under the Plan.
(v) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(w) "PLAN" means this 1997 Stock Plan, as amended.
(x) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(y) "SECTION 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
(z) "SERVICE PROVIDER" means an Employee, Director or
Consultant.
(aa) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(bb) "STOCK PURCHASE RIGHT" means a right to purchase Common
Stock pursuant to Section 11 below.
(cc) "SUBSIDIARY" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section
12 of the Plan, the maximum aggregate number of Shares which may be subject to
option and sold under the Plan is 12,300,000 Shares. The Shares may be
authorized but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased
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Shares which were subject thereto shall become available for future grant or
sale under the Plan (unless the Plan has terminated). However, Shares that
have actually been issued under the Plan, upon exercise of either an Option
or Stock Purchase Right, shall not be returned to the Plan and shall not
become available for future distribution under the Plan, except that if
Shares of Restricted Stock are repurchased by the Company at their original
purchase price, such Shares shall become available for future grant under the
Plan.
4. ADMINISTRATION OF THE PLAN.
(a) ADMINISTRATOR. The Plan shall be administered by the
Board or a Committee appointed by the Board, which Committee shall be
constituted to comply with Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions
of the Plan and, in the case of a Committee, the specific duties delegated by
the Board to such Committee, and subject to the approval of any relevant
authorities, the Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by
each such award granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, of any
Option or Stock Purchase Right granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or times when
Options or Stock Purchase Rights may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the Common Stock relating thereto, based in each case on
such factors as the Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances
an Option may be settled in cash under subsection 9(e) instead of Common
Stock;
(vii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
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(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax
treatment under foreign tax laws;
(x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of
Shares having a Fair Market Value equal to the amount required to be
withheld. The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined. All elections by Optionees to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.
5. ELIGIBILITY.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
(b) Each Option shall be designated in the Option Agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of this Section 5(b), Incentive Stock Options shall be taken into
account in the order in which they were granted. The Fair Market Value of
the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon any Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall it
interfere in any way with his or her right or the Company's right to
terminate such relationship at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon its
adoption by the Board. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 14 of the Plan.
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7. TERM OF OPTION. The term of each Option shall be stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant or such shorter term as
may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued
upon exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of
grant of such Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the exercise price shall be no less than 110% of the Fair Market
Value per Share on the date of grant.
(B) granted to any other Employee, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a Service Provider who, at the
time of grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any other Service Provider, the
per Share exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price other than as required above pursuant to
a merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal
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to the aggregate exercise price of the Shares as to which such Option shall
be exercised, (5) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan, or
(6) any combination of the foregoing methods of payment. In making its
determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected
to benefit the Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any
Option granted hereunder shall be exercisable according to the terms hereof
at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Except in the case of Options granted
to Officers, Directors and Consultants, Options shall become exercisable at a
rate of no less than 20% per year over five (5) years from the date the
Options are granted. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with
the Option Agreement) from the person entitled to exercise the Option, and
(ii) full payment for the Shares with respect to which the Option is
exercised. Full payment may consist of any consideration and method of
payment authorized by the Administrator and permitted by the Option Agreement
and the Plan. Shares issued upon exercise of an Option shall be issued in
the name of the Optionee or, if requested by the Optionee, in the name of the
Optionee and his or her spouse. Until the Shares are issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Shares,
notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Shares are issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares thereafter available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If
an Optionee ceases to be a Service Provider, such Optionee may exercise his
or her Option within such period of time as is specified in the Option
Agreement (of at least thirty (30) days) to the extent that the Option is
vested on the date of termination (but in no event later than the expiration
of the term of the Option as set forth in the Option Agreement). In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for three (3) months following the Optionee's
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termination. If, on the date of termination, the Optionee is not vested as
to his or her entire Option, the Shares covered by the unvested portion of
the Option shall revert to the Plan. If, after termination, the Optionee
does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement (of at least six (6) months) to the extent the Option is
vested on the date of termination (but in no event later than the expiration
of the term of such Option as set forth in the Option Agreement). In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If,
on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
revert to 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 the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is
specified in the Option Agreement (of at least six (6) months) to the extent
that the Option is vested on the date of death (but in no event later than
the expiration of the term of such Option as set forth in the Option
Agreement) by the Optionee's estate or by a person who acquires the right to
exercise the Option by bequest or inheritance. In the absence of a specified
time in the Option Agreement, the Option shall remain exercisable for twelve
(12) months following the Optionee's termination. If, at the time of death,
the Optionee is not vested as to the entire Option, the Shares covered by the
unvested portion of the Option shall immediately revert to the Plan. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously
granted, based on such terms and conditions as the Administrator shall
establish and communicate to the Optionee at the time that such offer is made.
10. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. The
Options and Stock Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or
by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. STOCK PURCHASE RIGHTS.
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(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under
the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing or electronically of the terms,
conditions and restrictions related to the offer, including the number of
Shares that such person shall be entitled to purchase, the price to be paid,
and the time within which such person must accept such offer. The terms of
the offer shall comply in all respects with Section 260.140.42 of Title 10 of
the California Code of Regulations. The offer shall be accepted by execution
of a Restricted Stock Purchase Agreement in the form determined by the
Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination
of the purchaser's service with the Company for any reason (including death
or disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at such rate as
the Administrator may determine. Except with respect to Shares purchased by
Officers, Directors and Consultants, the repurchase option shall in no case
lapse at a rate of less than 20% per year over five (5) years from the date
of purchase.
(c) OTHER PROVISIONS. The Restricted Stock purchase
agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its
sole discretion.
(d) RIGHTS AS A STOCKHOLDER. Once the Stock Purchase Right
is exercised, the purchaser shall have rights equivalent to those of a
stockholder and shall be a stockholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment shall be made for a dividend or other right for which the record
date is prior to the date the Stock Purchase Right is exercised, except as
provided in Section 12 of the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR ASSET SALE.
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(a) CHANGES IN CAPITALIZATION. Subject to any required
action by the stockholders of the Company, the number of shares of Common
Stock covered by each outstanding Option or Stock Purchase Right, and the
number of shares of Common Stock which have been authorized for issuance
under the Plan but as to which no Options or Stock Purchase Rights have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option or Stock Purchase Right, as well as the price per
share of Common Stock covered by each such outstanding Option or Stock
Purchase Right, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company. The conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to an Option or
Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
notify each Optionee as soon as practicable prior to the effective date of
such proposed transaction. The Administrator in its discretion may provide
for an Optionee to have the right to exercise his or her Option or Stock
Purchase Right until fifteen (15) days prior to such transaction as to all of
the Optioned Stock covered thereby, including Shares as to which the Option
or Stock Purchase Right would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option or Stock Purchase Right shall
lapse as to all such Shares, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has
not been previously exercised, an Option or Stock Purchase Right will
terminate immediately prior to the consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation.
In the event that the successor corporation refuses to assume or substitute
for the Option or Stock Purchase Right, the Optionee shall fully vest in and
have the right to exercise the Option or Stock Purchase Right as to all of
the Optioned Stock, including Shares as to which it would not otherwise be
vested or exercisable. If an Option or Stock Purchase Right becomes fully
vested and exercisable in lieu of assumption or substitution in the event of
a merger or sale of assets, the Administrator shall notify the Optionee in
writing or electronically that the Option or Stock Purchase Right shall be
fully exercisable for a period of fifteen (15) days from the date of such
notice, and the Option or Stock
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Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned
Stock subject to the Option or Stock Purchase Right immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders
of Common Stock for each Share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale
of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consieration to be received upon the exercise of the Option
or Stock Purchase Right, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
13. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date
of grant of an Option or Stock Purchase Right shall, for all purposes, be the
date on which the Administrator makes the determination granting such Option
or Stock Purchase Right, or such other date as is determined by the
Administrator. Notice of the determination shall be given to each Service
Provider to whom an Option or Stock Purchase Right is so granted within a
reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) STOCKHOLDER APPROVAL. The Board shall obtain
stockholder approval of any Plan amendment to the extent necessary and
desirable to comply with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of
any Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee
and the Company. Termination of the Plan shall not affect the
Administrator's ability to exercise the powers granted to it hereunder with
respect to Options granted under the Plan prior to the date of such
termination.
15. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares shall
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comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the
exercise of an Option, the Administrator may require the person exercising
such Option to represent and warrant at the time of any such exercise that
the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required.
16. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. RESERVATION OF SHARES. The Company, during the term of this
Plan, shall at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
18. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by
the stockholders of the Company within twelve (12) months after the date the
Plan is adopted. Such stockholder approval shall be obtained in the degree
and manner required under Applicable Laws.
19. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall
provide to each Optionee and to each individual who acquires Shares pursuant
to the Plan, not less frequently than annually during the period such
Optionee or purchaser has one or more Options or Stock Purchase Rights
outstanding, and, in the case of an individual who acquires Shares pursuant
to the Plan, during the period such individual owns such Shares, copies of
annual financial statements. The Company shall not be required to provide
such statements to key employees whose duties in connection with the Company
assure their access to equivalent information.
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REALNAMES CORPORATION
1997 STOCK PLAN
STOCK OPTION AGREEMENT -- EARLY EXERCISE
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
< < NameandAddress > >
______________________
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Option Number: < < Company > >
Date of Grant
Vesting Commencement Date < < VestingCommencementDate > >
Exercise Price per Share
Total Number of Shares Granted < < SharesGranted > >
Total Exercise Price $< < TotalPrice > >
Type of Option: X Incentive Stock Option
Nonstatutory Stock Option
Term/Expiration Date:
EXERCISE AND VESTING SCHEDULE:
This Option shall be exercisable in whole or in part, and shall vest
according to the following vesting schedule:
<PAGE>
25% of the Shares subject to the option shall vest twelve months after
the Vesting Commencement Date, and 1/48th of the Shares subject to the Option
shall vest each month thereafter, subject to your continuing to be a Service
Provider on such dates.
TERMINATION PERIOD:
This Option may be exercised, to the extent it is then vested, for three
months after Optionee ceases to be a Service Provider. Upon death or
Disability of the Optionee, this Option may be exercised, to the extent it is
then vested, for one year after Optionee ceases to be Service Provider. In
no event shall this Option be exercised later than the Term/Expiration Date
as provided above.
II. AGREEMENT
---------
1. GRANT OF OPTION. The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant (the "Optionee"), an
option (the "Option") to purchase the number of Shares set forth in the
Notice of Grant, at the exercise price per Share set forth in the Notice of
Grant (the "Exercise Price"), and subject to the terms and conditions of the
Plan, which is incorporated herein by reference. Subject to Section 14(c) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and this Option Agreement, the terms and conditions of the Plan shall
prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it
exceeds the $100,000 rule of Code Section 422(d), this Option shall be
treated as a Nonstatutory Stock Option ("NSO").
2. EXERCISE OF OPTION. This Option shall be exercisable during its
term in accordance with the provisions of Section 9 of the Plan as follows:
(a) RIGHT TO EXERCISE.
(i) Subject to subsections 2(a)(ii) and 2(a)(iii) below,
this Option shall be exercisable cumulatively according to the vesting
schedule set forth in the Notice of Grant. Alternatively, at the election of
the Optionee, this option may be exercised in whole or in part at any time as
to Shares which have not yet vested. For purposes of this Stock Option
Agreement, Shares subject to the Option shall vest based on continued
employment of Optionee with the Company. Vested Shares shall not be subject
to the Company's repurchase right (as set forth in the Restricted Stock
Purchase Agreement, attached hereto as EXHIBIT C-1).
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(ii) As a condition to exercising this Option for unvested
Shares, the Optionee shall execute the Restricted Stock Purchase Agreement.
(iii) This Option may not be exercised for a fraction of a
Share.
(b) METHOD OF EXERCISE. This Option shall be exercisable by
delivery of an exercise notice in the form attached as EXHIBIT A (the
"Exercise Notice") which shall state the election to exercise the Option, the
number of Shares with respect to which the Option is being exercised, and
such other representations and agreements as may be required by the Company.
The Exercise Notice shall be accompanied by payment of the aggregate Exercise
Price as to all Exercised Shares. This Option shall be deemed to be
exercised upon receipt by the Company of such fully executed Exercise Notice
accompanied by the aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option
unless such issuance and such exercise complies with Applicable Laws.
Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this
Option is exercised, the Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Option, deliver
to the Company his or her Investment Representation Statement in the form
attached hereto as Exhibit B.
4. LOCK-UP PERIOD. Optionee hereby agrees that, if so requested by
the Company or any representative of the underwriters (the "Managing
Underwriter") in connection with any registration of the offering of any
securities of the Company under the Securities Act, Optionee shall not sell
or otherwise transfer any Shares or other securities of the Company during
the 180-day period (or such other period as may be requested in writing by
the Managing Underwriter and agreed to in writing by the Company) (the
"Market Standoff Period") following the effective date of a registration
statement of the Company filed under the Securities Act. Such restriction
shall apply only to the first registration statement of the Company to
become effective under the Securities Act that includes securities to be sold
on behalf of the Company to the public in an underwritten public offering
under the Securities Act. The Company may impose stop-transfer instructions
with respect to securities subject to the foregoing restrictions until the
end of such Market Standoff Period.
5. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall
be by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
(b) check;
-3-
<PAGE>
(c) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
(d) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company,
or if the issuance of such Shares upon such exercise or the method of payment
of consideration for such shares would constitute a violation of any
Applicable Law.
7. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of the Plan and this Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.
8. TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
9. TAX CONSEQUENCES. Set forth below is a brief summary as of the
date of this Option of some of the federal tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) EXERCISE OF ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability upon the exercise of the
Option, although the excess, if any, of the Fair Market Value of the Shares
on the date of exercise over the Exercise Price will be treated as an
adjustment to the alternative minimum tax for federal tax purposes and may
subject the Optionee to the alternative minimum tax in the year of exercise.
(b) EXERCISE OF NONSTATUTORY STOCK OPTION. There may be a regular
federal income tax liability upon the exercise of a Nonstatutory Stock
Option. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise
Price. If Optionee is an Employee or a former Employee, the Company will be
required to withhold from Optionee's compensation or collect from Optionee
and pay to the applicable taxing authorities an amount in cash equal to a
percentage of this compensation income at the time of exercise, and may
refuse to honor the exercise and refuse to deliver Shares if such withholding
amounts are not delivered at the time of exercise.
-4-
<PAGE>
(c) DISPOSITION OF SHARES. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares
will be treated as long-term capital gain for federal income tax purposes.
In the case of an ISO, if Shares transferred pursuant to the Option are held
for at least one year after exercise and at least two years after the Date of
Grant, any gain realized on disposition of the Shares will also be treated as
long-term capital gain for federal income tax purposes. If Shares purchased
under an ISO are disposed of within one year after exercise or two years
after the Date of Grant, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the
extent of the difference between the Exercise Price and the lesser of (i) the
Fair Market Value of the Shares on the date of exercise, or (ii) the sale
price of the Shares. Different rules may apply if the Shares are subject to
a substantial risk of forfeiture (within the meaning of Section 83) at the
time of purchase. Any additional gain will be taxed as capital gain,
short-term depending on the period that the ISO Shares were held.
(d) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (i) the date two years after the Date of Grant, or (ii)
the date one year after the date of exercise, the Optionee shall immediately
notify the Company in writing of such disposition. Optionee agrees that
Optionee may be subject to income tax withholding by the Company on the
compensation income recognized by the Optionee.
(e) SECTION 83(B) ELECTION FOR UNVESTED SHARES PURCHASED PURSUANT
TO OPTIONS. With respect to the exercise of an Option for unvested Shares,
an election may be filed by the Optionee with the Internal Revenue Service,
WITHIN 30 DAYS of the purchase of the Shares, electing pursuant to Section
83(b) of the Code to be taxed currently on any difference between the
purchase price of the Shares and their Fair Market Value on the date of
purchase. In the case of a Nonstatutory Stock Option, this will result in a
recognition of taxable income to the Optionee on the date of exercise,
measured by the excess, if any, of the fair market value of the Shares, at
the time the Option is exercised over the purchase price for the Shares.
Absent such an election, taxable income will be measured and recognized by
Optionee at the time or times on which the Company's Repurchase Option
lapses. In the case of an Incentive Stock Option, such an election will
result in a recognition of income to the Optionee for alternative minimum tax
purposes on the date of exercise, measured by the excess, if any, of the fair
market value of the Shares, at the time the option is exercised, over the
purchase price for the Shares. Absent such an election, alternative minimum
taxable income will be measured and recognized by Optionee at the time or
times on which the Company's Repurchase Option lapses. Optionee is strongly
encouraged to seek the advice of his or her own tax consultants in connection
with the purchase of the Shares and the advisability of filing of the
Election under Section 83(b) of the Code. A form of Election under Section
83(b) is attached hereto as EXHIBIT C-5 for reference.
OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY AND NOT
THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b),
-5-
<PAGE>
EVEN IF OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS
FILING ON OPTIONEE'S BEHALF.
10. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein
by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not
be modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by the
internal substantive laws but not the choice of law rules of California.
11. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY
(NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING
SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR
AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT
ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby
accepts this Option subject to all of the terms and provisions thereof.
Optionee has reviewed the Plan and this Option in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
and fully understands all provisions of the Option. Optionee hereby agrees
to accept as binding, conclusive and final all decisions or interpretations
of the Administrator upon any questions arising under the Plan or this
Option. Optionee further agrees to notify the Company upon any change in the
residence address indicated below.
OPTIONEE: REALNAMES CORPORATION
____________________________________ ____________________________________
Signature By
____________________________________ ____________________________________
Print Name Title
____________________________________
____________________________________
Residence Address
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<PAGE>
EXHIBIT A
---------
1997 STOCK PLAN
EXERCISE NOTICE
RealNames Corporation
2 Circle Star Way, 2nd Floor
San Carlos, CA 94070-1350
Attention: Secretary
1. EXERCISE OF OPTION. Effective as of today, ___________, 19__,
the undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase _________ shares of the Common Stock (the "Shares") of RealNames
Corporation (the "Company") under and pursuant to the 1997 Stock Plan (the
"Plan") and the Stock Option Agreement dated ________, 19__ (the "Option
Agreement").
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company
the full purchase price of the Shares, as set forth in the Option Agreement.
3. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee
has received, read and understood the Plan and the Option Agreement and
agrees to abide by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance of the Shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to
the Optioned Stock, notwithstanding the exercise of the Option. The Shares
shall be issued to the Optionee as soon as practicable after the Option is
exercised. No adjustment shall be made for a dividend or other right for
which the record date is prior to the date of issuance except as provided in
Section 12 of the Plan.
5. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or
<PAGE>
otherwise transfer such Shares; (ii) the name of each proposed purchaser or
other transferee ("Proposed Transferee"); (iii) the number of Shares to be
transferred to each Proposed Transferee; and (iv) the bona fide cash price or
other consideration for which the Holder proposes to transfer the Shares (the
"Offered Price"), and the Holder shall offer the Shares at the Offered Price
to the Company or its assignee(s).
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not
less than all, of the Shares proposed to be transferred to any one or more of
the Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) PURCHASE PRICE. The purchase price ("Purchase Price") for
the Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash consideration
shall be determined by the Board of Directors of the Company in good faith.
(d) PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation
of all or a portion of any outstanding indebtedness of the Holder to the
Company (or, in the case of repurchase by an assignee, to the assignee), or
by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section, then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee
at the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 120 days after the date of the Notice, that
any such sale or other transfer is effected in accordance with any applicable
securities laws and that the Proposed Transferee agrees in writing that the
provisions of this Section shall continue to apply to the Shares in the hands
of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall
be given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or
all of the Shares during the Optionee's lifetime or on the Optionee's death
by will or intestacy to the Optionee's immediate family or a trust for the
benefit of the Optionee's immediate family shall be exempt from the
provisions of this Section. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister.
In such case, the transferee or other recipient shall receive and hold the
Shares so transferred subject to the provisions of this Section, and there
shall be no further transfer of such Shares except in accordance with the
terms of this Section.
-2-
<PAGE>
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate as to any Shares upon the first sale of Common Stock
of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
6. TAX CONSULTATION. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the
Shares together with any other legends that may be required by the Company or
by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY
THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY
OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING
ON TRANSFEREES OF THESE SHARES.
(b) STOP-TRANSFER NOTICES. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer"
-3-
<PAGE>
instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
8. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement
shall be binding upon Optionee and his or her heirs, executors,
administrators, successors and assigns.
9. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting.
The resolution of such a dispute by the Administrator shall be final and
binding on all parties.
10. GOVERNING LAW; SEVERABILITY. This Agreement is governed by the
internal substantive laws, but not the choice of law rules, of California.
11. ENTIRE AGREEMENT. The Plan and Option Agreement are incorporated
herein by reference. This Agreement, the Plan, the Restricted Stock Purchase
Agreement, the Option Agreement and the Investment Representation Statement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except
by means of a writing signed by the Company and Optionee.
-4-
<PAGE>
Submitted by: Accepted by:
OPTIONEE: REALNAMES CORPORATION
___________________________________ ______________________________
Signature By
___________________________________ ______________________________
Print Name Title
ADDRESS: ADDRESS:
___________________________________ 2 Circle Star Way, 2nd Floor
___________________________________ San Carlos, CA 94070-1350
___________________________________ ______________________________
Date Received
-5-
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : REALNAMES CORPORATION
SECURITY : COMMON STOCK
AMOUNT : < < SharesGranted > >
DATE :
In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities.
Optionee is acquiring these Securities for investment for Optionee's 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").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be
unavailable if Optionee's representation was predicated solely upon a present
intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase
or decrease in the market price of the Securities, or for a period of one
year or any other fixed period in the future. Optionee further understands
that the Securities must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Optionee further acknowledges and understands that the Company is
under no obligation to register the Securities. Optionee understands that
the certificate evidencing the Securities will be imprinted with a legend
which prohibits the transfer of the Securities unless they are registered or
such registration is not required in the opinion of counsel satisfactory to
the Company, a legend prohibiting their transfer without the consent of the
Commissioner of Corporations of the State of California and any other legend
required under applicable state securities laws.
<PAGE>
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the
Optionee, the exercise will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90)
days thereafter (or such longer period as any market stand-off agreement may
require) the Securities exempt under Rule 701 may be resold, subject to the
satisfaction of certain of the conditions specified by Rule 144, including:
(1) the resale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934); and, in the case of an
affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three month
period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
the resale to occur not less than one year after the later of the date the
Securities were sold by the Company or the date the Securities were sold by
an affiliate of the Company, within the meaning of Rule 144; and, in the case
of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact
that Rules 144 and 701 are not exclusive, the Staff of the Securities and
Exchange Commission has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and
otherwise than pursuant to Rules 144 or 701 will have a substantial burden of
proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk. Optionee
understands that no assurances can be given that any such other registration
exemption will be available in such event.
Signature of Optionee:
________________________________________
Date: ____________________________, 19__
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<PAGE>
EXHIBIT C-1
-----------
REALNAMES CORPORATION
1997 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made between ____________________________________ (the
"Purchaser") and RealNames Corporation (the "Company") as of
__________________, 199__.
RECITALS
--------
A. Pursuant to the exercise of the Option granted to Purchaser under
the Company's 1997 Stock Plan (the "Plan") and pursuant to the Stock Option
Agreement (the "Option Agreement") dated August 16, 1999 by and between the
Company and Purchaser with respect to such grant, which Plan and Option
Agreement are hereby incorporated by reference, Purchaser has elected to
purchase _________ of those shares which have not become vested under the
vesting schedule set forth in the Option Agreement ("Unvested Shares"). The
Unvested Shares and the shares subject to the Option Agreement which have
become vested are sometimes collectively referred to herein as the "Shares".
B. As required by the Option Agreement, as a condition to Purchaser's
election to exercise the option, Purchaser must execute this Restricted Stock
Purchase Agreement, which sets forth the rights and obligations of the
parties with respect to Unvested Shares acquired upon exercise of the Option.
1. REPURCHASE OPTION.
(a) If Purchaser's status as a Service Provider is terminated
for any reason, including for cause, death, and Disability, the Company shall
have the right and option to purchase from Purchaser, or Purchaser's personal
representative, as the case may be, all of the Purchaser's Unvested Shares as
of the date of such termination at the price paid by the Purchaser for such
Shares (the "Repurchase Option").
(b) Upon the occurrence of a termination, the Company may
exercise its Repurchase Option by delivering personally or by registered
mail, to Purchaser (or his transferee or legal representative, as the case
may be), within ninety (90) days of the termination, a notice in writing
indicating the Company's intention to exercise the Repurchase Option and
setting forth a date for closing not later than thirty (30) days from the
mailing of such notice. The closing shall take place at the Company's office.
At the closing, the holder of the certificates for the Unvested Shares being
transferred shall deliver the stock certificate or certificates evidencing
the Unvested Shares, and the Company shall deliver the purchase price
therefor.
<PAGE>
(c) At its option, the Company may elect to make payment for
the Unvested Shares to a bank selected by the Company. The Company shall
avail itself of this option by a notice in writing to Purchaser stating the
name and address of the bank, date of closing, and waiving the closing at the
Company's office.
(d) If the Company does not elect to exercise the Repurchase
Option conferred above by giving the requisite notice within ninety (90) days
following the termination, the Repurchase Option shall terminate.
(e) The Repurchase Option shall terminate in accordance with
the Vesting Schedule in Optionee's Option Agreement.
2. TRANSFERABILITY OF THE SHARES; ESCROW.
(a) Purchaser hereby authorizes and directs the Secretary of
the Company, or such other person designated by the Company, to transfer the
Unvested Shares as to which the Repurchase Option has been exercised from
Purchaser to the Company.
(b) To insure the availability for delivery of Purchaser's
Unvested Shares upon repurchase by the Company pursuant to the Repurchase
Option under Section 1, Purchaser hereby appoints the Secretary, or any other
person designated by the Company as escrow agent, as its attorney-in-fact to
sell, assign and transfer unto the Company, such Unvested Shares, if any,
repurchased by the Company pursuant to the Repurchase Option and shall, upon
execution of this Agreement, deliver and deposit with the Secretary of the
Company, or such other person designated by the Company, the share
certificates representing the Unvested Shares, together with the stock
assignment duly endorsed in blank, attached hereto as EXHIBIT C-2. The
Unvested Shares and stock assignment shall be held by the Secretary in
escrow, pursuant to the Joint Escrow Instructions of the Company and
Purchaser attached as EXHIBIT C-3 hereto, until the Company exercises its
purchase right as provided in Section 1, until such Unvested Shares are
vested, or until such time as this Agreement no longer is in effect. As a
further condition to the Company's obligations under this Agreement, the
spouse of the Purchaser, if any, shall execute and deliver to the Company the
Consent of Spouse attached hereto as EXHIBIT C-4. Upon vesting of the
Unvested Shares, the escrow agent shall promptly deliver to the Purchaser the
certificate or certificates representing such Shares in the escrow agent's
possession belonging to the Purchaser, and the escrow agent shall be
discharged of all further obligations hereunder; provided, however, that the
escrow agent shall nevertheless retain such certificate or certificates as
escrow agent if so required pursuant to other restrictions imposed pursuant
to this Agreement.
(c) The Company, or its designee, shall not be liable for any
act it may do or omit to do with respect to holding the Shares in escrow and
while acting in good faith and in the exercise of its judgment.
(d) Transfer or sale of the Shares is subject to restrictions
on transfer imposed by any applicable state and federal securities laws. Any
transferee shall hold such Shares subject to all the provisions hereof and
the Exercise Notice executed by the Purchaser with respect to any
-2-
<PAGE>
Unvested Shares purchased by Purchaser and shall acknowledge the same by
signing a copy of this Agreement.
3. OWNERSHIP, VOTING RIGHTS, DUTIES. This Agreement shall not affect
in any way the ownership, voting rights or other rights or duties of
Purchaser, except as specifically provided herein.
4. LEGENDS. The share certificate evidencing the Shares issued
hereunder shall be endorsed with the following legend (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE
WITH THE SECRETARY OF THE COMPANY.
5. ADJUSTMENT FOR STOCK SPLIT. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
6. NOTICES. Notices required hereunder shall be given in person or by
registered mail to the address of Purchaser shown on the records of the
Company, and to the Company at their respective principal executive offices.
7. SURVIVAL OF TERMS. This Agreement shall apply to and bind
Purchaser and the Company and their respective permitted assignees and
transferees, heirs, legatees, executors, administrators and legal successors.
8. SECTION 83(B) ELECTION. Purchaser hereby acknowledges that he or
she has been informed that, with respect to the exercise of an Option for
unvested Shares, an election may be filed by the Purchaser with the Internal
Revenue Service, WITHIN 30 DAYS of the purchase of the Shares, electing
pursuant to Section 83(b) of the Code to be taxed currently on any difference
between the purchase price of the Shares and their Fair Market Value on the
date of purchase. In the case of a Nonstatutory Stock Option, this will
result in a recognition of taxable income to the Purchaser on the date of
exercise, measured by the excess, if any, of the fair market value of the
Shares, at the time the Option is exercised over the purchase price for the
Shares. Absent such an election, taxable income will be measured and
recognized by Purchaser at the time or times on which the Company's
Repurchase Option lapses. In the case of an Incentive Stock Option, such an
election will result in a recognition of income to the Purchaser for
alternative minimum tax purposes on the date of exercise, measured by the
excess, if any, of the Fair Market Value of the Shares, at the time the
option is exercised, over the purchase price for the Shares. Absent such an
election, alternative minimum taxable income will be measured and recognized
by Purchaser at the time or times on which the Company's Repurchase Option
lapses. Purchaser is strongly encouraged to seek the advice of his or her
own tax consultants in connection with the purchase of the Shares and the
advisability of filing
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<PAGE>
of the Election under Section 83(b) of the Code. A form of Election under
Section 83(b) is attached hereto as EXHIBIT C-5 for reference.
PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND
NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON
PURCHASER'S BEHALF.
9. REPRESENTATIONS. Purchaser has reviewed with his own tax advisors
the federal, state, local and foreign tax consequences of this investment and
the transactions contemplated by this Agreement. Purchaser is relying solely
on such advisors and not on any statements or representations of the Company
or any of its agents. Purchaser understands that he (and not the Company)
shall be responsible for his own tax liability that may arise as a result of
this investment or the transactions contemplated by this Agreement.
10. GOVERNING LAW. This Agreement shall be governed by the internal
substantive laws, but not the choice of law rules, of California.
Purchaser represents that he has read this Agreement and is familiar
with its terms and provisions. Purchaser hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement is deemed made as of the date first
set forth above.
PURCHASER REALNAMES CORPORATION
___________________________________ ______________________________
Signature By
___________________________________ ______________________________
Print Name Title
___________________________________
Soc. Sec. No.
ADDRESS:
___________________________________
___________________________________
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<PAGE>
EXHIBIT C-2
-----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign
and transfer unto RealNames Corporation (__________) shares of the Common
Stock of RealNames Corporation standing in my name of the books of said
corporation represented by Certificate No. _____ herewith and do hereby
irrevocably constitute and appoint ____________________________________
_________________to transfer the said stock on the books of the within named
corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement of RealNames Corporation and the undersigned dated
______________, 19__.
Dated: _______________, 19 __ Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature
line. The purpose of this assignment is to enable the Company to exercise
its "repurchase option," as set forth in the Agreement, without requiring
additional signatures on the part of the Purchaser.
<PAGE>
EXHIBIT C-3
-----------
JOINT ESCROW INSTRUCTIONS
-------------------------
_____________________, 19__
RealNames Corporation
2 Circle Star Way, 2nd Floor
San Carlos, CA 94070-1350
Attention: Secretary
Dear Secretary:
As Escrow Agent for both RealNames Corporation (the "Company"), and the
undersigned purchaser of stock of the Company (the "Purchaser"), you are
hereby authorized and directed to hold the documents delivered to you
pursuant to the terms of that certain Restricted Stock Purchase Agreement
("Agreement") between the Company and the undersigned, in accordance with the
following instructions:
1. In the event the Company and/or any assignee of the Company
(referred to collectively for convenience herein as the "Company") exercises
the Company's repurchase option set forth in the Agreement, the Company shall
give to Purchaser and you a written notice specifying the number of shares of
stock to be purchased, the purchase price, and the time for a closing
hereunder at the principal office of the Company. Purchaser and the Company
hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and
any additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities all documents necessary or appropriate to make
such securities negotiable and to complete any transaction herein
contemplated, including but not limited to the filing with any applicable
state blue sky authority of any required applications for consent to, or
notice of transfer
<PAGE>
of, the securities. Subject to the provisions of this paragraph 3, Purchaser
shall exercise all rights and privileges of a stockholder of the Company
while the stock is held by you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 120 days after cessation of Purchaser's continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased
by the Company or its assignees pursuant to exercise of the Company's
repurchase option.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of the same to Purchaser and shall be
discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by
you to be genuine and to have been signed or presented by the proper party or
parties. You shall not be personally liable for any act you may do or omit
to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while
acting in good faith, and any act done or omitted by you pursuant to the
advice of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of
any court. In case you obey or comply with any such order, judgment or
decree, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified,
annulled, set aside, vacated or found to have been entered without
jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or
called for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
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<PAGE>
11. You shall be entitled to employ such legal counsel and other
experts as you may deem necessary properly to advise you in connection with
your obligations hereunder, may rely upon the advice of such counsel, and may
pay such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall
resign by written notice to each party. In the event of any such
termination, the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such
instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain
in your possession without liability to anyone all or any part of said
securities until such disputes shall have been settled either by mutual
written agreement of the parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail
with postage and fees prepaid, addressed to each of the other parties
thereunto entitled at the following addresses or at such other addresses as a
party may designate by ten days' advance written notice to each of the other
parties hereto.
COMPANY: RealNames Corporation
2 Circle Star Way, 2nd Floor
San Carlos, CA 94070-1350
Attention: Secretary
PURCHASER: ___________________
___________________
___________________
ESCROW AGENT: RealNames Corporation
2 Circle Star Way, 2nd Floor
San Carlos, CA 94070-1350
Attention: Secretary
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<PAGE>
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by the internal
substantive laws, but not the choice of law rules, of California.
REALNAMES CORPORATION PURCHASER
_____________________________________ _____________________________________
By Signature
_____________________________________ _____________________________________
Title Typed or Printed Name
ESCROW AGENT
_____________________________________
Secretary
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<PAGE>
EXHIBIT C-4
-----------
CONSENT OF SPOUSE
-----------------
I, ____________________, spouse of ___________________, have read and
approve the foregoing Agreement. In consideration of granting of the right
to my spouse to purchase shares of RealNames Corporation, as set forth in the
Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to
the exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said
Agreement or any shares issued pursuant thereto under the community property
laws or similar laws relating to marital property in effect in the state of
our residence as of the date of the signing of the foregoing Agreement.
Dated: _______________, 19__ Signature:___________________________________
<PAGE>
EXHIBIT C-5
-----------
ELECTION UNDER SECTION 83(B)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of
the Internal Revenue Code of 1986, as amended, to include in taxpayer's gross
income or alternative minimum taxable income, as the case may be, for the
current taxable year the amount of any compensation taxable to taxpayer in
connection with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: _____________________shares (the "Shares") of the Common Stock
of RealNames Corporation (the "Company").
3. The date on which the property was transferred is:
________________________________, 19 ____.
4. The property is subject to the following restrictions:
The Shares may not be transferred and are subject to forfeiture under
the terms of an agreement between the taxpayer and the Company. These
restrictions lapse upon the satisfaction of certain conditions contained
in such agreement.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will
never lapse, of such property is:
$______________________.
6. The amount (if any) paid for such property is:
$______________________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of
the above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.
Dated: ___________________, 19____ ________________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19____ ________________________________________
<PAGE>
Exhibit 10.2
REALNAMES CORPORATION
1999 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1999 Stock Plan are:
- to attract and retain the best available personnel for positions
of substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by
the Board in accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the common stock of the Company.
(g) "COMPANY" means RealNames Corporation, a Delaware
corporation.
(h) "CONSULTANT" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
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<PAGE>
(k) "EMPLOYEE" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
A Service Provider shall not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between locations of
the Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option. Neither service as a Director nor payment of a director's fee by
the Company shall be sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
THE WALL STREET JOURNAL or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in THE WALL STREET JOURNAL or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "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.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "NOTICE OF GRANT" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(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.
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<PAGE>
(s) "OPTION AGREEMENT" means an agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(t) "OPTION EXCHANGE PROGRAM" means a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.
(u) "OPTIONED STOCK" means the Common Stock subject to an
Option or Stock Purchase Right.
(v) "OPTIONEE" means the holder of an outstanding Option or
Stock Purchase Right granted under the Plan.
(w) "PLAN" means this 1999 Stock Plan.
(x) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(y) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(z) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(aa) "SECTION 16(b) " means Section 16(b) of the Exchange Act.
(bb) "SERVICE PROVIDER" means an Employee, Director or
Consultant.
(cc) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 14 of the Plan.
(dd) "STOCK PURCHASE RIGHT" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ee) "SUBSIDIARY" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 3,500,000 Shares, plus (a) any Shares which
were reserved but unissued under the Company's 1997 Stock Plan ("1997 Plan") as
of the date of stockholder approval of the original adoption of this Plan,
(b) any Shares subsequently returned to the 1997 Plan as a result of termination
of options or repurchase of Shares issued under the 1997 Plan, and (c) an annual
increase to be added on the first day of each of the Company's fiscal years
during the term of this Plan beginning in fiscal year 2001 equal to the lesser
of (i) 6,000,000 Shares, (ii) 4% of the outstanding Shares on such date, or
(iii) an amount
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<PAGE>
determined by the Board. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); PROVIDED, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
(ii) SECTION 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) RULE 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above,
the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to
be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder. Such terms and conditions
-4-
<PAGE>
include, but are not limited to, the exercise price, the time or times when
Options or Stock Purchase Rights may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the shares of Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option or Stock Purchase
Right (subject to Section 15(c) of the Plan), including the discretionary
authority to extend the post-termination exercisability period of Options longer
than is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to (or less than) the minimum amount required
to be withheld. The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined. All elections by an Optionee to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase Rights
may be granted to Service Providers. Incentive Stock Options may be granted
only to Employees.
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<PAGE>
6. LIMITATIONS.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon an Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall they
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than 1,500,000 Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
1,500,000 Shares that shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal year of
the Company in which it was granted (other than in connection with a transaction
described in Section 13, the cancelled Option will be counted against the limits
set forth in subsections (i) and (ii) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.
7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect
for a term of ten (10) years unless terminated earlier under Section 15 of the
Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option
granted to an Optionee who, at the time the Incentive Stock Option is granted,
owns stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.
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<PAGE>
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions that must be satisfied before
the Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
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(vi) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment;
or
(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. Subject
to Section 13, if an Optionee ceases to be a Service Provider (but not in the
event of an Optionee's change of status from Employee to Consultant (in which
case an Employee's Incentive Stock Option shall automatically convert to a
Nonstatutory Stock Option on the ninety-first (91st) day following such change
of status) or from Consultant to Employee), such Optionee may, but only within
such period of time as is specified in the Option Agreement (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that Optionee was
entitled to exercise it at the date of such termination. In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the
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Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may, but
only within twelve (12) months from the date of such termination (and in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise his or her Option the extent the Option is
vested on the date of termination. If, on the date of termination, the Optionee
is not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to 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 the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service
Provider, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance, but only to the extent that the Option is vested on the date of
death. If, at the time of death, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. The Option may be exercised by the executor or
administrator of the Optionee's estate or, if none, by the person(s) entitled to
exercise the Option under the Optionee's will or the laws of descent or
distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer
to buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to be
paid, and the time within which the offeree must accept such offer. The offer
shall be accepted by execution of a Restricted Stock Purchase Agreement in the
form determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
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<PAGE>
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and Stock Purchase Right, the number of shares of
Common Stock covered by First Options and Subsequent Options to be granted under
the Plan, the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options or Stock Purchase Rights have
yet been granted or which have been returned to the Plan upon cancellation or
expiration of an Option or Stock Purchase Right and the number of shares of
Common Stock which may be added to the Plan each fiscal year (pursuant to
Section 3), as well as the price per share of Common Stock covered by each such
outstanding Option or Stock Purchase Right, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase
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<PAGE>
Right shall lapse as to all such Shares, provided the proposed dissolution or
liquidation takes place at the time and in the manner contemplated. To the
extent it has not been previously exercised, an Option or Stock Purchase
Right will terminate immediately prior to the consummation of such proposed
action.
(c) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the
event that the successor corporation refuses to assume or substitute for the
Option or Stock Purchase Right, the Optionee shall fully vest in and have the
right to exercise the Option or Stock Purchase Right as to all of the Optioned
Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option or Stock Purchase Right becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option or Stock Purchase Right shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger or sale of assets, the
option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger or sale of assets, the consideration (whether stock, cash, or
other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
forthe consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
14. DATE OF GRANT. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise
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<PAGE>
between the Optionee and the Administrator, which agreement must be in
writing and signed by the Optionee and the Company. Termination of the Plan
shall not affect the Administrator's ability to exercise the powers granted
to it hereunder with respect to Options granted under the Plan prior to the
date of such termination.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to
the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise
of an Option or Stock Purchase Right, the Company may require the person
exercising such Option or Stock Purchase Right to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
17. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the manner and
to the degree required under Applicable Laws.
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<PAGE>
REALNAMES CORPORATION
1999 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number ______________________________
Date of Grant ______________________________
Vesting Commencement Date ______________________________
Exercise Price per Share $_____________________________
Total Number of Shares Granted ______________________________
Total Exercise Price $_____________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: ______________________________
VESTING SCHEDULE:
Subject to accelerated vesting as set forth in the Plan, this Option may be
exercised, in whole or in part, in accordance with the following schedule:
25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest each month thereafter, subject to the Optionee continuing to be a Service
Provider on such dates.
<PAGE>
TERMINATION PERIOD:
This Option may be exercised for three (3) months after Optionee ceases to
be a Service Provider. Upon the death or Disability of the Optionee, this
Option may be exercised for twelve (12) months after Optionee ceases to be a
Service Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
A. GRANT OF OPTION.
The Plan Administrator of the Company hereby grants to the Optionee
named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 15(c)
of the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
B. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Stock Plan Administrator of the Company.
The Exercise Notice shall be accompanied by payment of the aggregate Exercise
Price as to all Exercised Shares. This Option shall be deemed to be exercised
upon receipt by the Company of such fully executed Exercise Notice accompanied
by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
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<PAGE>
C. METHOD OF PAYMENT.
Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
1. cash; or
2. check; or
3. consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
4. surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
D. NON-TRANSFERABILITY OF OPTION.
This Option may not be transferred in any manner otherwise than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
E. TERM OF OPTION.
This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with
the Plan and the terms of this Option Agreement.
F. TAX CONSEQUENCES.
Some of the federal tax consequences relating to this Option, as of
the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
1. EXERCISING THE OPTION.
(a) NONSTATUTORY STOCK OPTION. The Optionee may incur regular
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may
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<PAGE>
refuse to honor the exercise and refuse to deliver Shares if such withholding
amounts are not delivered at the time of exercise.
(b) INCENTIVE STOCK OPTION. If this Option qualifies as an ISO,
the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
2. DISPOSITION OF SHARES.
(a) NSO. If the Optionee holds NSO Shares for at least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
(b) ISO. If the Optionee holds ISO Shares for at least one year
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
G. ENTIRE AGREEMENT; GOVERNING LAW.
The Plan is incorporated herein by reference. The Plan and this
Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
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<PAGE>
H. NO GUARANTEE OF CONTINUED SERVICE.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS
OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE
PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: REALNAMES CORPORATION
_________________________________ ___________________________________
Signature By
_________________________________ ___________________________________
Print Name Title
_________________________________
Residence Address
_________________________________
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EXHIBIT A
REALNAMES CORPORATION
1999 STOCK PLAN
EXERCISE NOTICE
RealNames Corporation
P.O. Box 3500
San Carlos, CA 94070-1350
Attention: [Title]
1. EXERCISE OF OPTION. Effective as of today, ________________, _____,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of RealNames Corporation (the "Company")
under and pursuant to the RealNames Corporation 1999 Stock Plan (the "Plan") and
the Stock Option Agreement dated, _____ (the "Option Agreement"). The purchase
price for the Shares shall be $_____, as required by the Option Agreement.
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. TAX CONSULTATION. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. ENTIRE AGREEMENT; GOVERNING LAW. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all
<PAGE>
prior undertakings and agreements of the Company and Purchaser with respect
to the subject matter hereof, and may not be modified adversely to the
Purchaser's interest except by means of a writing signed by the Company and
Purchaser. This agreement is governed by the internal substantive laws, but
not the choice of law rules, of California.
Submitted by: Accepted by:
PURCHASER REALNAMES CORPORATION
________________________________ ___________________________________
Signature By
________________________________ ___________________________________
Print Name Its
ADDRESS: ADDRESS:
________________________________ RealNames Corporation
P.O. Box 3500
________________________________ San Carlos, CA 94070-1350
___________________________________
Date Received
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Exhibit 10.3
REALNAMES CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock
Purchase Plan of RealNames Corporation.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "COMMON STOCK" shall mean the common stock of the Company.
(d) "COMPANY" shall mean RealNames Corporation and any
Designated Subsidiary of the Company.
(e) "COMPENSATION" shall mean all base straight time gross
earnings and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "DESIGNATED SUBSIDIARY" shall mean any Subsidiary that has
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "EMPLOYEE" shall mean any individual who is an Employee of
the Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any calendar
year. For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "ENROLLMENT DATE" shall mean the first Trading Day of each
Offering Period.
(i) "EXERCISE DATE" shall mean the last Trading Day of each
Purchase Period.
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(j) "FAIR MARKET VALUE" shall mean, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as reported in
THE WALL STREET JOURNAL or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock prior to the date of determination, as reported in THE WALL STREET
JOURNAL or such other source as the Board deems reliable;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board; or
(iv) For purposes of the Enrollment Date of the first
Offering Period under the Plan, the Fair Market Value shall be the initial price
to the public as set forth in the final prospectus included within the
registration statement in Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock (the
"Registration Statement").
(k) "OFFERING PERIODS" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after February 1 and
August 1 of each year and terminating on the last Trading Day in the periods
ending twenty-four months later; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
July 31, 2001. The duration and timing of Offering Periods may be changed
pursuant to Section 4 of this Plan.
(l) "PLAN" shall mean this 1999 Employee Stock Purchase Plan.
(m) "PURCHASE PERIOD" shall mean the approximately six month
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date.
(n) "PURCHASE PRICE" shall mean 85% of the Fair Market Value of
a share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower; provided however, that the Purchase Price may be adjusted by
the Board pursuant to Section 20.
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(o) "RESERVES" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(p) "SUBSIDIARY" shall mean a corporation, domestic or foreign,
of which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "TRADING DAY" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. ELIGIBILITY.
(a) Any Employee who shall be employed by the Company on a
given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after February 1 and August 1 each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
July 31, 2001. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Company's payroll office
prior to the applicable Enrollment Date.
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(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may increase or decrease the rate
of his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during a Purchase Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part,
or at the time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the
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Company's Common Stock determined by dividing such Employee's payroll
deductions accumulated prior to such Exercise Date and retained in the
Participant's account as of the Exercise Date by the applicable Purchase
Price; provided that in no event shall an Employee be permitted to purchase
during each Purchase Period more than 5,000 shares of the Company's Common
Stock (subject to any adjustment pursuant to Section 19), and provided
further that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 12 hereof. The Board may, for future Offering Periods,
increase or decrease, in its absolute discretion, the maximum number of
shares of the Company's Common Stock an Employee may purchase during each
Purchase Period of such Offering Period. Exercise of the option shall occur
as provided in Section 8 hereof, unless the participant has withdrawn
pursuant to Section 10 hereof. The option shall expire on the last day of
the Offering Period.
8. EXERCISE OF OPTION.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
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9. DELIVERY. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. WITHDRAWAL.
(a) A participant may withdraw all, but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period.
If a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.
11. TERMINATION OF EMPLOYMENT.
Upon a participant's ceasing to be an Employee, for any reason, he or she
shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. STOCK.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 1,000,000 shares, plus an annual increase to be added on the first day
of each of the Company's fiscal years during the term of this Plan beginning in
fiscal year 2001 equal to the lesser of (i) 3,000,000 shares, (ii) 2% of the
outstanding shares on such date, or (iii) an amount determined by the Board.
If, on a given Exercise Date, the number of shares with respect to which options
are to be exercised exceeds the number of shares then available under the Plan,
the
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Company shall make a pro rata allocation of the shares remaining available
for purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
14. ADMINISTRATION. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to receive
any cash from the participant's account under the Plan in the event of such
participant's death prior to exercise of the option. If a participant is
married and the designated beneficiary is not the spouse, spousal consent shall
be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
16. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
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17. USE OF FUNDS. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
18. REPORTS. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
LIQUIDATION, MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the shareholders of the Company, the Reserves and the number of shares of
Common Stock which may be added to the Plan each fiscal year (pursuant to
Section 13), the maximum number of shares each participant may purchase each
Purchase Period (pursuant to Section 7), as well as the price per share and the
number of shares of Common Stock covered by each option under the Plan which has
not yet been exercised shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least
ten (10) business days prior to the New Exercise Date, that the Exercise Date
for the participant's option has been changed to the New Exercise Date and that
the participant's option shall be exercised automatically on the New Exercise
Date, unless prior to such date the participant has withdrawn from the Offering
Period as provided in Section 10 hereof.
(c) MERGER OR ASSET SALE. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any
Purchase Periods then in progress shall be shortened by setting a new Exercise
Date (the "New Exercise Date") and any Offering Periods then in progress shall
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end on the New Exercise Date. The New Exercise Date shall be before the date of
the Company's proposed sale or merger. The Board shall notify each participant
in writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant has
withdrawn from the Offering Period as provided in Section 10 hereof.
20. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time and
for any reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Offering Period or the
Plan is in the best interests of the Company and its shareholders. Except as
provided in Section 19 and this Section 20 hereof, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law, regulation or
stock exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether
any participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing
operation of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such accounting
consequence including, but not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering
Period ends on a new Exercise Date, including an Offering Period underway at the
time of the Board action; and
(iii) allocating shares.
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Such modifications or amendments shall not require stockholder approval
or the consent of any Plan participants.
21. NOTICES. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
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EXHIBIT A
REALNAMES CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the RealNames
Corporation 1999 Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's Common
Stock in accordance with this Subscription Agreement and the Employee
Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 0 to _____%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):.
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at the
time such shares were purchased by me over the price
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which I paid for the shares. I HEREBY AGREE TO NOTIFY THE COMPANY IN
WRITING WITHIN 30 DAYS AFTER THE DATE OF ANY DISPOSITION OF MY SHARES AND
I WILL MAKE ADEQUATE PROVISION FOR FEDERAL, STATE OR OTHER TAX
WITHHOLDING OBLIGATIONS, IF ANY, WHICH ARISE UPON THE DISPOSITION OF THE
COMMON STOCK. The Company may, but will not be obligated to, withhold
from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make
available to the Company any tax deductions or benefits attributable to
sale or early disposition of Common Stock by me. If I dispose of such
shares at any time after the expiration of the 2-year and 1-year holding
periods, I understand that I will be treated for federal income tax
purposes as having received income only at the time of such disposition,
and that such income will be taxed as ordinary income only to the extent
of an amount equal to the lesser of (1) the excess of the fair market
value of the shares at the time of such disposition over the purchase
price which I paid for the shares, or (2) 15% of the fair market value of
the shares on the first day of the Offering Period. The remainder of the
gain, if any, recognized on such disposition will be taxed as capital
gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) __________________________________________________________
(First) (Middle) (Last)
____________________________________ ____________________________________
Relationship
____________________________________
(Address)
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Employee's Social
Security Number: ________________________________
Employee's Address: ________________________________
________________________________
________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ____________________________________
Signature of Employee
____________________________________
Spouse's Signature (If beneficiary
other than spouse)
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<PAGE>
EXHIBIT B
REALNAMES CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the RealNames
Corporation 1999 Employee Stock Purchase Plan that began on ____________, ______
(the Enrollment Date") hereby notifies the Company that, he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of
Participant:
____________________________________
____________________________________
____________________________________
Signature:
____________________________________
Date:_______________________________
<PAGE>
Exhibit 10.4
REALNAMES CORPORATION
1999 DIRECTOR OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1999 Director Option
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" means the common stock of the Company.
(d) "COMPANY" means RealNames Corporation, a Delaware
corporation.
(e) "DIRECTOR" means a member of the Board.
(f) "DISABILITY" means total and permanent disability as
defined in section 22(e)(3) of the Code.
(g) "EMPLOYEE" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(i) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination as reported in
THE WALL STREET JOURNAL or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock for the last market
<PAGE>
trading day prior to the time of determination, as reported in THE WALL
STREET JOURNAL or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(j) "INSIDE DIRECTOR" means a Director who is an Employee.
(k) "OPTION" means a stock option granted pursuant to the Plan.
(l) "OPTIONED STOCK" means the Common Stock subject to an
Option.
(m) "OPTIONEE" means a Director who holds an Option.
(n) "OUTSIDE DIRECTOR" means a Director who is not an Employee.
(o) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "PLAN" means this 1999 Director Option Plan.
(q) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(r) "SUBSIDIARY" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code
of 1986.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section
10 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 500,000 Shares (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. ADMINISTRATION AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) PROCEDURE FOR GRANTS. All grants of Options to Outside
Directors under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options.
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<PAGE>
(ii) Each Outside Director shall be automatically granted
an Option to purchase 40,000 Shares (the "First Option") on the date on which
the later of the following events occurs: (A) the effective date of this Plan,
as determined in accordance with Section 6 hereof, or (B) the date on which such
person first becomes an Outside Director, whether through election by the
shareholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted
an Option to purchase 20,000 Shares (a "Subsequent Option") following each
annual meeting of the stockholders of the Company provided he or she is then an
Outside Director and if as of such date, he or she shall have served on the
Board for at least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections (ii)
and (iii) hereof, any exercise of an Option granted before the Company has
obtained shareholder approval of the Plan in accordance with Section 16 hereof
shall be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall
be as follows:
(A) the term of the First Option shall be ten
(10) years.
(B) the First Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of
the Fair Market Value per Share on the date of grant of the First Option.
(D) subject to Section 10 hereof, the First
Option shall become exercisable as to 1/4 of the Shares subject to the First
Option on each anniversary of its date of grant, provided that the Optionee
continues to serve as a Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder
shall be as follows:
(A) the term of the Subsequent Option shall be
ten (10) years.
(B) the Subsequent Option shall be exercisable
only while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of
the Fair Market Value per Share on the date of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent
Option shall become exercisable as to 1/4 of the Shares subject to the
Subsequent Option on each anniversary of its date of grant, provided that the
Optionee continues to serve as a Director on such dates.
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<PAGE>
(vii) In the event that any Option granted under the Plan
would cause the number of Shares subject to outstanding Options plus the number
of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options to
the Outside Directors on a pro rata basis. No further grants shall be made
until such time, if any, as additional Shares become available for grant under
the Plan through action of the Board or the shareholders to increase the number
of Shares which may be issued under the Plan or through cancellation or
expiration of Options previously granted hereunder.
5. ELIGIBILITY. Options may be granted only to Outside Directors.
All Options shall be automatically granted in accordance with the terms set
forth in Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect
to continuation of service as a Director or nomination to serve as a Director,
nor shall it interfere in any way with any rights which the Director or the
Company may have to terminate the Director's relationship with the Company at
any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. FORM OF CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of payment,
shall consist of (i) cash, (ii) check, (iii) other shares which (x) in the case
of Shares acquired upon exercise of an option, have been owned by the Optionee
for more than six (6) months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (iv) consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan, or (v) any combination of the foregoing
methods of payment.
8. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may consist of any consideration and
method of payment allowable under Section 7 of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the
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<PAGE>
Company) of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. A
share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is
prior to the date the stock certificate is issued, except as provided in
Section 10 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. In the event Optionee's status as
a Director terminates as a result of Disability, the Optionee may exercise his
or her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of an Optionee's death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares
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<PAGE>
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per Share
covered by each such outstanding Option, and the number of Shares issuable
pursuant to the automatic grant provisions of Section 4 hereof shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of Shares subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation or the sale of substantially all of the
assets of the Company, outstanding Options may be assumed or equivalent options
may be substituted by the successor corporation or a Parent or Subsidiary
thereof (the "Successor Corporation"). If an Option is assumed or substituted
for, the Option or equivalent option shall continue to be exercisable as
provided in Section 4 hereof for so long as the Optionee serves as a Director or
a director of the Successor Corporation. Following such assumption or
substitution, if the Optionee's status as a Director or director of the
Successor Corporation, as applicable, is terminated other than upon a voluntary
resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise be
exercisable. Thereafter, the Option or option shall remain exercisable in
accordance with Sections 8(b) through (d) above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the Successor Corporation or its Parent, the Administrator may,
with the consent of the Successor Corporation, provide for the consideration to
be received upon the exercise
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<PAGE>
of the Option, for each Share of Optioned Stock subject to the Option, to be
solely common stock of the Successor Corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common
Stock in the merger or sale of assets.
11. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date determined in accordance with Section 4 hereof.
13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
14. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
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<PAGE>
15. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the degree and
manner required under applicable state and federal law and any stock exchange
rules.
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<PAGE>
Exhibit 10.5
REALNAMES CORPORATION
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is effective as of by
and between RealNames Corporation, a Delaware corporation (the "COMPANY"), and
("INDEMNITEE").
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such insurance
and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified and advanced expenses by the
Company as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. CERTAIN DEFINITIONS.
(a) "CHANGE IN CONTROL" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 50% of the total
voting power represented by the Company's then outstanding Voting Securities (as
defined below), (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least two
thirds (2/3) of the directors then still in office who either were
<PAGE>
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of related transactions) all or substantially all of the Company's assets.
(b) "CLAIM" shall mean with respect to a Covered Event (as
defined below): any threatened, pending or completed action, suit, proceeding
or alternative dispute resolution mechanism, or any hearing, inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit, proceeding or alternative dispute
resolution mechanism, whether civil, criminal, administrative, investigative or
other.
(c) References to the "COMPANY" shall include, in addition to
RealNames Corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger to which RealNames
Corporation (or any of its wholly owned subsidiaries) is a party which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees, agents or fiduciaries, so that if
Indemnitee is or was a director, officer, employee, agent or fiduciary of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise, Indemnitee shall stand in the same position under the provisions of
this Agreement with respect to the resulting or surviving corporation as
Indemnitee would have with respect to such constituent corporation if its
separate existence had continued.
(d) "COVERED EVENT" shall mean any event or occurrence related
to the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or any subsidiary of the Company, or is or was serving
at the request of the Company as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action or inaction on the part of Indemnitee
while serving in such capacity.
(e) "EXPENSES" shall mean any and all expenses (including
attorneys' fees and all other costs, expenses and obligations incurred in
connection with investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend, to be a witness in or to
participate in, any action, suit, proceeding, alternative dispute resolution
mechanism, hearing, inquiry or investigation), judgments, fines, penalties and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld), actually and
reasonably incurred, of any Claim and any federal, state, local or foreign taxes
imposed on the Indemnitee as a result of the actual or deemed receipt of any
payments under this Agreement.
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<PAGE>
(f) "EXPENSE ADVANCE" shall mean a payment to Indemnitee
pursuant to Section 3 of Expenses in advance of the settlement of or final
judgement in any action, suit, proceeding or alternative dispute resolution
mechanism, hearing, inquiry or investigation which constitutes a Claim.
(g) "INDEPENDENT LEGAL COUNSEL" shall mean an attorney or firm
of attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements).
(h) References to "OTHER ENTERPRISES" shall include employee
benefit plans; references to "FINES" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "SERVING
AT THE REQUEST OF THE COMPANY" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "NOT OPPOSED TO THE
BEST INTERESTS OF THE COMPANY" as referred to in this Agreement.
(i) "REVIEWING PARTY" shall mean, subject to the provisions of
Section 2(d), any person or body appointed by the Board of Directors in
accordance with applicable law to review the Company's obligations hereunder and
under applicable law, which may include a member or members of the Company's
Board of Directors, Independent Legal Counsel or any other person or body not a
party to the particular Claim for which Indemnitee is seeking indemnification.
(j) "SECTION" refers to a section of this Agreement unless
otherwise indicated.
(k) "VOTING SECURITIES" shall mean any securities of the
Company that vote generally in the election of directors.
2. INDEMNIFICATION.
(a) INDEMNIFICATION OF EXPENSES. Subject to the provisions of
Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the
fullest extent permitted by law if Indemnitee was or is or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, any Claim (whether by reason of or arising in
part out of a Covered Event), including all interest, assessments and other
charges paid or payable in connection with or in respect of such Expenses.
(b) REVIEW OF INDEMNIFICATION OBLIGATIONS. Notwithstanding the
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which Independent Legal Counsel is the Reviewing Party)
that Indemnitee is not entitled to be indemnified hereunder under applicable
law, (i) the Company shall have no further obligation under Section 2(a) to make
any payments to Indemnitee not made prior to such determination by such
Reviewing Party,
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and (ii) the Company shall be entitled to be reimbursed by Indemnitee (who
hereby agrees to reimburse the Company) for all Expenses theretofore paid in
indemnifying Indemnitee; PROVIDED, HOWEVER, that if Indemnitee has commenced
or thereafter commences legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee is entitled to be
indemnified hereunder under applicable law, any determination made by any
Reviewing Party that Indemnitee is not entitled to be indemnified hereunder
under applicable law shall not be binding and Indemnitee shall not be
required to reimburse the Company for any Expenses theretofore paid in
indemnifying Indemnitee until a final judicial determination is made with
respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee's obligation to reimburse the Company for
any Expenses shall be unsecured and no interest shall be charged thereon.
(c) INDEMNITEE RIGHTS ON UNFAVORABLE DETERMINATION; BINDING
EFFECT. If any Reviewing Party determines that Indemnitee substantively is not
entitled to be indemnified hereunder in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation seeking an initial
determination by the court or challenging any such determination by such
Reviewing Party or any aspect thereof, including the legal or factual bases
therefor, and, subject to the provisions of Section 15, the Company hereby
consents to service of process and to appear in any such proceeding. Absent
such litigation, any determination by any Reviewing Party shall be conclusive
and binding on the Company and Indemnitee.
(d) SELECTION OF REVIEWING PARTY; CHANGE IN CONTROL. If there
has not been a Change in Control, any Reviewing Party shall be selected by the
Board of Directors, and if there has been such a Change in Control (other than a
Change in Control which has been approved by a majority of the Company's Board
of Directors who were directors immediately prior to such Change in Control),
any Reviewing Party with respect to all matters thereafter arising concerning
the rights of Indemnitee to indemnification of Expenses under this Agreement or
any other agreement or under the Company's certificate of incorporation or
bylaws as now or hereafter in effect, or under any other applicable law, if
desired by Indemnitee, shall be Independent Legal Counsel selected by Indemnitee
and approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company agrees
to abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision of this Agreement, the
Company shall not be required to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the Company otherwise determines or (ii) any
Indemnitee shall provide a written statement setting forth in detail a
reasonable objection to such Independent Legal Counsel representing other
Indemnitees.
(e) MANDATORY PAYMENT OF EXPENSES. Notwithstanding any other
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in
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<PAGE>
defense of any Claim, Indemnitee shall be indemnified against all Expenses
incurred by Indemnitee in connection therewith.
3. EXPENSE ADVANCES.
(a) OBLIGATION TO MAKE EXPENSE ADVANCES. The Company shall
make Expense Advances to Indemnitee upon receipt of a written undertaking by or
on behalf of the Indemnitee to repay such amounts if it shall ultimately be
determined that the Indemnitee is not entitled to be indemnified therefor by the
Company.
(b) FORM OF UNDERTAKING. Any written undertaking by the
Indemnitee to repay any Expense Advances hereunder shall be unsecured and no
interest shall be charged thereon.
(c) DETERMINATION OF REASONABLE EXPENSE ADVANCES. The parties
agree that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all Expenses
included in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be presumed conclusively to be reasonable.
4. PROCEDURES FOR INDEMNIFICATION AND EXPENSE ADVANCES.
(a) TIMING OF PAYMENTS. All payments of Expenses (including
without limitation Expense Advances) by the Company to the Indemnitee pursuant
to this Agreement shall be made to the fullest extent permitted by law as soon
as practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than forty-five (45) business days after such
written demand by Indemnitee is presented to the Company, except in the case of
Expense Advances, which shall be made no later than twenty (20) business days
after such written demand by Indemnitee is presented to the Company.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances under this Agreement, give the Company notice
in writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
(c) NO PRESUMPTIONS; BURDEN OF PROOF. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of NOLO
CONTENDERE, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by this
Agreement or applicable law. In addition, neither the failure of any Reviewing
Party to have made a determination as to whether Indemnitee has met any
particular standard of conduct or had any particular belief, nor an actual
determination by any Reviewing Party that Indemnitee has not met such standard
of conduct or did
-5-
<PAGE>
not have such belief, prior to the commencement of legal proceedings by
Indemnitee to secure a judicial determination that Indemnitee should be
indemnified under this Agreement or applicable law, shall be a defense to
Indemnitee's claim or create a presumption that Indemnitee has not met any
particular standard of conduct or did not have any particular belief. In
connection with any determination by any Reviewing Party or otherwise as to
whether the Indemnitee is entitled to be indemnified hereunder, the burden of
proof shall be on the Company to establish that Indemnitee is not so entitled.
(d) NOTICE TO INSURERS. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated hereunder to provide indemnification for or make any Expense Advances
with respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently employed by
or on behalf of Indemnitee with respect to the same Claim; PROVIDED, HOWEVER,
that (i) Indemnitee shall have the right to employ Indemnitee's separate counsel
in any such Claim at Indemnitee's expense and (ii) if (A) the employment of
separate counsel by Indemnitee has been previously authorized by the Company,
(B) Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense Advances
hereunder.
5. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. The Company hereby agrees to indemnify the
Indemnitee to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this
Agreement, the Company's certificate of incorporation, the Company's bylaws or
by statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any applicable law, statute or rule which
narrows the right of a Delaware corporation to indemnify a member of its board
of directors or an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights and
obligations hereunder except as set forth in Section 10(a) hereof.
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<PAGE>
(b) NONEXCLUSIVITY. The indemnification and the payment of
Expense Advances provided by this Agreement shall be in addition to any rights
to which Indemnitee may be entitled under the Company's certificate of
incorporation, its bylaws, any other agreement, any vote of stockholders or
disinterested directors, the General Corporation Law of the State of Delaware,
or otherwise. The indemnification and the payment of Expense Advances provided
under this Agreement shall continue as to Indemnitee for any action taken or not
taken while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's certificate of
incorporation, bylaws or otherwise) of the amounts otherwise payable hereunder.
7. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
8. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee
acknowledge that in certain instances, federal law or applicable public policy
may prohibit the Company from indemnifying its directors, officers, employees,
agents or fiduciaries under this Agreement or otherwise. Indemnitee understands
and acknowledges that the Company has undertaken or may be required in the
future to undertake with the Securities and Exchange Commission to submit the
question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
9. LIABILITY INSURANCE. To the extent the Company maintains
liability insurance applicable to directors, officers, employees, agents or
fiduciaries, Indemnitee shall be covered by such policies in such a manner as to
provide Indemnitee the same rights and benefits as are provided to the most
favorably insured of the Company's directors, if Indemnitee is a director; or of
the Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
10. EXCEPTIONS. Notwithstanding any other provision of this
Agreement, the Company shall not be obligated pursuant to the terms of this
Agreement:
(a) EXCLUDED ACTION OR OMISSIONS. To indemnify Indemnitee for
Expenses resulting from acts, omissions or transactions for which Indemnitee is
prohibited from receiving indemnification under this Agreement or applicable
law; PROVIDED, HOWEVER, that notwithstanding any limitation set forth in this
Section 10(a) regarding the Company's obligation to provide indemnification,
Indemnitee shall be entitled under Section 3 to receive Expense Advances
hereunder with respect to any such Claim unless and until a court having
jurisdiction over the Claim shall have made a final judicial determination (as
to which all rights of appeal therefrom have been
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<PAGE>
exhausted or lapsed) that Indemnitee has engaged in acts, omissions or
transactions for which Indemnitee is prohibited from receiving
indemnification under this Agreement or applicable law.
(b) CLAIMS INITIATED BY INDEMNITEE. To indemnify or make
Expense Advances to Indemnitee with respect to Claims initiated or brought
voluntarily by Indemnitee and not by way of defense, counterclaim or crossclaim,
except (i) with respect to actions or proceedings brought to establish or
enforce a right to indemnification under this Agreement or any other agreement
or insurance policy or under the Company's certificate of incorporation or
bylaws now or hereafter in effect relating to Claims for Covered Events, (ii) in
specific cases if the Board of Directors has approved the initiation or bringing
of such Claim, or (iii) as otherwise required under Section 145 of the Delaware
General Corporation Law (relating to indemnification of officers, directors,
employees and agents; and insurance), regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification or insurance
recovery, as the case may be.
(c) LACK OF GOOD FAITH. To indemnify Indemnitee for any
Expenses incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by or in the name of the
Company to enforce or interpret this Agreement, if a court having jurisdiction
over such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.
(d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute; PROVIDED,
HOWEVER, that notwithstanding any limitation set forth in this Section 10(d)
regarding the Company's obligation to provide indemnification, Indemnitee shall
be entitled under Section 3 to receive Expense Advances hereunder with respect
to any such Claim unless and until a court having jurisdiction over the Claim
shall have made a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that Indemnitee has violated said
statute.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether
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<PAGE>
Indemnitee continues to serve as a director, officer, employee, agent or
fiduciary (as applicable) of the Company or of any other enterprise at the
Company's request.
13. EXPENSES INCURRED IN ACTION RELATING TO ENFORCEMENT OR
INTERPRETATION. In the event that any action is instituted by Indemnitee under
this Agreement or under any liability insurance policies maintained by the
Company to enforce or interpret any of the terms hereof or thereof, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee with
respect to such action (including without limitation attorneys' fees),
regardless of whether Indemnitee is ultimately successful in such action, unless
as a part of such action a court having jurisdiction over such action makes a
final judicial determination (as to which all rights of appeal therefrom have
been exhausted or lapsed) that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous; PROVIDED, HOWEVER, that until such final judicial determination is
made, Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee in defense of such action
(including without limitation costs and expenses incurred with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action a court having jurisdiction over such action makes a final
judicial determination (as to which all rights of appeal therefrom have been
exhausted or lapsed) that each of the material defenses asserted by Indemnitee
in such action was made in bad faith or was frivolous; PROVIDED, HOWEVER, that
until such final judicial determination is made, Indemnitee shall be entitled
under Section 3 to receive payment of Expense Advances hereunder with respect to
such action.
14. NOTICE. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement
or as subsequently modified by written notice.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. SEVERABILITY. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including without limitation each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
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<PAGE>
17. CHOICE OF LAW. This Agreement, and all rights, remedies,
liabilities, powers and duties of the parties to this Agreement, shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to principles of conflicts of laws.
18. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless it is in
writing signed by both the parties hereto. No waiver of any of the provisions
of this Agreement shall be deemed to be or shall constitute a waiver of any
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver.
20. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in
this Agreement shall be construed as giving Indemnitee any right to be retained
in the employ of the Company or any of its subsidiaries or affiliated entities.
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IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
REALNAMES CORPORATION
By:_____________________________________
Name____________________________________
Title:__________________________________
Address: RealNames Corporation
Two Circle Star Way
Second Floor
San Carlos, CA 94070
AGREED TO AND ACCEPTED BY:
INDEMNITEE
___________________________________
(signature)
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Exhibit 10.6
CIRCLE STAR LEASE AGREEMENT
BY AND BETWEEN
CIRCLE STAR CENTER ASSOCIATES, L.P.
("LANDLORD")
AND
CENTRAAL CORPORATION
("TENANT")
<PAGE>
<TABLE>
<CAPTION>
(b) INSURANCE REQUIREMENTS. 5
(c) NO LIMITATION ON OBLIGATIONS. 6
TABLE OF CONTENTS
PARAGRAPH DESCRIPTION PAGE
<S> <C>
BASIC LEASE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . v
1. OCCUPANCY AND USE . . . . . . . . . . . . . . . . . . . . . . . . 1
2. TERMS AND POSSESSION . . . . . . . . . . . . . . . . . . . . . . . 1
3. RENT; RENT ADJUSTMENTS; ADDITIONAL CHARGES FOR EXPENSES AND TAXES 2
(A) MONTHLY BASE RENT . . . . . . . . . . . . . . . . . . . . . . 2
(B) ADJUSTMENTS IN BASE RENT . . . . . . . . . . . . . . . . . . . 2
(C) ADDITIONAL CHARGES FOR EXPENSES AND TAXES . . . . . . . . . . 2
(1) DEFINITIONS OF ADDITIONAL CHARGES: . . . . . . . . . . . . . . 2
(A) "TAX YEAR" . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(B) "TENANT'S SHARE" . . . . . . . . . . . . . . . . . . . . . . . 2
(C) "REAL ESTATE TAXES" . . . . . . . . . . . . . . . . . . . . . 2
(D) "EXPENSES" . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(E) "EXPENSE YEAR" . . . . . . . . . . . . . . . . . . . . . . . . 4
(2) PAYMENT OF REAL ESTATE TAXES: . . . . . . . . . . . . . . . . 4
(3) PAYMENT OF EXPENSES: . . . . . . . . . . . . . . . . . . . . . 4
(4) OTHER: . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(5) AUDIT: . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(D) LATE CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. RESTRICTIONS ON USE . . . . . . . . . . . . . . . . . . . . . . . 5
5. COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . 5
6. ADDITIONAL ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . 6
7. REPAIR AND MAINTENANCE . . . . . . . . . . . . . . . . . . . . . . 6
8. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . 7
10. INSURANCE AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . 9
11. WAIVER OF SUBROGATION . . . . . . . . . . . . . . . . . . . . . .10
12. SERVICES AND UTILITIES . . . . . . . . . . . . . . . . . . . . . .10
13. TENANT'S CERTIFICATES . . . . . . . . . . . . . . . . . . . . . .11
14. HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . .11
15. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . .12
16. RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . .12
17. RE-ENTRY BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . .12
18. INSOLVENCY OR BANKRUPTCY . . . . . . . . . . . . . . . . . . . . .13
19. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
20. DAMAGE BY FIRE, ETC. . . . . . . . . . . . . . . . . . . . . . . .14
21. EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . . . . . .14
22. SALE BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . .15
23. RIGHT OF LANDLORD TO PERFORM . . . . . . . . . . . . . . . . . . .15
i
<PAGE>
24. SURRENDER OF PREMISES . . . . . . . . . . . . . . . . . . . . . .15
25. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
26 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
27. TAXES PAYABLE BY TENANT . . . . . . . . . . . . . . . . . . . . .16
28. ABANDONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .16
29. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . .16
30. ATTORNEY'S FEES . . . . . . . . . . . . . . . . . . . . . . . . .16
31. LIGHT AND AIR . . . . . . . . . . . . . . . . . . . . . . . . . .16
32. SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . .16
33. CORPORATE AUTHORITY; FINANCIAL INFORMATION . . . . . . . . . . . .17
34. PARKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
35. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .18
36. TENANT'S REMEDIES . . . . . . . . . . . . . . . . . . . . . . . .18
37. REAL ESTATE BROKERS . . . . . . . . . . . . . . . . . . . . . . .18
38. LEASE EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . .18
39. HAZARDOUS SUBSTANCE LIABILITY . . . . . . . . . . . . . . . . . .18
40. ARBITRATION OF DISPUTES . . . . . . . . . . . . . . . . . . . . .19
41. SIGNAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
42. OPTION TO RENEW . . . . . . . . . . . . . . . . . . . . . . . . .19
43. RENT DURING EXTENSION TERM . . . . . . . . . . . . . . . . . . . .19
44. SATELLITE ANTENNA . . . . . . . . . . . . . . . . . . . . . . . .20
45. RIGHT TO RELOCATE TENANT . . . . . . . . . . . . . . . . . . . . .21
</TABLE>
EXHIBIT "A" PREMISES
EXHIBIT "B" WORK LETTER
Exhibit "B-1" Landlord's Plans
Exhibit "B-2" Minimum Information Required
Exhibit "C" Rules and Regulations
Exhibit "D" Form of Tenant Estoppel Certificate
Exhibit "E" Encumbrances
Exhibit "F" Subordination, Nondisturbance and Attornment Agreement
Exhibit "G" Form of Letter of Credit
ii
<PAGE>
<TABLE>
<CAPTION>
BASIC LEASE INFORMATION
- -------------------------------------------------------------------------------
<S> <C>
Lease Date: December 16, 1998
LANDLORD: CIRCLE STAR CENTER ASSOCIATES, L.P.
a California limited partnership
Managing Agent: THE MOZART DEVELOPMENT COMPANY
Landlord's and Managing Agent's
Address: c/o THE MOZART DEVELOPMENT COMPANY
1068 East Meadow Circle
Palo Alto, CA 94303
TENANT: CENTRAAL CORPORATION
a California Corporation
Tenant's Address: Prior to Occupancy: After Commencement Date:
811 Hansen Way at the Premises
Palo Alto, CA 94303 Attn: Chief Financial
Attn: Doug Finlay Officer
Building: Two Circle Star Way, San Carlos, California
Suite: 200
Rentable Area of the Premises: 25,179 square feet
Rentable Area of the Building: 102,973 square feet
Tenant's Use of the Premises: General Office and Administration (including
twenty-four hour live internet
services and software development)
Lease Term: Seven (7) years
Scheduled Commencement Date: March 26,. 1999
Scheduled Expiration Date: February 28, 2006
Tenant Allowance: $579,800 ($25 pusf x 23,192 usf) plus up to
$15,000 for the cost of installation of glass
and glazing in the wall of the Premises
overlooking the first floor lobby; provided,
however, if Tenant does not install a
continuous drop ceiling grid throughout the
Premises the Tenant Allowance shall be
reduced by the amount estimated by Devcon
Construction to complete the drop ceiling
grid throughout the Premises.
Additional Allowance: None
Tenant's Plan Delivery Date: December 20, 1998
Outside Delivery Date: May 31, 1999
Monthly Base Rent: $2.55 per Rentable Square Foot of the
Rentable Area of the Premises.
Base Rent Adjustment: On each anniversary of the Rent Commencement
Date the Monthly Base Rent shall increase by
three percent (3 9[) over the Monthly Base
Rent applicable to the month immediately
prior, to the applicable anniversary.
Tenant's Share of Expenses and
Taxes ("Additional Charges"): 24.45%
Security Deposit: $650,000 plus additional security as provided
in Paragraph 32.
Guarantor of Lease: See Security Deposit
Broker: Cornish & Carey Commercial (Landlord &
Tenant)
Broker's Fee or Commission,
If Any, Paid By: Landlord
</TABLE>
The foregoing Basic Lease Information is hereby incorporated into and made a
part of this Lease. Each reference in this Lease to any of the Basic Lease
Information shall mean the respective information hereinabove set forth and
shall be construed to incorporate all of the terms provided under the particular
paragraph pertaining to such information. In the event of any conflict between
any Basic Lease Information and the Lease, the latter shall control.
iii
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LANDLORD:
CIRCLE STAR CENTER ASSOCIATES, L.P.
a California limited partnership
By: M-D Ventures, Inc.
Its: General Partner
By: /s/ Steve Dostart
---------------------------------
Steve Dostart
Its: Vice President
TENANT:
CENTRAAL CORPORATION
a California corporation
By: /s/ Keith Teare
---------------------------------
Keith W. Teare
Its: President & CEO
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LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into as of December 16, 1998, by
and between CIRCLE STAR CENTER ASSOCIATES, L.P., a California limited
partnership, (herein called "Landlord"), and CENTRAAL CORPORATION, a California
corporation, (herein called "Tenant").
Upon and subject to the terms, covenants and conditions hereinafter set
forth, Landlord hereby leases to Tenant and Tenant hereby hires from Landlord
those premises (the "Premises") comprising the area substantially as
crosshatched on the attached EXHIBIT "A", in the building (hereinafter referred
to as the "Building") specified in the Basic Lease Information attached hereto.
The number of square feet designated as Rentable Area of the Premises on the
Basic Lease Information may include portions of the Building Common Area
attributed to the Premises and not located within the area outlined on EXHIBIT
A. The Building is located on land on which Landlord intends to develop two
buildings as an integrated project (the "Project"). The term "Common Area" shall
mean all areas and facilities within the Project that are not designated by
Landlord for the exclusive use of Tenant or any other tenant or other occupant
of the Project, including the parking areas, access and perimeter roads,
pedestrian sidewalks, landscaped areas, trash enclosures, recreation areas and
the like.
1. OCCUPANCY AND USE. Tenant may use and occupy the Premises for the
purpose specified in the Basic Lease Information and for no other use or purpose
without the prior written consent of Landlord. Landlord shall have the right to
grant or withhold consent to a proposed change of use in its sole discretion.
Tenant shall be entitled to the benefit on a nonexclusive basis of (i) the
Building Common Areas with other occupants of the Building, and (ii) to the
extent and for so long as Landlord continues to own the Project, the Project
Common Areas with other occupants of the Project in accordance with the Rules
and Regulations established by Landlord from time to time. Provided, however,
that if Landlord sells a portion of the Project, Landlord shall assure to Tenant
that Tenant's rights to access and parking are assured through a Reciprocal
Easement Agreement or other like mechanism. Notwithstanding the above, Tenant
understands and agrees that (a) a Declaration of Covenants, Conditions and
Restrictions ("CC&R's"), (b) a ground lease and (c) a Conditional Use Permit may
encumber the Land and Project and that Tenant's Occupancy and Use of the
Premises may be restricted by such encumbrances. If necessary, Tenant shall
execute such documents as are reasonably necessary to cause this Lease to become
subordinate to such encumbrances (see the attached EXHIBIT E, Encumbrances).
2. TERMS AND POSSESSION.
(a) The term of this Lease (the "Term") shall be for the period
specified in the Basic Lease Information (or until sooner terminated as herein
provided). Subject to Tenant's termination right set forth below in this
Paragraph, if Landlord, for any reason whatsoever, cannot deliver possession of
the Premises in the condition required under this Lease (including the
Substantial Completion of the Tenant Improvements), with all governmental
permits required for the occupancy of the Premises, to Tenant on the date
specified in the Basic Lease Information for the commencement of the Term, this
Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for
any loss or damage resulting therefrom. In that event, however, the Term of the
Lease shall not commence until such commencement date as is determined pursuant
to EXHIBIT B. In such event, the scheduled commencement date and scheduled
expiration date shall be adjusted accordingly. Payment of Rent and Additional
Charges by Tenant due to delay in delivery of the Premises caused by Tenant
shall also be governed by EXHIBIT B hereof. Notwithstanding the provisions above
and of EXHIBIT B, if the delivery of the Premises is delayed beyond Outside
Delivery Date, as set forth in the Basic Lease Information, Tenant shall have
the right to terminate this Lease by notifying Landlord in writing of its intent
to do so no later than ten (10) business days after the Outside Delivery Date.
The Outside Delivery Date shall be extended one day for each day of delay caused
by (i) Tenant Delays as more particularly set forth in EXHIBIT B hereof and (ii)
acts of God or the elements, acts of the Government, labor disturbances of any
character, a shortage of material or labor, or other causes beyond the
reasonable control of Landlord (any of the foregoing, "Force Majeure"), provided
that any such delay shall not exceed sixty (60) days. The dates upon which the
Term shall actually commence and terminate pursuant to this Paragraph 2(a) are
herein called the "Commencement Date" and the "Expiration Date," respectively.
(b) Completion of the improvements to the Premises and Building
shall be governed by the terms and conditions of the separate work letter ("Work
Letter"), attached hereto as EXHIBIT "B".
(c) The Premises shall be deemed "delivered" and the Term shall
commence as defined in EXHIBIT B.
(d) Tenant shall, no later than thirty (30) days after the date of
issuance by the appropriate governmental agency of a Certificate of Occupancy or
its equivalent concerning the Improvements, occupy a portion of the Premises or
deliver a letter to Landlord confirming that possession of the Premises has been
tendered to and accepted by Tenant and that Tenant, by virtue of such
acceptance, is in occupancy of the Premises. Time is of essence. This
subparagraph 2(d) shall not be construed as an obligation of Tenant to
continuously occupy the Premises.
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<PAGE>
3. RENT; RENT ADJUSTMENTS; ADDITIONAL CHARGES FOR EXPENSES AND
TAXES.
(a) MONTHLY BASE RENT.
(i) PAYMENT OF BASE RENT. Commencing on the
Commencement Date, except to the extent otherwise provided for in Paragraph
2(a), Tenant shall pay to Landlord throughout the Term Base Rent in an amount
equal to the Monthly Base Rent rate specified in the Basic Lease Information
multiplied by the Rentable Area of the Premises, as specified in the Basic Lease
Information ("Base Rent"), which sum shall be payable by Tenant in equal monthly
installments on, or, at Tenant's election, before, the first clay of each month,
in advance, with the first month's rent due upon execution of this Lease
Agreement, in lawful money of the United States (without any prior demand
therefor and without deduction or offset whatsoever, except as expressly
provided for in Paragraphs 20 & 21) to Landlord or its managing agent at the
address specified in the Basic Lease Information or to such other firm or to
such other place as Landlord or its Managing Agent may from time to time
designate in writing. Tenant shall pay to Landlord all charges and other amounts
whatsoever as provided in this Lease ("Additional Charges") at the place where
the Base Rent is payable, and Landlord shall have the same remedies for a
default in the payment of Additional Charges as for a default in the payment of
Base Rent. As used herein, the term "Rent" shall include all Base Rent and
Additional Charges (including, without limitation, Additional Charges for Real
Estate Taxes and Expenses pursuant to Paragraph 3(c) below, and Additional
Charges pursuant to Paragraphs 7(b), 8, 10(d) 23). If the Commencement Date
should occur on a day other than the first day of a calendar month, or the
Expiration Date should occur on a day other than the last day of a calendar
month, then the Rent and Additional Charges for such fractional month shall be
prorated on a daily basis.
(ii) PARTIAL WAIVER OF RENT & ADDITIONAL CHARGES: During
the first 122 days of the Term, for each four-week period that at least 10,000
rentable square fee of the Premises is not occupied by Tenant (or its subtenant
or assignee), Tenant shall be entitled to a waiver of 40% of the Base Rent and
Additional Charges due for such period ("Partial Rent Waiver Entitlement"). For
such waiver to be valid, Tenant shall be required to notify Landlord in writing
during the first week of the subject period of such Partial Rent Waiver
Entitlement and Landlord shall have the opportunity to verify the validity of
such notice during business hours on any business day during the subject period.
(b) ADJUSTMENTS IN BASE RENT. The Monthly Base Rent under
Paragraph 3(a) shall be adjusted as provided in the Basic Lease Information.
Additionally, the Monthly Base Rent shall be increased in the event that Tenant
elects to utilize any of the Additional Allowance specified in the Basic Lease
Information. The amount of such increase shall be determined by calculating the
monthly payment amount for a fully amortizing loan where (i) the original
principal amount equals the amount of the Additional Allowance utilized by
Tenant, (ii) the annual interest rate is ten percent (10%), and (iii) the term
of the loan is the number of months in the initial Lease Term. For example, if
the entire amount of the Additional Allowance were utilized, then the addition
to Monthly Base Rent would be $3,850.15 per month, throughout the initial Lease
Term.
(c) ADDITIONAL CHARGES FOR EXPENSES AND TAXES.
(1) DEFINITIONS OF ADDITIONAL CHARGES: For purposes of
this Paragraph 3(c), the following terms shall have the meanings hereinafter set
forth:
(A) "TAX YEAR" shall mean each twelve (12)
consecutive month period commencing January 1st of the calendar year
during which the Commencement Date of this Lease occurs, provided that
Landlord, upon notice to Tenant, may change the Tax Year from time to
time to any other twelve (12) consecutive month period and, in the event
of any such change, Tenant's Share of Real Estate Taxes (as hereinafter
defined) shall be equitably adjusted for the Tax Years involved in any
such change.
(B) "TENANT'S SHARE" shall mean the percentage
figure so specified in the Basic Lease Information.
(C) "REAL ESTATE TAXES" shall mean all taxes,
assessments and charges levied upon or with respect to the Project or any
personal property of Landlord used in the operation of thereof, or
Landlord's interest in the Project or such personal property. Real Estate
Taxes shall include, without limitation, all general real property taxes
and general and special assessments, charges, fees or assessments for
transit, housing, police, fire or other governmental services or
purported benefits to the Building (provided, however, that any refunds
of Real Estate Taxes paid by Tenant (as part of Tenant's Share of Real
Estate Taxes) shall be credited against Tenant's further obligation to
pay Real Estate Taxes during the Term), service payments in lieu of
taxes, and any tax, fee or excise on the act of entering into this Lease,
or any other lease of space in the Building, or on the use or occupancy
of the Building or any part thereof, or on the rent payable under any
lease or in connection with the business of renting space in the
Building, that are now or hereafter levied or assessed against Landlord
by the United States of America, the State of California, or any
political subdivision, public corporation, district or any other
political or public entity, and shall also include any other tax, fee or
other excise, however described, that may be levied or assessed as a
substitute for, or as an addition to, in whole or in part, any other Real
Estate Taxes, whether or not now customary or in the contemplation of the
parties on the date of this Lease. Real Estate Taxes shall not include
franchise, transfer, inheritance or capital stock taxes, gift Or estate
taxes, any assessments in excess of the amount which would be payable if
such tax or assessment expense were paid in installments over the longest
2
<PAGE>
permitted term, any increases in taxes due to the improvement of the
Project for the sole use of other occupants, or income taxes measured by
the net income of Landlord from all sources unless, due to a change in
the method of taxation, any of such taxes is levied or assessed against
Landlord as a substitute for, in whole or in part, any other tax that
would otherwise constitute a Real Estate Tax. Additionally, Real Estate
Taxes shall not include any assessments or like charges to pay for any
remediation of contamination from any Hazardous Substance (which are not
the liability of Tenant pursuant to Paragraph 39 hereof). Real Estate
Taxes shall also include reasonable legal fees, costs and disbursements
incurred in connection with proceedings to contest, determine or reduce
Real Estate Taxes; provided that such fees, costs and disbursements do
not exceed the actual savings in Real Estate Taxes obtained by Tenant
over the Term of the Lease. If any assessments are levied on the Project,
Tenant shall have no obligation to pay more than that amount of annual
installments of principal and interest that would become due during the
Lease Term had Landlord elected to pay the assessment in installment
payments, even if Landlord pays the assessment in full.
(D) "EXPENSES" shall mean the total costs and
expenses reasonably paid or incurred by Landlord in connection with the
management, operation, maintenance and repair of the Building, including,
without limitation (i) the cost of air conditioning, electricity, steam,
heating, mechanical, ventilating, elevator systems and all other
utilities and the cost of supplies and equipment and maintenance and
service contracts in connection therewith; (ii) the cost of repairs and
general maintenance and cleaning; (iii) the cost of fire, extended
coverage, boiler, sprinkler, public liability, property damage, rent,
earthquake (if Landlord determines that it is available at commercially
reasonable rates) and other insurance obtained by Landlord in connection
with the Project, all including, without limitation, insurance premiums
and any deductible amounts paid by Landlord; (iv) fees, charges and other
costs, including management fees, consulting fees, legal fees (which are
allowed elsewhere in the Lease) and accounting fees, fees of all
independent contractors engaged by Landlord directly related to the
operation of the Building or reasonably charged by Landlord if Landlord
performs management services in connection with the Building, (though the
management fee shall not exceed the cap noted in the following
paragraph); (v) the cost of any capital improvements made to the Building
after the Commencement Date (a) as a labor saving device or to effect
other economies in the operation or maintenance of the Building (from
which a reasonable person would anticipate that savings would actually
result), (b) to repair or replace capital items which are no longer
capable of providing the services required of them, or (c) that are made
to the Building after the date of this Lease and are required under any
Laws (as defined in Paragraph 5), where such capital improvements were
not required under any such Laws to be completed with respect to the
Building prior to the date the Lease was executed, and in this regard,
during any calendar year, the cost of any capital improvements up to $.24
per square foot of the Rentable Area of the Premises, which are Tenant's
responsibility under the Lease, shall be expensed during that year, and
the cost of capital improvements incurred during any calendar year in
excess of such amount, which are the responsibility of Tenant pursuant to
this Lease, shall be amortized over the useful life of the capital item
in question as determined in accordance with generally accepted
accounting principles ("GAAP"), together with interest on the unamortized
balance at the greater of (x) the rate paid by Landlord on funds borrowed
for the purpose of constructing such capital improvements; or (y) 10% per
annum; and (vi) any other reasonable expenses of any other kind
whatsoever reasonably incurred in managing, operating, maintaining and
repairing the Building, including, but not limited to, costs incurred
pursuant to the Encumbrances identified in EXHIBIT E and the Building's
Share of Project Common Expenses. "Project Common Expenses" shall mean
any expenses paid or incurred by Landlord in connection with the
management, operation, maintenance and repair of the Project Common Areas
in the Project and any other Expenses paid or incurred by Landlord for
the benefit of the Project as a whole, including, but not limited to, the
cost of maintaining the parking lot and facilities and landscaping.
"Building's Share" shall mean the prorata portion of all Project Common
Expenses based on the amount of gross floor area of the Building as a
portion of the gross floor area of all applicable buildings in the
Project, all as reasonably determined by Landlord. Any "deductible"
amounts relating to capital improvements required to be paid by Tenant
hereunder in connection with any casualty policy carried by Landlord
shall be amortized over the useful life of the restoration work in
accordance with GAAP; provided, however, such amounts shall no longer
constitute Expenses from and after the date upon which Monthly Base Rent
is adjusted to fair market rental pursuant to the terms and conditions of
this Lease.
Notwithstanding anything to the contrary herein contained, Expenses shall
not include, and in no event shall Tenant have any obligation to pay for
pursuant to this Paragraph 3 or Paragraph 7(b), (aa) the initial
construction cost of the Project or real property on which the Building
is located; (bb) the cost of providing tenant improvements, renovations,
painting or redecorating (other than in Common Areas) to Tenant or any
other tenant; (cc) debt service (including, but without limitation,
interest, principal and any impound payments) required to be made on any
mortgage or deed of trust recorded with respect to the Building and/or
the real property on which the Building is located other than debt
service and financing charges imposed pursuant to Paragraph 3(c)(1)(D)(v)
above; (dd) the cost of special services, goods or materials provided to
any tenant; (ee) depreciation; (if) the portion of a management fee paid
to Landlord or affiliate in excess of three percent (3 %) of Base Rent
and Additional Charges (excluding the management fee); (gg) costs
occasioned by Landlord's fraud or willful misconduct under applicable
laws; (hh) costs for which Landlord has a right of and has received
reimbursement from others; (ii) costs to correct any construction or
design defects in the original construction of the Premises, the Building
or the Project; (ii) costs arising from a disproportionate use of any
utility or service supplied by Landlord to any other occupant of the
Building to the extent that Landlord has the ability to charge such other
tenant for said costs under the terms of a lease comparable to terms
governing said costs in this Lease; (kk) repairs, replacement and
upgrades to the structural elements of the Building; (ll)
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environmental pollution remediation related costs in connection with the
remediation of the Project including costs for which Landlord has
indemnified Tenant pursuant to Paragraph 39, except any such costs
incurred as the result of Tenant's use of the Premises; (mm) advertising
or promotional costs; (nn) leasing commissions; (oo) except as provided
in Paragraph 20, costs occasioned by casualties or by the exercise of the
power of eminent domain (other than deductible amounts under insurance
policies which shall be included as an Expense); and (pp) legal costs
incurred in connection with negotiations or disputes with any other
occupant (or prospective occupant) of the Project. In the event that the
Building or the Project is not at least ninety-five percent (95 5)
occupied during any fiscal year of the Term as determined by Landlord, an
adjustment shall be made in computing the Expenses and/or the Project
Common Expenses, as applicable, for such year so that Expenses and/or
Project Common Expenses, as applicable, which vary with occupancy shall
be computed as though the Building or Project, as applicable, had been
ninety-five percent (95 %) occupied; provided, however, that in no event
shall Landlord be entitled to collect in excess of one hundred percent
(100%) of the total Expenses from all of the tenants in the Building
including Tenant. All costs and expenses shall be determined in
accordance with generally accepted accounting principles which shall be
consistently applied (with accruals appropriate to Landlord's business).
Expenses shall not include specific costs incurred for the account of,
separately billed to and paid by specific tenants.
(E) "EXPENSE YEAR" shall mean each twelve (12)
consecutive month period commencing January 1 of the calendar year during
which the Commencement Date of the Lease occurs, provided that Landlord,
upon notice to Tenant, may change the Expense Year from time to time to
any other twelve (12) consecutive month period, and, in the event of any
such change, Tenant's Share of Expenses shall be equitably adjusted for
the Expense Years involved in any such change.
(2) PAYMENT OF REAL ESTATE TAXES: Commencing on the
Commencement Date, unless otherwise provided for in Paragraph 3 (a), Tenant
shall pay to Landlord as Additional Charges one-twelfth (1/12th) of Tenant's
Share of Real Estate Taxes fairly allocable to the Building as reasonably
determined by Landlord for each Tax Year on or before the first day of each
month during such Tax Year, in advance, in an amount reasonably estimated by
Landlord and billed by Landlord to Tenant, and Landlord shall have the right
initially to determine monthly estimates and to revise such estimates from time
to time. With reasonable promptness after Landlord has received the tax bills
for any Tax Year, Landlord shall furnish Tenant with a statement (herein called
"Landlord's Tax Statement") setting forth the amount of Real Estate Taxes for
such Tax Year, and Tenant's Share thereof. If the actual Real Estate Taxes for
such Tax Year exceed the estimated Real Estate Taxes paid by Tenant for such Tax
Year, Tenant shall pay to Landlord the difference between the amount paid by
Tenant and the actual Real Estate Taxes within fifteen (15) days after the
receipt of Landlord's Tax Statement, and if the total amount paid by Tenant for
any such Tax Year shall exceed the actual Real Estate Taxes for such Tax Year,
such excess shall be credited against the next installment of Real Estate Taxes
due from Tenant to. Landlord hereunder. If it has been determined that Tenant
has overpaid Real Estate Taxes during the last year of the Lease Term, then
Landlord shall reimburse Tenant for such overage on or before the thirtieth
(30th) day following the Expiration Date.
(3) PAYMENT OF EXPENSES: Commencing on the Commencement
Date, unless otherwise provided for in Paragraph 3(a), Tenant shall pay to
Landlord as Additional Charges one-twelfth (1/12th) of Tenant's Share of the
Expenses for each Expense Year on or before the first day of each month of such
Expense Year, in advance, in an amount reasonably estimated by Landlord and
billed by Landlord to Tenant, and Landlord shall have the right initially to
determine monthly estimates and to revise such estimates from time to time. With
reasonable promptness after the expiration of each Expense Year, Landlord shall
furnish Tenant with a statement (herein called "Landlord's Expense Statement"),
setting forth in reasonable detail the Expenses for such Expense Year and
Tenant's Share thereof. If the actual Expenses for such Expense Year exceed the
estimated Expenses paid by Tenant for such Expense Year, Tenant shall pay to
Landlord the difference between the amount paid by Tenant and the actual
Expenses within fifteen (15) days after the receipt of Landlord's Expense
Statement, and if the total amount paid by Tenant for any such Expense Year
shall exceed the actual Expenses for such Expense Year, such excess shall be
credited against the next installment of the estimated Expenses due from Tenant
to Landlord hereunder or if the Term has ended it shall be returned to Tenant
within thirty (30) days. Any utility rebates for the Project which Landlord
receives for payments made by Tenant (as part of Tenant's Share of Expenses)
shall be forwarded to Tenant so long as such rebate is received within one year
following the Expiration Date or sooner termination of the Lease. If it has been
determined that Tenant has overpaid Expenses during the last year of the Lease
Term (including rebates of utilities applicable to Tenant), then Landlord shall
reimburse Tenant for such overage on or before the thirtieth (30th) day
following the Expiration Date.
(4) OTHER: To the extent any item of Real Estate Taxes or
Expenses is payable by Landlord in advance of the period to which it is
applicable (e.g. insurance and tax escrows required by Landlord's Lender), or to
the extent that prepayment is customary for the service or matter, Landlord may
(i) include such items in Landlord's estimate for periods prior to the date such
item is to be paid by Landlord and (ii) to the extent Landlord has not collected
the full amount of such item prior to the date such item is to be paid by
Landlord, Landlord may include the balance of such full amount in a revised
monthly estimate for Additional Charges. If the Commencement Date or Expiration
Date shall occur on a date other than the first day of a Tax Year and/or Expense
Year, Tenant's share of Real Estate Taxes and Expenses, for the Tax Year and/or
Expense Year in which the Commencement Date occurs shall be prorated.
(5) AUDIT: Within ninety (90) days after receipt of any
Expense Statement or Tax Statement from Landlord, Tenant shall have the right to
examine Landlord's books and records relating to such Expense Statements and Tax
Statements, or cause an independent audit thereof to be conducted by an
accounting
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firm to be selected by Tenant and subject to the reasonable approval of
Landlord. If the audit conclusively proves that Tenant has overpaid either
Expenses or Real Estate Taxes, then Landlord shall promptly reimburse Tenant for
such overage, and if such overage exceeds five percent (5 %) of the actual
amount of Expenses or Real Estate Taxes paid by Landlord for the Tax or Expense
Year covered by such audit, then Landlord shall bear the cost of such audit, up
to a maximum cost of $5,000. If Tenant fails to object to any such Expense
Statement or Tax Statement or request an independent audit thereof within such
ninety (90) day period, such Expense Statement and/or Tax Statement shall be
final and shall not be subject to any audit, challenge or adjustment.
(d) LATE CHARGES. Tenant recognizes that late payment of
any Base Rent or Additional Charges will result in administrative expenses to
Landlord, the extent of which additional expense is extremely difficult and
economically impractical to ascertain. Tenant therefore agrees that if any Base
Rent or Additional Charges remain unpaid three (3) days after such amount is
due, the amount of such unpaid Base Rent or Additional Charges shall be
increased by a late charge to be paid to Landlord by Tenant in an amount equal
to four percent (4 %) of the amount of the delinquent Base Rent or Additional
Charges. Tenant shall be excused once each twelve (12) month period of the Term
from the application of a late fee to any Base Rent or Additional Charge which
became delinquent without a prior written invoice or other notice of Landlord;
provided, however, the late fee shall nevertheless be payable if Tenant does not
cure the delinquency within ten (10) days after written notice from Landlord. In
addition, any outstanding Base Rent, Additional Charges, late charges and other
outstanding amounts shall accrue interest at annualized rate of the lesser of
(i) the greater of, 10% or The Federal Reserve Discount Rate plus 5%, or (ii)
the maximum rate permitted by law (the "Default Rate"), until paid to Landlord.
Tenant agrees that such amount is a reasonable estimate of the loss and expense
to be suffered by Landlord as a result of such late payment by Tenant and may be
charged by Landlord to defray such loss and expense. The provisions of this
Paragraph 3(d) in no way relieve Tenant of the obligation to pay Rent or
Additional Charges on or before the date on which they are due, nor do the terms
of this Paragraph 3(d) in any way affect Landlord's remedies pursuant to
Paragraph 19 in the event any Base Rent or Additional Charges are unpaid after
the date due.
4. RESTRICTIONS ON USE. Tenant shall not do or permit anything to be
done in or about the Premises which will obstruct or interfere with the rights
of other tenants or occupants of the Building or the Project or injure or annoy
them, nor use or allow the Premises to be used for any unlawful purpose, nor
shall Tenant cause or maintain or permit any nuisance in, on or about the
Premises. Tenant shall not commit or suffer the commission of any waste in, on
or about the Premises.
5. COMPLIANCE WITH LAWS.
(a) TENANT'S COMPLIANCE OBLIGATIONS. Tenant shall not use the
Premises or permit anything to be done in or about the Premises which will in
any way conflict with any present and future laws, statutes, ordinances,
resolutions, regulations, proclamations, orders or decrees of any municipal,
county, state or federal government or other governmental or regulatory
authority with jurisdiction over the Project, or any portion thereof, whether
currently in effect or adopted in the future and whether or not in the
contemplation of the parties hereto (collectively, "Laws"), and Tenant shall
promptly, at its sole expense, maintain the Premises, any Alterations (as
defined in Paragraph 6 below) permitted hereunder and Tenant's use and
operations thereon in strict compliance at all times with all Laws. "Laws" shall
include, without limitation, all Laws relating to health and safety (including,
without limitation, the California Occupational Safety and Health Act of 1973 an
the California Safe Drinking Water and Toxic Enforcement Act of 1986, including
posting and delivery of notices required by such Laws with respect to the
Premises) and disabled accessibility (including, without limitation, the
Americans with Disabilities Act, 42 U.S.C. section 12101 ET SEQ.), Hazardous
Substances, and all present and future life safety, fire, sprinkler, seismic
retrofit, building code and municipal code requirements; provided however, that
Tenant's obligation to comply with Laws relating to Hazardous Substances is
subject to the terms and conditions of Paragraph 39, and Tenant shall not be
responsible for compliance with clean-up provisions of any Laws with respect to
Hazardous Substances except to the extent of any release caused by the Tenant
Parties or otherwise included in Tenant's indemnity contained in Paragraph 39.
Notwithstanding the foregoing, Landlord, and not Tenant, shall be responsible
for correcting any condition at the Premises which is in violation of applicable
Laws on or prior to the Commencement Date, except to the extent such condition
is caused by the acts or omissions of the Tenant Parties or such violation
results from Tenant's use of the Premises in a manner other than as permitted
under this Lease. Notwithstanding the first sentence of this Paragraph 5(a),
Tenant shall not be required to make any alterations to the Premises in order to
comply with Laws unless the requirement that such alterations be made is
triggered by any of the following (or, if such requirement results from the
cumulative effect of any of the following when added to other acts, omissions,
negligence or events, to the extent such alterations are required by any of the
following): (i) the installation, use or operation of any Alterations, or any of
Tenant's trade fixtures or personal property; (ii) the acts, omissions or
negligence of Tenant, or any of its servants, employees, contractors, agents or
licensees; or (iii) the particular use or particular occupancy or manner of use
or occupancy of the Premises by Tenant, or any of its servants, employees,
contractors, agents or licensees. Any alterations that are Tenant's
responsibility pursuant to this Paragraph 5 shall be made in accordance with
Paragraph 6 below. The parties acknowledge and agree that Tenant's obligation to
comply with all Laws as provided in this paragraph (subject to the limitations
contained herein) is a material part of the bargained-for consideration under
this Lease. Tenant's obligations under this Paragraph and under Paragraph 7(c)
below shall include, without limitation, the responsibility of Tenant to make
substantial or structural repairs and alterations to the Premises to the extent
provided above, regardless of, among other factors, the relationship of the cost
of curative action to the Rent under this Lease, the length of the then
remaining Term hereof, the relative benefit of the repairs to Tenant or
landlord, the degree to which the curative action may interfere with Tenant's
use or enjoyment of the Premises, and the likelihood that the parties
contemplated the particular Law involved.
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(b) INSURANCE REQUIREMENTS. Tenant shall not do or permit
anything to be done in or about the Premises or bring or keep anything therein
which will in any way increase the rate of any insurance upon the Project or any
of its contents (unless Tenant agrees to pay for such increase) or cause a
cancellation of any insurance on the Project or otherwise violate any
requirements, guidelines, conditions, rules or orders with respect to such
insurance. Tenant shall at its sole cost and expense promptly comply with the
requirements of the ISO, board of fire underwriters, or other similar body now
or hereafter constituted relating to or affecting Tenant's use or occupancy of
the Project (other than in situations where compliance involves repair,
maintenance or replacement of items that Landlord is expressly required to
repair, maintain or replace under this Lease).
(c) NO LIMITATION ON OBLIGATIONS. The provisions of this
Paragraph 5 shall in no way limit Tenant's maintenance, repair and replacement
obligations under Paragraph 7 or Tenant's obligation to pay Expenses under
Paragraph 3(c). The judgment of any court of competent jurisdiction or the
admission of Tenant in an action against Tenant, whether Landlord is a party
thereto or not, that Tenant has so violated any such Law shall be conclusive of
such violation as between Landlord and Tenant.
or cause a cancellation of such insurance or otherwise affect such insurance in
any manner, and Tenant shall at its sole cost and expense promptly comply with
all laws, statutes, ordinances and governmental rules, regulations or
requirements now in force or which may hereafter be in force and with the
requirements of any board or fire underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Premises, to the extent required because of (i) Tenant's unique use of
the Premises, (ii) alterations or improvements made by or for Tenant, or (iii)
Tenant's negligence or willful misconduct. The provisions of this Paragraph 5
shall in no way limit Tenant's obligation to pay Expenses as noted in Paragraph
3 of the Lease. The judgment of any court of competent jurisdiction or the
admission of Tenant in an action against Tenant, whether Landlord be a party
thereto or not, that Tenant has so violated any such law, statute, ordinance,
rule, regulation or requirement, shall be conclusive of such violation as
between Landlord and Tenant.
6. ADDITIONAL ALTERATIONS. Tenant shall not make or suffer to be made
any additional alterations, additions or improvements ("Alterations") in, on or
to the Premises or any part thereof without the prior written consent of
Landlord. Failure of Landlord to give its disapproval within fifteen (15)
calendar days after receipt of Tenant's written request for approval shall
constitute disapproval by Landlord. Any alterations in, on or to the Premises,
except for Tenant's movable furniture and equipment (including the telephone
system, security system, demountable partitions, secretarial stations, cubicles,
cabinets or shelving systems and kitchen equipment, except to the extent paid
for with the Tenant Improvement Allowance or Additional Allowance), shall be the
property of Tenant during the Term and shall become Landlord's property at the
end of the Term without compensation to Tenant. Landlord shall not unreasonably
withhold its consent to Alterations that (i) do not materially affect the
structure of the Building or its electrical, plumbing, HVAC, security or other
systems, (ii) are not visible from the exterior of the Premises, (iii) are
consistent with Tenant's permitted use hereunder, and (iv) do not adversely
affect the value or marketability of Landlord's reversionary interest upon
termination or expiration of this Lease. In the event Landlord consents to the
making of any Alterations by Tenant, the same shall be made by Tenant, at
Tenant's sole cost and expense, in accordance with plans and specifications
reasonably approved by Landlord, and any contractor or person selected by Tenant
to make the same must first be reasonably approved in writing by Landlord or, at
Landlord's option, the Alterations shall be made by Landlord (substantially in
accordance with the terms of the Work Letter attached hereto to the extent
applicable to such alterations) for Tenant's account and Tenant shall reimburse
Landlord. for the cost thereof (including a reasonable charge for Landlord's
overhead) within twenty (20) days after receipt of a statement from Landlord
therefor. Upon the expiration or sooner termination of the Term, Tenant shall
upon demand by Landlord, at Landlord's election either (i) at Tenant's sole cost
and expense, forthwith and with all due diligence remove any Alterations made by
or for the account of Tenant, designated by Landlord to be removed (provided,
however, that upon the written request of Tenant prior to installation of such
Alterations Landlord shall advise Tenant at that time whether or not such
Alterations must be removed upon the expiration or sooner termination of this
Lease), and restore the Premises to its original condition as of the
Commencement Date, subject to normal wear and tear and the rights and
obligations of Tenant concerning casualty damage pursuant to Paragraph 20 or
(ii) pay Landlord the reasonable estimated cost thereof.
7. REPAIR AND MAINTENANCE.
(a) Landlord shall be responsible for the following repair,
replacement and maintenance obligations: (i) maintenance and repair of the
exterior of the Building, roof and structural portions of the Building, (ii)
repairs, replacement, and maintenance of the Building systems, including,
without limitation, electrical, mechanical, HVAC and plumbing and all controls
appurtenant thereto, (iii) repairs, replacement and maintenance of any elevators
in the Building, (iv) repair, replacement and maintenance of Common Areas, (v)
alterations to the Premises required under applicable Laws to the extent not the
responsibility of Tenant pursuant to Paragraph 5 or 6 hereof, (vi) any repair,
maintenance or improvements which could be treated as a "capital expenditure"
under generally accepted accounting principles, (vii) any repair, maintenance or
improvements which are a result of casualty or the exercise of the power of
eminent domain which are Landlord's responsibility under Paragraph 20 or 21,
(viii) repairs and replacements of lighting equipment (including light bulbs),
(ix) any repair, maintenance or improvements which are required as a consequence
of construction defects in Landlord's work or the Tenant Improvements, (x) any
repair, maintenance or improvements for which Landlord has a right of
reimbursement from others. Notwithstanding the foregoing, Tenant shall be
responsible for Tenant's Share of the costs described in the previous sentence
to the extend such costs are properly included in Expenses.
(b) Tenant shall maintain and repair the interior portion of the
Premises and any Alterations
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installed by or on behalf of Tenant within the Premises, however, excluding any
portions thereof which are structural in nature or which are the obligation of
Landlord under Paragraph 7(a) (subject to Paragraphs 5 and 7(c)). Tenant shall
be responsible for the expense of installation, operation, and maintenance of
its telephone and other communications cabling from the point of entry into the
Building to the Premises and throughout the Premises; though Landlord shall have
the right to perform such work on behalf of Tenant in Common Areas. Tenant
hereby waives and releases its right to make repairs at Landlord's expense under
Sections 1941 and 1942 of the California Civil Code or under any similar law,
statute or ordinance now or hereafter in effect. In addition, Tenant hereby
waives and releases its right to terminate this Lease under Section 1932(1) of
the California Civil Code or under any similar law, statute or ordinance now or
hereafter in effect. If Tenant fails after thirty (30) days' written notice by
Landlord to proceed with due diligence to make repairs required to be made by
Tenant, the same may be made by Landlord at the expense of Tenant and the
expenses thereof incurred by Landlord shall be reimbursed (with interest at the
Default Rate from the date Landlord incurs such cost) as Additional Charges
within thirty (30) days after submission of a bill or statement therefor.
(c) The purpose of Paragraph 7(a) and 7(b) is to define the
obligations of Landlord and Tenant to perform various repair and maintenance
functions; the allocation of the costs therefor are covered under this Paragraph
7(c) and Paragraph 3. Tenant shall bear the full cost of repairs or maintenance
interior or exterior, structural or otherwise, to preserve the Premises and the
Building in good working order and condition, arising out of (i) the existence,
installation, use or operation of any Alterations, or any of Tenant's trade
fixtures or personal property; (ii) the moving of Tenant's property or fixtures
in or out of the Building or Project or in and about the Premises; or (iii)
except to the extent any claims arising from any of the foregoing are reimbursed
by insurance carried by Landlord, are covered by the waiver of subrogation in
Paragraph 11 or are otherwise provided for in Paragraph 20, the acts, omissions
or negligence of Tenant, or any of its servants, employees, contractors, agents,
visitors, or licensees, or the particular use or particular occupancy or manner
of use or occupancy of the Premises by Tenant or any such person. Any to
Alterations required with respect Tenant's responsibilities pursuant to this
Paragraph 7(c) shall be made in accordance with Paragraph 6.
(d) Except to the extent any claims arising from any of the
foregoing are reimbursed by rental abatement insurance carried by Landlord,
are covered by the waiver of subrogation in Paragraph 11 or are otherwise
provided for in Paragraph 20, there shall be no abatement of Rent with
respect to, and except for Landlord's active negligence or willful
misconduct, Landlord shall not be liable for any injury to or interference
with Tenant's business arising from any repairs, maintenance, alteration or
improvement in or to any portion of the Building, including the Premises, or
in or to the fixtures, appurtenances and equipment therein.
8. LIENS. Tenant shall keep the Premises free from any liens arising
out of any work performed, material furnished or obligations incurred by Tenant.
In the event that Tenant shall not, within fifteen (15) clays after Tenant
receives actual notice of the imposition of any such lien, cause the same to be
released of record by payment or posting of a proper bond, Landlord shall have,
in addition to all other remedies provided herein and by law, the right, but not
the obligation, to cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All such sums
paid by Landlord and all expenses incurred by it in connection therewith shall
be considered Additional Charges and shall be payable to it by Tenant on demand
with interest at the Default Rate. Landlord shall have the right at all times to
post and keep posted on the Premises any notices permitted or required by law,
or which Landlord shall deem proper, for the protection of Landlord, the
Premises, the Building and any other party having an interest therein, from
mechanics and materialmen's liens, and Tenant shall give notice to Landlord at
least five (5) business days' prior notice of commencement of any construction
on the Premises.
9. ASSIGNMENT AND SUBLETTING.
(a) Tenant shall not directly or indirectly, voluntarily or by
operation of law, sell, assign, encumber, pledge or otherwise transfer or
hypothecate all or any part of the Premises or Tenant's leasehold estate
hereunder (collectively, "Assignment"), or permit the Premises to be occupied by
anyone other than Tenant or sublet the Premises or any portion thereof
(collectively, "Sublease"), without Landlord's prior written consent in each
instance, which consent shall not be unreasonably withheld by Landlord. Without
otherwise limiting the criteria upon which Landlord may withhold its consent to
any proposed Sublease or Assignment, if Landlord withholds its consent where
either (i) the creditworthiness of the proposed Sublessee or Assignee is not
reasonably acceptable to Landlord or, (ii) the proposed Sublessee's or
Assignee's use of the Premises is not in compliance with the allowed Tenant's
Use of the Premises as described in the Basic Lease Information, such
withholding of consent shall be presumptively reasonable. If Landlord consents
to the Sublease or Assignment, Tenant may thereafter enter into a valid Sublease
or Assignment upon the terms and condition set forth in this Paragraph 9.
(b) If Tenant desires at any time to enter into an Assignment of
this Lease or a Sublease of the Premises or any portion thereof, it shall first
give written notice to Landlord of its desire to do so, which notice shall
contain (i) the name of the proposed assignee, subtenant or occupant; (ii) the
name of the proposed assignee's, subtenant, or occupant's business to be carried
on in the Premises; (iii) the terms and provisions of the proposed Assignment or
Sublease; and (iv) such financial information as Landlord may request concerning
the proposed assignee, subtenant or occupant.
(c) At any time within fifteen (15) days after Landlord's receipt
of the notice specified in Paragraph 9(b), Landlord may by written notice to
Tenant elect to (i) consent to the Sublease or Assignment; (ii) disapprove the
Sublease or Assignment; or (iii) terminate this Lease as to the portion of the
Premises that is specified in Tenant's notice, with a proportionate abatement in
Base Rent and Additional Charges and Security Deposit/Letter of Credit;
provided, however, that Landlord shall only have the termination option set
forth in
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clause (iii) if at the time of receipt of such notice, and after taking into
account the Assignment or Sublease contemplated by such notice and the Initial
Sublease (if any), Tenant will directly occupy less than seventy-five percent
(75%) of the Premises. If Landlord elects to terminate the Lease as to a portion
of the Premises pursuant to clause (iii) above, Tenant shall it all times
provide reasonable and appropriate access to such portion of the Premises and
use of any common facilities within the Building. Promptly after request from
Landlord, Tenant shall enter into any amendment to this Lease or other
documentation reasonably requested by Landlord in connection with any such
termination of this Lease as to a portion of the Premises. Failure by Landlord
to either consent to or disapprove a proposed Assignment or Sublease within the
fifteen (15) day time period specified above shall be deemed to be Landlord's
consent thereto.
If Landlord consents to the Sublease or Assignment within said
fifteen (15) day period, Tenant may thereafter Within one hundred twenty
(120) days after Landlord's consent, but not later than the expiration of
said one hundred twenty (120) days, enter into such Assignment or Sublease of
the Premises or portion thereof upon the terms and conditions set forth in
the notice furnished by Tenant to Landlord pursuant to Paragraph 9(b).
However;, during any period of time in which Tenant directly occupies less
than seventy-five percent (75%) of the Premises (regardless of whether such
occupancy threshold is not met at the time the Sublease or Assignment is
entered into or at any time after such Assignment or during the term of such
Sublease), fifty percent (50%) of any rent or other consideration realized by
Tenant under any such Assignment or Sublease in excess of the Base Rent and
Additional Charges payable hereunder (or the amount thereof proportionate to
the portion of the Premises subject to such Sublease or Assignment) shall be
paid to Landlord ("Bonus Rent"), after first deducting from such excess the
unamortized costs of any portion of the Tenant Improvements paid for by
Tenant, (and not from the Tenant Improvement Allowance or Additional
Allowance) or costs reasonably incurred for tenant improvements installed by
Tenant to obtain the Sublease or Assignment in question, each of which are
installed in that portion of the Premises which is the subject of the
Sublease or Assignment and which unamortized costs shall be amortized on a
straight line basis (without interest) over the term of the Sublease or
Assignment in equal installments, and after deducting therefrom any customary
brokers' commissions that Tenant has incurred in connection with such
Assignment or Sublease amortized on a straight line basis (without interest)
over the term of the Sublease or Assignment.
(d) No consent by Landlord to any Assignment or Sublease by Tenant
shall relieve Tenant of any obligation to be performed by Tenant under this
Lease, whether arising before or after the Assignment or Sublease. The consent
by Landlord to any Assignment or Sublease shall not relieve Tenant from the
obligation to obtain Landlord's express written consent to any other Assignment
or Sublease. Any Assignment or Sublease that is not in compliance with this
Paragraph 9 shall be void and, at the option of Landlord, shall constitute a
material default by Tenant under this Lease. The acceptance of Base Rent or
Additional Charges by Landlord from a proposed assignee or sublessee shall not
constitute the consent to such Assignment or Sublease by Landlord.
(e) The following shall be deemed a voluntary assignment of
Tenant's interest in this Lease: (i) any dissolution, merger, consolidation, or
other reorganization of Tenant; and (ii) if the capital stock of Tenant is not
publicly traded, the sale or transfer to one person or entity stock possessing
more than fifty percent (50%) of the total combined voting power of all classes
of Tenant's stock issued, outstanding and entitled to vote for the election of
directors. Notwithstanding anything to the contrary contained in this Paragraph
9, Tenant may enter into any of the following transfers (a "Permitted Transfer")
without Landlord's prior written consent: (1) Tenant may assign its interest in
the Lease to a corporation which results from a merger, consolidation or other
reorganization, so long as the surviving corporation has a net worth immediately
following such transaction that is equal to or greater than the net worth of
Tenant as of the date immediately prior to such transaction; and (2) Tenant may
assign this Lease to a corporation which purchases or otherwise acquires all or
substantially all of the assets of Tenant, so long as such acquiring corporation
has a net worth immediately following such transaction that is equal to or
greater than the net worth of Tenant as of the date immediately prior to such
transaction.
(f) Each assignee, sublessee or other transferee, other than
Landlord, shall assume, as provided in this Paragraph 9(f), all obligations of
Tenant under this Lease and shall be and remain liable jointly and severally
with Tenant for the payment of Base Rent and Additional Charges, and for the
performance of all the terms, covenants, conditions and agreements herein
contained on Tenant's part to be performed for the Term; provided, however, that
the assignee, sublessee, mortgagee, pledgee or other transferee shall be liable
to Landlord for rent only in the amount set forth in the Assignment or Sublease
and shall only be required to perform those obligations under the Lease to the
extent that they relate to the portion of the Premises subleased or interest in
the Lease assigned. No Assignment shall be binding on Landlord unless the
assignee or Tenant shall deliver to Landlord a counterpart of the Assignment and
an instrument in recordable form that contains a covenant of assumption by the
assignee satisfactory in substance and form to Landlord, consistent with the
requirements of this Paragraph 9(f), but the failure or refusal of the assignee
to execute such instrument of assumption shall not release or discharge the
assignee from its liability as set forth above.
(g) Tenant shall have the right, without Landlord's consent but
with written notice to Landlord at least ten (10) days prior thereto, to enter
into an Assignment of Tenant's interest in the Lease or a Sublease of all or any
portion of the Premises to an Affiliate (as defined below) of Tenant, provided
that (i) in connection with an Assignment that is not a sublease, the Affiliate
delivers to Landlord concurrent with such Assignment a written notice of the
Assignment and an assumption agreement whereby the Affiliate assumes and agrees
to
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perform, observe and abide by the terms, conditions, obligations, and provisions
of this Lease; and (ii) the entity remains an Affiliate throughout the term of
this Lease (and the assumption agreement shall contain provisions consistent
with the provisions of this subparagraph allowing Landlord to terminate this
Lease at such time as the entity is no longer an Affiliate of the original
Tenant). If this Lease is assigned to an Affiliate and thereafter any
circumstance occurs which causes such assignee to no longer be an Affiliate of
the original Tenant, Tenant shall give written notice thereof to Landlord, which
notice, to become effective, shall refer to Landlord's right to terminate this
Lease pursuant to this subparagraph ("Affiliation Termination Notice").
Following occurrence of the circumstance giving rise to the discontinuation of
such assignee being an Affiliate ("Affiliate Termination") of the original
Tenant, Landlord shall be entitled to terminate this Lease unless Landlord has
given its prior written consent to such circumstance, which consent shall not be
unreasonably withheld by Landlord so long as such assignee (after giving effect
to such circumstance) has financial strength (as demonstrated by audited
financial statements) equal to or greater than the original Tenant (including
its net worth) as of the date of execution of this Lease, or the original Tenant
executes a guaranty in usual form reasonably acceptable to Landlord (however,
this does not imply that Tenant would be released without such guaranty). No
Sublease or Assignment by Tenant made pursuant to this Paragraph shall relieve
Tenant of Tenant's obligations under this Lease. As used in this paragraph, the
term "Affiliate" shall mean and collectively refer to a corporation or other
entity which controls, is controlled by or is under common control with Tenant,
by means of an ownership of either (aa) more than fifty percent (50%) of the
outstanding voting shares of stock or partnership or other ownership interests,
or (bb) stock, or partnership or other ownership interests, which provide the
right to control the operations, transactions and activities of the applicable
entity.
(h) Tenant shall have a one-time right to sublease a portion of
the Premises, not to exceed 10,000 Rentable Square Feet, to a single subtenant
for a term not to exceed the Initial Term of this Lease (the "Initial
Sublease"), upon Landlord's prior written consent in accordance with the
standards set forth in this Paragraph 9(a); provided, however, that with respect
to the Initial Sublease (i) Tenant's request to Landlord for consent to such
Sublease shall state that, if approved, it will be the "Initial Sublease", (ii)
Landlord shall not have the termination right set forth in clause (iii) of
Paragraph 9(c), and (iii) Landlord shall not be entitled to share in any Bonus
Rent as provided in Paragraph 9(c).
10. INSURANCE AND INDEMNIFICATION.
(a) Except to the extent caused by the negligence or willful
misconduct of Tenant Parties (as defined in Paragraph 10(c) below) or Tenant's
breach of this Lease, Landlord shall indemnify and hold Tenant harmless from and
against any and all claims or liability for any injury or damage to any person
or property including any reasonable attorney's fees (but excluding any
consequential damages or loss of business) occurring in, on, or about the
Project to the extent such injury or damage is caused by the negligence or
willful misconduct of Landlord, its agents, servants, contractors, employees
(collectively, including Landlord, "Landlord Parties") or Landlord's breach of
this Lease.
(b) Landlord shall not be liable to Tenant, and Tenant hereby
waives all claims against Landlord Parties for any injury or damage to any
person or property in or about the Premises by or from any cause whatsoever
(other than the negligence or willful misconduct of Landlord Parties, including
Landlord's negligence or willful misconduct as related to construction or
property management), and without limiting the generality of the foregoing,
whether caused by water leakage of any character from the roof, walls, basement,
or other portion of the Premises or the Building, or caused by gas, fire, oil,
electricity, or any cause whatsoever, in, on, or about the Premises, the
Building or any part thereof (other than that caused by the negligence or
willful misconduct of Landlord Parties). Tenant acknowledges that any casualty
insurance carried by Landlord will not cover loss of income to Tenant or damage
to the alterations in the Premises installed by Tenant or Tenant's personal
property located within the Premises. Tenant shall be required to maintain the
insurance described in Subparagraph 10(d) below during the Term.
(c) Except to the extent caused by the negligence or willful
misconduct of Landlord Parties or Landlord's breach of this Lease, Tenant shall
indemnify and hold Landlord harmless from and defend Landlord against any and
all claims or liability for any injury or damage to any person or property
whatsoever: (i) occurring in or on the Premises; or (ii) occurring in, on, or
about any other portion of the Project to the extent such injury or damage shall
be caused by the negligence or willful misconduct by Tenant, its agents,
servants, employees, or invitees (collectively, including Tenant, "Tenant
Parties"). Tenant further agrees to indemnify and hold Landlord harmless from,
and defend Landlord against, any and all claims, losses, or liabilities
(including damage to Landlord's property) arising from (x) any breach of this
Lease by Tenant and/or (y) the conduct of any work or business of Tenant Parties
in or about the Project. This Section 20 does not govern liability for Hazardous
Substances, which subject is governed by Paragraph 39 of the Lease concerning
Hazardous Substance liability.
(d) Tenant shall procure at its cost and expense and keep in
effect during the Term the following insurance: (i) commercial general liability
insurance including contractual liability with a minimum combined single limit
of liability of Three Million Dollars ($3,000,000). Such insurance shall name
Landlord as an additional insured, shall specifically include the liability
assumed hereunder by Tenant, and shall provide that it is primary insurance, and
not excess over or contributory with any other valid, existing, and applicable
insurance in force for or on behalf of Landlord, and shall provide that Landlord
shall receive thirty (30) days' written notice from the insurer prior to any
cancellation or change of coverage; (ii) business interruption insurance,
insuring Tenant for a period of twelve (12) months against losses arising from
the interruption of Tenant's business, and for lost profits, and charges and
expenses which continue but would have been earned if the business had gone on
without interruption, insuring against such perils, in such form and with such
deductible amount as are reasonably satisfactory to Landlord, (iii) "all risk"
property insurance (including,
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without limitation, boiler and machinery (if applicable); sprinkler damage,
vandalism and malicious mischief) on all leasehold improvements installed in the
Premises by Tenant at its expense (if any), and on all Tenant's personal
property. Such insurance shall be an amount equal to full replacement cost of
the aggregate of the foregoing and shall provide coverage comparable to the
coverage in the standard ISO All Risk form, when such form is supplemented with
the coverages required above; (iv) worker's compensation insurance; and (v) such
other insurance as may be required by the law. Tenant shall deliver policies of
such insurance or certificates thereof to Landlord on or before the Commencement
Date, and thereafter at least thirty (30) days before the expiration dates of
expiring policies; and, in the event Tenant shall fail to procure such
insurance, or to deliver such policies or certificates, Landlord may, at its
option, procure same for the account of Tenant, and the cost thereof shall be
paid to Landlord as Additional Charges within five (5) days after delivery to
Tenant of bills therefor.
(e) The provisions of this paragraph 10 shall survive the
expiration or termination of this Lease with respect to any claims or liability
occurring prior to such expiration or termination.
(f) Landlord shall maintain insurance on the Project against fire
and risks covered by "all risk" (excluding earthquake and flood, though
Landlord, at its option, may include this coverage) on a 100% of "replacement
cost" basis (though reasonable deductibles may be included under such coverage).
Landlord's insurance shall also cover the improvements installed by Landlord
prior to the commencement of the Term, shall have a building ordinance
provision, and shall provide fax rental interruption insurance covering a period
of twelve (12) full months. In no event shall Landlord be deemed a co-insurer
under such policy. Landlord shall also maintain contractual liability coverage
(or with contractual liability endorsement) on an occurrence basis in amounts
not less than Three Million Dollars ($3,000,000) per occurrence with respect to
bodily injury or death and property damage. Notwithstanding the foregoing
obligations of Landlord to carry insurance, Landlord may modify the foregoing
coverages if and to the extent it is commercially reasonable to do so.
11. WAIVER OF SUBROGATION. Notwithstanding anything to the contrary
in this Lease, to the extent that this waiver does not invalidate or impair
their respective insurance policies, the parties hereto release each other and
their respective agents, employees, successors, assignees and subtenants from
all liability for injury to any person or damage to any property that is caused
by or results from a risk (i) which is actually insured against, to the extent
of receipt of payment under such policy (unless the failure to receive payment
under any such policy results from a failure of the insured party to comply with
or observe the terms and conditions of the insurance policy covering such
liability, in which event, such release shall not be so limited), (ii) which is
required to be insured against under this Lease, or (iii) which would normally
be covered by the standard form of "all risk-extended coverage" casualty
insurance, without regard to the negligence or willful misconduct of the entity
so released. Landlord and Tenant shall each obtain from their respective
insurers under all policies of fire, theft, and other property insurance
maintained by either of them at any time during the Term insuring or covering
the Project or any portion thereof of its contents therein, a waiver of all
rights of subrogation which the insurer of one party might otherwise, if at all,
have against the other party, and Landlord and Tenant shall each indemnify the
other against any loss or expense, including reasonable attorneys' fees,
resulting from the failure to obtain such waiver.
12. SERVICES AND UTILITIES.
(a) Landlord shall provide the maintenance and repairs described
in paragraph 7(a), except for damage occasioned by the act of Tenant, which
damage shall be repaired by Landlord at Tenant's expense.
(b) Subject to the provisions elsewhere herein contained and to
the rules and regulations of the Building, Landlord agrees to furnish to the
premises during ordinary business hours of generally recognized business days,
to be determined by Landlord (but exclusive, in any event, of Saturdays, Sundays
and legal holidays), water and electricity suitable for the intended use of the
Premises, heat and air conditioning required in Landlord's judgment for the
comfortable use and occupation of the Premises, janitorial services during the
times and in the manner that such services are, in landlord's judgment,
customarily furnished in comparable office buildings in the immediate market
area, and elevator service (if the Building has an elevator) which shall mean
service either by non-attended automatic elevators or elevators with attendants,
or both, at the option of the Landlord. Notwithstanding the above, except in the
case of emergencies, utilities to the Building shall be provided every day. At
Tenant's request, Landlord shall provide additional or after hours heating or
air conditioning and Tenant shall pay to Landlord a reasonable charge for such
services as determined by Landlord (not to exceed Landlord's actual costs, which
costs do not include depreciation). Tenant agrees at all times to cooperate
fully with Landlord and to abide by all the regulations and requirements which
Landlord may prescribe for the proper functioning and protection of the heating,
ventilating and air conditioning system. Wherever heat generating machines,
excess lighting or equipment are used in the Premises which affect the
temperature otherwise maintained by the air conditioning system, Landlord
reserves the right to install supplementary air conditioning units in the
Premises, and the cost thereof, including the cost of installation and the cost
of operation and maintenance thereof, shall be paid by Tenant to Landlord upon
demand by Landlord. To the extent Tenant requires water, electricity, heat, air
conditioning or other services in portions of the Premises which are not metered
separately from other tenants of the Project and in amounts in excess of amounts
delivered to such other tenants of the Project as reasonably determined by
Landlord, Tenant shall pay to Landlord a reasonable charge for such excess
amounts as determined by Landlord. Landlord shall make available to Tenant
reasonable documentation supporting its charges for such excess services.
(c) Tenant will not without the written consent of Landlord, which
consent shall not be unreasonably withheld or delayed, use any apparatus or
device in the Premises which, when used, puts an excessive load on the Building
or its structure or systems, including, without limitation, electronic data
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processing machines, punch card machines and machines using excess lighting or
voltage in excess of the amount for which the Building is designed, which will
in any way materially increase the amount of gas, electricity or water usually
furnished or supplied for use of the Premises as general office space; nor
connect with electric current, except through existing electrical outlets in the
Premises, or water pipes or gas outlets, any apparatus or device for the
purposes of using gas, electrical current or water. If Tenant shall require
water or electrical current or any other resource in excess of that usually
furnished or supplied for use of the Premises as general office space, Tenant
shall first obtain the consent of Landlord, which Landlord may refuse, to the
use thereof, and Landlord may cause a special meter to be installed in the
Premises so as to measure the amount of water, electric current or other
resource consumed for any such other use. The cost of any such meters and of
installation, maintenance an repair thereof shall be paid for by Tenant, and
Tenant agrees to pay Landlord promptly upon demand by Landlord for all such
water, electric current or other resource consumed, as shown by said meters, at
the rates charged by the local public utility, furnishing the same, plus any
additional expense incurred in keeping account of the water, electric current or
other resource so consumed.
(d) Landlord shall not be in default hereunder, nor be deemed to
have evicted Tenant, nor be liable for any damages directly or indirectly
resulting from, nor shall the rental herein reserved be abated by reason of (i)
the installation, use or interruption of use of any equipment in connection with
the foregoing utilities and services; (ii) failure to furnish or delay in
furnishing any services to be provided by Landlord when such failure or delay is
caused by Force Majeure, or by the making of repairs or improvements to the
Premises or to the Building (unless such failure or delay is caused by
Landlord's negligence or willful misconduct); or (iii) the limitation,
curtailment, rationing or restriction on use of water, electricity, gas or any
other form of energy, or any other service or utility whatsoever serving the
Premises, the Building or the Project. Furthermore, Landlord shall be entitled
to cooperate with the mandatory requirements of national, state or local
governmental agencies or Utilities suppliers in connection with reducing energy
or other resources consumption. If the Premises become unsuitable for Tenant's
use as a consequence of cessation of gas and electric utilities or other
services provided to the Premises resulting from a casualty covered by
Landlord's insurance, then Tenant's Base Rent and Additional Charges shall abate
during the period of time in which Tenant cannot occupy the Premises for
Tenant's use, but only to the extent of rental abatement insurance proceeds
received by Landlord. Landlord shall use reasonable diligence to make such
repairs as may be required to lines, cables, wires, pipes equipment or machinery
within the Project to provide restoration of the services Landlord is
responsible for providing under this Paragraph 12 and, where the cessation or
interruption of such services has occurred due to circumstances or conditions
beyond Project boundaries, to cause the same to be restored, by diligent
application or request to the provider thereof. In no event shall any
mortgagee or beneficiary under any mortgage or deed of trust on all or any
portion of the Project, the Building, or the land on which all or any portion of
the Project is located (any such mortgagee or beneficiary, a "Mortgagee") be or
become liable for any default of Landlord under this Paragraph 12.
13. TENANT'S CERTIFICATES. Tenant, at any time and from time to time,
within ten (10) days from receipt of written notice from Landlord, will execute,
acknowledge and deliver to Landlord and, at Landlord's request, to any
prospective tenant, purchaser, ground or underlying lessor or Mortgagee or any
other party acquiring an interest in Landlord, a certificate of Tenant
substantially in the form attached as EXHIBIT "D" and also containing any other
information that may reasonably be required by any of such persons. It is
intended that any such certificate of Tenant delivered pursuant to this
Paragraph 13 may be relied upon by Landlord and any prospective tenant,
purchaser, ground or underlying lessor or Mortgagee, or such other party. If
requested by Tenant, Landlord shall provide Tenant with a similar certificate.
14. HOLDING OVER. If Tenant (directly or through any
successor-in-interest of Tenant) remains in possession of any or all of the
Premises after the expiration or termination of this Lease with the consent
of Landlord, such continued possession shall be construed to be a tenancy
from month to month at one hundred twenty-five percent (125 %) of the Monthly
Base Rent herein specified (and shall be increased in accordance with
Paragraph 4(b) [Adjustments in Base Rent]), together with an amount estimated
by Landlord for the monthly Additional Charges payable under this Lease, and
shall otherwise be on the terms and conditions herein specified so far-as
applicable. If Tenant (directly or through any successor-in-interest of
Tenant) remains in possession of all or any portion of the Premises after the
expiration or termination of this Lease without the consent of Landlord,
Tenant's continued possession shall be on the basis of a tenancy at the
sufferance of Landlord. In such event, Tenant shall continue to comply with
or perform all the terms and obligations of Tenant under this Lease, except
that the Monthly Base Rent during Tenant's holding over shall be the greater
of the then-fair market rent for the Premises (as reasonably determined by
Landlord) or one hundred fifty percent (150%) of the Monthly Base Rent and
Additional Charges payable in the last full month prior to the termination
hereof (and shall be increased in accordance with Paragraph 4(b)
[Adjustments in Base Rent]). In addition to Rent, Tenant shall pay Landlord
for all damages proximately caused by reason of the Tenant's retention of
possession. Landlord's acceptance of Rent after the termination of this Lease
shall not constitute a renewal of this Lease, and nothing contained in this
provision shall be deemed to waive Landlord's right of reentry or any other
right hereunder or at law. Tenant acknowledges that, in Landlord's marketing
and re-leasing efforts for the Premises, Landlord is relying on Tenant's
vacation of the Premises on the Expiration Date. Accordingly, Tenant shall
indemnify, defend and hold Landlord harmless from and against all claims,
liabilities, losses, costs, expenses and damages arising or resulting
directly or indirectly from Tenant's failure to timely surrender the
Premises, including (i) any loss, cost or damages suffered by any prospective
tenant of all or any part of the Premises, and (ii) Landlord's damages as a
result of such prospective tenant rescinding or refusing to enter into the
prospective lease of all or any portion of the Premises by reason of such
failure of Tenant to timely surrender the Premises.
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15. SUBORDINATION.
(a) Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, this Lease
shall be subject and subordinate at all times to: (i) the Encumbrances and
all ground leases or underlying leases which may now exist or hereafter be
executed affecting the Building or the land upon which the Building is
situated or both; (ii) any CC&R's, currently in effect or that Landlord may
enter into in the future, that affect the Building or the Common Areas; and
(iii) the lien of any mortgage or deed of trust which may now exist or
hereafter be executed in any amount for which the Building, land, ground
leases or underlying leases, or Landlord's interest or estate in any of said
items, is specified as security. Notwithstanding the foregoing, Landlord
shall have the right to subordinate or cause to be subordinated any such
ground leases or underlying leases or any such liens to this Lease. In the
event that any ground lease or underlying lease terminates for any reason or
any mortgage or deed of trust is foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor in interest
to Landlord at the option of such successor in interest. Notwithstanding
anything to the contrary contained herein (but subject to subparagraph 15(b)
below), this Lease shall not be subject or subordinate to any ground or
underlying lease or to any lien, mortgage, deed of trust or other security
interest affecting the Premises, unless the ground lessor, lender or other
holder of the interest to which this lease would be subordinated executes a
reasonable recognition and non-disturbance agreement which provides that
Tenant shall be entitled to continue in possession of the Premises on the
terms and conditions of this Lease if and for so long as Tenant fully
performs all of its obligations hereunder. Tenant covenants and agrees to
execute and deliver upon demand by Landlord and in the form requested by
Landlord and reasonably acceptable to Tenant (Tenant has approved the form of
the subordination, non-disturbance and attornment agreement attached as
EXHIBIT F), any customary additional documents evidencing the priority or
subordination of this Lease with respect to any such ground leases or
underlying leases or the lien of any such. mortgage or deed of trust. Tenant
shall execute, deliver and record any such documents within twenty (20) days
after Landlord's written request.
(b) Notwithstanding the provisions of subparagraph 15(a) above
to the contrary, specifically with regard to the Ground Lease (as defined in
EXHIBIT E), this Lease shall be subject to and subordinate to the terms,
covenants and conditions of the Ground Lease and the rights of the Lessor (as
defined in the Ground Lease), without the requirement that the Lessor enter into
a separate recognition and non-disturbance agreement as contemplated by
subparagraph 15(a), provided that Landlord and Tenant agree to the following
conditions as required by Article 25 of the Ground Lease:
(1) Upon any termination or surrender of the Ground Lease,
this Lease shall continue in full force and effect and the Tenant (defined as
"sublessee" in the Ground Lease) shall attorn to, or, at the option of Lessor
(as defined in the Ground Lease), enter into a direct lease on identical terms
(i.e. the terms of this Lease) with, Lessor;
(2) Lessor shall not be bound by any prepayment of rent
hereunder; and
(3) Tenant and Landlord agree that this Lease is an arm's
length transaction between Landlord (defined as "Lessee" in the Ground Lease)
and Tenant (defined as "the subtenant" in the Ground Lease), and that Tenant is
not an Affiliate (as defined in the Ground Lease) of Landlord.
16. RULES AND REGULATIONS. Tenant shall faithfully observe and comply
with the rules and regulations attached to this Lease as EXHIBIT "C" and all
reasonable modifications thereof and additions thereto from time to time put
into effect by Landlord. Landlord shall not be responsible for the
nonperformance by any other Tenant or occupant of the Building or the Project of
any said rules and regulations. In the event of an express and direct conflict
between the terms, covenants, agreements and conditions of this Lease and those
set forth in the rules and regulations, as modified and amended from time to
time by Landlord, this Lease shall control.
17. RE-ENTRY BY LANDLORD. Landlord reserves and shall at all
reasonable times, upon reasonable prior notice (except in the case of an
emergency), and subject to Tenant's reasonable security precautions and the
right of Tenant to accompany Landlord at all times, have the right to re-enter
the Premises to inspect the same, to supply janitor service and any other
service to be provided by Landlord to Tenant hereunder (unless Tenant is
supplying such service), to show the Premises to prospective purchasers,
Mortgagees or tenants (as to prospective tenants, only during the last twelve
(12) months of the Lease Term), to post notices of nonresponsibility or as
otherwise required or allowed by this Lease or by law, and to alter, improve or
repair the Premises and any portion of the Building and may for that purpose
erect, use, and maintain scaffolding, pipes, conduits, and other necessary
structures in and through the Premises where reasonably required by the
character of the work to be performed. Landlord shall not be liable in any
manner for any inconvenience, disturbance, loss of business, nuisance or other
damage arising from Landlord's entry and acts pursuant to this Paragraph and
Tenant shall not be entitled to an abatement or reduction of Base Rent or
Additional Charges if Landlord exercises any rights reserved in this paragraph.
Tenant hereby waives any claim for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment of
the Premises, and any other loss occasioned thereby, except for Landlord's
negligence or willful misconduct. For each of the aforesaid purposes, Landlord
shall at all times have and retain a key with which to un-lock all of the doors
in, upon and about the Premises, excluding Tenant's vaults and safes, or special
security areas (designated in advance), and Landlord shall have the right to use
any and all means which Landlord may deem necessary or proper to open said doors
in an emergency, in order to obtain entry to any portion of the Premises, and
any entry to the Premises, or portion thereof obtained by Landlord by any of
said means, or otherwise, shall not under any emergency circumstances be
construed or deemed to be a
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forcible or unlawful entry into, or a detainer of, the Premises, or an eviction,
actual or constructive, of Tenant from the Premises or any portions thereof.
Landlord shall use best efforts during re-entry to not unreasonably interfere
with Tenant's use of the Premises or its business conducted therein.
18. INSOLVENCY OR BANKRUPTCY. The appointment of a receiver to take
possession of all or substantially all of the assets of Tenant, or an assignment
of Tenant for the benefit of creditors, or any action taken or suffered by
Tenant under any insolvency, bankruptcy, reorganization or other debtor relief
proceedings, whether now existing or hereafter amended or enacted, shall at
Landlord's option constitute a breach of this Lease by Tenant unless a petition
in bankruptcy, or receiver attachment, or other remedy pursued by a third party
is discharged within sixty (60) days. Upon the happening of any such event or at
any time thereafter, this Lease shall terminate five (5) days after written
notice of termination from Landlord to Tenant. In no event shall this Lease be
assigned or assignable by operation of law or by voluntary or involuntary
bankruptcy proceedings or otherwise and in no event shall this Lease or any
rights or privileges hereunder be an asset of Tenant under any bankruptcy,
insolvency, reorganization or other debtor relief proceedings.
19. DEFAULT.
(a) 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 or cure period hereinafter
provided. Tenant shall have a period of three (3) days from the date of written
notice from Landlord (which notice shall be in lieu of and not in addition to
the notice required by Section 1161 of the California Code of Civil Procedure)
within which to cure any failure to pay Base Rent or Additional Charges;
provided, however, that Landlord shall not be required to provide such notice
more than four times during any two (2) year period during the Term with respect
to non-payment of Base Rein or Additional Charges, the third such non-payment
constituting default without requirement of notice. Tenant shall have/a period
of thirty (30) days from the date of written notice from Landlord within which
to cure any other curable failure to perform any obligation under this Lease;
provided, however, that with respect to any curable failure to perform other
than the payment of Base Rent or Additional Charges that cannot reasonably be
cured within thirty (30) days, the cure period shall be extended if Tenant
commences to cure within thirty (30) days from Landlord's notice and continues
to prosecute diligently the curing thereof. Notwithstanding the foregoing, (i)
if a different cure period is specified elsewhere in this Lease or the Work
Letter with respect to any specific obligation of Tenant, such specific cure
period shall apply with respect to a failure of such obligation; and (ii) the
foregoing cure rights shall not extend the specified time for compliance with
any required delivery, approval or performance obligation of Tenant under the
Work Letter. Upon a 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:
(1) The rights and remedies provided 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 Base Rent and Additional Charges
for the balance of the Term after the time of award exceeds the amount of rental
loss for the same period that the Tenant proves could be reasonably avoided, as
computed pursuant to subsection (b) of said Section 1951.2;
(2) The rights and remedies provided by, California Civil
Code, Section 1951.4, that allows Landlord to continue this Lease in effect and
to enforce all of its rights and remedies under this Lease, including the right
to recover Base Rent and Additional Charges as they become due, for so long as
Landlord does not terminate Tenant's right to possession; provided, however, if
Landlord elects to exercise its remedies described in this Paragraph 19(a)(ii)
and Landlord does not terminate this Lease, and if Tenant requests Landlord's
consent to an assignment of this Lease or a sublease of the Premises at such
time as Tenant is in default, Landlord shall not unreasonably withhold its
consent to such assignment or sublease. Acts of maintenance or preservation,
efforts to relet the Premises or the appointment of a receiver upon Landlord's
initiative to protect its interest under this Lease shall not constitute a
termination of Tenant's rights to possession;
(3) The right to terminate this Lease by giving notice to
Tenant in accordance with applicable law;
(4) If Landlord elects to terminate this Lease, the right
and power to enter the Premises and remove therefrom all persons and property
and, 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.
(b) Landlord shall have a period of thirty (30) days from the date
of written notice from Tenant within which to cure any default by Landlord under
this Lease; provided, however, that with respect to any default that cannot
reasonably be cured within thirty (30) days, the default shall not be deemed to
be uncured if Landlord commences to cure within thirty'(30) days from Tenant's
notice and continues to prosecute diligently the curing thereof. Tenant agrees
to give any Mortgagee, by registered or certified mail, a copy of any Notice of
Default served upon the Landlord, provided that prior to such notice Tenant has
been notified in writing, (by way of Notice of Assignment of Rents and Leases,
or otherwise) of the address of such Mortgagee. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
this Lease, then the Mortgagee shall have an additional thirty (30) days
(provided that Tenant notifies Mortgagee concurrently with Tenant's notice to
Landlord at the beginning of Landlord's thirty (30) day period; otherwise
Mortgagee shall have sixty days from the date on which it is noticed) within
which to cure such default or if such default cannot be cured within that time,
then the cure period shall be extended for such additional time as
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may be necessary to cure such default shall be granted if within such applicable
period Mortgagee has commenced and continues to prosecute diligently the cure of
such default (including, but not limited to, commencement of foreclosure
proceedings, if necessary to effect such cure).
20. DAMAGE BY FIRE, ETC. If the Premises or the Building are damaged
by fire or other casualty, Landlord shall forthwith repair the same, provided
that such repairs can be made within one hundred eighty (180) days after the
date of such damage under the laws and regulations of the federal, state and
local governmental authorities having jurisdiction thereof. In such event, this
Lease shall remain in full force and effect except that Tenant shall be entitled
to a proportionate reduction of Base Rent and Additional Charges while such
repairs to be made hereunder by Landlord are being made. Such reduction of rent,
if any, shall be based upon the greater of (i) the proportion that the area of
the Premises rendered untenantable by such damage bears to the total area of the
Premises; or (ii) the extent to which such damage and the making of such repairs
by Landlord shall interfere with the business carried on by Tenant in the
Premises, where clause (ii) is limited to the extent of rental abatement
insurance allowed by Landlord's casualty insurance policy. Within twenty (20)
days after the date of such damage, Landlord shall notify Tenant whether or not
in Landlord's reasonable opinion such repairs can be made within one hundred
eighty (180) days after the date of such damage and Landlord's determination
thereof shall be binding on Tenant. If such repairs cannot be made within one
hundred eighty (180) days from the date of such damage, Landlord shall have the
option within thirty (30) days after the date of such damage either to: (i)
notify Tenant of Landlord's intention to repair such damage and diligently
prosecute such repairs, in which event this Lease shall continue in full force
and effect and the Base Rent and Additional Charges shall be reduced as provided
herein; or (ii) notify Tenant of Landlord's election to terminate this Lease as
of a date specified in such notice, which date shall not be less than thirty
(30) days nor more than sixty (60) days after notice is given. In the event that
such notice to terminate is given by Landlord,this Lease shall terminate on the
date specified in such notice. In the event that Landlord notifies Tenant that
restoration or repair of the Premises will take more than one hundred and eighty
days (180) days, Tenant shall have a right to terminate the Lease within fifteen
(15) days following receipt of Landlord's notice, by providing Landlord with
written notice of its election to do so in such event (and also in the event
Landlord terminates the lease pursuant to the immediately preceding sentence),
Tenant shall have no liability for payment of the deductible under Landlord's
insurance relating to such damage. In case of termination by either event, the
Base Rent and Additional Charges shall be reduced by a proportionate amount
based upon the extent to which such damage interfered with the business carried
on by Tenant in the Premises, and Tenant shall pay such reduced Base Rent and
Additional Charges up to the date of termination. Landlord agrees to refund to
Tenant any Base Rent and Additional Charges previously paid for any period of
time subsequent to such date of termination. The repairs to be made hereunder by
Landlord shall not include, and Landlord shall not be required to repair, any
damage by fire or other cause to the property of Tenant or any repairs or
replacements of any paneling, decorations, railings, floor coverings or any
alterations, additions, fixtures or improvements installed on the Premises by or
at the expense of Tenant (excluding the initial Tenant Improvements constructed
by Landlord). Tenant hereby waives the provisions of Section 1932.2, and Section
1933.4, of the Civil Code of California. Notwithstanding anything contained
herein to the contrary, if a Major Casualty occurs with respect to any portion
of the Building, and the net insurance proceeds obtained as a result of such
casualty are ninety percent (90%) or a lesser percentage of the cost of
restoration, rebuilding or replacement, then Landlord shall not be obligated to
undertake such restoration, rebuilding or replacement unlss Landlord elects to
do so in writing. For the purpose of this Lease, a "Major Casualty" shall mean a
casualty that renders unusable twenty percent (20%) or more of the Net Rentable
Area of the Building or which materially adversely affects the use of such
Building.
21. EMINENT DOMAIN. If any part over 15 % of the Premises shall be
taken or appropriated under the power of eminent domain or conveyed in lieu
thereof, Tenant shall have the right to terminate this Lease at its option. If
any part of the Building shall be taken or appropriated under power of eminent
domain or conveyed in lieu thereof and such taking is so extensive that it
renders the remaining portion of the Building unsuitable for the use being made
of the Building on the date immediately preceding such taking, Landlord may
terminate this Lease at its option. In either of such events, Landlord shall
receive (and Tenant shall assign to Landlord upon demand from Landlord) any
income, rent, award or any interest therein which may be paid in connection with
the exercise of such power of eminent domain, and Tenant shall have no claim
against Landlord for any part of sum paid by virtue of such proceedings, whether
or not attributable to the value of the unexpired term of this Lease except that
Tenant shall be entitled to petition the condemning authority for the following
- - (i) the then unamortized cost of any Alterations or tenant improvements paid
for by Tenant from its own funds (as opposed to any allowance provided by
Landlord); (ii) the value of Tenant's trade fixtures; (iii) Tenant's relocation
costs; (iv) Tenant's goodwill, loss of business and business interruption; and
(v) one-half of the amount which is the lesser of (a) the bonus value of this
lease, or (b) the amount of the award in excess of the sum of amounts payable to
Landlord's ground lessor (if any) and any holder of a mortgage or other third
party lien encumbering Landlord's ground lease estate or fee simple ownership in
the Property. If a part of the Premises shall be so taken or appropriated or
conveyed and neither party hereto shall elect to terminate this Lease and the
Premises have been damaged as a consequence of such partial taking or
appropriation or conveyance, Landlord shall restore the Premises continuing
under this Lease at Landlord's cost and expense; provided, however, that
Landlord shall not be required to repair or restore any injury or damage to the
property of Tenant or to make any repairs or restoration of any Alterations
installed on the Premises by or at the expense of Tenant. Thereafter, the Base
Rent and Additional Charges to be paid under this Lease for the remainder of the
Term shall be proportionately reduced, such that thereafter the amounts to be
paid by Tenant shall be in the ratio that they are of the portion of the
Premises not so taken bears to the total area of the Premises prior to such
taking. Notwithstanding anything to the contrary contained in this Paragraph 21,
if the temporary use or occupancy of any part of the Premises shall be taken or
appropriated under power of eminent domain during the Term, this Lease shall be
and remain unaffected by such taking or appropriation and Tenant shall continue
to pay in full all Base Rent and Additional Charges payable hereunder by Tenant
during the Term; in the event of
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any such temporary appropriation or taking, Tenant shall be entitled to receive
that portion of any award which represents compensation for the use of or
occupancy of the Premises during the Term, and Landlord shall be entitled to
receive that portion of any award which represents the cost of restoration of
the Premises and the use and occupancy of the Premises after the end of the
Tenn. If such temporary taking is for a period longer than two hundred and
seventy (270) days and unreasonably interferes with Tenant's use of the Premises
or the Project Common Areas, then, Tenant shall have the right to terminate the
Lease. Landlord and Tenant understand and agree that the provisions of this
Paragraph 21 are intended to govern fully the rights and obligations of the
parties in the event of a Taking of all or any portion of the Premises.
Accordingly, the parties each hereby waives any right to terminate this Lease in
whole or in part under Sections 1265.120 and 1265.130 of the California Code of
Civil Procedure or under any similar Law now or hereafter in effect.
22. SALE BY LANDLORD. If Landlord sells or otherwise conveys its
interest in the Premises, Landlord shall be relieved of its obligations under
the Lease from and after the date of sale or conveyance (including the
obligations of Landlord under Section 39), only when Landlord transfers any
security deposit of Tenant to its successor and the successor assumes in writing
the obligations to be performed by Landlord on and after the effective date of
the transfer (including the obligations of Landlord under Section 39), whereupon
Tenant shall attorn to such successor.
23. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be
performed by Tenant under any of the terms of this Lease shall be performed by
Tenant at Tenant's sole cost and expense and without any abatement of Base Rent
or Additional Charges. If Tenant shall default in the payment of any sum of
money, other than Base Rent or Additional Charges, required to be paid by it
hereunder or shall fail to perform any other act on its part to be performed
hereunder, and such failure shall continue for the applicable cure period
provided in Paragraph 19 (except in the event of emergency, when no cure period
shall be required), Landlord may, but shall not be obligated so to do, and
without waiving or releasing Tenant from any obligations of Tenant, make any
such payment or perform any such act on Tenant's part to be made or performed as
provided in this Lease. All sums so paid by Landlord and all necessary
incidental costs together with interest thereon at the Default Rate, from the
date of such payment by Landlord shall be payable as Additional Charges to
Landlord on demand.
24. SURRENDER OF PREMISES.
(a) At the end of the Term or any renewal thereof or other sooner
termination of this Lease, Tenant will peaceably deliver to Landlord possession
of the Premises, together with all improvements or additions upon or belonging
to Landlord, by whomsoever made, in the same condition as received, or first
installed, subject to the terms of Paragraphs 39 & 21 and the rights and
obligation of Tenant concerning casualty damage pursuant to Paragraph 20, damage
by fire, earthquake, Act of God, ordinary wear and tear, Hazardous Substances
(other than those for which Tenant is indemnifying Landlord pursuant to
Paragraph 39) or the elements alone excepted. Tenant may, upon the termination
of this Lease, remove all movable furniture and equipment belonging to Tenant,
at Tenant's sole cost, provided that Tenant repairs any damage caused by such
removal. Property not so removed shall be deemed abandoned by Tenant, and title
to the same shall thereupon pass to Landlord. Upon request by Landlord, and
unless otherwise agreed to in writing by Landlord, Tenant shall remove, at
Tenant's sole cost, any or all Alterations to the Premises installed by or at
the expense of Tenant and all movable furniture and equipment belonging to
Tenant which may be left by Tenant and repair any damage resulting from such
removal.
(b) The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation thereof, shall not work a merger, and shall, at the option
of Landlord, terminate all or any existing subleases or subtenancies, or may, at
the option of Landlord, operate as an assignment to it of any or all such
subleases or subtenancies.
25. WAIVER. If either Landlord or Tenant waives the performance of any
term, covenant or condition contained in this Lease, such waiver shall not be
deemed to be a waiver of any subsequent breach of the same or any other term,
covenant or condition contained herein. Furthermore, the acceptance of Base Rent
or Additional Charges by Landlord shall not constitute a waiver of any preceding
breach by Tenant of any term, covenant or condition of this Lease, regardless of
Landlord's knowledge of such preceding breach at the time Landlord accepted such
Base Rent or Additional Charges. Failure by Landlord to enforce any of the
terms, covenants or conditions of this Lease for any length of time shall not be
deemed to waive or to decrease the right of Landlord to insist thereafter upon
strict performance by Tenant. Waiver by Landlord of any term, covenant or
condition contained in this Lease may only be made by a written document signed
by Landlord.
26. NOTICES. Except as otherwise expressly provided in this Lease, any
bills, statements, notices, demands, requests or other communications given or
required to be given under this Lease shall be effective only if rendered or
given in writing, sent by certified mail, return receipt requested, reputable
overnight carrier, or delivered personally, (i) to Tenant (A) at Tenant's
address set forth in the Basic Lease Information, if sent prior to Tenant's
taking possession of the Premises, or (B) at the Premises if sent subsequent to
Tenant's taking possession of the Premises, or (C) at any place where Tenant may
be found if sent subsequent to Tenant's vacating, deserting, abandoning or
surrendering the Premises; or (ii) to Landlord at Landlord's address set forth
in the Basic Lease Information; or (iii) to such other address as either
Landlord or Tenant may designate as its new address for such purpose by notice
given to the other in accordance with the provisions of this Paragraph 26. Any
such bill, statement, notice, demand, request or other communication shall be
deemed to have been rendered or given on the date the return receipt indicates
delivery of or refusal of delivery if sent by certified mail, the day upon which
recipient accepts and signs for delivery from a reputable overnight carrier, or
on the date a reputable overnight carrier indicates refusal of delivery, or upon
the date
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personal delivery is made. If Tenant is notified in writing of the identity and
address of any Mortgagee or ground or underlying lessor, Tenant shall give to
such Mortgagee or ground or underlying lessor notice of any default by Landlord
under the terms of this Lease in writing sent by registered or certified mail,
and such Mortgagee or ground or underlying lessor shall be given the opportunity
to cure such default (as defined in Paragraph 19(b)) prior to Tenant exercising
any remedy available to it.
27. TAXES PAYABLE BY TENANT. At least ten (10) days prior to
delinquency Tenant shall pay all taxes levied or assessed upon Tenant's
equipment, furniture, fixtures and other personal property located in or about
the Premises. If the assessed value of Landlord's property is increased by the
inclusion therein of a value placed upon Tenant's equipment, furniture, fixtures
or other personal property, Tenant shall pay to Landlord, upon written demand,
the taxes so levied against Landlord, or the proportion thereof resulting from
said increase in assessment.
28. ABANDONMENT. Tenant shall not abandon the Premises and cease
performing its financial and maintenance obligations under this Lease at any
time during the Term, and if Tenant shall abandon and cease performing its
financial and maintenance obligations under this Lease, or surrender the
Premises or be dispossessed by process of law, or otherwise, any personal
property belonging to Tenant and left on the Premises shall, at the option of
Landlord, be deemed to be abandoned and title thereto shall thereupon pass to
Landlord. Notwithstanding anything to contrary contained herein, Tenant shall
not be allowed to vacate the Premises if such would result in a termination of
Landlord's insurance. Upon Tenant's request, Landlord will ask its insurer if
such vacation of the Premises would result in termination of its current
insurance policy. For purposes of this Paragraph 28, the Tenant shall not be
deemed to have abandoned the Premises solely because the Tenant is not occupying
the Premises.
29. SUCCESSORS AND ASSIGNS. Subject to the provisions of Paragraph 9,
the terms, covenants and conditions contained herein shall be binding upon and
inure to the benefit of the parties hereto and their respective legal and
personal representatives, successors and assigns.
30. ATTORNEY'S FEES. If Tenant or Landlord brings any action for any
relief against the other, declaratory or otherwise, arising out of this Lease,
including any suit by Landlord for the recovery of Base Rent or Additional
Charges or possession of the Premises, the losing party shall pay to the
prevailing party a reasonable sum for attorney's fees, which shall be deemed to
have accrued on the commencement of such action and shall be paid whether or not
the action is prosecuted to judgment.
31. LIGHT AND AIR. Tenant covenants and agrees that no diminution of
light, air or view by any structure which may hereafter be erected (whether or
not by Landlord) shall entitle Tenant to any reduction of rent under this Lease,
result in any liability of Landlord to Tenant, or in any other way affect this
Lease or Tenant's obligations hereunder.
32. SECURITY DEPOSIT.
(a) LETTER OF CREDIT. Concurrently with Tenant's execution of
this Lease, Tenant shall deliver to Landlord an unconditional, irrevocable,
transferable letter of credit, in an amount equal to Six Hundred and Fifty
Thousand Dollars ($650,000) issued by a financial institution acceptable to
Landlord in the form attached hereto as Exhibit G", with an original term of no
less than one year and automatic extensions through the end of the Term of this
Lease and sixty (60) days thereafter (the "Letter of Credit"). The Letter of
Credit shall be increased in an amount equal to fifty percent (50%) of any
Additional Allowance utilized by Tenant within three (3) business days after
[approval of the cost estimate for the Tenant Improvements pursuant to Paragraph
5 of the Work Letter]. Tenant shall keep the Letter of Credit, at its expense,
in full force and effect until the sixtieth (60th) day after the Expiration Date
or other termination of this Lease, to insure the faithful performance by Tenant
of all of the covenants, terms and conditions of this Lease, including, without
limitation, Tenant's obligations to repair, replace or maintain the Premises and
Tenant's obligations under the Work Letter; provided, however, at any time
during the term that Landlord holds cash as a security deposit hereunder in the
amount of the Letter of Credit, Tenant shall not be in default hereunder for
failing to maintain the Letter of Credit. The Letter of Credit shall provide
sixty (60) days' prior written notice to Landlord of cancellation or material
change thereof, and shall further provide that, in the event of any nonextension
of the Letter of Credit at least thirty (30) days prior to its expiration, the
entire face amount shall automatically be paid to Landlord, and Landlord shall
hold the funds so obtained as the security deposit required under this Lease. If
for any reason such automatic payment does not occur in the event of a
nonextension at least thirty (30) days prior to expiration, Landlord shall be
entitled to present its written demand for payment o the entire face amount of
the Letter of Credit, and the funds paid to Landlord in respect of such demand
shall be held as provided above. Any unused portion of the funds so obtained by
Landlord shall be returned to Tenant upon replacement of the Letter of Credit or
deposit of cash security in the full amount required as the face amount of the
Letter of Credit hereunder. If Landlord uses any portion of the Letter of
Credit, or the cash security deposit resulting from a draw on the Letter of
Credit, to cure any default by Tenant hereunder, Tenant shall replenish the
security deposit to the original amount within ten (10) days of notice from
Landlord. Tenant's failure to do so shall become be a material breach of this
Lease. Landlord shall keep any cash security funds separate from its general
funds, and shall invest such cash security at Tenant's reasonable direction, and
any interest actually earned by Landlord on such cash security shall be paid to
Tenant quarterly. If an event of default occurs under this Lease or the Work
Letter (including, without limitation, any default by Tenant with respect to its
payment and performance obligations under the Work Letter), or if Tenant is the
subject of an Insolvency Proceeding, Landlord may present its written demand for
payment of the entire face amount of the Letter of Credit and the funds so
obtained shall become due and payable to Landlord. Landlord may retain such
funds to the extent required to compensate Landlord for damages incurred, or to
reimburse Landlord as provided herein, in
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connection with any such default, and any remaining funds shall be held as a
cash security deposit. Without limiting the foregoing, in the event of a default
in Tenant's obligations to complete or pay for the Tenant Improvements in
accordance with the Work Letter, Landlord may use the security deposit to
complete and/or pay for the Tenant Improvements to the extent of Tenant's
obligations as contemplated by the Work Letter. Landlord shall pay the costs of
such Letter of Credit to the extent that they do not exceed one percent (1%) of
the face value of the Letter of Credit.
(b) ANNUAL REDUCTION OF LETTER OF CREDIT. The face amount of
the Letter of Credit may be reduced on the third through seventh
anniversaries of the Rent Commencement Date in the amount of one-fourth
(1/4th) of the initial balance, so long as (i) Tenant is not in default (and
no event has occurred which, with the passage of time or giving of notice or
both, would constitute a default under the Lease on such anniversary date,
and (ii) Landlord has not delivered a notice of Tenant's failure to perform
any of its monetary obligations hereunder during the previous six months,
regardless of whether such failure was cured by Tenant within any applicable
grace or cure period; provided, however, that any such notice of failure to
perform relating to a non-monetary failure to perform which was disputed, in
good faith, by Tenant and ultimately determined (by agreement of the parties,
arbitration or judicial action) not to be a violation of this Lease shall not
be considered for purposes of determining whether such condition has been met.
(c) RETURN OF LETTER OF CREDIT. The Letter of Credit shall be
returned to, at any time after the third anniversary of the Rent Commencement
Date when Tenant can establish to Landlord's reasonable satisfaction that as of
the end of any fiscal year of Tenant following the third anniversary of the Rent
Commencement Date, Tenant has (i) annual net income in excess of Twenty Million
Dollars ($20,000,000) for the previous two consecutive years, (ii) shareholder
equity in excess of One Hundred Million Dollars ($100,000,000), and (iii) cash
and cash equivalents in excess of Twenty-five Million Dollars ($25,000,000), all
as determined in accordance with GAAP and as reflected on certified, audited
financial statements.
(d) CONVERSION OF DEPOSIT TO LOAN. Landlord and Tenant
acknowledge and agree that, if Tenant defaults under this Lease and Landlord
elects to pursue its remedies under California Civil Code Section 1951.2 or
under this Lease to terminate this Lease (any such event, a "Landlord Action"),
(i) Landlord will incur certain damages, costs and expenses, including, without
limitation, marketing costs, commissions, relocation costs, tenant improvement
costs, and carrying costs in connection with releasing the Premises, in addition
to the other damages, costs and expenses Landlord may incur as a result of such
default and/or other defaults under this Lease (all of the foregoing
collectively, "Default Damages"); (ii) Landlord has no assurance of a source of
funds to cover such Default Damages other than the proceeds of the Letter of
Credit (or cash collateral); and (iii) the proceeds of the Letter of Credit (or
cash collateral) should be available to Landlord to apply to Default Damages,
even if the amount thereof exceeds that amount to which Landlord is ultimately
determined to be entitled under this Lease and pursuant to applicable law.
Accordingly, at Landlord's sole election, Landlord shall be entitled to draw the
full amount of the Letter of Credit (or the full amount of cash collateral shall
be released to Landlord) which is then existing (after any previous application
of funds by Landlord and/or replenishment by Tenant pursuant to Paragraph 32(a)
above), simultaneously with commencement of a Landlord Action or at any time
thereafter. All proceeds thereof in excess of amounts applied (pursuant to
Paragraph 32(a)) to Default Damages incurred by Landlord prior to commencement
of the Landlord Action shall be deemed a loan from Tenant to Landlord (the
*Default Loan"). The Default Loan shall be unsecured and shall not bear
interest, and repayment thereof shall be limited to the terms and conditions set
forth in this paragraph. Any sums to which Landlord from time to time becomes
entitled hereunder and pursuant to law as a result of Tenant's default and
any previous defaults of the Lease, to which the Letter of Credit (or cash
collateral) has not previously been applied pursuant to Paragraph 32(a), shall
be offset against the principal balance of the Loan. The amount of the Default
Loan remaining, if any, after such offset shall be referred to herein as the
"Excess Amount" The Excess Amount shall be payable by Landlord to Tenant from,
and only from, first any proceeds from the Letter of Credit (or cash collateral)
which have not been applied to Default Damages incurred by Landlord after the
same are finally determined (the "Remaining Proceeds"), and then Excess Rent.
The Remaining Proceeds shall be paid by Landlord to Tenant promptly upon final
determination after the entire Premises are leased to a third party or parties.
If Tenant disputes the amount of Remaining Proceeds paid by Landlord, Tenant may
submit such dispute to arbitration in accordance with Paragraph 40 [Arbitration
of Disputes] of this Lease. "Excess Rent" shall mean the amount by which (x)
rent received by Landlord (from the tenant or tenants leasing all or any portion
of the Premises after Tenant's default) in any month exceeds (y) the amount of
rent that would have been payable under this Lease for such month if this Lease
had not been terminated. Landlord shall pay Tenant one-half of the Excess Rent
until the earlier of (A) the date the Excess Amount is fully repaid or (B) the
date that would have been the Expiration Date (excluding any Renewal Term) of
this Lease. Any remaining balance of the Default Loan on such date shall be
deemed forgiven. If the Default Loan is insufficient to cover all Default
Damages, Tenant shall pay Landlord any SUCH shortfall immediately upon demand by
Landlord, and Landlord shall have all rights and remedies available at law or
elsewhere in the Lease with respect to such shortfall.
33. CORPORATE AUTHORITY; FINANCIAL INFORMATION. If Tenant signs as a
corporation each of the persons executing this Lease on behalf of Tenant does
hereby covenant and warrant that Tenant is a duly authorized and existing
corporation, that Tenant has and is qualified to do business in California, that
the corporation has full right and authority to enter into this Lease, and that
each and both of the persons signing on behalf of the corporation were
authorized to do so. Upon Landlord's request, Tenant shall provide Landlord with
evidence reasonably satisfactory to Landlord confirming the foregoing covenants
and warranties. Tenant hereby further covenants and warrants to Landlord that
all financial information and other descriptive information regarding Tenant's
business, which has been or shall be furnished to Landlord, is to Tenant's best
knowledge accurate and complete at the time of delivery to Landlord.
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34. PARKING. Tenant shall have the right to use the Building's parking
spaces in common with other tenants or occupants of the Building, if any,
subject to the Encumbrances and the rules and regulations of Landlord for such
parking facilities which may be established or altered by Landlord at any time
or from time to time during the term.
35. MISCELLANEOUS.
(a) The term "Premises" wherever it appears herein includes and
shall be deemed or taken to include (except where such meaning would be clearly
repugnant to the context) the office space demised and improvements now or at
any time hereafter comprising or built in the space hereby demised. The
paragraph headings herein are for convenience of reference and shall in no way
define, increase, limit or describe the scope or intent of any provision of this
Lease. The term "Landlord" shall include Landlord and its successors and
assigns. In any case where this Lease is signed by more than one person, the
obligations hereunder shall be joint and several. The term "Tenant" or any
pronoun used in place thereof shall indicate and include the masculine or
feminine, the singular or plural number, individuals, firms or corporations, and
their and each of their respective successors, executors, administrators, and
permitted assigns, according to the context hereof.
(b) Time is of the essence of this Lease and all of its
provisions. This Lease shall in all respects be governed by the laws of the
State of California. This Lease, together with its exhibits, contains all the
agreements of the parties hereto and supersedes any previous negotiations. There
have been no representations made by the Landlord or understandings made between
the parties other than those set forth in this Lease and its exhibits. This
Lease may not be modified except by a written instrument by the parties hereto.
(c) If for any reason whatsoever any of the provisions hereof
shall be unenforceable or ineffective, all of the other provisions shall be and
remain in full force and effect.
(d) Upon Tenant paying the Base Rent and Additional Charges and
performing all of Tenant's obligations under this Lease, Tenant may peacefully
and quietly enjoy the Premises during the Term as against all persons or
entities lawfully claiming by or through Landlord; subject, however, to the
provisions of this Lease.
36. TENANT'S REMEDIES. If any default hereunder by Landlord is not
cured within the applicable cure period provided in Subparagraph 19(b), Tenant's
exclusive remedies shall be an action for specific performance or action for
actual damages. Tenant hereby waives the benefit of any laws granting it (A) the
right to perform Landlord's obligation, or (B) the right to terminate this Lease
or withhold Rent on account of any Landlord default. Tenant shall look solely to
Landlord's interest in the Project for the recovery of any judgment from
Landlord. Landlord, or if Landlord is a partnership, its partners whether
general or limited, or if Landlord is a corporation, its directors, officers or
shareholders, shall never be personally liable for any such judgment. Any lien
obtained to enforce such judgment and any levy of execution thereon shall be
subject and subordinate to any mortgage or deed of trust (excluding any mortgage
or deed of trust which was created as part of an effort to defraud creditors,
i.e., a fraudulent conveyance); provided, however that any such judgement and
any such levy of execution thereon shall not be subject or subordinated to any
mortgage or deed of trust that shall have been created or recorded in the
official records of Santa Clara County after the date of the judgement giving
rise to such lien. Landlord's interest in the Project shall include any
insurance proceeds received by Landlord which are not controlled by Landlord's
lender and any proceeds of the Security Deposit under this Lease that are then
held by Landlord.
37. REAL ESTATE BROKERS. Each party represents that it has not had
dealings with any real estate broker, finder or other person with respect to
this Lease in any manner, except for any broker named in the Basic Lease
Information, whose fees or commission, if earned, shall be paid as provided in
the Basic Lease Information. Each party shall hold harmless the other party from
all damages resulting from any claims that may be asserted against the other
party by any other broker, finder or other person with whom the other party has
or purportedly has dealt.
38. LEASE EFFECTIVE DATE. Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of or
option for lease, and it is not effective as a lease or otherwise until
execution and delivery by both Landlord and Tenant.
39. HAZARDOUS SUBSTANCE LIABILITY. Tenant has received from Landlord a
copy of the following reports (the "Environmental Reports"):" Phase I and II
Environmental Assessment Report, Circle Star Theater Property, 1717 Industrial
Way, San Carlos, California, January 31, 1997 prepared by McLaren/Hart
Environmental Engineering Corporation. Except as noted in the Environmental
Reports, Landlord represents and warrants that to the best of its knowledge, the
Premises and Project are presently free of asbestos, toxic waste, underground
storage tanks and other Hazardous Substances in amounts exceeding legally
established maximum thresholds. Additionally, except as noted in the
Environmental Reports, Landlord represents that it has received no written
notice of any violation or claimed violation with respect to the presence of
toxic or Hazardous Substances on, in or under the Project or of any pending or
contemplated investigation or other action relating thereto.
(a) Definition of Hazardous Substances. For the purpose of this
Lease, "Hazardous Substances" shall be defined, collectively, as oil, flammable
explosives, asbestos, radioactive materials, hazardous wastes, toxic or
contaminated substances or similar materials, including, without limitation, any
substances which are "hazardous substances," "hazardous wastes," "hazardous
materials" or "toxic substances"
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under applicable environmental laws, ordinance or regulation.
(b) TENANT INDEMNITY. Tenant releases Landlord from any
liability for, waives all claims against Landlord and shall indemnify, defend
and hold harmless Landlord, its employees, partners,, agents,, subsidiaries and
affiliate organizations against any and all claims, suits, loss, costs
(including costs of investigation, clean up, monitoring, restoration and
reasonably attorney fees), damage or liability, whether foreseeable or
unforeseeable, by reason of property damage (including diminution in the value
of the property of Landlord), personal injury or death directly arising from or
related to Hazardous Substances released, manufactured, discharged, disposed,
used or stored on, in, or under the Property or Premises during the initial Term
and any extensions of this Lease by Tenant or its employees, agents, sublessees,
assignees or contractors. The provisions of this Tenant Indemnity regarding
Hazardous Substances shall survive the termination of the Lease.
(c) LANDLORD INDEMNITY. Landlord releases Tenant from any
liability for, waives all claims against Tenant and shall indemnify, defend and
hold harmless Tenant, its officers, employees, and agents to the extent of
Landlord's interest in the Project, against any and all actions by any
governmental agency for clean up of Hazardous Substances on or under the
Property, including costs of legal proceedings, investigation, clean up,
monitoring, and restoration, including reasonable attorney fees, if, and to the
extent, arising from the presence of Hazardous Substances on, in or under the
Property or Premises, except to the extent caused by the release, disposal, use
or storage of Hazardous Substances in, on or about the Premises by Tenant, its
employees, agents, sublessees, assignees, or contractors. The provisions of this
Landlord Indemnity regarding Hazardous Substances shall survive the termination
of the Lease.
Tenant has informed Landlord, that except for very immaterial amounts of toxic
materials incidental to its office. use (e.g. copier toner), Tenant will not use
and Hazardous Substances in material amounts within the Building and shall
comply with any applicable laws to the extent that it does.
40. ARBITRATION OF DISPUTES.
ANY CONTROVERSY OR CLAIM ARISING OUT OF THIS LEASE OR A BREACH OF
THIS LEASE SOLELY BETWEEN LANDLORD AND TENANT RELATING TO A MONETARY DEFAULT IN
AN AMOUNT OF LESS THAN TWENTY-FIVE THOUSAND DOLLARS ($25,000), BUT NOT INCLUDING
A DEFAULT WITH RESPECT TO THE TIMELY PAYMENT OF BASE RENT AND ADDITIONAL
CHARGES, SHALL BE SETTLED BY ARBITRATION BEFORE THE JUDICIAL ARBITRATION
MEDIATION SERVICE (JAMS) IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION, AND JUDGMENT ON THE AWARD RENDERED BY THE ARBITRATOR(S)
MAY BE ENTERED IN ANY COURT HAVING JURISDICTION.
NOTICE: BY INITIALLY IN THE SPACE BELOW YOU ARE AGREEING TO HAVE
ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU
ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A
COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY
INCLUDED IN THE ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO
THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT
DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION.
Consent to neutral arbitration by: /s/ XXX (Landlord): /s/ Keith Teare
(Tenant).
41. SIGNAGE. Tenant shall b lowed to use a proportional share (based
on square footage) of the main lobby directory and the monument sign located at
the Project's entry off of Industrial Road, as well as building standard signage
at the lobby on Tenant's floor as well as Tenant's main entry door. Such signage
shall be in conformity with standards provided by Landlord, and subject to
approval by Landlord. All signage shall be at Tenant's expense.
42. OPTION TO RENEW. Upon condition that (i) no event of default is
continuing under this Lease at the time of exercise or at the commencement of
the option term, and (ii) Tenant or its affiliate continues to physically occupy
at least fifty percent (50%) of the Premises, then Tenant shall have the right
to extend the Term for one (1) period of five (5) years ("Extension Term(s)")
following the initial Expiration Date, by giving written notice ("Exercise
Notice") to Landlord at least eighteen (18) months prior to the Expiration of
the Term.
43. RENT DURING EXTENSION TERM. The Monthly Base Rent during the five
(5) year Extension Term shall be the greater of the Base Rent paid during the
last month of the immediately preceding Term or the Fair Market Rental Value for
the Premises as of the commencement of the option term, as determined below:
(a) Within thirty (30) days after receipt of Tenant's Exercise
Notice, Landlord shall notify Tenant of Landlord's estimate of the Fair Market
Rental Value for the Premises, as determined below, for
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determining Monthly Base Rent during the ensuing Extension Term; provided,
however, if Tenant's Exercise Notice is given more than eighteen (I 8) months
before the Expiration Date, Landlord's estimate of Fair Market Rental Value may,
but need not be given more than eighteen (18) months before the Expiration Date.
Within fifteen (15) days after receipt of such notice from Landlord, Tenant
shall notify Landlord in writing that it (i) agrees with such rental rate or
(ii) disagrees with such rental rate. No response shall constitute agreement. In
the event that Tenant disagrees with Landlord's estimate of Fair Market Rental
Value for the Premises, then the parties shall meet and endeavor to agree within
fifteen (15) days after Landlord receives Tenant's notice described in the
immediately preceding sentence. If the parties cannot agree upon the Fair Market
Rental Value within said fifteen (15) day period, then the parties shall submit
the matter to binding appraisal in accordance with the following procedure
except that in any event neither party shall be obligated to start such
procedure sooner than eighteen (18) months before the expiration of the Lease
Term. Within fifteen (15) days of the conclusion of the period during which the
two parties fail to agree (but not sooner than eighteen (18) months before the
expiration of the Lease Term), the parties shall either (i) jointly appoint an
appraiser for this purpose or (ii) failing this joint action, each separately
designate a disinterested appraiser. No person shall be appointed or designated
an appraiser unless such person has at least five (5) years experience in
appraising major commercial property in San Marco County and is a member of a
recognized society of real estate appraisers. If within thirty (30) days after
the appointment, the two appraisers reach agreement on the Fair Market Rental
Value for the Premises, that value shall be binding and conclusive upon the
parties. If the two appraisers thus appointed cannot reach agreement on the Fair
Market Rental Vaue for the Premises within thirty (30) days after their
appointment, then the appraisers thus appointed shall appoint a third
disinterested appraiser having like qualifications within five (5) days. If
within thirty (30) days after the appointment of the third appraiser a majority
of the appraisers agree on the Fair Market Rental Value of the Premises, that
value shall be binding and conclusive upon the parties. If within thirty (30)
days after the appointment of the third appraiser a majority of the appraisers
cannot reach agreement on the Fair Market Rental Value for the Premises, then
the three appraisers shall each simultaneously submit their independent
appraisal to the parties, the appraisal farthest from the median of the three
appraisals shall be disregarded, and the mean average of the remaining two
appraisals shall be deemed to be the Fair Market Rental Value for the Premises
and shall be binding and conclusive upon the parties. Each party shall pay the
fees and expenses of the appraiser appointed by it and shall share equally the
fees and expenses of the third appraiser. If the two appraisers appointed by the
parties cannot agree on the appointment of the third appraiser, they or either
of them shall give notice of such failure to agree to the parties and if the
parties fail to agree upon the selection of such third appraiser within ten (10)
clays after the appraisers appointed by the parties give such notice, then
either of the parties, upon notice to the other party, may request such
appointment by the American Arbitration Association or, on it failure, refusal
or inability to act, may apply for such appointment to the presiding judge of
the Superior Court of San Mateo County, California.
(b) Wherever used throughout this Paragraph (Rent during
Extension Term) the term "Fair Market Rental Value" shall mean the fair market
rental value of the Premises, using as a guide the rate of monthly base rent
which would be charged during the Extension Term (including periodic increases
during the Extension Term, if any) in the Mid-Peninsula area for comparable high
image, Class A office space in comparable condition, of comparable quality, as
of the time that the Extension Term commences, with appropriate adjustments
regarding taxes, insurance and operating expenses as necessary to insure
comparability to this Lease, as the case may be, and also taking into
consideration amount and type of parking, location, leasehold improvements,
proposed term of lease, amount of space leased, extent of service provided or to
be provided, and any other relevant terms or conditions (including consideration
of whether or not the monthly base rent is fixed).
(c) In the event of a failure, refusal or inability of any
appraiser to act, his successor shall be appointed by the party who originally
appointed him, but in the case of the third appraiser, his successor shall be
appointed in the same manner as provided for appointment of the third appraiser.
(d) The appraisers shall render their appraisals in writing
with counterpart copies to Landlord and Tenant. The appraisers shall have no
power to modify the provisions of this Lease.
(e) To the extent that binding appraisal has not been completed
prior to the expiration of any preceding period for which Monthly Base Rent has
been determined, Tenant shall pay Monthly Base Rent at the rate estimated by
Landlord, with an adjustment to be made once Fair Market Rental Value is
ultimately determined by binding appraisal. In no event shall any such
adjustment result in a decrease of the Monthly Base Rent for the Premises below
the amount payable by Tenant as of the period immediately preceding the ensuing
Extension Term.
(f) From and after the commencement of the Extension Term, all
of the other terms, covenants and conditions of the Lease shall also apply;
provided, however, that Tenant shall have no further rights to extend the Term.
44. .SATELLITE ANTENNA. During the Term, Tenant shall have the right,
subject to relevant regulatory approvals, availability of space within the
roofscreen and Landlord's consent, such consent not to be unreasonably withheld
or delayed, to install a satellite antenna ("Antenna") within the roofscreen on
the roof of the Building in a location satisfactory to both Landlord and Tenant.
Without otherwise limiting the criteria upon which Landlord may withhold its
consent to any proposed Antenna, if Landlord withholds its consent due to
concerns regarding the appearance of the Antenna or the impact on structural
aspects of the Building, such withholding of consent shall be presumptively
reasonable. Tenant shall not be charged any rent for roof space. Prior to
submitting any plans to the City of San Carlos or proceeding with any
installation of an Antenna, Tenant shall submit to Landlord elevations and
specifications for the Antenna. Tenant shall install any approved
20
<PAGE>
Antenna at its sole expense and shall be responsible for any damage caused by
the installation of the Antenna or related to the Antenna. At the end of the
Term, Tenant shall remove the Antenna from its location and repair any damage
caused by such removal.
45. RIGHT TO RELOCATE TENANT. By written notice delivered to Tenant by
Landlord on or before January 15, 1999, Landlord may elect to relocate Tenant to
the third floor of the building in which the Premises is located. In the event
Landlord makes such election the following provisions shall apply:
(i) The Tenant's Plan Delivery Date, and Scheduled
Commencement Date shall be extended by the number of days
between the date this Lease is fully executed and the date
of such notice;
(ii) The Rentable Area of the Premises designated on the
Basic Lease Information shall be 26,561;
(iii) The Tenant Allowance of $579,800 designated on the
Basic Lease Information shall be increased to $609,925 and
the $15,000 glass allowance shall be available to Tenant
for its actual out-of-pocket costs for architectural fees
incurred in connection with the relocation of Tenant
pursuant to this Paragraph 45; and
(iv) At the request of either party, Landlord and Tenant
shall execute a memorandum confirming the foregoing.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
date first above written.
LANDLORD:
CIRCLE STAR CENTER ASSOCIATES, L.P.
a California limited partnership
By: M-D Ventures, Inc.
Its: General Partner
By: /s/ Steve Dostart
---------------------------------
Steve Dostart
Its: Vice President
TENANT:
CENTRAAL CORPORATION
a California corporation
By: /s/ Keith Teare
---------------------------------
Keith W. Teare
Its: President & CEO
21
<PAGE>
EXHIBIT "B"
- --------------------------------------------------------------------------------
WORK LETTER
1. BASE BUILDING: Landlord shall furnish and install the office building,
as defined in the plans listed in the attached Exhibit B-l, "Landlord's Plans,"
at Landlord's expense ("Base Building").
2. TENANT'S PLANS: On or before Tenant's Plan Delivery Date, as specified
in the Basic Lease Information, Tenant shall submit plans and specifications for
the tenant improvements which Tenant desires to construct within the Premises
("Tenant's Plans"). Tenant's Plans shall include all such information required
by Landlord's contractor to bid and construct said improvements, including but
not limited to those items in Exhibit B-2, "Minimum Information Required." Such
plans shall be subject to Landlord's approval, which shall not be unreasonably
withheld so long as the tenant improvements contemplated therein are (i)
substantially in compliance with any preliminary space plan drawn by Bernhard
Blauel and faxed to Gladys Gardiner on December 5, 1998, and (ii) such finishes
are in compliance with typical Class A office building improvements and
Landlord's building standard finishes (e.g. blinds, color of doors, etc.).
Tenant shall engage Landlord's architect and/or engineers to prepare complete
mechanical, electrical, plumbing, and other engineering plans for the
installation of the heating, ventilating, air conditioning, electrical and
plumbing to be installed in the Premises, and the costs charged by Landlord's
architect and/or engineers for such services shall not exceed reasonable and
competitive rates. The engineering fees for plumbing and fire sprinkler work
shall be competitively bid as design/build with engineered drawings to be
included in the successful contractor's scope of work.
3. TENANT IMPROVEMENTS: Landlord shall cause Landlord's contractor to
construct, at Tenant's expense, subject to the Tenant Allowance as noted below,
the additional work to complete the Premises ("Tenant Improvements") normally
performed by the construction trades, required by the plans and specifications
approved by Landlord and Tenant pursuant to this Work Letter. The quantities,
character and manner of installation of all of the foregoing work shall be
subject to the limitations imposed by any applicable regulations, laws,
ordinance, codes and roles.
4. TENANT'S EXPENSE: The cost of the Tenant Improvements, as well as
space planning and preparing the working drawings (including Tenant's Plans) for
the Tenant Improvements or any change to the original instruction and/or plans
and specifications shall be paid by Tenant. Upon Tenant's written request,
Landlord shall make available to Tenant an allowance of the amount specified in
the Basic Lease Information as the "Tenant Allowance". The Tenant Allowance may
be applied toward the following items in respect of the Tenant Improvements:
Architectural and engineering fees, space planning, building permits or other
governmental fees, cost of labor materials and other charges included in the
construction contract for construction of Tenant Improvements. The cost of the
Tenant Improvements to be paid from the Tenant Allowance or by Tenant shall not
include the following (which shall be Landlord's responsibility): (a) costs
attributable to improvements installed outside the demising walls of the
Premises; (b) costs for improvements which are not shown on or described in the
Tenant's Plans as finally approved by Landlord, other than changes required by
the City of San Carlos or other governmental authorities in connection with
their review of Tenant's Plans or issuance of permits, changes necessitated by
Tenant Delays (as defined below), or changes that are requested or approved by
Tenant; (c) attorneys' fees incurred in connection with negotiation of
construction contracts, and attorneys' fees, experts' fees and other costs in
connection with disputes with third parties, except to the extend such disputes
result from Tenant's acts or omissions; (d) unless interest and other costs
incurred by Landlord to finance Landlord's construction costs; (e) costs
incurred as a consequence of delay (other than Tenant Delays), construction
defects or default by Landlord's contractor; (f) costs recoverable by Landlord
upon account of warranties and insurance; (g) restoration costs in excess of
insurance proceeds as a consequence of casualties; (h) penaltes and late charges
attributable to Landlord's failure to pay construction costs; (i) costs to bring
the Base Building into compliance with applicable laws and restrictions,
including, without limitation, the Americans with Disabilities Act and
environmental law, except to the extend such laws and restrictions are only
triggered by Tenant's acts, improvements or particular use of the Premises; (j)
wages, labor and overhead for overtime and premium time, unless required due to
Tenant Delays; (k) offsite construction management or other general construction
overhead costs incurred by Landlord; and (1) a General Contractor's fee in
excess of that contemplated in Paragraph 5 below. Upon the approval by Landlord
and Tenant of the Landlord's contractor's cost estimate in accordance with
Paragraph 5 below, Tenant shall provide Landlord with a detailed breakdown of
the final costs to be incurred or which have been incurred in connection with
the design and construction of the Tenant Improvements (the "Final Costs").
Prior to the commencement of construction of the Tenant Improvements, Tenant
shall supply Landlord with cash in an amount (the "Over-Allowance Amount") equal
to the difference between the amount of the Final Costs and the Tenant Allowance
(less any portion thereof already disbursed by Landlord, on or before the
commencement of construction of the Tenant Improvements). The Over-Allowance
Amount shall be disbursed by Landlord pro
Exhibits - Page 2 of 17
<PAGE>
rata with the Tenant Allowance as costs are incurred for Tenant Improvements.
Any amounts payable by Tenant under this Work Letter which are in excess of the
Tenant Allowance and Over-Allowance Amount deposited with Landlord shall be paid
by Tenant to Landlord within twenty (20) days of receipt of an invoice from
Landlord.
In addition, the Tenant Improvements shall include widow shades meeting the
following specifications: Hunter Dougals 8 Mil Atlantis Mini-Blinds; Color: 190
Bright Alluminum.
5. COST ESTIMATE: Upon receipt of Tenant's Plans, Landlord shall obtain a
cost estimate for the Tenant Improvements from Landlord's contractor, the costs
and quality of which are within industry standards. Landlord shall require that
its general contractor secure three (3) approved independent sealed bids from
three (3) subcontractors for each trade whose costs are in excess of five
percent (5%) of the total cost estimate. Tenant shall have the right to add to
the bid list one unionized subcontractor in each area where costs are in excess
of such five percent (5 %) mount, subject to the general contractor's reasonable
requirements. All bids shall be submitted to Landlord and Tenant; at Tenant's
request, Landlord and Tenant shall open the bids together at the offices of the
Landlord's general contractor. Landlord agrees to permit Tenant to designate
that the lowest bidding subcontractor be selected. The General Contractor's fee
shall be calculated on a "cost plus a fee" basis where the fee for overhead and
profit is four percent (4 %) of cost and the amount charged for general
conditions is reasonable and competitive for similar tenant improvement
projects. Tenant shall not be charged any fee for Landlord's oversight of the
construction of Tenant's Improvements. If the cost estimate exceeds the Tenant
Allowance, the cost estimate shall be submitted to Tenant. Tenant shall approve
or disapprove such estimate within seven (7) days. Failure to disapprove within
such period shall constitute approval. If disapproved, Tenant shall provide new
sufficient instruction within such seven (7) days for the revision of plans and
cost estimates for approval by Landlord. Tenant shall be obligated to approve
the cost estimate if the cost is within the Tenant Allowance or any greater
budget approved by Tenant. If the cost estimate is in excess of the Tenant
Allowance or such greater budget, Tenant shall provide new sufficient
instruction which will reduce the cost estimate for the Tenant Improvements to a
level acceptable to Tenant and within any alowance provided by Landlord within
ten (10) days after receipt of the cost estimate. In the event that, after
receiving Tenant's approval of the cost estimate, the cost of the Tenant
Improvements shall increase due to the requirements of any governmental agency,
such increased amount shall automatically approved so long as it does not exceed
ten percent (10%) of the previously approved amount.
6. CONSTRUCTION OF TENANT IMPROVEMENTS: After Tenant's approval of the
cost estimate for Tenant's Plans, Landlord shall administer and diligently
prosecute the construction of Tenant Improvements in accordance with Tenant's
Plans; provided, however, that Landlord shall not be required to install any
Tenant Improvements which do not conform to the plans and specifications for the
Base Building, or do not conform to any applicable regulations, laws,
ordinances, codes and roles; such conformity shall be the obligation of Tenant.
After the cost estimate has been approved by Landlord and Tenant as provided
above, neither party shall have the right to require extra work or change orders
with respect to the construction of the Tenant Improvements without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed. All change orders shall specify any change in the cost estimate as a
consequence of the change order. All Tenant Improvements shall be constructed by
Landlord's contractor, which shall be a reputable, unionized general contractor,
subject to approval by Tenant which approval shall not be unreasonably withheld,
who will complete the work in a good and workmanlike manner and in accordance
with relevant laws and codes. Subject to the limitation on the General
Contractor's fee imposed by Paragraph 5, Tenant approves the use of Devcon
Construction, the General Contractor for the Base Building, as the General
Contractor for the Tenant Improvements.
7. TENANT'S CONTRACTORS: Cable TV connections, telephone equipment and
wiring and office equipment wiring, shall be installed by Tenant's contractors
and shall conform with Landlord's contractor's schedule and work of installation
and shall be handled in such a manner as to maintain harmonious labor relations
and as not to interfere with or delay the work of Landlord's contractors. All
such improvements furnished and installed by Tenant's contractor shall not cause
Landlord's contractor to be dependent upon the work of Tenant's contractors in
order for Landlord's contractor to complete its work. Tenant's contractors,
subcontractors and labor shall be subject to approval by Landlord which approval
shall not be unreasonably withheld or delayed and shall be subject to the
reasonable administrative supervision of Landlord's general contractor and
reasonable roles of the site. Contractors and subcontractor engaged by Tenant
shall employ laborers and means to insure, so far as may be possible, the
progress of the work without interruption on account of strikes, work stoppage
or similar causes for delay. Landlord shall give access and entry to the Leased
Premises to Tenant's contractors at least three (3) weeks prior to the scheduled
completion of the Tenant Improvements; provided, however, that if such entry is
prior to the first day of the Term such entry shall be subject to all of the
terms and conditions of this Lease except payment of Rent and Additional Charges
and Tenant shall not be allowed to commence business in the Premises.
8. SUBSTANTIAL COMPLETION/PUNCH LIST: "Substantial Completion" shall be
defined as when Landlord's contractor has substantially completed all work to be
performed by Landlord in accordance with Tenant's Plans,
Exhibits - Page 3 of 17
<PAGE>
subject only to (i) the completion or correction of items on Landlord's
architect's punch list, which shall be subject to approval by Tenant, such
approval not to be unreasonably withheld, (ii) a certificate of occupancy for
the Premises having been obtained, (iii) all utilities having been turned on and
available for use, and (iv) all Building common areas having been completed.
9. TENANT DELAYS: "Tenant Delays" shall be defined as those delays caused
in achieving Substantial Completion due to: (a) Tenant's failure to submit (i)
Tenant's Plans, (ii) approval of the cost estimates, or (iii) sufficient
instruction to change Tenant's Plans as a result of disapproval of a cost
estimate on or before the dates or time periods called for; (b) Tenant's
change(s) in plans and specifications after said dates that actually delay
construction, but only to the extent that Tenant received prior written notice
from the Landlord of the amount of delay associated with the changes before the
changes were finally approved and authorized by Tenant; (c) Tenant's request for
materials, finishes or installations which require longer than forty-five (45)
days to complete; or (d) other delays caused by Tenant in construction.
10. COMMENCEMENT DATE: The Premises shall be deemed completed and
possession delivered and Tenant shall accept the Premises upon Substantial
Completion. Notwithstanding anything to the contrary in the Lease, effective
upon delivery of the Premises to Tenant, Landlord does hereby warrant that, to
Landlord best knowledge, (a) the construction of the Tenant Improvements was
performed in accordance with all roles, regulations, codes, statutes,
ordinances, and laws of all applicable governmental and quasi-governmental
authorities and in a good and workman-like manner, (b) all materials and
equipment installed therein was new and otherwise of good quality, (c) the
electrical, plumbing, and mechanical systems servicing the Premises are in
working order and in good condition, and (d) the roof is in good condition and
water tight. The foregoing warranties shall automatically expire one year after
Substantial Completion. Tenant's obligation under the Lease to pay Rent and
Additional Charges shall commence upon the later of (i) the Scheduled
Commencement Date, as specified in the Basic Lease Information, or (ii)
Substantial Completion. If Landlord shall be delayed in substantial completion
as a result of Tenant Delays, then the Commencement Date, and Tenant's
obligation to begin paying Rent and Additional Charges, shall be adjusted to
reflect what the Commencement Date would have been if there had been no Tenant
Delays. Within seven (7) days after written request of Landlord, Tenant agrees
to give Landlord a letter confirming the Commencement Date and certifying that
Tenant has accepted delivery of the Premises and that the condition of the
Premises complies with Landlord's obligations hereunder.
Exhibits - Page 4 of 17
<PAGE>
EXHIBIT "B-I"
LANDLORD'S PLANS
The plans and specifications related to Two Circle Star Way as drawn or
assembled by Kenneth Rodrigues & Partners, Inc. as called out below:
GENERAL
A0.0 COVER SHEET 1/22/98
A0.1 GENERAL INFORMATION SHEET/ 1/22/98
TITLE 24 ENERGY COMPLIANCE
CIVIL
C0.2 STORM WATER POLLUTION PREVENTION PLAN
C1.1 LAYOUT AND PAVING PLAN 11/14/97
C1.2 LAYOUT AND PAVING PLAN 12/19/97
C2.1 GRADING PLAN 11/14/97
C2.2 GRADING PLAN 11/14/97
C3.1 UTILITY PLAN 11/14/97
C3.2 UTILITY PLAN 11/14/97
C4.1 DETAILS 11/14/97
C4.2 DETAILS 11/14/97
C4.3 DETAILS 12/19/97
ARCHITECTURAL
A2.1 BUILDING ONE FIRST FLOOR PLAN 2/26/98
A2.2 BUILDING ONE SECOND FLOOR PLAN 1/22/98
A2.3 BUILDING ONE THIRD FLOOR PLAN 1/22/98
A2.4 BUILDING ONE FOURTH FLOOR PLAN 1/22/98
A2.5 ENLARGED CORE PLAN 1/22/98
A2.6 ENLARGED BATHROOM PLANS 1/22/98
A3.1 BUILDING ONE ROOF PLAN 1/22/98
A4.1 BUILDING ONE ELEVATIONS 2/26/98
A4.2 BUILDING ONE ELEVATIONS 1/22/98
A5.1 BUILDING SECTION 1/22/98
A5.2 TYPICAL WALL SECTIONS 1/22/98
A7.1 REFLECTED CEILING PLANS 3/5/97
A7.2 ENLARGED STAIR PLANS AND SECTIONS 1/22/98
A7.3 ENLARGED ELEVATOR PLANS AND SECTIONS 1/22/98
A7.4 DOOR AND HARDWARE SCHEDULE/ROOM 3/11/98
FINISH SCHEDULE
A8.1 EXTERIOR DETAILS 1/22/98
A8.2 DOOR/WINDOW DETAILS 1/22/98
A8.3 ROOF DETAILS 1/22/98
A9.1 WALL TYPES 1/22/98
A9.2 INTERIOR DETAILS 1/22/98
A9.3 UL ASSEMBLIES 11/14/97
STRUCTURAL
S0.1 GENERAL NOTES 10/6/97
S2.1 BUILDING ONE FOUNDATION/FIRST 10/6/97
FLOOR FRAMING PLAN
S2.2 BUILDING ONE 2ND FLR. FRAMING PLAN 10/6/97
S2.3 BUILDING ONE 3RD FLR. FRAMING PLAN 10/6/97
S2.4 BUILDING ONE 4TH FLR. FRAMING PLAN 10/6/97
S2.5 BUILDING ONE ROOF FRAMING PLAN 10/6/97
S2.5A BUILDING ONE ROOF SCREEN/SLAB 10/6/97
REINFORCING PLAN
S3.1 TYPICAL CONCRETE DETAILS 7/23/97
S3.2 CONCRETE DETAILS NO. 1 10/6/97
S3.3 CONCRETE DETAILS NO. 2 10/6/97
S3.4 CONCRETE DETAILS NO. 3 I0/6/97
S5.1 TYPICAL METAL DECK DETAILS NO. 1 10/6/97
S5.2 TYPICAL METAL DECK DETAILS NO. 2 10/6/97
S5.3 TYPICAL STEEL DETAILS 10/6/97
S5.4 COLUMN SCHEDULE AND DETAILS 10/6/97
Exhibits - Page 5 of 17
<PAGE>
S5.5 BRACED FRAME ELEVATIONS AND DETAILS 10/6/97
S5.6 STEEL DETAILS NO. 1 10/6/97
S5.7 STEEL DETAILS NO. 2 10/6/97
S9.1 PRECAST PANEL SUPPORT PLAN 10/6/97
S9.2 PRECAST PANEL SUPPORT PLAN 7/30/97
S9.3 PRECAST PANEL SUPPORT DETAILS 10/6/97
LANDSCAPE
L-1 PHASE ONE NOTES AND LEGEND 2/6/98
L-2 PHASE ONE LAYOUT AND GRADING PLAN 2/6/98
L-3 PHASE ONE PLATING PLAN 2/6/98
L-4 PHASE ONE IRRIGATION 2/6/98
L-5 PHASE ONE DETAILS 7/28/97
L-6 PHASE ONE DETAILS 11/26/97
L-7 PHASE ONE DETAILS 2/6/98
MECHANICAL
AC0.01 TITLE 24, DRAWING SCHEDULE, MANDATORY 3/10/98
MEASURES, AND GENERAL NOTES 3/10/98
AC0.02 EQUIPMENT SCHEDULE 3/10/98
AC1.01 FIRST FLOOR HVAC PLAN 3/10/98
AC1.02 SECOND FLOOR HVAC PLAN 3/10/98
AC1.03 THIRD FLOOR HVAC PLAN 3/10/98
AC1.04 FOURTH FLOOR HVAC PLAN 3/10/98
AC1.05 ROOF PLAN 3/10/98
AC1.06 ROOF COORDINATION PLAN 3/10/98
AC2.01 PIPING SCHEMATICS AND DETAILS 3/10/98
AC7.01 WIRING AND CONTROLS 3/10/98
ELECTRICAL
CIR-E0 COVER SHEET 7/23/97
CIR-SE1 SITE LIGHTING PLAN 7/23/97
CIR-SE2 SITE LIGHTING PLAN 7/23/97
CIR-E1 FIRST FLOOR LIGHTING PLAN 7/23/97
CIR-E2 SECOND FLOOR LIGHTING PLAN 7/23/97
CIR-E3 THIRD FLOOR LIGHTING PLAN 7/23/97
CIR-E4 FOURTH FLOOR LIGHTING PLAN 7/23/97
CIR-E5 FIRST FLOOR POWER PLAN 7/23/97
CIR-E6 SECOND FLOOR POWER PLAN 7/23/97
CIR-E7 THIRD FLOOR POWER PLAN 7/23/97
CIR-E8 FOURTH FLOOR POWER PLAN 7/23/97
CIR-E9 FIRST FLOOR MECHANICAL PLAN - 7/23/97
CIR-E10 SECOND FLOOR MECHANICAL PLAN 7/23/97
CIR-E11 THIRD FLOOR MECHANICAL PLAN 7/23/97
CIR-E12 FOURTH FLOOR MECHANICAL PLAN 7/23/97
CIR-E13 ROOF MECHANICAL PLAN 7/23/97
CIR-E14 SINGLE LINE DIAGRAM 11/24/97
CIR-E 15 PANEL SCHEDULES 7/23/97
CIR-E 16 PANEL SCHEDULES 7/23/97
CIR-E17 TITLE 24 7/23/97
PLUMBING
P1A 1ST FLOOR BELOW GRADE 12/18/97
P1B 1ST FLOOR ABOVE GRADE 12/18/97
P2 2ND FLOOR 12/18/97
P3 3RD FLOOR 12/18/97
P4 4TH FLOOR 12/18/97
P5 ROOF PLAN 12/18/97
FIRE ALARM SYSTEM
FA-1 FIRST FLOOR BUILDING ONE 12/5/97
FA-2 SECOND FLOOR BUILDING ONE 12/5/97
FA-3 THIRD FLOOR BUILDING ONE 12/5/97
FA-4 FOURTH FLOOR BUILDING ONE 12/5/97
FA-5 ROOF PLAN BUILDING ONE 12/5/97
Exhibits - Page 6 of 17
<PAGE>
EXHIBIT "B-2"
- ----------------------------------------------------------------------------
MINIMUM INFORMATION REQUIRED
FLOOR PLANS INDICATING:
1. Location and type of all partitions;
2. Location and type of all doors. Indicate hardware and provide keying
schedule;
3. Location and type of glass partitions, windows and doors. Indicate
framing if not Building Standard;
4. Location of telephone equipment room;
5. Indicate critical dimensions necessary for construction;
6. Location of all Building Standard electrical items (outlets,
switches, telephone outlets). Building Standard lighting will be
determined by Landlord's architect;
7. Location and type of all non-Building Standard electrical items,
including lighting.
8. Location and type of equipment that will require special electrical
requirements. Provide manufacturer's specifications for use and
operation;
9. Location, weight per square foot, and description of any
exceptionally heavy equipment or filing system exceeding 50 LBS. psf
live load;
10. Requirements for special air conditioning or ventilation;
11. Type and color of floor covering;
12. Location, type, and color of wall covering;
13. Locations, type and color of Building Standard and non-Building
Standard paint or finishes;
14. Location and type of plumbing;
15. Location and type of kitchen equipment.
DETAILS SHOWING:
1. All millwork with verified dimensions and dimensions of all
equipment to be built in;
2. Corridor entrance;
3. Bracing or support of special walls, glass partitions, etc., if
desired. If not included with the space plan, the Landlord's
architect will design all support or bracing required at Tenant's
expense.
Exhibits - Page 7 of 17
<PAGE>
EXHIBIT "C"
- -------------------------------------------------------------------------------
RULES AND REGULATIONS
1. Sidewalks, halls, passages, exits, entrances, elevators, escalators
and stairways shall not be obstructed by Tenant or used by Tenant for any
purpose other than for ingress to and egress from the Premises. The halls,
passages, exits, entrances, elevators and stairways are not for the use of the
general public and Landlord shall in all cases retain the right to control and
prevent access thereto by all persons whose presence, in the judgment of
Landlord, shall be prejudicial to the safety, character, reputation arid
interests of the Building and its tenants, provided that nothing herein
contained shall be construed to prevent such access to persons with whom Tenant
normally deals in the ordinary course of Tenant's business unless such persons
are engaged in illegal activities. Tenant, and Tenant's employees or invitees,
shall not go upon the roof of the Building, except as authorized by Landlord.
2. No sign, placard, picture, name, advertisement or notice visible
from the exterior of the Premises shall be inscribed, painted, affixed,
installed or otherwise displayed by Tenant either on the Premises or any part of
the Building without the prior written consent of Landlord, and Landlord shall
have the right to remove any such sign, placard, picture, name, advertisement or
notice without notice to and at the expense of Tenant. Tenant may place its name
and logo on one wall in Reception Area of Premises.
If Landlord shall have given such consent to Tenant at any time,
whether before or after the execution of the Lease, such consent shall not in
any way operate as a waiver or release of any of the provisions hereof or of the
Lease, and shall be deemed to relate only to the particular sign, placard,
picture, name, advertisement or notice so consented to by Landlord arid shall
not be construed as dispensing with the necessity of obtaining the specific
written consent of Landlord with respect to any other such sign, placard,
picture, name, advertisement or notice. All approved signs or lettering on doors
and walls shall be printed, painted, affixed or inscribed at the expense of
Tenant by a person approved by Landlord.
3. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of tenants only and
Landlord reserves the right to exclude any other names therefrom.
4. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, awnings, hangings or decorations shall be attached to, hung or placed
in, or used in connection with, any window, door or patio on the Premises
without the prior written consent of Landlord. In any event with the prior
written consent of Landlord, all such items shall be installed inboard of
Landlord's window coverings and shall not in any way be visible from the
exterior of the Building. No articles shall be placed or kept on the window
sills so as to be visible from the exterior of the Building. No articles shall
be placed against glass partitions or doors which might appear unsightly from
outside the Building.
5. Landlord reserves the right to exclude from the Building between the
hours of 6:00 p.m. and 8:00 a.m. and at all hours on Saturdays, Sundays and
holidays all persons who do not possess a building access card provided by
Landlord or who are not accompanied by Tenant's employees. Landlord will furnish
access cards to persons for whom Tenant requests the same in writing. Tenant
shall be responsible for all persons from who it requests access cards and shall
be liable to Landlord for all acts of such persons. Landlord shall in no case be
liable for damages for error with regard to the admission to or exclusion from
the Building of any person.
During the continuance of any invasion, mob, riot, public excitement
or other circumstance rendering such action advisable in Landlord's opinion,
Landlord reserves the right to prevent access to the Building by closing the
doors, or otherwise, for the safety of tenants and protection of the Building
and property in the Building.
6. Tenant shall not employ any person or persons other than the janitor
of Landlord for the purpose of cleaning the Premises unless otherwise agreed to
by Landlord in writing. Except with the written consent of Landlord, no person
or persons other than those approved by Landlord shall be permitted to enter the
Building for the purpose of cleaning the same. Tenant shall not cause any
unnecessary labor by reason of Tenant's carelessness or indifference in the
preservation of good order and cleanliness of the Premises. Landlord shall not
in any way be responsible to Tenant for any loss of property on the Premises,
however occurring, or for any damage done to the effects of Tenant by the
janitor or any other employee or any other person.
7. Tenant shall not obtain for use upon the Premises ice, drinking
water, food, beverage, towel or other similar services except through facilities
approved in writing by Landlord and under regulations fixed by Landlord, or
accept barbering or bootblacking services in the Premises except from persons
authorized by Landlord. Tenant may have a Lunchroom/Break room in the Premises
that has a refrigerator and microwave.
Exhibits - Page 8 of 17
<PAGE>
8. Tenant shall see that the doors of the Premises are closed and
securely locked and must observe strict care and caution that all water faucets
or water apparatus are entirely shut off before Tenant or its employees leave
such Premises, and that all utilities shall likewise be carefully shut off, so
as to prevent waste or damage, and for any default or carelessness the Tenant
shall make good all injuries sustained by other tenants or occupants of the
Building or Landlord. On multiple-tenancy floors, all tenants shall keep the
door or doors to the Building corridors closed at all times except for ingress
and egress.
9. As more specifically provided in the Lease, Tenant shall not waste
electricity, water or air conditioning and agrees to cooperate fully with
Landlord to assure the most effective operation of the Building's heating and
air conditioning, and shall refrain from attempting to adjust any controls other
than room thermostats installed for Tenant's use.
10. Tenant shall leave the blinds in a down position so as to minimize
excess heat load in the building from the sun.
11. Tenant shall not alter any lock or access device or install a new or
additional lock or access device or any bolt on any door of the Premises without
the prior written consent of Landlord. If Landlord shall give its consent,
Tenant shall in each case furnish Landlord with a key for any such lock.
12. Tenant shall not make or have made additional copies of any keys or
access devices provided by Landlord. Tenant, upon the termination of the
tenancy, shall deliver to Landlord all the keys or access devices for the
Building, offices, rooms and toilet rooms which shall have been furnished to
Tenant or which Tenant shall have had made. In the event of the loss of any keys
or access devices so furnished by Landlord, Tenant shall pay Landlord therefor.
13. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein, and the expense of any breakage, stoppage or damage resulting from the
violation of this rule by Tenant or Tenant's employees or invitees shall be
borne by Tenant.
14. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material other than
limited quantities necessary for the operation or maintenance of office or
office equipment. Tenant shall not use any method of heating or air conditioning
other than supplied by Landlord.
15 Tenant shall not use, keep or permit to be used or kept in the
Premises any foul or noxious gas or substance or permit or suffer the Premises
to be occupied or used in a manner offensive or objectionable to Landlord or
other occupants of the Building by reason of noise, odors and/or vibrations or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds be brought or kept in or about the Premises or the
Building.
16. No cooking shall be done or permitted by Tenant on the Premises
(except that use by the Tenant of Underwriter's Laboratory approved equipment
for the preparation of coffee, tea, hot chocolate and similar beverages for
Tenant and its employees shall be permitted, provided that such equipment and
use are in accordance with all applicable federal, state and city laws, codes,
ordinances, rules and regulations), nor shall Premises be used for lodging. See
Paragraph 7.
17. Except with the prior written consent of Landlord, Tenant shall not
sell, or permit the sale, at retail, of newspapers, magazines, periodicals,
theater tickets or any other goods or merchandise in or on the Premises, nor
shall Tenant carry on, or permit or allow any employee or other person to carry
on, the business of stenography, typewriting or any similar business in or from
the Premises for the service or accommodation of occupants of any other portion
of the Building, nor shall the Premises be used for the storage of merchandise
or for manufacturing of any kind, or the business of a public barber shop or
beauty parlor, nor shall the Premises be used for any improper, immoral or
objectionable purpose, or any business or activity other than that specifically
provided for in Tenant's Lease.
18. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain and comply with Landlord's reasonable
instructions in their installation.
19. Landlord will direct electricians as to where and how telephone,
telegraph and electrical wires are to be introduced or installed. No boring or
cutting for wires will be allowed without the prior written consent of Landlord.
The location of burglar alarms, telephones, call boxes and other office
equipment affixed to the Premises shall be subject to the written approval of
Landlord, which shall not be unreasonably withheld.
Exhibits - Page 9 of 17
<PAGE>
20. Tenant shall not install any radio or television antenna (not
including the satellite antenna referred to in Paragraph 44 of the Lease),
loudspeaker or any other device on the exterior walls or the roof of the
Building. Tenant shall not interfere with radio or television broadcasting or
reception from or in the Building or elsewhere.
21. Tenant shall not lay linoleum, tile, carpet or any other floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved in writing by Landlord. The expense of repairing any
damage resulting from a violation of this role by Tenant or Tenant's
contractors, employees or invitees or the removal of any floor covering shall be
borne by Tenant. Tenant shall use chair pads if needed to avoid excess wear and
tear to the floor coverings.
22. The freight elevator shall be available for use by all tenants in
the Building, subject to such reasonable scheduling as Landlord in its
discretion shall deem appropriate. No furniture, freight, equipment, materials,
supplies, packages, merchandise or other property will be received in the
Building or carried up or down the elevators except between such hours and in
such elevators as shall be designed by Landlord.
Landlord shall have the right to prescribe the weight, size, and
position of all safes, furniture or other heavy equipment brought into the
Building. Safes or other heavy objects shall, if considered necessary by
Landlord, stand on wood strips of such thickness as determined by Landlord to be
necessary to properly distribute the weight thereof. Landlord will not be
responsible for loss of or damage to any such safe, equipment or property from
any cause, and all damage done to the Building by moving or maintaining any such
safe, equipment or other property shall be repaired at the expense of Tenant.
Business machines and mechanical equipment belonging to Tenant which
cause noise or vibration that may be transmitted to the structure of the
Building or to any space therein to such a degree as to be objectionable to
Landlord or to any tenants in the Building shall be placed and maintained by
Tenant, at Tenant's expense, on vibration eliminators or other devices
sufficient to eliminate noise or vibration. The persons employed to move such
equipment in or out of the Building must be acceptable to Landlord.
23. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry and
which is allowed by law. Tenant shall not mark, use double-sided adhesive tape
on, or drive nails, screw or drill into, the partitions, woodwork or plaster or
in any way deface the Premises or any part thereof, without repairing any
resulting damage. Tenant may hang pictures on walls in the Premises. Any damage
to the walls caused by molley bolts, or like hanging materials, will be repaired
by Tenant.
24. Tenant shall not install, maintain or operate upon the Premises any
vending machine without the written consent of Landlord.
25. There shall not be used in any space, or in the public areas of the
Building, either by Tenant or others, any hand trucks except those equipped with
robber tires and side guards or such other material-handling equipment as
Landlord may approve. No other vehicles of any kind shall be brought by Tenant
into or kept in or about the Premises.
26. Tenant shall store all trash and garbage within the interior of the
Premises. No material shall be placed in the trash boxes or receptacles if such
material is of such nature that it may not be disposed of in the ordinary and
customary manner of removing and disposing of trash and garbage in the
jurisdiction in which the Premises is located, without violation of any law or
ordinance governing such disposal. All trash, garbage and refuse disposal shall
be made only through entryways and elevators provided for such purposes and at
such times as Landlord shall designate.
27. Canvassing, soliciting, distribution of handbills or any other
written material and peddling in the Building are prohibited, and Tenant shall
cooperate to prevent the same. Tenant shall not make room-to-room solicitation
of business from other tenants in the Building.
28. Landlord shall have the right, exercisable without notice and
without liability to Tenant, to change the name and address of the Building.
29. Landlord reserves the right to exclude or expel from the Building
any person who, in Landlord's judgment, is intoxicated or under the influence of
liquor or drugs or who is in violation of any of the roles or regulations of the
Building.
30. Without the prior written consent of Landlord, Tenant shall not use
the name of the Building in connection with or in promoting or advertising the
business of Tenant except as Tenant's address. Tenant may use Project's name on
its stationery and business cards.
Exhibits - Page 10 of 17
<PAGE>
31. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
32. Tenant assumes any and all responsibility for protecting the
Premises from theft, robbery and pilferage, which includes keeping doors locked
and other means of entry to the Premises closed, unless caused by the gross
negligence or willful misconduct of Landlord, its agents, servants, or employees
("Landlord Parties").
33. The requirements of Tenant will be attended to only upon application
at the office of the Building by an authorized individual. Employees of Landlord
shall not perform any work or do anything outside of their regular duties unless
under special instructions from Landlord, and no employees will admit any person
(Tenant or otherwise) to any office without specific instructions from Landlord.
34. Landlord may waive any one or more of these Rules and Regulations
for the benefit of any particular tenant or tenants, but no such waiver by
Landlord shall be construed as a waiver of such Rules and Regulations in favor
of any other tenant or tenants, nor prevent Landlord from thereafter enforcing
any such Rules and Regulations against any or all tenants of the Building.
35. Landlord reserves the right to make such other and reasonable rules
and regulations as in its judgment may from time to time be needed for safety
and security, for care and cleanliness of the Building and for the preservation
of good order therein. Tenant agrees to abide by all such Rules and Regulations
hereinafter stated and any additional rules and regulations which are adopted.
No new Rule or Regulation shall be designed to discriminate solely against
Tenant.
36. Tenant shall be responsible for the observance of all of the
foregoing Rules and Regulations by Tenant's employees, agents, clients,
customers, invitees and guests.
37. Unless otherwise defined, terms used in these Rules and Regulations
shall have the same meaning as in the Lease.
Exhibits - Page 11 of 17
<PAGE>
EXHIBIT "D"
- -------------------------------------------------------------------------------
FORM OF TENANT ESTOPPEL CERTIFICATE
TO: ________________, or Assignee ("Lender"), and/or whom else it may concern:
THIS IS TO CERTIFY THAT:
1. The undersigned is the lessee ("Tenant") under that certain lease dated
_____________ 19__, ("Lease"), by and between _________________________
_________________ as lessor ("Landlord") and __________________________
__________________________ as Tenant, covering those certain premises
commonly known and designated as ___________________ ("Premises").
2. The Lease has not been modified, changed, altered, assigned, supplemented
or amended in any respect (except as indicated below; if none, state
"none"). The Lease is not in default and is valid and in full force and
effect on the date hereof. The Lease is the only Lease or agreement
between the Tenant and the Landlord affecting or relating to the
Premises. The Lease represents the entire agreement between the Landlord
and the Tenant with respect to the Premises. __________________.
3. The Tenant is not entitled to, and has made no agreement(s) with the
Landlord or its agents or employees concerning free rent, partial rent,
rebate of rent payments, credit or offset or deduction in rent, or any
other type of rental concession, including, without limitation, lease
support payments or lease buy-outs (except as indicated below; if none,
state "none"). _______________________________________________________
______________________________________________________________________.
4. The Tenant has accepted and now occupies the Premises, and is and has
been open for business since ____________ 19__. The Lease term began
______________,19___. The termination date of the present term of the
Lease, excluding unexercised renewals, is _____________, 19___.
5. The Tenant has paid rent for the Premises for the period up to and
including ______________, 19___. The fixed minimum rent and any
additional rent (including the Tenant's share of tax increases and cost
of living increases) payable by the Tenant presently is $____________ per
month. No such rent has been paid more than two (2) months in advance of
its due date, except as indicated below (if none, state "none"). The
Tenant's security deposit is $____________.
6. No event has occurred and no condition exists which, with the giving
notice or the lapse of time or both, will constitute a default under the
Lease. The Tenant has no existing defenses or offsets against the
enforcement of this Lease by the Landlord, except ____________________.
7. The Tenant has received or will receive payment or credit for tenant
improvement work in the total amount of $_________________ (or if other
than cash, describe below; if none, state "none"). All conditions under
this Lease to be performed to date by the Landlord have been satisfied.
All required contributions by the Landlord to the Tenant on account of
the Tenant's tenant improvements have been received by the Tenant, except
________________________________________________________________________
________________________________________________________________________.
8. The Lease contains, and the Tenant has, no outstanding options or rights
of first refusal to purchase the Premises or any part thereof or all or
any part of the real property of which the Premises are a part.
9. No actions, whether voluntary or otherwise, are pending against the
Tenant or any general partner of the Tenant under the bankruptcy laws of
the United States or any state thereof.
10. The Tenant has not sublet the Premises to any sublessee and has not
assigned any of its rights under the Lease, except as indicated below (if
none, state "none"). No one except the Tenant and its employees occupies
the Premises. ___________________________________________________.
11. The address for notices to be sent to the Tenant is as set forth in the
Lease.
12. To the best of Tenant's knowledge, the use, maintenance or operation of
the Premises complies with, and will at all times comply with, all
applicable federal, state, county or local statutes, laws, rules and
regulations of any governmental authorities relating to environmental,
health or safety matters (being
Exhibits - Page 12 of 17
<PAGE>
hereinafter collectively referred to as the Environmental Laws).
Exhibits - Page 13 of 17
<PAGE>
13. The Premises have not been used and the Tenant does not plan to use the
Premises for any activities which, directly or indirectly, involve the
use, generation, treatment, storage, transportation or disposal of any
petroleum product or any toxic or hazardous chemical, material,
substance, pollutant or waste.
14. Tenant has not received any notices, written or oral, of violation of any
Environmental Law or of any allegation which, if tree, would contradict
anything contained herein and there are not writs, injunctions, decrees,
orders or judgements outstanding, no lawsuits, claims, proceedings or
investigations pending or threatened, relating to the use, maintenance or
operation of the Premises, nor is Tenant aware of a basis for any such
proceeding.
15. (INCLUDE THIS PARAGRAPH FOR LOAN TRANSACTIONS.) The Tenant acknowledges
that all the interest of the Landlord in and to the Lease is being duly
assigned to Lender, and that pursuant to the terms thereof, all rent
payments under the Lease shall continue to be paid to the Landlord in
accordance with the terms of the Lease unless and until the Tenant is
notified otherwise in writing by Lender or its successors or assigns.
It is particularly noted that:
(a) Under the provisions of this assignment, the Lease cannot be
terminated (either directly or by the exercise of any option which
could lead to termination) or modified in any of its terms, or
consent be given to the release of any party having liability
thereon, without the prior written consent of Lender or it
successors or assigns, and without such consent, no rent may be
collected or accepted more than two (2) months in advance.
(b) The interest of the Landlord in the Lease has been assigned to
Lender for the purposes specified in the assignment. Lender, or its
successors or assigns, assumes no duty, liability or obligation
whatsoever under the Lease or any extension or renewal thereof.
(c) Any notices sent to Lender or its affiliates should be sent by
registered mail and addressed as follows: ______.
16. Tenant agrees to give any Mortgagee and/or Trust Deed Holders
("Mortgagee"), by registered mail, a copy of any notice of default served
upon the Landlord, provided that prior to such notice Tenant has been
notified in writing (by way of Notice of Assignment of Rents and Leases,
or otherwise), of the address of such Mortgagee. Tenant further agrees
that if Landlord shall have failed to cure such default within the time
provided for in this Lease, then the Mortgagee shall have an additional
sixty (60) days within which to cure such default of it such default
cannot be cured within that time, then such additional time as may be
necessary to cure such default shall be granted if within such sixty (60)
days Mortgagee has commenced and is diligently pursuing the remedies
necessary to cure such default (including, but not limited to,
commencement of foreclosure proceedings, if necessary to effect such
cure), in which event the Lease shall not be terminated while such
remedies are being so diligently pursued.
17. This certification is made to induce Lender to make certain fundings,
knowing that Lender relies upon the troth of this certification in
disbursing said funds.
18. The undersigned is authorized to execute this Tenant Estoppel Certificate
on behalf of the Tenant.
DATED THIS ____________________ DAY OF _______________, 19___.
------------------------------------------------
(TENANT)
BY:
-------------------------------------------
ITS:
--------------------------------------
DATE:
--------------------------------------
THE UNDERSIGNED HEREBY CERTIFIES THAT THE CERTIFICATIONS SET FORTH ABOVE ARE
TRUE AS OF THE DATE HEREOF.
------------------------------------------------
(OWNER/LANDLORD)
By:
-------------------------------------------
Its:
--------------------------------------
Date:
--------------------------------------
Exhibits - Page 14 of 17
<PAGE>
EXHIBIT "E"
- ------------------------------------------------------------------------------
ENCUMBRANCES
1. Ground Lease: That certain Lease between Mozad, L.P., as Lessor and Circle
Star Center Associates, L.P., as Lessee, dated October 15,
1997.
2. C,C&R's: "Declaration of Covenants, Conditions and Restrictions" dated
June 24, 1997 by and between Mozad, L.P. and Homestead Village
Incorporated.
3. Other: "Approved Conditional Use Permit - Office Complex, 1717
Industrial Road, San Carlos, CA 94070," effective date
June 12, 1997.
Exhibits - Page 15 of 17
<PAGE>
Cecile Sharp
- -------------------------------------------------------------------------------
FROM: [email protected]
SENT: Monday, December 21, 1998 8:19 AM
TO: Cecile Sharp
CC: [email protected]; [email protected]; [email protected];
[email protected]
SUBJECT: Circle Star Second Floor Project Notes
The following is an outline of installations and finishes for the proposed
offices on the second floor of Circle Star Centre, Circle Star Way, San Carlos,
CA (to be read in conjunction with layout document).
The second floor is open plan for 150 work stations with fully exposed services
in the ceiling void.
5'9 high semi transparent metal mesh screens along two sides of core,
demarkating corridor from open plan area.
Rubber floor finish in corridor area, carpet in open plan area.
Fresh and return air to be contained in zinc finished circular ducting.
Sprinkler system in painted proprietary mild steel pipes.
Fluorescent lighting suspended from ceiling running above and along with linear
desk configuration.
Power, voice and data to be run in zinc coated trays in ceiling with drops into
linear desk configuration.
2 no.s fully glazed server rooms, enclosed with fresh air supply and extended
sprinkler heads, approximately 24x36 each, attached to core end walls adjacent
to exit stairs.
Reception counter with mail room section, kitchenette with plumbing point,
coffee bar, copy corner
Kitchen with plumbing point in scharp angled corner of perimeter with open
meeting area.
1 no. 18 seater free standing board room in translucent light weight
construction, enclosed with fresh air supply.
7 no.s small free standing 6-8 seater meeting rooms in light weight
construction, enclosed with fresh air supply.
Blauel Architects
37 Claylands Road
London SW8 1NX
England
tel. +44 (0) 171 587 5100 fax. +44 (0) 171 735 6793
1
<PAGE>
Exhibit A - Premises
(IMAGE)
2
<PAGE>
EXHIBIT F
RECORDING REQUESTED BY
UNION BANK OF CALIFORNIA, N.A.
AND WHEN RECORDED MAIL TO:
UNION BANK OF CALIFORNIA, N.A.
Attn.: __________________________________
_________________________________________
_________________________________________
_________________________________________
- -------------------------------------------------------------------------------
SPACE BEFORE THIS LINE FOR RECORDER'S USE
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement")
is made as of ____________ by and between Union Bank of California, N.A.
("Bank") and _____________________________________________________ ("Tenant").
RECITAL:
A. Bank has made, or has agreed to make, a loan (the "Loan") to _____
______________________________________________________ ("Borrower") evidenced
by, among other things, a promissory note executed, or to be executed, by
Borrower in favor of Bank in the principal amount of the Loan (as amended from
time to time, the "Note").
B. The Note and certain other obligations of Borrower under the Loan
are, or will be, secured by, among other things, a Deed of Trust, Assignment of
Rents, Security Agreement and Fixture Filing (as amended from time to time, the
"Deed of Trust"). The Deed of Trust, executed or to be executed by Borrower in
favor of Bank, and previously recorded or recorded concurrently herewith,
encumbers the estate of Borrower in certain real property and improvements
commonly known as ___________________________________________________________
___________, and more particularly described on Exhibit A attached hereto (the
"Property").
C. Borrower has leased a portion of the Property to Tenant subject to
the terms and condition of a lease dated ________ (together with any amendments
executed prior to the date hereof, the "Lease").
D. As a condition to making the Loan, Bank requires that Tenant
subordinate the Lease to the Deed of Trust and the lien thereof and to attorn to
Bank as provided below. Tenant is willing to provide such subordination and
attornment provided Bank agrees not to disturb Tenant's right to possession
under the Lease as provided below.
1
<PAGE>
AGREEMENT
For good and valuable consideration, Tenant and Bank agree as follows:
1. SUBORDINATION. Tenant hereby subordinates the Lease and all rights,
remedies and options of Tenant thereunder, including without limitation any
option to purchase or right of first refusal to purchase the Property or any
part thereof or interest therein, to the Deed of Trust and to the lien thereof
and to all sums thereby and advances made thereunder with the same force and
effect as if the Deed of Trust had been executed, delivered and recorded prior
to the execution and delivery of the Lease.
2. NON DISTURBANCE. Bank will not join Tenant as party in any
Foreclosure (defined below) unless the joinder is necessary or desirable to
pursue its remedies under the Deed of Trust, and provided that such joinder
shall not result in the termination of the Lease or disturb interest of Tenant
under the Lease shall not be terminated by reason of the Foreclosure, but rather
the Lease shall continue in full force and effect and Bank shall recognize and
accept Tenant as tenant under the Lease subject to the provisions of the Lease
except as otherwise provided below; provided that, if Tenant shall then be in
default under the Lease beyond any notice, grace or cure period, at Bank's
option the Lease shall be terminated by reason of the Foreclosure and Bank shall
have no obligation to Tenant under the Lease. As used in this Agreement,
"Foreclosure" means any non-judicial or judicial foreclosure or other
enforcement of the remedies of the Deed of Trust, or any deed or other transfer
in lieu thereof.
3. ATTORNMENT. In the event of a transfer of Borrower's interest in the
Property to Purchaser (defined below), Tenant agrees that the Lease shall
continue in full force and effect and Tenant agrees to attorn to the Purchaser
as its landlord under the Lease and to be bound by all of the provisions of the
Lease for the balance of the thereof; provided that, the Purchaser shall not be:
(a) Liable for any act or omission of any Prior Landlord (defined below)
or subject to any offsets or defenses which Tenant might have against any Prior
Landlord;
(b) Liable for the return of any rental security deposit, or bound by
any payment of rents, additional rents or other sums which Tenant may have paid
more than one month in advance to any Prior Landlord, except to the extent such
sums are actually received by Purchaser;
(c) Bound by any amendment to the Lease, made without Bank's prior
written consent;
(d) Liable for obligation under the Lease the cost of which exceed the
value of its interest in the Property or for obligations which accrue after
Purchaser has sold or otherwise transferred its interest in the Property;
(e) *Bound to restore the Property after a casualty for a cost in excess
of proceeds recovered under any insurance required to be carried under the
Lease, or bound to restore the Property after a taking for a cost in excess of
any condemnation award;
(f) Bound by any restriction on competition beyond the Property;
* Notwithstanding anything to the contrary in this Lease, the terms of
this Section 3(e) of this Subordination, Non-Disturbance and Attornment
Agreement ("SNDA") shall only be binding upon the Tenant in connection with the
existing financing by Union Bank of California. The Tenant has not approved this
Section 3(e) in connection with any subsequent SNDA nor shall the refusal by
Centraal to incorporate this Section 3(e) into any subsequent SNDA be
unreasonable under Section 15 of the Lease.
2
<PAGE>
(g) Bound by any notice of termination, cancellation or surrender of the
Lease made without Bank's prior written consent;
(h) Bound by any environmental representation, warranty, covenant or
indemnity contained in the Lease.
(i) Bound by any option to purchase or right of first refusal with
respect to the Property or any portion thereof; and
(j) Bound by any representation or warranty contained in the Lease.
This attornment shall be immediately effective and self operative, without the
execution of any further instrument, upon Purchaser's acquisition of Borrower's
interest in the Property. As used in this Agreement, "Purchaser" means any
transferee, including Bank, of Borrower's interest in the Property pursuant to a
Foreclosure, and "Prior Landlord" means any landlord, including Borrower, under
the Lease prior in time to Purchaser.
4. NOTICE TO TENANT. After written notice is given to Tenant by Bank
that Borrower is in default under the Loan and that the rentals under the Lease
should be paid to Bank pursuant to the terms of the Deed of Trust, Tenant shall
thereafter pay to Bank all rent and all other sums due Borrower under the Lease.
5. NOTICE TO LENDER AND RIGHT TO CURE. Tenant shall provide written
notice to Bank of any default by Borrower under the Lease and Tenant agrees that
no notice of termination of the Lease or of an abatement of rent shall be
effective unless Bank shall have received written notice of default giving rise
to such termination or abatement and shall have failed within 60 days after
receipt of such notice to cure such default, or if such default cannot be cured
within 60 days, shall have failed within 60 days after receipt of such notice to
commence and thereafter diligently pursue any action necessary to cure such
default, including without limitation any action to obtain possession of the
Property. Notwithstanding the foregoing, Bank shall have no obligation to cure
any such default.
6. MISCELLANEOUS. This Agreement shall be binding upon and inure to the
benefit of Bank and Tenant and their respective successors and assigns. This
Agreement shall be governed and interpreted under the laws of the state where
the Property is located. This Agreement is the entire agreement of the parties
and supersedes any prior agreement with respect to its subject matter, and no
provision of this Agreement may be waived or modified except in a writing signed
by all parties. If any lawsuit, arbitration or other proceeding is brought under
this Agreement, the prevailing party shall be entitled to recover the reasonable
fees and costs of its attorneys in such proceeding. If any provision of this
Agreement is held to be invalid or unenforceable in any respect, this Agreement
shall be construed without such provision. This Agreement may be executed in two
or morn counterparts, each of which shall be deemed an original but all of which
taken together shall constitute one and the same document. Tenant represents and
warrants to Bank that this Agreement is a valid and binding agreement of Tenant
and the person(s) executing this Agreement on behalf of Tenant have the
authority to do so.
3
<PAGE>
DRAFT
IN WITNESS WHEREOF, Bank and Tenant have duly executed this Agreement as of the
date first above written.
BANK: TENANT:
Union Bank of California, N.A.
---------------------------------------
a
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By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
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Name:
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Title:
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4
<PAGE>
SILICON VALLEY BANK 3003 TASMAN DRIVE SANTA CLARA, CA 95054, U.S.A.
INTERNATIONAL DIVISION SWIFT ADDRESS: SVBKUS6S
TELEX NO. 6732567
ANSWERBACK: SVB TF
EXHIBIT "A"
TO: SILICON VALLEY BANK DATE:
3003 TASMAN DRIVE RE: LETTER OF CREDIT ISSUED BY:
SANTA CLARA, CA 94054 SILICON VALLEY BANK
ATTN: INTERNATIONAL DIVISION LETTER OF CREDIT NO. SVB98IS1124
STANDBY LETTER OF CREDITS AVAILABLE AMOUNT:
Gentlemen:
For value received, the undersigned Beneficiary hereby irrevocably transfers to:
(Name of Transferee)
(Address)
All rights of the undersigned Beneficiary to draw under the above Letter of
Credit up to its Available Amount as shown above as of the date of this
transfer.
By this transfer, all rights of the undersigned Beneficiary in such Letter of
Credit are transferred to the transferee. Transferee shall have the sole rights
as beneficiary thereof, including sole rights relating to any amendments,
whether increases or extensions or other amendments, and whether now existing or
hereafter made. All amendments are to be advised direct to the Transferee
without necessity of any consent of or notice to the undersigned Beneficiary.
The original of such Letter of Credit is returned herewith, and we ask you to
endorse the transfer on the reverse thereof, and forward it direct to the
Transferee with your customary notice of transfer.
Yours Very Truly
Signature Authenticated 650 East Fairchild Associates, L.P.
- ------------------------------ -----------------------------------
(Bank) Signature of Beneficiary
- ------------------------------
Authorized Signature
Fax No: (408) 496-2419 Phone No: (408) 654-7400 main line
(408) 654-7736
(Member FDIC)
<PAGE>
SILICON VALLEY BANK 3003 TASMAN DRIVE SANTA CLARA, CA 95054, U.S.A.
INTERNATIONAL DIVISION SWIFT ADDRESS: SVBKUS6S
TELEX NO. 6732567
ANSWERBACK: SVB TF
IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVB XXX
DATED OCTOBER 23, 1998
SPECIAL CONDITION:
IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT WILL BE DEEMED AUTOMATICALLY
RENEWED WITHOUT AN AMENDMENT OF A PERIOD OF OWE YEAR FROM THE CURRENT OR EACH
FUTURE EXPIRATION DATE UNLESS AT LEAST THIRTY (30) DAYS PRIOR TO THE THEN
CURRENT EXPIRATION DATE WE NOTIFY THE BENEFICIARY IN WRITING BY OVERNIGHT
COURIER THAT THIS LETTER OF CREDIT WILL NOT BE RENEWED. FOLLOWING SUCH
NOTIFICATION AND PRIOR TO THE EXPIRATION DATE OF THIS LETTER OF CREDIT, YOU MAY
DRAW UPON THIS LETTER OF CREDIT BY PRESENTATION OF THIS ORIGINAL LETTER OF
CREDIT AND ITS AMENDMENTS IF ANY TOGETHER WITH THE SIGHT DRAFT(S) MENTIONED
ABOVE AND BENEFICIARY'S SIGNED AND DATED STATEMENT STATING THAT APPLICANT HAS
FAILED TO PROVIDE A SUBSTITUTE LETTER OF CREDIT IN THE SAME PRINCIPAL AMOUNT, OR
SUCH REDUCED PRINCIPAL AMOUNT AS MAY BE PERMITTED BY THE LEASE, AND ON THE SAME
TERMS AS THIS LETTER OF CREDIT, FROM AN ISSUER REASONABLY SATISFACTORY TO YOU.
IN NO EVENT SHALL THIS LETTER OF CREDIT BE AUTOMATICALLY EXTENDED BEYOND JANUARY
31, 2009.
ALL DOCUMENTS MUST BE SENT TO US VIA OVERNIGHT COURIER (I.E. FEDERAL EXPRESS,
UPS, DHL OR ANY OTHER EXPRESS COURIER) AT OUR ADDRESS:
SILICON VALLEY BANK, 3003 TASMAN DRIVE, SANTA CLARA, CA 95054
ATTN: INTERNATIONAL DIVISION.
WE HEREBY ENGAGE WITH DRAWERS AND /OR BONAFIDE HOLDERS THAT DRAFT(S) DRAWN UNDER
AND NEGOTIATED IN CONFORMANCE WITH THE TERMS AND CONDITIONS OF THE SUBJECT
CREDIT WILL BE DULY HONORED ON PRESENTATION.
THIS CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION 500.
/s/ XXX /s/ XXX
- ---------------------------------- ----------------------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
Fax No: (408) 496-2419 Phone No: (408) 654-7400 main line
(408) 654-7736
(Member FDIC)
<PAGE>
SILICON VALLEY BANK 300 TASMAN DRIVE SANTA CLARA, CA 95054, U.S.A.
INTERNATIONAL DIVISION SWIFT ADDRESS: SVBKUS6S
TELEX NO. 6732567
ANSWERBACK: SVB TF
IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVB XXX
DATED OCTOBER 23, 1998
Beneficiary: 605 EAST FAIRCHILD ASSOCIATES, L.P.
1068 EAST MEADOW CIRCLE
PALO ALTO, CA 94303
AS "LANDLORD"
APPLICANT: CALIPER TECHNOLOGIES CORPORATION
1275 CALIFORNIA AVENUE
PALO ALTO, CA 94304
AMOUNT: USD 1,000,000.00
(ONE MILLION AND 00/100 USDOLLARS)
EXPIRY DATE: OCTOBER 23, 1999
LOCATION: AT OUR COUNTER IN SANTA CLARA
DEAR SIR/MAM:
WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVB98I81124 IN
YOUR FAVOR. AVAILABLE BY PAYMENT WITH SILICON VALLEY BANK, 3003 TASMAN DRIVE,
SANTA CLARA, CA 95054, ATTN: INT'L DEPT. OF BENEFICIARY'S DRAFT AT SIGHT DRAWN
ON US, AND ACCOMPANIED BY THE FOLLOWING DOCUMENTS:
1. THE ORIGINAL OF THIS LETTER OF CREDIT AND AMENDMENT IF ANY.
2. A LETTER SIGNED AND DATED BY AN AUTHORIZED REPRESENTATIVE OF THE
BENEFICIARY AS "LANDLORD" FOLLOWED BY ITS DESIGNATED TITLE STATING THE
FOLLOWING:
"THE TERMS AND CONDITIONS OF THE LEASE AUTHORIZE LANDLORD TO DRAW
DOWN ON THE LETTER OF CREDIT."
ADDITIONAL CONDITION:
1- PARTIAL DRAWINGS ARE ALLOWED.
2- THIS LETTER OF CREDIT IS TRANSFERABLE IN WHOLE BUT NOT IN PART ONLY UPON
OUR RECEIPT OF THE ATTACHED EXHIBIT "A" (TRANSFER FORM" DULY COMPLETED
AND EXECUTED BY THE BENEFICIARY TOGETHER WITH ORIGINAL LETTER OF CREDIT
AND AMENDMENTS IF ANY AND OUR CHARGE PAID (1/4% OF THE AMOUNT).
Page 1 of 2
Fax No: (408) 496-2419 Phone No: (408) 654-7400 main line
(408) 654-7736
(Member FDIC)
<PAGE>
Exhibit 10.7
SUBLEASE
THIS SUBLEASE ("Sublease"), dated September 1, 1999 for reference
purposes only, is entered into by and between BROADVISION, INC., a Delaware
corporation ("Broadvision") and REALNAMES CORPORATION, a Delaware corporation
("Subtenant").
RECITALS
A. Broadvision leases certain premises consisting of an industrial
building containing approximately 55,282 square feet, located at 405
Broadway, Redwood City, California, pursuant to that certain Lease dated
February 10, 1999, between Martin/Campus Associates No. 4, L.P., a Delaware
limited partnership, as landlord (the "Master Landlord") and Broadvision, as
tenant (the "Master Lease"), as more particularly described therein (the
"Master Premises"). Capitalized terms used but not defined herein have the
same meanings as they have in the Master Lease. A copy of the Master Lease is
attached hereto as EXHIBIT A.
B. Broadvision desires to sublease a portion of the Premises to
Subtenant, and Subtenant desires to sublease a portion of the Premises from
Broadvision on the terms and provisions hereof.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, Broadvision and Subtenant covenant and agree as follows:
AGREEMENT
1. PREMISES. On and subject to the terms and conditions below,
Broadvision hereby leases to Subtenant, and Subtenant hereby leases from
Broadvision, the entire second floor of the Master Premises which contains
approximately 25,891 rentable square feet, and as more particularly described
in Exhibit B.
2. TERM. This Sublease shall commence on Broadvision's delivery of
possession (the "Commencement Date"), provided Broadvision has theretofore
obtained the consent of Master Landlord, and shall expire May 31, 2000,
unless sooner terminated pursuant to any provision hereof.
3. POSSESSION.
(a) Broadvision shall use commercially reasonable efforts to deliver
possession of the Premises to Subtenant by October 1, 1999. If for any reason
Broadvision cannot deliver possession of the Premises to Subtenant by October
1, 1999, Broadvision shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Sublease or the obligations of
Subtenant hereunder or extend the term hereof, provided that no rent shall be
due hereunder until possession of the Premises has been delivered to
Subtenant.
(b) In addition to the foregoing, Broadvision shall use commercially
reasonable efforts to deliver the "Office" portion of the Premises to
Subtenant by September 15, 1999. If such portion of the Premises shall be
delivered to Subtenant prior to delivery of the entire Premises, then
Subtenant's occupancy shall be subject to all of the terms and conditions of
-1-
<PAGE>
this Sublease except that Subtenant shall pay rent to Broadvision for such
space in the amount of $1,531.88 per day (representing one half of the Rent
as pro-rated on a daily basis).
4. Rent.
(a) Commencing on the Commencement Date and continuing throughout the
term of this Sublease, Subtenant shall pay monthly rent ("Rent") to
Broadvision in the amount of ninety-one thousand nine-hundred thirteen and
05/100 Dollars ($91,913.05). Such Rent is "full-service" which shall include
without limitation, all operating expenses for the premises, Building and the
Project, and all costs for a commercially reasonable amount of utilities,
building security and janitorial services provided to Subtenant as more
particularly described in Exhibit E; However, to the extent that there are
any increases in Additional Rent (as such term is defined in the Master
Lease) due to any acts or omissions of Subtenant hereunder, then Subtenant
shall be liable to Broadvision for such increases and shall pay such
increases to Broadvision upon request.
(b) If the Commencement Date does not fall on the first day of a
calendar month, Rent for the first month shall be prorated on a daily basis
based upon a calendar month. Rent shall be payable to Broadvision in lawful
money of the United States, in advance, without prior notice, demand, or
offset, on or before the first day of each calendar month during the term
hereof. All Rent shall be paid to Broadvision at the address specified for
notices to Broadvision in SECTION 14, below.
(c) Subtenant recognizes that late payment of any Rent will result in
administrative expenses to Broadvision, the extent of which additional
expenses are extremely difficult and economically impractical to ascertain.
Subtenant therefore agrees that if any Rent shall remain unpaid five (5) days
after such amounts are due, the amount of such Rent shall be increased by a
late charge to be paid to Broadvision by Subtenant in an amount equal to ten
percent (10%) of the amount of the delinquent Rent.
(d) Upon execution of this Sublease, Subtenant shall deliver to
Broadvision the sum of ninety-one thousand nine hundred thirteen and 05/100
Dollars ($91,913.05), representing the first month's Base Rent.
(e) In the event of any casualty, or condemnation affecting the
Premises, Rent payable by Subtenant shall be abated hereunder, but only to
the extent that Rent under the Master Lease is abated Furthermore, Subtenant
shall have the right to terminate this Sublease, in connection with a
casualty or condemnation, in the event that Subtenant's ability to utilize
the Premises is materially interfered with for a period of more than 30 days.
5. SECURITY DEPOSIT. Upon execution of this Sublease, Subtenant shall
deposit with Broadvision the sum of ninety-one thousand nine-hundred thirteen
and 05/100 Dollars ($91,913.05) as a security deposit ("Security Deposit").
If Subtenant fails to pay Rent or other charges when due under this Sublease,
or fails to perform any of its other obligations hereunder, Broadvision may
use or apply all or any portion of the Security Deposit for the payment of
any Rent or other amount then due hereunder and unpaid, for the payment of
any other sum for which Broadvision may become obligated by reason of
Subtenant's default or breach, or for any
-2-
<PAGE>
loss or damage sustained by Broadvision as a result of Subtenant's default or
breach. If Broadvision so uses any portion of the Security Deposit, Subtenant
shall restore the Security Deposit to the full amount originally deposited
within ten (10) days after Broadvision's written demand. Broadvision shall
not be required to keep the Security Deposit separate from its general
accounts, and shall have no obligation or liability for payment of interest
on the Security Deposit. The Security Deposit, or so much thereof as had not
theretofore been applied by Broadvision, shall be returned to Subtenant
within thirty (30) days of the expiration or earlier termination of this
Sublease, provided Subtenant has vacated the Premises.
6. CONDITION OF PREMISES. Subtenant has used due diligence in
inspecting the Premises and agrees to accept the Premises in "as-is"
condition and with all faults as of the date of Subtenant's execution of this
Sublease, without any representation or warranty of any kind or nature
whatsoever, or any obligation on the part of Broadvision to modify, improve
or otherwise prepare the Premises for Subtenant's occupancy, except as
otherwise provided in Exhibit C and SECTION 7 hereof. By entry hereunder,
Subtenant accepts the Premises in their present condition and without
representation or warranty of any kind by Broadvision. Subtenant hereby
expressly waives the provisions of subsection 1 of Section 1932 and Sections
1941 and 1942 of the California Civil Code and all rights to make repairs at
the expense of Broadvision as provided in Section 1942 of said Civil Code.
7. CONDITION OF THE PREMISES UPON COMMENCEMENT.
(a) Broadvision, at its sole cost and expense shall build out the
Premises according to the attached floor plan, and install partitioned
furniture systems, general office furniture, and Enhanced Cat-5 computer
network wiring all as more particularly described in Exhibits C and D hereto.
Broadvision shall use commercially reasonable efforts to complete such work
by October 1, 1999.
(b) The Premises shall be delivered by Broadvision secured by
electronic key card access locks and in full compliance with the Americans
with Disabilities Act respecting Subtenants permitted use. Broadvision shall
provide Subtenant with up to ___ ( ) card keys at a cost of $15.00 per key.
(c) Subtenant shall install at its sole cost and expense their own
independent phone switch.
8. USE. Subtenant may use the Premises only for the purposes as
allowed in the Master Lease, and for no other purpose. Subtenant shall
promptly comply with all applicable statutes, ordinances, roles, regulations,
orders, restrictions of record, and requirements in effect during the term of
this Sublease governing, affecting and regulating the Premises, including but
not limited to the use thereof. Subtenant shall not use or permit the use of
the Premises in a manner that will create waste or a nuisance, interfere with
or disturb other tenants in the Building or violate the provisions of the
Master Lease.
9. PARKING. Subtenant shall have its proportionate share of such
parking rights as Broadvision may have in connection with the Premises
pursuant to the Master Lease.
-3-
<PAGE>
10. INCORPORATION OF SUBLEASE.
(a) All of the terms and provisions of the Master Lease, except as
provided in subsection (b) below, are incorporated into and made a part of
this Sublease and the rights and obligations of the parties under the Master
Lease are hereby imposed upon the parties hereto with respect to the
Premises, Broadvision being substituted for the "Lessor" in the Master Lease,
and Subtenant being substituted for the "Lessee" in the Master Lease. It is
further understood that where reference is made in the Master Lease to the
"Premises," the same shall mean the Premises as defined herein; where
reference is made to the "Commencement Date," the same shall mean the
Commencement Date as defined herein; and where reference is made to the
"Lease," the same shall mean this Sublease.
(b) The following Paragraphs of the Master Lease are not
incorporated herein: Lease Summary; Sections: 1, 2, 3.F., 3.Q., 3.T., 3.W.,
3.Y., 3.DD, 3.HH., 4, 5, 6, 7, 9, 10, 11.C, 12, the last paragraph of 13.A.,
14, 15.A, 15.C., 16, 17.A., 20, 21.C., 23, 24, 27, 28, the first sentence of
33, 34, 35, 36, and 40; and all Exhibits.
(c) Subtenant hereby assumes and agrees to perform for
Broadvision's benefit, during the term of this Sublease, all of Broadvision's
obligations with respect to the Premises under the Master Lease, except as
otherwise provided herein. Subtenant shall not commit or permit to be
committed any act or omission which violates any term or condition of the
Master Lease. Except as otherwise provided herein, this Sublease shall be
subject and subordinate to all of the terms of the Master Lease.
11. INSURANCE. Subtenant shall be responsible for compliance with the
insurance provisions of the Master Lease. Such insurance shall insure the
performance by Subtenant of its indemnification obligations hereunder and
shall name Master Landlord and Broadvision as additional insureds. All
insurance required under this Sublease shall contain an endorsement requiring
thirty (30) days written notice from the insurance company to Subtenant and
Broadvision before cancellation or change in the coverage, insureds or amount
of any policy. Subtenant shall provide Broadvision with certificates of
insurance evidencing such coverage prior to the commencement of this Sublease.
12. UTILITIES. The Rent payable pursuant to SECTION 4(a) hereunder is
inclusive of a commercially reasonable amount of utilities. If Broadvision
reasonably determines that Subtenant has used in excess of a commercially
reasonable amount, then Subtenant shall be liable for any costs incurred by
Broadvision and shall pay such costs upon demand therefore as additional Rent
hereunder.
13. DEFAULT. In addition to defaults contained in the Master Lease,
failure of Subtenant to make any payment of any sums when due hereunder,
shall constitute an event of default hereunder.
-4-
<PAGE>
14. NOTICES. The addresses specified in the Master Lease for receipt of
notices to each of the parties are deleted and replaced with the following:
<TABLE>
<S> <C>
TO BROADVISION AT: BROADVISION, INC.
585 Broadway
Redwood City, California 94063
Attn: Sharon Paul
WITH COPY TO: COOLEY GODWARD LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: J. Derek Boswell
TO SUBTENANT AT: At the Premises
</TABLE>
15. SIGNAGE. Signage shall be as mutually agreed upon between Master
Landlord, Broadvision and Subtenant. All signage shall be subject to the
Master Lease and all applicable laws, codes and ordinances and shall be
installed at the sole cost and expense of Subtenant.
16. ACCESS. Following no less that five (5) business days advance prior
notice (except in the case of emergency) Broadvision agrees to provide
Subtenant reasonable periodic access to the Master Premises for the
installation and repair of wiring to the Premises. Subtenant shall use its
best efforts during any such access not to interfere with Broadvision's use
of the Master Premises
17. BROADVISION'S OBLIGATIONS.
(a) To the extent that the provision of any services or the
performance of any maintenance or any other act respecting the Premises or
Building is the responsibility of Master Landlord (collectively "Master
Landlord Obligations"), upon Subtenant's request, Broadvision shall make
reasonable efforts to cause Master Landlord to perform such Master Landlord
Obligations, provided, however, that in no event shall Broadvision be liable
to Subtenant for any liability, loss or damage whatsoever in the event that
Master Landlord should fail to perform the same, nor shall Subtenant be
entitled to withhold the payment of Rent or terminate this Sublease. It is
expressly understood that the services and repairs which are incorporated
herein by reference, including but not limited to the maintenance of exterior
walls, structural portions of the roof, and foundations will in fact be
furnished by Master Landlord and not by Broadvision, except to the extent
otherwise provided in the Master Lease. In addition, Broadvision shall not be
liable for any maintenance, restoration (following casualty or destruction)
or repairs in or to the Building or Premises, other than its obligation
hereunder to use reasonable efforts to cause Master Landlord to perform its
obligations under the Master Lease.
-5-
<PAGE>
(b) Except as otherwise provided herein, Broadvision shall have no
other obligations to Subtenant with respect to the Premises or the
performance of the Master Landlord Obligations.
18. EARLY TERMINATION OF SUBLEASE. If, without the fault of
Broadvision, the Master Lease should terminate prior to the expiration of
this Sublease, Broadvision shall have no liability to Subtenant on account of
such termination. To the extent that the Master Lease grants Broadvision any
discretionary right to terminate the Master Lease, whether due to casualty,
condemnation, or otherwise, Broadvision shall be entitled to exercise or not
exercise such right in its complete and absolute discretion.
19. CONSENT OF MASTER LANDLORD AND BROADVISION. If Subtenant desires to
take any action which requires the consent or approval of the Master Landlord
pursuant to the terms of the Master Lease, prior to taking such action,
including, without limitation, making any alterations, then, notwithstanding
anything to the contrary herein, (a) Broadvision shall have the same rights
of approval or disapproval as Master Landlord has under the Master Lease, and
(b)Subtenant shall not take any such action until it obtains the consent of
Broadvision and Master Landlord, as may be required under this Sublease or
the Master Lease. This Sublease shall not be effective unless and until any
required written consent of the Master Landlord, respecting this Sublease and
the improvements contemplated by section 7 hereof, shall have been obtained.
20. BROKERS. Each party hereto represents and warrants that it has
dealt with no broker in connection with this Sublease and the transactions
contemplated herein, except Cornish & Carey Commercial/ONCOR International.
Each party shall indemnify, protect, defend and hold the other party harmless
from all costs and expenses (including reasonable attorneys' fees) arising
from or relating to a breach of the foregoing representation and warranty.
21. SURRENDER OF PREMISES. Upon the expiration or earlier termination
of this Sublease, Subtenant shall surrender the Premises (including all
improvements, furniture systems, general office furniture and anything
installed or made available pursuant to Section 7 hereof at the expense of
Broadvision) in good operating condition, except for ordinary wear and tear,
with all wiring in place and functioning properly.
22. NO THIRD PARTY RIGHTS. The benefit of the provisions of this
Sublease is expressly limited to Broadvision and Subtenant and their
respective permitted successors and assigns. Under no circumstances will any
third party be construed to have any rights as a third party beneficiary with
respect to any of said provisions.
23. COUNTERPARTS. This Sublease may be signed in two or more
counterparts, each of which shall be deemed an original and all of which
shall constitute one agreement.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Sublease as of the
date first written above.
BROADVISION REALNAMES CORPORATION
By: /s/ By: /s/
------------------------- ------------------------
Its: CFO Its: Controller
------------------------ -----------------------
Date: 9/24/99 Date: 9/20/99
----------------------- ----------------------
By: By: /s/
------------------------- ------------------------
Its: Its: VP Human Resources
------------------------ -----------------------
Date: Date: 9/20/99
----------------------- ----------------------
-7-
<PAGE>
LEASE
1. PARTIES.
THIS LEASE (the "LEASE"), dated as of January ______ , 1999, is
entered into by and between MARTIN/CAMPUS ASSOCIATES NO. 4, L.P., a Delaware
limited partnership ("LANDLORD"), whose address is 100 Bush Street, San
Francisco, California 94104, and BROADVISION, INC., a Delaware corporation
("TENANT"), whose address is 585 Broadway, Redwood City, California 94063.
2. PREMISES.
Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord those certain premises consisting of a total area of approximately
Fifty-Five Thousand Two Hundred Eighty-Two (55,282) square feet, which
comprises all of the Rentable Area (as defined below) of that certain
building commonly known as 405 Broadway (the "BUILDING"), in the City of
Redwood City, County of San Mateo, State of California, as more particularly
shown on EXHIBITS A-1 AND A-2 (the "PREMISES"). On or before the Commencement
Date, Landlord shall measure the Rentable Area of the Premises to the outside
of all exterior walls, and to the middle of the interior demising wall, that
form the boundaries of the Premises, and Landlord and Tenant shall amend this
Lease if necessary to reflect any discrepancy in the size of the Premises
disclosed by Landlord's measurement of the Premises by Landlord's architect.
The Premises also includes the appurtenant right to use in common with other
tenants of the Project (as defined below) the Common Area (as defined below)
of the Project owned by Landlord.
3. DEFINITIONS.
The following terms shall have the following meanings in this Lease:
A. AFFILIATE. Any Person that controls, or is controlled by or is
under common control with, Landlord or Tenant. No Person shall be deemed in
control of another simply by virtue of being a partner, director, officer or
holder of voting securities of any Person. For purposes of this PARAGRAPH
3.A, "control" shall mean the ownership of, and/or the right vote, stock,
partnership interests, membership interests, or
1
<PAGE>
other indicia of ownership possessing at least fifty-one percent (51%) of
either the total combined interests in a Person, or the voting power of all
classes of a Person's capital stock, partnership interests, membership
interests, or other indicia of ownership, that have been issued, outstanding,
and (if applicable) are entitled to vote.
B. ALTERATIONS. Any alterations, additions or improvements made
in, on or about the Premises after the substantial completion of the
Improvements, including, but not limited to, lighting, heating, ventilating,
air conditioning, electrical, partitioning, drapery and carpentry
installations.
C. BUILDING. The term "Building" shall have the meaning set forth
in PARAGRAPH 2.A above.
D. CAPITAL IMPROVEMENT. Those certain improvements to the
Building to be constructed by Landlord pursuant to PARAGRAPH 10.A and the
Work Letter Agreement attached to this Lease as EXHIBIT B (the "WORK
LETTER").
E. CC&RS. Any declaration of conditions, covenants and/or
restrictions, or similar instrument, that now encumbers, or may in the future
encumber the Project or the Premises, as adopted by Landlord or its
successors in interest from time to time, and any modifications or amendments
thereto.
F. COMMENCEMENT DATE. The Commencement Date of this Lease shall
be the first day of the Term determined in accordance with PARAGRAPH 4.A.
G. COMMON AREA. All areas and facilities within the Project not
appropriated to the exclusive occupancy of tenants, including the Parking
Area, the sidewalks, pedestrian ways, driveways, signs, pools, ponds, service
delivery facilities, common storage areas, common utility facilities and all
other areas in the Project established by Landlord and/or its successors for
non-exclusive use. Landlord may, by written notice to Tenant, elect in its
sole discretion to increase and/or decrease the Common Area from time to time
during the Term for any reason whatsoever (including without limitation an
election by Landlord and/or it's successors in their sole discretion to make
changes to the buildings situated in the Project, and/or to subdivide, sell,
exchange, dispose of, transfer, or change the configuration of all or any
portion of the Common Area from time
2
<PAGE>
to time), so long as Landlord neither unreasonably interferes with ingress to
or egress from the Building, nor reduces the number of parking spaces
available for Tenant's use below the minimum requirements set forth in
PARAGRAPH 37 for a period of sixty (60) consecutive days or more. No such
subdivision, sale, exchange, disposition, transfer, or change to the
configuration of all or any portion of the Common Area shall cause the Common
Area to be increased or decreased unless and until Landlord has given Tenant
written notice of such increase or decrease. However, Landlord shall make no
changes which have a material adverse effect upon Tenant's use and enjoyment
of the Premises or the accessibility of parking thereto.
H. COMMON AREA MAINTENANCE COSTS. The total of all costs and
expenses paid or incurred by Landlord in connection with the operation,
maintenance, ownership and repair of the Common Area, and the performance of
Landlord's obligations under PARAGRAPHS 17.A, and the exercise of Landlord's
rights under PARAGRAPH 17.D. Without limiting the generality of the
foregoing, Common Area Maintenance Costs include all costs of and expense
for: (i) maintenance and repairs of the Common Area; (ii) resurfacing,
resealing, remarking, painting, repainting, striping or restriping the
Parking Area; (iii) maintenance and repair of all public or common
facilities; (iv) maintenance, repair and replacement of sidewalks, curbs,
paving, walkways, Parking Area, Project signs, landscaping, planting and
irrigation systems, trash facilities, loading and delivery areas, lighting,
drainage and common utility facilities, directional or other signs, markers
and bumpers, and any fixtures, equipment and personal property located on the
Common Area; (v) wages, salaries, benefits, payroll burden fees and charges
of personnel employed by Landlord and the charges of all independent
contractors retained by Landlord (to the extent that such personnel and
contractors are utilized by Landlord) for the maintenance, repair, management
and/or supervision of the Project, and of any security personnel retained by
Landlord in connection with the operation and maintenance of the Common Area
(although Landlord shall not be required to obtain security services); (vi)
maintenance, repair and replacement of security systems and alarms installed
by Landlord (if any); (vii) depreciation or amortization (or in lieu thereof,
rental payments) on all tools, equipment and machinery used in the operation
and maintenance of the Common Area; (viii) premiums for Comprehensive General
Liability Insurance or Commercial General Liability Insurance, casualty
insurance, workers' compensation
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insurance or other insurance on the Common Area, or any portion thereof or
interest therein, and any deductibles payable with respect to such insurance
policies; (ix) all personal property or real property taxes and assessments
levied or assessed on the Project, or any portion thereof or interest
therein, including without limitation the Real Property Taxes for the
Project, if applicable under PARAGRAPH 15 A; (x) cleaning, collection,
storage and removal of trash, rubbish, dirt and debris, and sweeping and
cleaning the Common Area; (xi) legal, accounting and other professional
services for the Project, including costs, fees and expenses of contesting
the validity or applicability of any law, ordinance, rule, regulation or
order relating Co the Building, and of contesting, appealing or otherwise
attempting to reduce any Real Property Taxes assessed against the Project;
(xii) any alterations, additions or improvements required to be made to the
Common Area in order to reduce Common Area Maintenance Costs or to protect
the health or safety of occupants of the Project, but only to the extent of
any actual cost savings realized thereby (provided that if the cost of any
such alterations, additions or improvements during any year exceeds the
amount of cost savings realized thereby for that year, Landlord may in its
sole discretion elect to include such excess amounts in Common Area
Maintenance Costs for the following year, but only to the extent of any
actual cost savings realized during such year by reason of such alterations,
additions or improvements); (xiii) all costs and expenses of providing,
creating, maintaining, repairing, managing, operating, and supervising an
amenity center for the Project, which may include without limitation a dining
facility (provided, however, that Landlord shall not be required to provide
or create such an amenity center), which costs and expenses may include
without limitation rent charged by Landlord for the space occupied by such
amenity center; (xiv) all costs and expenses incurred by Landlord in
performing its obligations under PARAGRAPHS 17 A or exercising its rights
under PARAGRAPH 17 D, including without limitation all costs and expenses
incurred in performing any alterations, additions or improvements required to
be made to the Building in order to comply with applicable laws, ordinances,
rules, regulations and orders (to the extent that such laws, ordinances,
rules, regulations and orders are either enacted after, or become applicable
to the Building due to an amendment thereto that becomes effective after, the
Commencement Date) and all capital improvements required to made in
connection with the operation, maintenance and repair of the Building,
provided that the cost of any such alterations, additions, improvements or
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capital improvements, together with interest at the Interest Rate, shall be
amortized over the useful life of the alteration, addition, improvement or
capital improvement in question and included in Common Area Maintenance Costs
for each year over which such costs are amortized; (xv) all costs and
expenses incurred in performing any alterations, additions or improvements
required to be made to the Common Area in order to comply with applicable
laws, ordinances, rules, regulations and orders and all capital improvements
required to made in connection with the operation, maintenance and repair of
the Common Area, provided that the cost of any such alterations, additions,
improvements or capital improvements, together with interest at the Interest
Rate, shall be amortized over the useful life of the alteration, addition,
improvement or capital improvement in question and included in Common Area
Maintenance Costs for each year over which such costs are amortized; and
(xvi) any and all payments due and owing on behalf of the Project or any
portion thereof with respect to any CC&Rs, including without limitation any
and all assessments and association dues. However, notwithstanding the
foregoing or anything to the contrary in this Lease, Common Area Maintenance
Costs shall not include the cost of or expenses for the following. (A)
leasing commissions, attorneys' fees or other costs or expenses incurred in
connection with negotiations or disputes with other tenants of the Project;
(B) depreciation of buildings in the Project; (C) payments of principal,
interest, late fees, prepayment fees or other charges on any debt secured by
a mortgage covering the Project, or rental payments under any ground lease or
underlying lease; (D) any penalties incurred due to Landlord's violation of
any governmental rule or authority (but not excluding the cost of compliance
therewith, if such cost is chargeable to Tenant pursuant to this Lease); (E)
any Real Property Taxes or costs for which Landlord is separately and
directly reimbursed by Tenant or any other tenant of the Project which are
assessed against the Premises or the premises leased by such other tenant(s);
(F) items for which Landlord is reimbursed by insurance; (G) all costs
associated with the operation of the business of the entity which constitutes
"Landlord" (as distinguished from the costs of operations, the costs
described in clause (v) of this PARAGRAPH 3.H, and the property management
fee described in PARAGRAPH 5.C below), including, but not limited to, costs
of partnership accounting and legal matters, costs of defending any lawsuits
with any mortgagee (except as the actions of Tenant may be in issue), costs
of selling, syndicating, financing, mortgaging, or hypothecating any of the
Landlord's interest in the Project and/or Common Area, or any portion
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thereof, costs of any disputes between Landlord and its employees, costs of
disputes of Landlord with Building management or costs paid in connection
with disputes with Tenant or any other tenants; (H) all costs (including
permit, license and inspection fees) incurred in renovating or otherwise
improving or decorating, painting or redecorating space for other tenants in
the Project; (I) the creation of any reserves for equipment or capital
replacement (but not the expenditure of any funds from such reserves); (J)
all costs arising from monitoring, cleaning up and otherwise remediating any
release of Hazardous Materials at the Premises to the extent that either (1)
Landlord (who shall use reasonable efforts to obtain reimbursement) is
actually reimbursed by third parties for such costs (but not the costs of
collection incurred by Landlord, unless such costs of collection are also
reimbursed by third parties), or (2) such release of Hazardous Materials
occurred prior to the Commencement Date and did not arise from Tenant's early
occupancy of the Premises pursuant to PARAGRAPH 40 below; (K) all costs and
expenses incurred in performing any alterations, additions or improvements
required to be made to the Building in order to comply with applicable laws,
ordinances, rules, regulations and orders, to the extent that such laws,
ordinances, rules, regulations and orders are enacted before the Commencement
Date (unless any such law, ordinance, rule, regulation or order becomes
applicable to the Building due to an amendment that becomes effective after
the Commencement Date, in which event such costs and expenses shall be
includable in Common Area Maintenance Costs); and (L) all costs and expenses
incurred in removing asbestos-containing materials from, or encapsulating
asbestos-containing materials within, the Premises.
Notwithstanding anything to the contrary in the definition of Common
Area Maintenance Costs set forth in this Lease, Common Area Maintenance Costs
shall not include the following:
1. any depreciation on the Building and Project;
2. interest, principal, points and fees on debt or
amortization on any mortgages and deeds of trust or other debt instruments
secured by the Building or the Project or any underlying ground lease;
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3. costs of repairs and general maintenance paid from
insurance proceeds but excluding the amount of any deductibles paid by
Landlord;
4. repairs and replacements covered by warranties or
guaranties (to the extent actually collected by Landlord);
5. costs of special services rendered to individual tenants
(including Tenant) for which a special charge is made;
6. costs of improvements for other tenants in the Building
or Project;
7. costs of the Landlord for which a tenant is obligated to
reimburse Landlord, including, for example, taxes and property insurance
premiums on improvements for tenants of the Building and Project that are
above the building standard;
8. costs incurred by Landlord due to violations of any of
the terms and conditions of any lease in the Building: or Project (other than
this Lease);
9. Marketing costs including without limitation, leasing
commissions, attorneys' fees, space planning costs and other costs and
expenses incurred in connection with the leasing of the Building; and
10. Overhead and profit increment paid to Landlord and
Landlord's subsidiaries for goods and/or services in or to the Building or
Project to the extent the same exceeds the costs of such goods and/or
services rendered by unaffiliated third parties on a competitive basis.
I. EXISTING BUILDINGS. Those buildings currently situated within
the Project and commonly known as 405 Broadway, 425 Broadway, 475 Broadway,
555 Broadway, and 575-585 Broadway, provided, however, that if at any time
Landlord sells, exchanges, disposes of, or otherwise transfers its interest
in any such building, then effective upon the date of such sale, exchange,
disposition, or other transfer, the building shall cease to be an Existing
Building for the purposes of this Lease; and provided further, that if at any
time Landlord demolishes any Existing Building, neither the demolished
building nor any new building constructed on or about the location of the
demolished building
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(even if such new building uses the same address as the demolished building)
shall be considered to be an Existing Building for the purposes of this Lease.
J. EXISTING PROJECT SPACE. All Rentable Area located within the
Existing Buildings.
K. FINAL PLANS. As defined in the Work Letter.
L. HVAC. Heating, ventilating and air conditioning.
M. IMPOSITIONS. Taxes, assessments, charges, excises and levies,
business taxes, license, permit, inspection and other authorization fees,
transit development fees, assessments or charges for housing funds, service
payments in lieu of taxes and any other fees or charges of any kind at any
time levied, assessed, charged or imposed by any federal, state or local
entity, (i) upon, measured by or reasonably attributable to the cost or value
of Tenant's equipment, furniture, fixtures or other personal property located
in the Premises, or the cost or value of any Alterations; (ii) upon, or
measured by, any Rent payable hereunder, including any gross receipts tax;
(iii) upon, with respect to or by reason of the development, possession,
leasing, operation, management, maintenance, alteration, repair, use or
occupancy by Tenant of the Premises, or any portion thereof; or (iv) upon
this Lease transaction, or any document to which Tenant is a party creating
or transferring any interest or estate in the Premises. Impositions do not
include franchise, transfer, inheritance or capital stock taxes, or income
taxes measured by the net income of Landlord from all sources, except to the
extent any such taxes are levied or assessed against Landlord as a substitute
for, in whole or in part, any item that would otherwise be deemed an
Imposition under this PARAGRAPH 3.M. Impositions also do not include any
increases in the taxes, assessments, charges, excises and levies assessed
against the Project due solely to the construction or installation of tenant
improvements or other alterations by tenants of the Project other than Tenant
and any other tenants or occupants of the Building; provided, however, that
if any Impositions are imposed or increased due to the construction or
installation of tenant improvements or other alterations in the Building,
such Impositions shall be equitably prorated in Landlord's reasonable
judgment between Tenant and any other tenants of the Building.
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N. IMPROVEMENTS. Collectively, the Tenant Improvements and the
Capital Improvements.
O. INTEREST RATE. Either (i) the greater of (a) eleven percent (11%)
per annum, or (b) the reference rate, or succeeding similar index, announced
from time to time by the Bank of America's main San Francisco office, plus two
percent (2%) per annum; or (ii) the maximum rate of interest permitted by law,
whichever is less.
P. LANDLORD'S AGENTS. Landlord's authorized agents, partners,
subsidiaries, directors, officers, and employees.
Q. MONTHLY RENT. The rent payable pursuant to PARAGRAPHS 4.D AND
5.A., as adjusted from time to time pursuant to the terms of this Lease.
R. PARKING AREA. All Common Area (except sidewalks and service
delivery facilities) now or hereafter designated by Landlord for the parking or
access of motor vehicles, including roads, traffic lanes, vehicular parking
spaces, landscaped areas and walkways, and including any parking structure
constructed during the Term. Landlord and/or its successors may, by written
notice to Tenant, elect in their sole discretion to increase and/or decrease the
Parking Area from time to time during the Term for any reason whatsoever
(including without limitation an election by Landlord and/or its successors in
their sole discretion to make changes to the buildings situated in the Project,
and/or to subdivide, sell, exchange, dispose of, transfer, or change the
configuration of all or any portion of the Parking Area from time to time), so
long as such changes to the Parking Area do not reduce the number of parking
spaces available for Tenant's use below the minimum requirements set forth in
PARAGRAPH 37 for a period of sixty (60) consecutive days or more. No such
subdivision, sale, exchange, disposition, transfer, or change to the
configuration of all or any portion of the Parking Area shall cause the Parking
Area to be increased or decreased unless and until Landlord has given Tenant
written notice of such increase or decrease.
S. PERSON. Any individual, partnership, firm, association,
corporation, limited liability company, trust, or other form of business or
legal entity.
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T. PREMISES The term "Premises" shall have the meaning set forth in
PARAGRAPH 2 above.
U. PROJECT. That certain real property shown on EXHIBIT C, upon
which are currently located the Building and four (4) other buildings, currently
consisting of a total building square footage of approximately Four Hundred
Eleven Thousand Three Hundred Five and 00/100 (411,305) square feet of Rentable
Area. Landlord and/or its successors may, by written notice to Tenant, elect in
their sole discretion to increase and/or decrease the number of buildings and/or
the amount of Rentable Area situated in the Project from time to time during the
Term for any reason whatsoever.
V. REAL PROPERTY TAXES. Taxes, assessments and charges now or
hereafter levied or assessed upon, or with respect to, the Project, or any
personal property of Landlord used in the operation thereof or located therein,
or Landlord's interest in the Project or such personal property, by any federal,
state or local entity, including: (i) all real property taxes and general and
special assessments; (ii) charges, fees or assessments for transit, housing, day
care, open space, art, police, fire or other governmental services or benefits
to the Project, including assessments, taxes, fees, levies and charges imposed
by governmental agencies for such purposes as street, sidewalk, road, utility
construction and maintenance, refuse removal and for other governmental
services; (iii) service payments in lieu of taxes; (iv) any tax, fee or excise
on the use or occupancy of any part of the Project, or on rent for space in the
Project; (v) any other tax, fee or excise, however described, that may be levied
or assessed as a substitute for, or as an addition to, in whole or in part, any
other Real Property Taxes; and (vi) reasonable consultants' and attorneys' fees
and expenses incurred in connection with proceedings to contest, determine or
reduce Real Property Taxes. Real Property Taxes do not include: (A) franchise,
transfer, inheritance or capital stock taxes, or income taxes measured by the
net income of Landlord from all sources, unless any such taxes are levied or
assessed against Landlord as a substitute for, in whole or in part, any Real
Property Tax; (B) Impositions and all similar amounts payable by tenants of the
Project under their leases; and (C) penalties, fines, interest or charges due
for late payment of Real Property Taxes by Landlord. If any Real Property Taxes
are payable, or may at the option of the taxpayer be paid, in installments, such
Real Property Taxes shall, together with any interest that would
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otherwise be payable with such installment, be deemed to have been paid in
installments, amortized over the maximum time period allowed by applicable law.
If the tax statement from a taxing authority does not allocate Real Property
Taxes to the Building, Landlord shall make the determination of the proper
allocation of such Real Property Taxes based, to the extent possible, upon
records of the taxing authority and, if not so available, then on an equitable
basis. Real Property Taxes also do not include any increases in the taxes,
assessments, charges, excises and levies assessed against the Project due solely
to the construction or installation of tenant improvements or other alterations
by tenants of the Project other than Tenant and any other tenants or occupants
of the Building; provided, however, that if any Real Property Taxes are imposed
or increased due to the construction or installation of tenant improvements or
other alterations in the Building, such Real Property Taxes shall be equitably
prorated in Landlord's reasonable judgment between Tenant and any other tenants
of the Building.
W. RENT. Monthly Rent plus the Additional Rent as defined in
PARAGRAPH 5.E.
X. RENTABLE AREA. The aggregate square footage in any one or more
buildings in the Project, as appropriate, as reasonably determined by Landlord's
architect from time to time.
Y. SECURITY DEPOSIT. That amount paid by Tenant pursuant to
PARAGRAPH 7.
Z. SUBLET. Any transfer, sublet, assignment, license or concession
agreement, change of ownership, mortgage, or hypothecation of this Lease or the
Tenant's interest in the Lease or in and to all or a portion of the Premises. As
used herein, a Sublet includes the following: (i) if Tenant is a partnership or
a limited liability company, a transfer, voluntary or involuntary, of all or any
part of any interest in such partnership or limited liability company, or the
dissolution of the partnership or limited liability company, whether voluntary
or involuntary; (ii) if Tenant is a corporation, any dissolution, merger,
consolidation or other reorganization of Tenant, or the transfer, either by a
single transaction or in a series of transactions, of a controlling percentage
of the stock of Tenant (except that a Sublet shall not include any such transfer
of a controlling percentage of the stock of Tenant occurring at a time when the
stock of Tenant is publicly traded on a nationally
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recognized stock exchange or over the counter), or the sale, by a single
transaction of or series of transaction, within any one (1) year period, of
corporate assets equaling or exceeding twenty percent (20%) of the total value
of Tenant's assets (except in connection with an initial public offering of the
stock of Tenant on a nationally recognized stock exchange or over the counter);
(iii) if Tenant is a trust, the transfer, voluntarily or involuntarily, of all
or any part of the controlling interest in such trust; and (iv) if Tenant is any
other form of entity, a transfer, voluntary or involuntary, of all or any part
of any interest in such entity. As used herein, the phrases "controlling
percentage" and "controlling interest" means the ownership of, and/or the right
to vote, stock, partnership interests, membership interests, or other indicia of
ownership possessing at least fifty-one percent (51%) of either the total
combined interests in Tenant, or the voting power of all classes of Tenant's
capital stock, partnership interests, membership interests, or other indicia of
ownership, that have been issued, outstanding, and (if applicable) are entitled
to vote.
AA. SUBRENT. Any consideration of any kind received or to be
received, by Tenant from a subtenant if such sums are related to Tenant's
interest in this Lease or in the Premises.
BB. SUBTENANT. The person or entity with whom a Sublet agreement is
proposed to be or is made.
CC. TENANT DELAY. Any delay that Landlord may encounter in the
performance of Landlord's obligations under the Lease because of any act or
omission of any nature by Tenant or its agents or contractors, including without
limitation any (i) delay attributable to the postponement of any Improvements at
the request of Tenant; (ii) delay by Tenant in the submission of information or
the giving of authorizations or approvals within the time limits set forth in
the Lease or the Work Letter; (iii) delay attributable to the failure of Tenant
to pay, when due, any amounts required to be paid by Tenant pursuant to the
Lease or the Work Letter; and (iv) delay resulting from any change order request
initiated or requested by Tenant.
DD. TENANT IMPROVEMENTS. Those certain improvements to the Premises
to be constructed by Landlord pursuant to EXHIBIT B, other than the Capital
Improvements. The Tenant Improvements shall at all times be the property of
Landlord and shall not be deemed Tenant's Personal Property.
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EE. TENANT'S BUILDING SHARE. The ratio (expressed as a percentage) of
the total Rentable Area of the Premises to the total Rentable Area of the
Building as determined by Landlord from time to time, which as of the
Commencement Date shall equal one hundred percent (100%). Tenant's Building
Share shall be recalculated any time that the amount of Rentable Area contained
in Premises is adjusted, or there is a change in the total Rentable Area of the
Building.
FF. TENANT'S PERCENTAGE SHARE. The ratio (expressed as a percentage)
of the total Rentable Area of the Premises to the total Rentable Area of all of
the buildings at the Project owned by Landlord from time to time, which as of
the Commencement Date shall equal Thirteen and 44/100ths percent (13.44%) (i.e.,
the Rentable Area of the Premises divided by the Rentable Area of the buildings
at the Project owned by Landlord as of the date of this Lease). Tenant's
Percentage Share shall be recalculated any time that the amount of Rentable Area
contained in Premises is adjusted, or there is a change in the total Rentable
Area of those buildings in the Project owned by Landlord, or Landlord sells,
exchanges, or otherwise transfers any or all of the buildings situated in the
Project (including without limitation the Building). The parties acknowledge and
agree that the total Rentable Area of all of the buildings in the Project owned
by Landlord may increase and/or decrease from time to time during the Term,
since Landlord may elect in its sole discretion to sell a building or buildings
or to make changes to the buildings it owns in the Project.
GG. TENANT'S PERSONAL PROPERTY. Tenant's trade fixtures, furniture,
equipment and other personal property in the Premises.
HH. TERM. The Term of this Lease set forth in PARAGRAPH 4.A., as it
may be extended hereunder pursuant to any options to extend granted herein.
4. LEASE TERM.
A. TERM. The Term shall commence on the date that Landlord has
substantially completed the Improvements (the "COMMENCEMENT DATE"), and shall
terminate December 4, 2007. For the purposes of this Lease, Landlord shall be
deemed to have substantially completed the Improvements at such time as the
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building inspector and fire marshall or the City of Redwood City has granted
temporary occupancy of the Improvements.
B. DELAYS IN COMPLETION. Landlord shall diligently prosecute the
completion of the Improvements in accordance with the schedule attached to
EXHIBIT B-3. Tenant agrees that if Landlord, for any reason whatsoever, is
unable to substantially complete the Improvements on or before the Estimated
Commencement Date (as defined below), Landlord shall not be liable to Tenant
for any loss or damage therefrom, nor shall this Lease be void or voidable.
Landlord and Tenant estimate that the Commencement Date shall be August 26,
1999 (the "Estimated COMMENCEMENT DATE"). Upon the establishment of the
actual Commencement Date, Landlord and Tenant shall execute a Commencement
Date Memorandum in the form set forth in EXHIBIT D. No delay in Landlord's
completion of the Improvements caused by any Tenant Delay shall delay the
commencement of Monthly Rent or the commencement of the Term hereunder. In
the event of a delay caused by any Tenant Delay, Landlord shall set the
"Commencement Date" by written notice to Tenant as the date the Improvements
would have been substantially completed without such delay as reasonably
determined by Landlord. Landlord shall then subsequently deliver the Premises
to Tenant upon substantial completion as hereinabove defined. Such right of
Landlord to reset the Commencement Date shall not be determined if the delay
in Landlord's completion of the Improvements is due to any delay caused by
Landlord or by the City of Redwood City provided a Tenant has timely
submitted its plans in accordance with the schedule attached to EXHIBIT B-3
Tenant shall pay any and all costs and expenses incurred by Landlord which
result from any Tenant Delay, including, without limitation, any and all
costs and expenses attributable to increases in the cost of labor or
materials. Notwithstanding the foregoing, if Landlord is delayed in the
performance of the Improvements because of acts of any other party, actions
of the elements, acts of nature, war, riots, strikes, lockouts, labor
disputes, inability to procure or general shortage of labor or materials in
the normal channels of trade, or delay in governmental action or inaction
where action is required (collectively, "Force Majuere Delays") then the
Commencement Date shall be extended by the period of the delay, and the
period for Landlord's performance of the Improvements shall be extended for a
period equivalent, to the period of such delay. Notwithstanding anything to
the contrary contained herein, if (i) Landlord has not delivered the Premises
substantially completed to Tenet on or before the date that is sixty (60)
day's after the
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Estimated Commencement Date for any reason other than Tenant Delay or Force
Majeure Delays, or (ii) Landlord has not delivered the Premises substantially
completed to Tenant on or before the date that is ninety (90) days after the
Estimated Commencement Date for any reason, including but not limited to Force
Majeure Delays, then in either such event Tenant shall have the right thereafter
to cancel this Lease, and upon such cancellation, Landlord shall return all sums
theretofore deposited by Tenant with Landlord, and neither party shall have any
further liability to the other; provided, however, in the event of cancellation
pursuant to clause (ii) above, Landlord shall not be required to return to
Tenant the expended portion of the Set Aside Funds as defined in EXHIBIT B.
C. OPTION TO EXTEND.
(i) GRANT OF OPTION. Landlord hereby grants to Tenant one (1)
option ("OPTION TO EXTEND") to extend the Term of this Lease for an additional
term of five (5) years. The five-year option term (the "EXTENDED TERM") shall
commence upon the expiration of the initial Term. The Option to Extend is
expressly conditioned upon Tenant's not being in default under any term or
condition of this Lease after notice from Landlord and the expiration of any
applicable cure period granted by this Lease, either at the time the Option to
Extend is exercised or at the time the Extended Term would commence. The Option
to Extend shall be personal to the Tenant originally named in this Lease, and
shall not be assigned, sold, conveyed or otherwise transferred to any other
party, except to an Affiliate or a Permitted Transferee in accordance with
PARAGRAPH 25.G below (including without limitation any assignee or sublessee of
such Tenant) without the prior written consent of Landlord, which consent may be
Withheld in Landlord's sole discretion. The Option to Extend shall be
exercisable only so long as the Lease remains in full force and effect and shall
be an interest appurtenant to and not separable from Tenant's estate under the
Lease. Under no circumstances shall Landlord be required to pay any real estate
commission to any party with respect to Tenant's exercise of the Option to
Extend.
(ii) MANNER OF EXERCISE. Tenant may exercise the Option to
Extend only by giving Landlord written notice not less than one (1) year prior
to the expiration of the Term. If Tenant fails to exercise the Option to Extend,
then the Option to Extend
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automatically shall lapse and thereafter Tenant shall have no right to exercise
the Option to Extend.
(iii) TERMS AND RENT. The initial Monthly Rent for the
Premises for the Extended Term shall be equal to the greater of (x) one hundred
percent (100%) of the fair market rent, as determined below, for the Premises as
of the commencement of the Extended Term, or (x) an amount equal to the Monthly
Rent payable during the last year of the Term, multiplied by one hundred three
and one fourth percent (103.25%). All other terms and conditions of the Lease,
as amended from time to time by the parties in accordance with the provisions of
the Lease, shall remain in full force and effect and shall apply during the
Extended Term; provided, however, that neither the Option to Extend nor
Landlord's obligations under the Work Letter shall be of any force or effect
during the Extended Term.
(iv) DETERMINATION OF RENT. For the purposes of calculating the
Monthly Rent for the Extended Term, the fair market rent shall be equal to the
net effective rent per rentable square foot being charged for leases executed
within the preceding twelve (12) months for comparable space at either the
Project (if any), or if there are none, for comparable space in office and
research and development complexes located in the Redwood Shores area or the
Menlo Oaks Business Park (located in Menlo Park, California), with terms
comparable to the terms contained in this Lease, taking into consideration
relevant factors such as the presence or absence of tenant improvement
contributions by the lessor (but excluding the value of any tenant improvements
paid for by Tenant), and incorporating increases in the Rent during the Extended
Term, if appropriate. Any value added to the Premises by the Tenant Improvements
and any Alterations paid for by Tenant shall not be considered or included in
the determination of the fair market rent. The fair market rent shall be
determined by mutual agreement of the parties or, if the parties are unable to
agree within forty-five (45) days after Tenant's exercise of the Option to
Extend, then fair market rent shall be determined pursuant to the procedure set
forth in PARAGRAPHS 4.C. (v) and 4.C. (vi). The determination of the Monthly
Rent for the Extended Term for the Premises shall take into account the fact
that the Premises shall be leased in its shell condition with a tenant
improvement allowance of Ten and 00/100 Dollars ($10.00)per square foot.
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(v) LANDLORD'S INITIAL DETERMINATION. If the parties are
unable mutually to agree upon the fair market rent pursuant to PARAGRAPH 4.C.
(iv), then the fair market rent initially shall be determined by Landlord by
written notice ("LANDLORD'S NOTICE") given to Tenant promptly following the
expiration of the 45-day period set forth in PARAGRAPH 4.C. (iv). If Tenant
disputes the amount of fair market rent set forth in Landlord's Notice, then,
within thirty (30) days after the date of Landlord's Notice, Tenant shall send
Landlord a written notice ("TENANT'S NOTICE") which specifically (a) disputes
the fair market rent set forth in Landlord's Notice, (b) demands arbitration
pursuant to PARAGRAPH 4.C. (vi), and (c) states the name and address of the
person who shall act as arbitrator on Tenant's behalf. Tenant's Notice shall be
deemed defective, and not given to Landlord, if it fails to substantially comply
with the requirements or fails to strictly comply with the time period set forth
above. If Tenant does not send Tenant's Notice within thirty (30) days after the
date of Landlord's Notice, or if Tenant's Notice fails to contain all of the
required information, then Tenant shall be deemed to have rejected Landlord's
Notice. If Tenant is deemed to have rejected Landlord's Notice, and Landlord
thereafter gives Tenant a written notice ("LANDLORD'S SECOND NOTICE") demanding
that Tenant respond to Landlord's Notice, and Tenant does not send Tenant's
Notice within five (5) days of the date of Landlord's Second Notice, then the
Monthly Rent for the Extended Term shall equal one hundred percent (100%) of the
fair market rent specified in Landlord's Notice. If Tenant sends Tenant's Notice
in the proper form within thirty (30) days after the date of Landlord's Notice,
then the Monthly Rent for the Extended Term shall be determined by arbitration
pursuant to PARAGRAPH 4.C(vi) below. If the arbitration is not concluded prior
to the commencement of the Extended Term, then Tenant shall pay Monthly Rent
equal to one hundred twenty-five percent (125%) of the Monthly Rent payable
immediately prior to the commencement of the Extended Term. If the fair market
rent determined by arbitration differs from that paid by Tenant pending the
results of arbitration, then any adjustment required to adjust the amount
previously paid shall be made by payment by the appropriate party within ten
(10) days after the determination of fair market rent.
(vi) ARBITRATION. The arbitration shall be conducted in the
City of San Francisco in accordance with the then prevailing rules of the
American Arbitration Association (or its successor) for the arbitration of
commercial disputes, except
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that the procedures mandated by such rules shall be modified as follows:
(a) Each arbitrator must be a real estate appraiser with at
least five (5) years of full-time commercial appraisal experience who is
familiar with the fair market rent of office and research and development
complexes located in the vicinity of the Premises. Within ten (10) business days
after receipt of Tenant's Notice, Landlord shall notify Tenant of the name and
address of the person designated by Landlord to act as arbitrator on Landlord's
behalf.
(b) The two arbitrators chosen pursuant to PARAGRAPH 4.C.
(vi)(a) shall meet within ten (10) business days after the second arbitrator is
appointed and shall either agree upon the fair market rent or appoint a third
arbitrator possessing the qualifications set forth in PARAGRAPH 4.C. (vi)(a). If
the two arbitrators agree upon the fair market rent within such ten (10)
business day period, the Monthly Rent for the Extended Term shall equal one
hundred percent (100%) of such fair-market rent. If the two arbitrators are
unable to agree upon the fair market rent and are unable to agree upon the third
arbitrator within five (5) business days after the expiration of such ten (10)
business day period, the third arbitrator shall be selected by the parties
themselves. If the parties do not agree on the third arbitrator within five (5)
business days after the expiration of such five (5) business day period, then
either party, on behalf of both, may request appointment of the third arbitrator
by the Association of South Bay Brokers. The three arbitrators shall decide the
dispute, if it has not been previously resolved, by following the procedures set
forth in PARAGRAPH 4.C. (vi)(c). Each party shall pay the fees and expenses of
its respective arbitrator and both shall share the fees and expenses of the
third arbitrator. Each party shall pay its own attorneys' fees and costs of
witnesses.
(c) The three arbitrators shall determine the fair market rent
in accordance with the following procedures. Each of Landlord's arbitrator and
Tenant's arbitrator shall state, in writing, his or her determination of the
fair market rent, supported by the reasons therefor, and shall make counterpart
copies for the other arbitrators. All of the arbitrators shall arrange for a
simultaneous exchange of the proposed resolutions within ten (10) business days
after appointment of the third arbitrator. If any arbitrator fails to
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deliver his or her own determination to the other arbitrators within such ten
(10) business day period, then the fair market rent shall equal the average of
the resolutions submitted by the other arbitrators. If all three (3) arbitrators
deliver their determinations to the other arbitrators within such ten (10)
business day period, then the two (2) closest determinations of the arbitrators
shall be averaged, and the resulting quotient shall be the fair market rent, and
the Monthly Rent for the Extended Term shall equal one hundred percent (100%) of
such fair market rent; provided, however, that if the determination of one (1)
of the arbitrators (the "AVERAGE DETERMINATION") is equal to the average of the
determinations of the other two (2) arbitrators, then the Average Determination
shall be the fair market rent. However, the arbitrators shall not attempt to
reach a mutual agreement of the fair market rent; each arbitrator shall
independently arrive at his or her proposed resolution.
(d) The arbitrators shall have the right to consult experts
and competent authorities for factual information or evidence pertaining to a
determination of fair market rent, but any such consultation shall be made in
the presence of both parties with full right on their part to cross-examine. The
arbitrators shall render the decision and award in writing with counterpart
copies to each party. The arbitrators shall have no power to modify the
provisions of this Lease. In the event of a failure, refusal or inability of any
arbitrator to act, his or her successor shall be appointed by him or her, but in
the case of the third arbitrator, his or her successor shall be appointed in the
same manner as that set forth herein with respect to the appointment of the
original third arbitrator.
5. RENT AND ADDITIONAL CHARGES.
A. MONTHLY RENT. Tenant shall pay to Landlord, in lawful money of
the United States, Monthly Rent as follows. commencing on the Commencement Date,
and continuing throughout the balance of the Term (subject to adjustment
pursuant to PARAGRAPH 5.B), the Monthly Rent shall equal Two and 25/100ths
Dollars ($2.25) multiplied by the number of square feet of Rentable Area
situated within the Premises, as determined by Landlord under PARAGRAPH 2.
Monthly Rent shall be paid in advance, on the first day of each calendar month
during the Term, without abatement, deduction, claim, offset, prior notice or
demand. The sum of One
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[page missing]
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before the first day of each month during the ensuing calendar year, Tenant
shall pay to Landlord one-twelfth (1/12th) of such estimated amounts, provided
that if such notice is not given in December, Tenant shall continue to pay on
the basis of the prior year's estimate until the month after such notice is
given. If at any time or times it appears to Landlord, in its reasonable
judgment, that the amounts payable under this PARAGRAPH 5.D. (i) for the current
calendar year will vary from its then current estimate by more than five percent
(5%), Landlord may, in its sole discretion, by notice to Tenant, showing in
reasonable detail the basis for such variance, revise its estimate for such
year, in which case subsequent payments by Tenant for such year shall be based
upon such revised estimate. Landlord's election not to give the notice described
in the foregoing sentence shall not affect Landlord's ability to charge Tenant
for, nor Tenant's liability to pay for, any shortfall in the estimated payments
for such calendar year previously made by Tenant, as set forth in PARAGRAPH 5.D.
(ii).
(ii) ADJUSTMENT. Within one hundred twenty (120) days after
the close of each calendar year or as soon after such 120-day period as
reasonably practicable, Landlord shall deliver to Tenant a reasonably detailed
statement of Common Area Maintenance Costs for such calendar year, certified by
Landlord or its property manager, subject to Tenant's right to audit as
hereinafter provided. At that time, Landlord shall also deliver to Tenant a
statement, certified as correct by Landlord, of the adjustments to be made
pursuant to PARAGRAPH 5.D. (i) above. If Landlord's statement shows that Tenant
owes an amount that is less than the estimated payments for such calendar year
previously made by Tenant, Landlord shall refund such excess to Tenant within
thirty (30) days after delivery of the statement. If such statement shows that
Tenant owes an amount that is more than the estimated payments for such calendar
year previously made by Tenant, Tenant shall pay the deficiency to Landlord
within thirty (30) days after delivery of the statement.
(iii) LAST YEAR. If this Lease shall terminate on a day other
than the last day of a calendar year, the adjustment in Rent applicable to the
calendar year in which such termination shall occur shall be prorated on the
basis which the number of days from the commencement of such calendar year to
and including such termination date bears to three hundred sixty (360). The
termination of this Lease shall not affect the
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obligations of Landlord and Tenant pursuant to PARAGRAPH 5.D. (ii) to be
performed after such termination.
(iv) AUDIT. Within one hundred eighty (180) days after receipt
of Landlord's statement of Common Area Maintenance Costs as provided in
PARAGRAPH 5.D. (ii), Tenant or its designee, on not less than five (5) days'
prior written notice to Landlord, shall have the right to, at Tenant's sole cost
and expense, audit, examine and copy Landlord's books and records with respect
to the Common Area Maintenance Costs for the year for which the Landlord's
statement pertains. If Tenant fails to give such written notice to Landlord
within such 180-day period, Tenant shall be deemed to have forever waived its
right to audit the Common Area Maintenance Costs for the year for which the
Landlord's statement pertains. Landlord shall cooperate with Tenant in any such
examination of its books and records. Tenant shall have the right to audit at
Landlord's local offices, at Tenant's expense, Landlord's accounts and records
relating to Common Area Maintenance Costs and Impositions. If such audit reveals
to the reasonable satisfaction of Landlord and Tenant that Landlord has
overcharged Tenant, the amount overcharged shall be paid to Tenant within thirty
(30) days after the audit: is concluded. If such audit reveals to the reasonable
satisfaction of Landlord and Tenant that Landlord has undercharged Tenant, the
amount undercharged shall be paid to Landlord within thirty (30) days after the
audit is concluded. In addition, if the audit reveals to the reasonable
satisfaction of Landlord and Tenant that Landlord's statement exceeds the actual
Common Area Maintenance Costs and Impositions which should have been charged to
Tenant by more than seven percent (7%), the cost of the audit shall be paid by
Landlord. If Tenant retains or utilizes a third party to perform such an audit
of the Common Area Maintenance Costs and Impositions, Tenant shall not
compensate such third party on anything other than an hourly basis.
E. ADDITIONAL RENT. All monies required to be paid by Tenant under
this Lease, including, without limitation, the Tenant Improvement costs pursuant
to EXHIBIT B, the management fee described in PARAGRAPH 5.D, Tenant's share of
Common Area Maintenance Costs pursuant to PARAGRAPH 5.D, Real Property Taxes and
Impositions pursuant to PARAGRAPH 15, and the monthly cost of insurance premiums
required pursuant to PARAGRAPH 21.C, shall be deemed Additional Rent.
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F. PRORATIONS. If the Commencement Date is not the first (1st) day
of a month, or if the termination date of this Lease is not the last day of a
month, a prorated installment of Monthly Rent based on a 30-day month shall be
paid for the fractional month during which such date occurs or the Lease
terminates.
G. INTEREST. Any amount of Rent or other charges provided for under
this Lease due and payable to Landlord which is not paid within five (5) days
after written notice from Landlord shall bear interest at the Interest Rate from
(i) the date such Rent is due until such Rent is paid, or (ii) the date that is
ten (10) days after Tenant receives written notice from Landlord that any other
charge provided for under this Lease (other than Rent) is due and payable, until
such other charge is paid.
6. LATE PAYMENT CHARGES.
Tenant acknowledges that late payment by Tenant to Landlord of Rent
and other charges provided for under this Lease will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of such costs being
extremely difficult or impracticable to fix. Therefore, if any installment of
Rent or any other charge due from Tenant is not received by Landlord within five
(5) days after Landlord gives Tenant notice that such Rent or other charge is
due, Tenant shall pay to Landlord an additional sum equal to seven percent (7%)
of the amount overdue as a late charge for every month or portion thereof that
the Rent or other charges remain unpaid. The parties agree that this late charge
represents a fair and reasonable estimate of the costs that Landlord will incur
by reason of the late payment by Tenant.
INITIALS:
______________________________ ______________________________
Landlord Tenant
7. SECURITY DEPOSIT.
A. DEPOSIT REQUIRED. Tenant shall deposit with Landlord upon the
execution of this Lease by Landlord and Tenant, the sum of Four Hundred
Ninety-Seven Thousand Five Hundred
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Thirty-Eight and 00/100 Dollars ($497,538.00) (i.e., an amount equal to four (4)
installments of Monthly Rent) as the "SECURITY DEPOSIT" for the full and
faithful performance of every provision of this Lease to be performed by Tenant.
At Tenant's option, the Security Deposit may be in the form of an irrevocable
standby letter of credit ("L-C") Landlord shall not be required to segregate
the Security Deposit from Landlord's general funds; Landlord's obligations with
respect to the Security Deposit shall be those of a debtor and not a trustee,
and Tenant shall not be entitled to any interest on the Security Deposit.
Invocation by Landlord of its rights hereunder shall not constitute a waiver of
nor relieve Tenant from any liability or obligation for any default by Tenant
under this Lease.
(i) REDUCTION OR REPLACEMENT. So long as Tenant has not
committed any default under this Lease, which default is continuing after notice
from Landlord and the expiration of any applicable grace period provided for in
this Lease, (a) as of each of the second (2nd) anniversary of the Lease
Commencement Date and the fourth (4th) anniversary of the Lease Commencement
Date, Tenant may reduce the Security Deposit in the amount of One Hundred
Twenty-Four Thousand Three Hundred Eighty-Four and 50/100 Dollars ($124,384.50)
on each such anniversary date; or (b) if Tenant is profitable for a period of
eight (8) consecutive quarters commencing after the Commencement Date, then
Tenant may elect to reduce the Security Deposit to the sum equal to two (2)
installments of the initial Monthly Rent. For the purposes of this PARAGRAPH 7,
in order for Tenant to demonstrate that it has been profitable for the calendar
quarter in question, Tenant must at a minimum deliver to Landlord an audited
financial statement of Tenant, showing that Tenant has earned a net profit for
each calendar quarter in question. In no event shall Tenant be entitled to
reduce the Security Deposit below an amount equal to two (2) installments of the
initial Monthly Rent
If Tenant is entitled to and does elect to reduce the amount of the
Security Deposit pursuant to this PARAGRAPH 7.A. (i), and Tenant delivers to
Landlord written notice of its election to so reduce the amount of the Security
Deposit and the financial statements described in the foregoing paragraph, then
if the Security Deposit is in the form of cash, Landlord shall pay to Tenant the
excess amount of the Security Deposit, without interest, within thirty (30) days
after Landlord's receipt of such notice and statements; or if the Security
Deposit is in the form of an L-C, then Tenant may, not less than ten (10) days
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after Landlord's receipt of such notice and statement, replace the L-C with an
L-C in an amount equal to the reduced amount of the Security Deposit.
(ii) CONSEQUENCES OF DEFAULT. If Tenant defaults with
respect to any provision of this Lease, after notice from Landlord and the
expiration of any applicable cure or grace periods expressly provided for in
this Lease, Landlord may apply all or any part of the Security Deposit for
the payment of any Rent or other sum in default, the repair of such damage to
the Premises or the payment of any other amount which Landlord may spend or
become obligated to 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 to the full extent permitted by law. If any portion of a
cash Security Deposit is so applied, or any portion of an L-C posted as the
Security Deposit, if applicable, is drawn upon, by Landlord for such
purposes, Tenant shall either, within ten (10) days after written demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to its original amount or deposit a replacement L-C with
Landlord in the amount of the original L-C. The Security Deposit or any
balance thereof remaining after Landlord cures any default of Tenant
hereunder shall be returned to Tenant within thirty (30) days of termination
of the Lease.
(iii) FORM OF L-C. If at any time Tenant elects to deposit an
L-C as the Security Deposit, the L-C shall be issued by a bank reasonably
acceptable to Landlord, shall be issued for a term of at least twelve (12)
months and shall be in a form and with such content acceptable to Landlord in
its sole discretion. Tenant shall either replace the expiring L-C with an L-C
in an amount equal to the original L-C or renew the expiring L-C, in any
event no later than thirty (30) days prior to the expiration of the term of
the L-C then in effect. If Tenant fails to deposit a replacement L-C or renew
the expiring L-C, Landlord shall have the right to draw upon the expiring L-C
for the full amount thereof and hold the same as the Security Deposit;
provided, however, that if Tenant provides a replacement L-C that meets the
requirements of this PARAGRAPH 7,A, then Landlord shall return to Tenant
promptly in cash that amount of the L-C that had been drawn upon by Landlord.
Drawing upon the L-C shall be conditioned upon notice to Tenant of Landlord's
intention to draw upon the L-C and the presentation to the issuer of the L-C
of a certified statement executed by a general partner of Landlord
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that (i) Tenant is in default under the Lease, which default is continuing
after notice to Tenant and the expiration of any applicable grace period
provided for herein, and Landlord is exercising its right to draw upon so
much of the L-C as is necessary to cure Tenant's default, or (ii) Tenant has
not renewed or replaced an expiring L-C as required by this Lease and
Landlord is authorized to draw upon the L-C prior to its expiration. The L-C
shall not be mortgaged, assigned or encumbered in any manner whatsoever by
Tenant without the prior written consent of Landlord. The use, application or
retention of the L-C, or any portion thereof, by Landlord shall not prevent
Landlord from exercising any other right or remedy provided by this Lease or
by law, it being intended that Landlord shall not first be required to
proceed against the L-C, and such use, application or retention shall not
operate as a limitation on any recovery to which Landlord may otherwise be
entitled.
8. HOLDING OVER.
If Tenant remains in possession of all or any part of the Premises
after the expiration of the Term, with the express or implied consent of
Landlord, such tenancy shall be at sufferance only, and shall not constitute a
renewal or extension for any further term. If Tenant remains in possession after
the expiration of the Term, without Landlord's consent, Rent shall be payable at
a rental equal to one hundred fifty percent (150%) of the Monthly Rent payable
during the last month of the Term (which rental shall be due and payable at the
same time as Monthly Rent is due under this Lease), and any other sums due under
this Lease shall be payable in the amount and at the times specified in this
Lease. If Tenant remains in possession after the expiration of the Term with
Landlord's consent, Rent shall be payable at a rental equal to one hundred
percent (100%) of the Monthly Rent payable during the last month of the Term
(which rental shall be due and payable at the same time as Monthly Rent is due
under this Lease), and any other sums due under this Lease shall be payable in
the amount and at the times specified in this Lease. Any such holdover tenancy
(with or without Landlord's consent) shall be subject to every other term,
condition, and covenant contained herein; provided, however, that Landlord's
obligations under the Work Letter shall not be of any force or effect during any
such holdover tenancy.
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9. TENANT IMPROVEMENTS.
Landlord agrees to construct the Tenant Improvements pursuant to the
terms of EXHIBIT B.
10. CONDITION. OF PREMISES.
A. CAPITAL IMPROVEMENTS. Prior to the Commencement Date, Landlord
shall complete the Capital Improvements to the Premises in accordance with the
terms of EXHIBIT B. Except for its obligation to perform the Capital
Improvements and the Tenant Improvements as set forth in this Lease and the Work
Letter, Landlord shall have no obligation whatsoever to do any work or perform
any improvements whatsoever to any portion of the Premises or the Building.
B. ACCEPTANCE OF PREMISES. Within ten (10) days after completion
of the Tenant Improvements, Tenant shall conduct a walk-through inspection of
the Premises with Landlord and complete a punch list of items needing
additional work. Other than the items specified in the punch list, if any,
and latent defects in the Capital Improvements that could not have been
discovered by a reasonably thorough visual inspection of the Capital
Improvements, and subject to Landlord's representations and warranties
described below, by taking possession of the Premises, Tenant shall be deemed
to have accepted the Premises in good, clean and completed condition and
repair, subject to all applicable laws, codes and ordinances. Any damage to
the Premises caused by Tenant's move-in shall be repaired or corrected by
Tenant, at its sole cost and expense. Tenant acknowledges that neither
Landlord nor Landlord's Agents have made any representations or warranties as
to the suitability or fitness of the Premises for the conduct of Tenant's
business or for any other purpose, nor has Landlord or Landlord's Agents
agreed to undertake any Alterations or construct any Improvements to the
Premises except as expressly provided in this Lease. If Tenant fails to
submit a punch list to Landlord within such 10-day period, it shall be deemed
that there are no Improvement items needing additional work or repair.
Landlord's contractor shall complete all reasonable punch-list items within
thirty (30) days after the walk-through inspection; provided, however, that
if such punch-list items cannot reasonably be completed within the 30-day
period, Landlord's contractor shall commence such performance within the
30-day period and diligently thereafter prosecute the same to completion.
Upon completion of such
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punch-list items, Tenant shall approve such completed items in writing to
Landlord. If Tenant fails to approve such items within fourteen (14) days of
completion, such items shall be deemed approved by Tenant.
C. LANDLORD'S REPRESENTATIONS AND WARRANTIES. Landlord represents and
warrants (the "Condition Warranties") to Tenant that as of the Commencement
Date the following portions of the Building shall be in good condition (i.e.
in an operable (but not new) state of repair, free of defects that would
adversely affect Tenant's operation of its business in the Premises). (i) the
HVAC system serving the Premises, (ii) the roof of the Building, (iii) the
main electrical supply to a main distribution point in the Building, (iv) the
working sanitary sewer lines to the Building, and (v) water service to the
Building. The Condition Warranties shall terminate on a date one hundred
eighty (180) days after the Commencement Date, except to the extent that
Tenant has delivered to Landlord within such 180-day period a written notice
specifying in detail any defaults by Landlord under the Condition Warranties
(a "Violation Notice"), and Landlord shall thereafter have absolutely no
liability to Tenant for the inaccuracy of any Condition Warranty, except to
the extent set forth in a Violation Notice. Landlord's liability for the
correction of any defects described in a Violation Notice shall be subject to
Landlord's reasonable right to dispute the claims set forth in any Violation
Notice. Landlord's sole liability with respect to any breach of any Condition
Warranty that is properly set forth in a timely delivered Violation Notice
shall be to promptly correct such defect; Landlord shall have no liability
for any other loss, cost, damage, expense or lost profit in connection with
such breach, and Tenant shall have no right to any abatement or offset of
Rent in connection with such breach.
D. LANDLORD'S ADDITIONAL REPRESENTATION AND WARRANTY. Landlord
represents and warrants (the "Environmental Warranty") to Tenant that to the
best of Landlord's knowledge, as of the Commencement Date, no
asbestos-containing materials (other than asbestos-containing materials that
are fully encapsulated or that are within the transite panels of the curtain
wall of the Building) shall be present in the Premises. Landlord's sole
liability with respect to any breach of the Environmental Warranty shall be
to promptly correct such defect; Landlord shall have no liability for any
other loss, cost, damage, expense or lose profit in connection with such
breach, and Tenant shall have
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no right to any abatement or offset of Rent in connection with such breach.
11. USE OF THE PREMISES AND COMMON AREA.
A. TENANT'S USE. Tenant shall use the Premises only for general
office, administration, research and development, manufacturing, warehousing
and any other legal use related to such activities and consistent with any
CC&Rs. Tenant shall not use the Premises or suffer or permit anything to be
done in or about the Premises which will in any way conflict with any law,
statute, zoning restriction, ordinance or governmental law, rule, regulation
or requirement of public authorities now in force or which may hereafter be
in force, relating to or affecting the condition, use or occupancy of the
Premises. Tenant shall not commit any public or private nuisance or any other
act or thing which might or would disturb the quiet enjoyment of any other
tenant of Landlord or any occupant of nearby property. Tenant shall place no
loads upon the floors, walls or ceilings in excess of the maximum designed
load determined by a licensed structural engineer or which endanger the
structure; nor place any harmful liquids in the drainage systems; nor dump or
store waste materials or refuse or allow waste materials or refuse to remain
outside the Building proper, except in the enclosed trash areas provided.
Tenant shall not store or permit to be stored or otherwise placed any other
material of any nature whatsoever outside the Building, except on a temporary
basis.
B. HAZARDOUS MATERIALS.
(i) HAZARDOUS MATERIALS DEFINED. As used herein, the term
"HAZARDOUS MATERIALS" shall mean any wastes, materials or substances (whether
in the form of liquids, solids or gases, and whether or not air-borne), which
are or are deemed to be (a) pollutants or contaminants, or which are or are
deemed to be hazardous, toxic, ignitable, reactive, corrosive, dangerous,
harmful or injurious, or which present a risk to public health or to the
environment, or which are or may become regulated by or under the authority
of any applicable local, state or federal laws, judgments, ordinances,
orders, rules, regulations, codes or other governmental restrictions,
guidelines or requirements, any amendments or successor(s) thereto,
replacements thereof or publications promulgated pursuant thereto, including,
without limitation, any such items or substances which are or may become
regulated by any of the Environmental Laws (as hereinafter
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defined); (b) listed as a chemical known to the State of California to cause
cancer or reproductive toxicity pursuant to Section 25249.8 of the California
Health and Safety Code, Division 20, Chapter 6.6 (Safe Drinking Water and
Toxic Enforcement Act of 1986); or (c) a pesticide, petroleum, including
crude oil or any fraction thereof, asbestos or any asbestos-containing
material, a polychlorinated biphenyl, radioactive material, or urea
formaldehyde.
(ii) ENVIRONMENTAL LAWS DEFINED. In addition to the laws
referred to in PARAGRAPH 11.B. (i) above, the term "ENVIRONMENTAL LAWS" shall
be deemed to include, without limitation, 33 U.S.C. Section 1251 ET SEQ., 42
U.S.C. Section 6901 ET SEQ., 42 U.S.C. Section 7401 ET SEQ., 42 U.S.C.
Section 9601 ET SEQ., and California Health and Safety Code Section 25100 ET
SEQ., and 25300 ET SEQ., California Water Code, Section 13020 ET SEQ., or any
successor(s) thereto, all local, state and federal laws, judgments,
ordinances, orders, rules, regulations, codes and other governmental
restrictions, guidelines and requirements, any amendments and successors
thereto, replacements thereof and publications promulgated pursuant thereto,
which deal with or otherwise in any manner relate to, air or water quality,
air emissions, soil or ground conditions or other environmental matters of
any kind.
(iii) USE OF HAZARDOUS MATERIALS. Tenant agrees that during
the Term of this Lease, Tenant shall not use, or permit the use of, nor
store, generate, treat, manufacture or dispose of Hazardous Materials on,
from or under the Premises (individually and collectively, "HAZARDOUS USE")
except to the extent that, and in accordance with such conditions as,
Landlord may have previously approved in writing in its sole and absolute
discretion. Notwithstanding the foregoing, Tenant shall be entitled to use
and store only those Hazardous Materials which are (a) set forth in a list
prepared by Tenant and approved in writing by Landlord, which shall be deemed
given with respect to the Approved Hazardous Materials (hereinafter defined),
(b) necessary for Tenant's business, but then only in the amounts and for the
purposes previously disclosed in writing to and approved in writing by
Landlord, and (c) in full compliance with Environmental Laws, and all
judicial and administrative decisions pertaining thereto. All Hazardous
Materials approved in writing by Landlord as provided in the preceding
sentence shall collectively be referred to as the "APPROVED HAZARDOUS
MATERIALS". Within thirty (30) days after request by Landlord,
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Tenant shall deliver to Landlord a list of the Approved Hazardous Materials.
Tenant shall nor. be entitled to install any tanks under, on or about the
Premises for the storage of Hazardous Materials without the express written
consent of Landlord, which may be given or withheld in Landlord's sole
discretion. For the purposes of this PARAGRAPH 11.B. (iii), the term
Hazardous Use shall include Hazardous Use(s) on, from or under the Premises
by Tenant, any Subtenant occupying all or any portion of the Premises during
the Term, or any of their directors, officers, employees, shareholders,
partners, invitees, agents, contractors or occupants (collectively, "Tenant's
Parties"), whether known or unknown to Tenant, occurring during the Term of
this Lease. The term "TENANT'S PARTIES" shall not include any tenants of the
Project other than Tenant, except that the term "TENANT'S PARTIES" shall
include any Subtenant occupying all or any portion of the Premises during the
Term. Notwithstanding anything herein to the contrary, Tenant may use normal
amounts of cleaning supplies and office products customarily used by office
tenants without Landlord's prior consent thereto.
(iv) HAZARDOUS MATERIALS REPORT; WHEN REQUIRED. Tenant shall
submit to Landlord a written report with respect to Hazardous Materials
("REPORT") in the form prescribed in PARAGRAPH 11.B. (v) below on the
following dates:
(a) At any time within ten (10) days after written
request by Landlord, and
(b) At any time when there has been a violation of any
Environmental Law, or in connection with any proposed request for Landlord's
consent to any change in the list of Approved Hazardous Materials or for an
increase in the intensity of usage or storage of such Approved Hazardous
Materials.
(v) HAZARDOUS MATERIALS REPORT; CONTENTS. The Report shall
contain, without limitation, the following information:
(a) Whether on the date of the Report and (if
applicable) during the period since the last Report there has been any
Hazardous Use on, from or under the Premises, other than the use of Approved
Hazardous Materials.
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(b) If there was. such Hazardous Use, the exact identity
of the Hazardous Materials (other than the Approved Hazardous Materials), the
dates upon which such materials were brought upon the Premises, the dates
upon which such Hazardous Materials were removed therefrom, and the quantity,
location, use and purpose thereof.
(c) If there was such Hazardous Use, any governmental
permits maintained by Tenant with respect to such Hazardous Materials, the
issuing agency, original date of issue, renewal dates (if any) and expiration
date. Copies of any such permits and applications therefor shall be attached.
(d) If there was such Hazardous Use, any governmental
reporting or inspection requirements with respect to such Hazardous
Materials, the governmental agency to which reports are made and/or which
conducts inspections, and the dates of all such reports and/or inspections
(if applicable) since the last Report. Copies of any such Reports shall be
attached.
(e) If there was such Hazardous Use, identification of
any operation or business plan prepared for any government agency with
respect to Hazardous Use.
(f) Any liability insurance carried by Tenant with
respect to Hazardous Materials, if any, the insurer, policy number, date of
issue, coverage amounts, and date of expiration. Copies of any such policies
or certificates of coverage shall be attached.
(g) Any notices of violation of Environmental Laws,
written or oral, received by Tenant from any governmental agency since the
last Report, the date, name of agency, and description of violation. Copies
of any such written notices shall be attached.
(h) Any knowledge, information or communication which
Tenant has acquired or received relating to (x) any enforcement, cleanup,
removal or other governmental or regulatory action threatened or commenced
against Tenant or with respect to the Premises pursuant to any Environmental
Laws; (y) any claim made or threatened by any person or entity against Tenant
or the Premises on account of any alleged loss or injury claimed to result
from any alleged Hazardous Use on or about the Premises; or (z) any report,
notice or complaint made to or filed
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with any governmental agency concerning any Hazardous Use on or about the
Premises. The Report shall be accompanied by copies of any such claim,
report, complaint, notice, warning or other communication that is in the
possession of or is available to Tenant.
(i) Such other pertinent information or documents as are
reasonably requested by Landlord in writing.
(vi) RELEASE OF HAZARDOUS MATERIALS; NOTIFICATION AND CLEANUP.
(a) At any time during the Term, if Tenant knows or
believes that any release of any Hazardous Materials has come or will come to
be located upon, about or beneath the Premises, then Tenant shall
immediately, either prior to the release or following the discovery thereof
by Tenant, give verbal and follow-up written notice of that condition to
Landlord.
(b) At its sole cost and expense, Tenant covenants to
investigate, clean up and otherwise remediate any release of Hazardous
Materials which were caused or created by Tenant or any of Tenant's Parties.
Such investigation, clean-up and remediation shall be performed only after
Tenant has obtained, if practicable, Landlord's written consent, which shall
not be unreasonably withheld; provided, however, that Tenant shall be
entitled to respond immediately to an emergency without first obtaining
Landlord's written consent. All clean-up and remediation shall be done in
compliance with Environmental Laws and to the reasonable satisfaction of
Landlord; provided, however, that Landlord shall not require Tenant to
perform any clean-up or remediation work in excess of that work required to
return the property affected by such release of Hazardous Materials to the
condition it was in prior to the date of such release.
(c) Notwithstanding the foregoing, Landlord shall have
the right, but not the obligation, in Landlord's sole and absolute
discretion, exercisable by written notice to Tenant, to undertake within or
outside the Premises all or any portion of any reasonable investigation,
clean-up or remediation with respect to any Hazardous Use of such Hazardous
Materials by Tenant or any of Tenant's Parties (or, once having undertaken
any of such work, to cease same, in which case Tenant shall perform the
work), all at Tenant's sole cost and expense, which shall be
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paid by Tenant as Additional Rent within ten (10) days after receipt of
written request therefor by Landlord (and which Landlord may require to be
paid prior to commencement of any work by Landlord; provided, however, that
Tenant's obligation to pay for such work shall only be applicable if Tenant
fails to perform its obligations under this PARAGRAPH 11 (including without
limitation the obligations described in PARAGRAPH 11.B. (vi)(b)). No such
work by Landlord shall create any liability on the part of Landlord to Tenant
or any other party in connection with such Hazardous Materials by Tenant or
any of Tenant's Parties or constitute an admission by Landlord of any
responsibility with respect to such Hazardous Materials.
(d) It is the express intention of the parties hereto
that Tenant shall be liable under this PARAGRAPH 11.B, (vi) for any and all
conditions covered hereby which were or are caused or created by Tenant or
any of Tenant's Parties, whether occurring (x) on or after the Commencement
Date, or (y) prior to the Commencement Date (to the extent that such
condition or conditions occurring prior to the Commencement Date arise from
Tenant's early occupancy of the Premises pursuant to PARAGRAPH 40 below).
Tenant shall not enter into any settlement agreement, consent decree or other
compromise with respect to any claims relating to any Hazardous Materials in
any way connected to the Premises without first (A) notifying Landlord of
Tenant's intention to do so and affording Landlord the opportunity to
participate in any such proceedings, and (B) obtaining Landlord's written
consent, which shall not be unreasonably withheld.
(vii) INSPECTION AND TESTING BY LANDLORD. Landlord shall have
the right at all times during the Term of this Lease to (a) inspect the
Premises, as well as such of Tenant's books and records pertaining to the
Premises and the conduct of Tenant's business therein, and to (b) conduct
tests and investigations to determine whether Tenant is in compliance with
the provisions of this PARAGRAPH 11.B. Except in case of emergency, Landlord
shall give reasonable notice to Tenant before conducting any inspections,
tests, or investigations in accordance with PARAGRAPH 19, shall provide
Tenant with a work plan describing any testing that shall be performed at the
Premises, and shall use reasonable efforts to minimize interference with the
conduct of Tenant's business at the Premises caused by any such inspections,
tests, or investigations. The cost of all such inspections, tests and
investigations shall be borne by Tenant if Landlord reasonably
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concludes on the basis of such investigation that Tenant has failed to comply
with its obligations under this PARAGRAPH 11.B. Neither any action nor
inaction on the part of Landlord pursuant to this PARAGRAPH 11.B. (vii) shall
be deemed in any way to release Tenant from, or in any way modify or alter,
Tenant's responsibilities, obligations, and liabilities incurred pursuant to
PARAGRAPH 11.B hereof.
(viii) INDEMNITY. Tenant shall indemnify, defend, protect,
hold harmless, and, at Landlord's option (with such attorneys as Landlord may
approve in advance and in writing), defend Landlord, Landlord's Agents, and
Landlord's officers, directors, shareholders, partners, employees,
contractors, property managers, agents and mortgagees and other lien holders,
from and against any and all Losses (as defined below), whenever such Losses
arise, arising from or related to:(a) any violation or alleged violation by
Tenant or any of Tenant's Parties of any of the requirements, ordinances,
statutes, regulations or other laws referred to in this PARAGRAPH 11.B,
including, without limitation, the Environmental Laws, whether such violation
or alleged violation occurred prior to (but only to the extent that such
violation or alleged violation arises from Tenant's early occupancy of the
Premises pursuant to PARAGRAPH 40 below), on, or after the Commencement Date,
(b) any breach of the provisions of this PARAGRAPH 11.B by Tenant or any of
Tenant's Parties, or (c) any Hazardous Use on, about or from the Premises by
Tenant or any of Tenant's Parties of any Hazardous Materials (whether or not
approved by Landlord under this Lease), whether such Hazardous Use occurred
prior to, on, or after the Commencement Date. The term "LOSSES" shall mean
all claims, demands, expenses, actions, judgments, damages (whether
consequential, direct or indirect, known or unknown, foreseen or unforeseen),
penalties, fines, liabilities, losses of every kind and nature (including,
without limitation, property damage, diminution in value of Landlord's
interest in the Premises, damages for the loss of restriction on use of any
space or amenity within the Premises, damages arising from any adverse impact
on marketing space in the Premises, sums paid in settlement of claims and any
costs and expenses associated with injury, illness or death to or of any
person), suits, administrative proceedings, costs and fees, including, but
not limited to, reasonable attorneys' and consultants' fees and expenses, and
the costs of cleanup, remediation, removal and restoration, that are in any
way related to any matter covered by the foregoing indemnity.
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(ix) SURVIVAL. The provisions of this PARAGRAPH 11.B shall
survive the expiration or earlier termination of this Lease.
C. SPECIAL PROVISIONS RELATING TO THE AMERICANS WITH DISABILITIES
ACT OF 1990.
(i) ALLOCATION OF RESPONSIBILITY TO LANDLORD. As between
Landlord and Tenant, Landlord shall be responsible for assuring that the
Common Area owned by Landlord and the exterior of the Building comply with
the requirements of Title III of the Americans with Disabilities Act of 1990
(42 U.S.C. 12181, et seq., The Provisions Governing Public Accommodations and
Services Operated by Private Entities), and all regulations promulgated
thereunder, and all amendments, revisions or modifications thereto now or
hereafter adopted or in effect in connection therewith (hereinafter
collectively referred to as the "ADA"), and to take such actions and make
such alterations and improvements as are necessary for such compliance;
provided, however, that to the extent such requirements arise from the
construction of any Alterations to the Premises made by or on behalf of
Tenant, then as between Landlord and Tenant, Tenant shall be responsible that
the Common Area complies with the requirements of the ADA, and to take such
actions and make such alterations and improvements as are necessary for such
compliance.
(ii) ALLOCATION OF RESPONSIBILITY TO TENANT. Except as
expressly provided in the Work Letter, as between Landlord and Tenant,
Tenant, at its sole cost and expense, shall be responsible for assuring that
the Premises (and all modifications made by Tenant of access to the Premises
from the street), and all alterations and improvements in the Premises
(including without limitation the Tenant Improvements), and Tenant's use and
occupancy of the Premises, and Tenant's performance of its obligations under
this Lease, comply with the requirements of the ADA, and to take such actions
and make such alterations and improvements as are necessary for such
compliance; provided, however, that Tenant shall not make any such
alterations or improvements except upon Landlord's prior written consent
(which shall not be unreasonably withheld) pursuant to the terms and
conditions of this Lease. If Tenant fails diligently to take such actions or
make such alterations or improvements as are necessary for such compliance,
Landlord may, but shall not be obligated to, take such actions and make such
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alterations and improvements and may recover all of the costs and expenses of
such actions, alterations and improvements from Tenant as Additional Rent.
Tenant shall be entitled to utilize the Tenant Improvements Allowance to pay
for the cost of any improvements required by ADA that are triggered by the
construction of the Tenant Improvements.
(iii) GENERAL. Notwithstanding anything in this Lease
contained to the contrary, no act or omission of either party, including any
approval, consent or acceptance by it or its agents, employees or other
representatives, shall be deemed an agreement, acknowledgment, warranty, or
other representation by it that the other party has complied with the ADA as
provided under PARAGRAPHS 11.C. (i) or 11.C. (ii) or that any action,
alteration or improvement by it complies or will comply with the ADA as
provided under PARAGRAPHS 11.C. (i) or 11.C. (ii) or constitutes a waiver by
it of the other party's obligations to comply with the ADA under PARAGRAPHS
11.C. (i) or 11.C. (ii) of this Lease or otherwise. Any failure of either
party to comply with its obligations of the ADA under PARAGRAPHS 11.C, (i) or
11.C. (ii) shall not relieve such party from any obligations under this Lease
or in the case of Landlord's failure to comply under PARAGRAPH 11.C. (i),
constitute or be construed as a constructive or other eviction of Tenant or
disturbance of Tenant's use and possession of the Premises.
D. USE AND MAINTENANCE OF COMMON AREA. Tenant and its employees
and invitees shall have the non-exclusive right to use the Common Area in
common with other persons during the Term of this Lease, subject to the CC&Rs
and such reasonable rules and regulations as may from time to time be deemed
necessary or advisable in Landlord's reasonable discretion for the proper and
efficient operation and maintenance of the Common Area. Such rules and
regulations may include, among other things, the hours during which the
Common Area shall be open for use. Landlord shall maintain and operate the
Common Area from time to time owned by Landlord in good condition, provided
that any damage thereto, other than normal wear and tear, occasioned by the
negligence of Tenant or its employees or invitees shall be paid by Tenant
upon demand by Landlord.
12. QUIET ENJOYMENT.
Landlord covenants that Tenant, upon performing the terms,
conditions and covenants of this Lease, shall have quiet
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and peaceful possession of the Premises as against any person claiming the
same by, through or Under Landlord.
13. ALTERATIONS.
A. ALTERATION RIGHTS. After the Commencement Date, Tenant shall not
make or permit any Alterations in, on or about the Premises, without the
prior written consent of Landlord, and according to plans and specifications
approved in writing by Landlord, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing Tenant shall not, without the prior
written consent of Landlord, make any.
(i) Alterations to the exterior of the Building;
(ii) Alterations to the roof of the Building; and
(iii) Alterations visible from outside the Building, to which
Landlord may withhold Landlord's consent on wholly aesthetic grounds.
Notwithstanding anything to the contrary herein, Tenant may make alterations
to the Premises without Landlord's prior consent (but with notice to
Landlord) provided the same do not cost in excess of Twenty-Five Thousand
Dollars ($25,000) in each instance (and that Tenant has not performed
alterations to the Premises during any period of twelve (12) consecutive
months that in the aggregate cost in excess of Seventy-Five Thousand Dollars
($75,000)), are not structural in nature, do not affect Building systems or
the exterior of or the roof of the Building, and are not visible from the
outside of the Building.
B. PERFORMANCE OF ALTERATIONS. All Alterations shall be installed at
Tenant's sole expense, in compliance with all applicable laws, by a licensed
contractor, shall be done in a good and workmanlike manner conforming in
quality and design with the Premises existing as of the Commencement Date,
and shall not diminish the value of either the Building or the Premises. All
Alterations made by Tenant shall be and become the property of Landlord upon
installation and shall not be deemed Tenant's Personal Property, and Tenant
shall not remove any Alterations from the Premises unless Tenant has first
obtained Landlord's written consent to such removal. Landlord may require
Tenant to remove, at Tenant's expense, any Alterations from the Premises au
the expiration or earlier termination of this Lease; provided,
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however, that at the time any Alterations are constructed, Tenant shall have
the right to request Landlord's written approval (which shall not be
unreasonably withheld or delayed) that Landlord will not require the removal
of such Alterations at the expiration or earlier termination of this Lease.
Notwithstanding any other provision of this Lease, Tenant shall be solely
responsible for the maintenance and repair of any and all Alterations made by
it to the Premises. Tenant shall give Landlord written notice of Tenant's
intention to perform work on the Premises at least ten (10) days prior to the
commencement of such work to enable Landlord to post and record a Notice of
Nonresponsibility or other notice deemed proper before the commencement of
any such work. Notwithstanding anything to the contrary contained herein,
Tenant shall not be required to remove (i) any of the initial Tenant
Improvements constructed by or on behalf of Tenant, and (ii) any alterations,
additions or improvements for which Tenant has obtained Landlord's consent,
but only if at the time Tenant requested Landlord's consent thereto, Tenant
gave Landlord a written request that Landlord identify in writing which, if
any, of Tenant's alterations, additions or improvements must in Landlord's
sole discretion be removed upon the expiration of the Term, and Landlord did
not notify Tenant within twenty (20) days after Landlord's receipt of such
notice that such alterations, additions or improvements must be removed upon
the expiration of the Term.
14. SURRENDER OF THE PREMISES.
Upon the expiration or earlier termination of the Term, Tenant
shall surrender the Premises to Landlord in its condition existing as of the
date of substantial completion of the Improvements, normal wear and tear and
fire or other casualty excepted, with all interior walls repaired if damaged,
all broken, marred or nonconforming acoustical ceiling tiles replaced, all
windows washed, the plumbing and electrical systems and lighting in good
order and repair, including replacement of any burned out or broken light
bulbs or ballasts, the HVAC equipment serviced and repaired by a reputable
and licensed service firm, and all floors cleaned, all to the reasonable
satisfaction of Landlord. Tenant shall remove from the Premises all of
Tenant's Alterations required to be removed pursuant to PARAGRAPH 13, and all
of Tenant's Personal Property, and repair any damage and perform any
restoration work caused by such removal. If Tenant fails to remove such
Alterations and Tenant's Personal Property, and such failure continues after
the
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expiration or earlier termination of this Lease, Landlord may, to the extent
permitted by law, retain such Alterations and Tenant's Property and all
rights of Tenant with respect to it shall cease, or Landlord may place all or
any portion of such Alterations and Tenant's Property in public storage for
Tenant's account. Tenant shall be liable to Landlord for costs of removal of
any such Alterations and Tenant's Personal Property and storage and
transportation costs of same, and the cost of repairing and restoring the
Premises, together with interest at the Interest Rate from the date of
expenditure by Landlord. If the Premises are not so surrendered at the
expiration or earlier termination of this Lease, Tenant shall indemnify
Landlord and Landlord's Agents against all loss or liability, including
reasonable attorneys' fees and costs, resulting from delay by Tenant in so
surrendering the Premises.
Normal wear and tear, for the purposes of this Lease, shall be
construed to mean wear and tear caused to the Premises by a natural aging
process which occurs in spite of prudent application of good standards for
maintenance, repair and janitorial practices. It is not intended, nor shall
it be construed, to include items of neglected or deferred maintenance which
would have or should have been attended to during the Term of the Lease if
good standards had been applied to properly maintain and keep the Premises at
all times in good condition and repair.
15. IMPOSITIONS AND REAL PROPERTY TAXES.
A. PAYMENT BY TENANT. Tenant shall pay all Impositions prior to
delinquency. If billed directly, Tenant shall pay such Impositions and
concurrently present to Landlord satisfactory evidence of such payments. If
any Impositions are billed to Landlord or included in bills to Landlord for
Real Property Taxes, then Tenant shall pay to Landlord all such amounts not
less than five (5) days prior to the date such Imposition would be
delinquent. If applicable law prohibits Tenant from reimbursing Landlord for
an Imposition, but Landlord may lawfully increased the Monthly Rent to
account for Landlord's payment of such Imposition, the Monthly Rent payable
to Landlord shall be increased so that the amount of such increased Monthly
Rent, together with any accompanying increases in the Real Property Taxes
payable by Tenant with respect to such Imposition, are sufficient to net to
Landlord the same return without reimbursement of such Imposition as would
have been received by
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Landlord with reimbursement of such Imposition. In addition, on or before April
10 and December 10 of each year of the Term, Tenant shall pay directly to the
San Mateo County assessor the Real Property Taxes for the Premises as set forth
on the assessor's tax bill for the Premises. If, however, the Premises are not a
separate parcel for tax purposes but constitute a portion of a larger tax parcel
or parcels, the Real Property Taxes payable by Tenant under this Lease shall be
a percentage of the Real Property Taxes payable for such parcel or parcels,
which percentage shall be determined by dividing the Rentable Area of the
Premises by the total Rentable Area of all buildings on such parcel or parcels
and multiplying the result by 100, which Real Property Taxes shall be payable by
Tenant to Landlord monthly as part of the Common Area Maintenance Costs. Tenant,
at its cost, shall have the right at any time to seek a reduction in or
otherwise contest any Real Property Taxes for which it is obligated to reimburse
Landlord pursuant to this PARAGRAPH 15, by action or proceeding against the
entity with authority to assess or impose the same. Landlord shall not be
required to join in any proceeding or action brought by Tenant unless the
provisions of applicable regulations require that such proceeding or action be
brought by or in the name of Landlord, in which event Landlord shall join in
such proceeding or action or permit it to be brought in Landlord's name,
provided that Tenant shall protect, indemnify, defend, and hold Landlord free
and harmless from and against any and all loss, liability, cost, damage, claim
or expense in connection with such proceeding or contest. Tenant shall continue,
during the pendency of such proceeding or action, to pay the Real Property Taxes
due as determined by landlord pursuant to this PARAGRAPH 15. If Tenant is
successful in such action or proceeding, Landlord shall reimburse to Tenant its
prorata share of the reduction in Real Property Taxes realized by Tenant in such
Contest or proceeding within ten (10) days after the amount of such reduction
has been determined.
(i) TAX PARCELS. If Landlord determines in its reasonable
discretion that the configuration of tax parcels within the Project (including
without limitation the tax parcel on which the Premises is situated) causes the
allocation of Real Property Taxes between the affected tax parcels to be unfair
or inequitable, Landlord reserves the right to internally reallocate the Real
Property Taxes assessed against such affected tax parcels in a manner that
reasonably addresses such unfairness or inequity. If Landlord effects any such
reallocation, then the
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Real Property Taxes payable by Tenant under this Lease shall be those Real
Property Taxes allocated to the Premises pursuant to this PARAGRAPH 15 A. (i).
(ii) PAYMENT. Promptly following payment of the Real Property
Taxes, Tenant shall provide Landlord with copies of paid receipts or other
documentary evidence that the Real Property Taxes have been paid by Tenant. If
Tenant fails to pay the Real Property Taxes on or before April 10 and December
10, respectively, or if Tenant fails to pay its share of Real Property Taxes as
part of the Common Area Maintenance Costs, Tenant shall pay to Landlord any
penalty incurred by such late payment. In addition, Tenant shall pay any Real
Property Tax not included within the county tax assessor's tax bill within ten
(10) days after being billed for same by Landlord. The foregoing dates are based
on the dates established by the county as the dates on which Real Property Taxes
become delinquent if not paid. If such delinquency dates change, the dates on
which Tenant must pay the Real Property Taxes for the Premises shall be at least
ten (10) days prior to the new delinquency dates. Assessments, taxes, fees,
levies and charges may be imposed by governmental agencies for such purposes as
fire protection, street, sidewalk, road, utility construction and maintenance,
refuse removal and for other governmental services which may formerly have been
provided without charge to property owners or occupants. It is the intention of
the parties that all new and increased assessments, taxes, fees, levies and
charges are to be included within the definition of Real Property Taxes for the
purposes of this Lease.
B. TAXES ON TENANT IMPROVEMENTS AND PERSONAL PROPERTY. Tenant shall
pay any increase in Real Property Taxes resulting from any and all Alterations
and Tenant Improvements of any kind whatsoever placed in, on or about the
Premises for the benefit of, at the request of, or by Tenant. Tenant shall pay
prior to delinquency all taxes assessed or levied against Tenant's Personal
Property in, on or about the Premises or elsewhere. When possible, Tenant shall
cause its Personal Property to be assessed and billed separately from the
Premises and the real property or Personal Property of Landlord.
C. PRORATION. Tenant's liability to pay Real Property Taxes shall be
prorated on the basis of a 360-day year to account for any fractional portion of
a fiscal tax year included at the commencement or expiration of the Term. With
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respect to any assessments which may be levied against or upon the Premises or
all or any portion of the Project, or which under the laws then in force may be
evidenced by improvements or other bonds or may be paid in annual installments,
only the amount of such annual installment (with appropriate proration for any
partial year) and interest due thereon shall be included within the computation
of the annual Real Property Taxes levied against the Premises or such portion of
the Project, as applicable.
16. UTILITIES AND SERVICES.
Tenant shall be responsible for and shall pay promptly all charges for
water, gas, electricity, telephone, refuse pick-up, janitorial service and all
other utilities, materials and services furnished directly to or used by Tenant
in, on or about the Premises during the Term, together with any taxes thereon.
If any utility, material or service is not separately charged or metered to any
portion of the Premises, Tenant shall pay to Landlord, within ten (10) days
after written demand therefor, Tenant's pro rata share of the total cost thereof
as may be determined by Landlord. Landlord shall not be liable in damages or
otherwise for any failure or interruption of any utility service or other
service furnished to the Premises, except that resulting from the gross
negligence or willful misconduct of Landlord. Tenant shall have the right to
contract directly with vendors for janitorial and maintenance services, provided
such vendors must be approved in advance by Landlord, which approval shall not
be unreasonably withheld; and provided further, that Tenant shall have no right
to contract with any vendor to maintain the Building's HVAC system, which shall
be the sole responsibility of Landlord as set forth in PARAGRAPH 17.A.
17. REPAIR AND MAINTENANCE.
A. LANDLORD'S OBLIGATIONS. Landlord shall keep in good order,
condition and repair the structural parts of the Building, which structural
parts consist only of the foundation, subflooring, exterior walls (excluding the
interior of all walls and the exterior and interior of all windows, doors,
ceilings, and plate glass), and roof of the Building, and all plumbing and
electrical facilities leading up to (but not situated within) the Building,
except for any damage thereto caused by the negligence or willful acts or
omissions of Tenant or of Tenant's agents, employees or invitees, or by reason
of the failure of Tenant to perform or comply with any terms of this Lease, or
caused by
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Alterations made by Tenant or by Tenant's agents, employees or contractors. It
is an express condition precedent to all obligations of Landlord to repair and
maintain that Tenant shall have notified Landlord of the need for such repairs
or maintenance. Tenant waives the provisions of Sections 1941 and 1942 of the
California Civil Code and any similar or successor law regarding Tenant's right
to make repairs and deduct the expenses of such repairs from the Rent due under
this Lease. Landlord shall keep in good order, condition, repair and maintenance
the Building's HVAC system and roof, and shall maintain an HVAC system
preventive maintenance service contract from a qualified vendor at a competitive
price for the purpose of maintaining the Building's HVAC system, and a roof
maintenance service contract from a qualified vendor for the purpose Of
maintaining the Building's roof. Landlord shall determine in its sole discretion
whether any such vender is qualified. Any and all costs of any maintenance or
repair of the HVAC system or the roof (including without limitation the cost of
maintaining HVAC system preventative maintenance contracts and roof maintenance
service contracts) shall be included in the Common Area Maintenance Costs
payable by Tenant for the year in which such cost is incurred. Landlord may
elect, in its sole discretion, to paint the exterior of the Building and/or to
replace or perform capital improvements to any area or aspect of the Building
which Landlord is required keep in good order, condition and repair. Subject to
the provisions of PARAGRAPH 17.A(i) below, if Landlord decides, in its sole
discretion, to replace the roof of the Building or make other capital
improvements or replacements to the Building or its systems during the Term,
then the cost of so replacing the roof or performing such replacement, together
with interest at the Interest Rate, shall be amortized on a straight-line basis
over the useful life of the roof or capital improvement or replacement (as
determined by Landlord in its sole discretion) (the "USEFUL LIFE"), and the
entire amount of such amortized costs and interest allocable to each month,
multiplied by Tenant's Building Share, shall be included in the monthly Common
Area Maintenance Costs payable by Tenant during the entire period over which
such costs are amortized, until Tenant has paid to Landlord that proportion of
the total amount of such amortized costs equal to (a) the number of months
remaining during the Term as of the date such roof replacement was completed,
divided by (b) the number of months of the Useful Life, multiplied by (c)
Tenant's Building Share. For. the purposes of example only and not by way of
limitation, if the Building's roof is replaced twenty-four (24) months before
the end of the Term, at a cost of
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Fifty Thousand Dollars ($50,000.00), and the Useful Life is one hundred twenty
(120) months, then (a) the cost of such replacement shall be amortized at the
rate of Four Hundred Sixteen and 67/100ths Dollars ($416.67) per month, with
interest at the Interest Rate, and (b) the amount to be included in the monthly
Common Area Maintenance Costs payable solely by Tenant for the balance of the
Term shall equal Two Hundred Ninety-One and 67/100ths Dollars ($291.67), with
interest at the Interest Rate, until Tenant has paid to Landlord a total
aggregate amount of Seven Thousand Dollars ($7,000.00), together with interest
at the Interest Rate, towards such amortized costs (i.e., Fifty Thousand Dollars
($50,000.00) multiplied by [Twenty-Four (24) months divided by One Hundred
Twenty (120) months]) multiplied by Tenant's Building Share. If Tenant exercises
the Option to Extend, the total length of the Term (i.e., the initial Term and
the Extended Term) shall be utilized to calculate the maximum amount of such
amortized costs that shall be includable in the monthly Common Area Maintenance
Costs payable solely by Tenant pursuant to this PARAGRAPH 17.A.
It is the express intent of the parties that except as specifically
set forth in this PARAGRAPH 17.A, Landlord shall have no obligation whatsoever
to repair or maintain the Premises or the Building, and that Tenant shall be
responsible for performing all repair, operation, and maintenance of the
Premises except for those tasks specifically described in this PARAGRAPH 17.A.
If Tenant gives Landlord written notice ("DEFECT NOTICE") that there is a defect
or other problem with the Capital Improvements that may be covered by a warranty
issued by Contractor (as defined in EXHIBIT B) or any subcontractor that
performed any of the Capital Improvements, Landlord shall (i) assign to Tenant
the benefit of those warranties (if any) held by Landlord that are applicable to
the defects described in the Defect Notice, (ii) at no cost or expense to
Landlord, take such actions as may be reasonably requested by Tenant to assist
Tenant's efforts to enforce any such warranties.
It is also, the express intent of the parties that if Landlord for any
reason fails to complete all of the Capital Improvements before the Commencement
Date, Landlord shall complete the construction of the Capital Improvements at
its sole cost and expense, and shall have no right to include the cost of
completing the Capital Improvements in Common Area Maintenance Costs or
otherwise seek reimbursement from Tenant for the cost of completing the Capital
Improvements.
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(i) The parties acknowledge and agree that as part of the Capital
Improvements, Landlord will install a new roof on the Building, that the roof
will be covered by one or more warranties (collectively, the "Roof Warranties"),
and that the roof has an estimated useful life of ten (10) years.
Notwithstanding anything to the contrary set forth above in this PARAGRAPH 17.A,
if Landlord elects to replace the roof of the Building within ten (10) years
from the date such roof was originally installed, and the cost of so replacing
the roof exceeds any amounts covered or paid for under the Roof Warranties, then
(i) the amount of any such excess shall be collectively called the "Excess Roof
Replacement Costs"; (ii) the cost of the initial roof installation (as
reasonably determined by Landlord) shall be amortized on a straight-line basis,t
over the ten (10) year useful life of such roof, determined as of the date the
roof replacement commences, and the unamortized portion of such costs shall
hereafter be called the "Unamortized Roof Costs"; and (iii) only those Excess
Roof Replacement Costs that exceed the Unamortized Roof Costs (if any) shall be
includable in Common Area Maintenance Costs in the manner set forth above in
this PARAGRAPH 17.A.
B. TENANT'S OBLIGATIONS. Tenant shall at all times and at its sole
cost and expense clean, keep and maintain in good order, condition and repair
(and replace, if necessary) every part of the Premises which is not within
Landlord's obligation pursuant to PARAGRAPH 17.A. Tenant's repair and
maintenance obligations shall include without limitation all plumbing and
electrical facilities situated within the Premises, fixtures, interior walls and
ceiling, floors, windows, window frames, doors, entrances, plate glass,
showcases, skylights, all lighting fixtures, lamps, fans and any exhaust
equipment and systems, all mechanical systems (but not the HVAC system), any
automatic fire extinguisher equipment within the Premises, all security systems
and alarms, all electrical motors and all other appliances and equipment of
every kind and nature located in, upon or about the Premises. Tenant shall also
be responsible for all pest control within the Premises.
C. CONDITIONS APPLICABLE TO REPAIRS. All repairs, replacements and
reconstruction made by or on behalf of Tenant or any person claiming through or
under Tenant shall be made and performed (i) at Tenant's sole cost and expense,
in a good and workmanlike manner and at such time and in such manner as Landlord
may reasonably designate, (ii) by contractors approved
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in advance by Landlord, (iii) so that the repairs, replacements or
reconstruction shall be at least equal in quality, value and utility to the
original work or installation, (iv) in accordance with such reasonable
requirements as Landlord may impose with respect to insurance and bonds to be
obtained by Tenant in connection with the proposed work (provided that Tenant
shall not be required to post a bond if the total cost of any such repair,
replacement or reconstruction work is equal to or less than Twenty-Five Thousand
Dollars ($25,000.00)), and (v) in accordance with any rules and regulations for
the Building as may be. adopted by Landlord from time to time and in accordance
with all applicable laws and regulations of governmental authorities having
jurisdiction over the Premises.
D. LANDLORD'S RIGHTS. If Tenant fails to perform Tenant's
obligations under PARAGRAPH 17.B, Landlord may in its sole discretion give
Tenant notice of such work as is reasonably required to fulfill such
obligations. If Tenant fails to commence the work within thirty (30) days after
receipt of such notice and diligently prosecute the work to completion, then
Landlord shall have the right (but not the obligation) to do such acts or expend
such funds at the expense of Tenant as are reasonably required to perform such
work. Any amount so expended by Landlord shall be paid by Tenant to Landlord
promptly after demand with interest at the Interest Rate. Landlord shall have no
liability to Tenant for any damage to, or interference with Tenant's use of, the
Premises, or inconvenience to Tenant as a result of performing any such work.
E. COMPLIANCE WITH GOVERNMENTAL REGULATIONS. Tenant shall, at its
sole cost and expense, comply with, including the making by Tenant of any
Alteration to the Premises, all present and future regulations, rules, laws,
ordinances, and requirements of all governmental authorities (including, without
limitation state, municipal, county and federal governments and their
departments, bureaus, boards and officials) applicable to the Premises.
Notwithstanding the foregoing or anything to the contrary contained in this
Lease, Tenant shall not be responsible for compliance with any regulations,
rules, laws, ordinances, or requirements of all governmental authorities where
such compliance is not related specifically to Tenant's use and occupancy of the
Premises. For example, if any governmental authority should require the Building
or the Premises to be structurally strengthened against earthquake, or should
require the removal of asbestos from the Premises and such measures are
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imposed as a general requirement applicable to all tenants rather than as a
condition to Tenant's specific use or occupancy of the Premises, such work shall
be performed by and at the sole cost of Landlord, subject to contribution by
Tenant to the extent included in Common Area Maintenance Costs.
18. LIENS.
Tenant shall keep the Building and the Premises free from any liens
arising out of any work performed, materials furnished, or obligations incurred
by or on behalf of Tenant, and free from any liens arising out of any effort by
Tenant to reduce or contest Impositions, or Tenant's exercise of its rights
under Paragraph 39 below, and Tenant hereby agrees to indemnify, defend, protect
and hold Landlord and Landlord's Agents harmless from and against any and all
loss, claim, damage, liability, cost and expense, including attorneys' fees and
costs, in connection with or arising out of any such lien or claim of lien.
Tenant shall cause any such lien imposed to be released of record by payment or
posting of a proper bond acceptable to Landlord within ten (10) days after
written request by Landlord. Tenant shall give Landlord written notice of
Tenant's intention to perform work on the Premises which might result in any
claim of lien at least ten (10) days prior to the commencement of such work to
enable Landlord to post and record a Notice of Nonresponsibility or any such
other notice(s) as Landlord may deem appropriate. If Tenant fails to so remove
any such lien within the prescribed ten 10-day period, then Landlord may do so
at Tenant's expense and Tenant shall reimburse Landlord for such amounts upon
demand. Such reimbursement shall include all costs incurred by Landlord
including Landlord's reasonable attorneys' fees with interest thereon at the
Interest Rate.
19. LANDLORD'S RIGHT TO ENTER THE PREMISES.
Tenant shall permit Landlord and Landlord's Agents to enter the
Premises at all reasonable times with reasonable notice, except for emergencies
in which case no notice shall be required, to inspect the same, to post Notices
of Nonresponsibility and similar notices, and real estate "For Sale" signs, to
show the Premises to interested parties such as prospective lenders and
purchasers, to make necessary repairs, to discharge Landlord's obligations under
this Lease, to discharge Tenant's obligations under this Lease when Tenant has
failed to do so within a reasonable time after written notice from
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Landlord, and to place upon the Building ordinary "For Lease" signs and to show
the Premises to prospective tenants (provided that so long as Tenant is not in
default under any term or condition of this Lease after notice from Landlord and
the expiration of any applicable cure period granted by this Lease, Landlord
shall only be permitted to show the Premises to prospective tenants during the
last twelve (12) months of the Term).
20. SIGNS.
Subject to Tenant obtaining all necessary approvals from the City of
Redwood City and subject to Landlord's review and approval of plans and
specifications for any proposed signage, which approval may be withheld only in
Landlord's commercially reasonable judgment, Tenant shall have the exclusive
right to install identification signage with its name and logo near the north
entry on the exterior of the Building in the location depicted on EXHIBIT B-1 so
long as such signage complies with Landlord's project sign program. Tenant shall
have no right to maintain any Tenant identification sign in any other location
in, on or about the Building or the Premises and shall not display or erect any
other Tenant identification sign, display or other advertising material that is
visible from the exterior of the Building. Any changes to the size, design,
color or other physical aspects of Tenant's identification sign(s) shall be
subject to the Landlord's prior written approval, which shall not be
unreasonably withheld, and any appropriate municipal or other governmental
approvals. The cost of Tenant's sign(s) and their installation, maintenance and
removal shall be Tenant's sole cost and expense. If Tenant fails to maintain its
sign(s), or, if Tenant fails to remove its sign(s) upon termination of this
Lease, Landlord may do so at Tenant's expense and the amounts expended by
Landlord in doing so shall be immediately payable by Tenant to Landlord as
Additional Rent.
21. INSURANCE.
A. Indemnification. Tenant shall indemnify, defend,
protect and hold Landlord harmless of and from any and all loss, liens,
liability, claims, causes of action, damage, injury, cost or expense arising out
of or in connection with, or related to (i) the negligent making of Alterations,
or (ii) injury to or death of persons or damage to property occurring or
resulting directly or indirectly from: (A) the use or occupancy of, or the
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conduct of business in, the Premises; (B) any other occurrence or condition in
or on the Premises; and (C) acts or omissions of Tenant, its officers,
directors, agents, employees, invitees or licensees in or about any portion of
the Project. Tenant's indemnity obligation includes reasonable attorneys' fees
and costs, investigation costs and all other reasonable costs and expenses
incurred by Landlord. If Landlord reasonably disapproves the legal counsel
proposed by Tenant for the defense of any claim indemnified against hereunder,
Landlord shall have the right to appoint its own legal counsel, the reasonable
fees, costs and expenses of which shall be included as part of Tenant's
indemnify obligation hereunder. The indemnification contained in this PARAGRAPH
21.A shall extend to the officers, directors, shareholders, partners, employees,
agents and representatives of Landlord. The obligations assumed by Tenant herein
shall survive this Lease. Notwithstanding the foregoing, Landlord shall have the
right, in its sole discretion, but without being required to do so, to defend,
adjust, settle or compromise any claim, obligation, debt, demand, suit or
judgment against Landlord arising out of or in connection with the matters
covered by the foregoing indemnity and, in such event, Tenant shall reimburse
Landlord for all reasonable charges and expenses incurred by Landlord in
connection therewith, including reasonable attorneys' fees; provided, however,
that Landlord shall not undertake any unilateral action or settlement so long as
Tenant or an insurance company, at its or their sole expense, is contesting in
good faith, diligently and with continuity such claim, action, obligation,
demand or suit, and so long as such claim, action, obligation, demand or suit
does not have or threaten to have a material adverse impact on Landlord's
assets, reputation or business affairs.
Notwithstanding anything to the contrary in this PARAGRAPH 21.A:
(i) Tenant shall not be required to indemnify, defend or hold
Landlord harmless from or against loss, liens, liability, claims, causes of
action, damage, injury, cost or expense to the extent arising out of: (a) the
breach by Landlord or Landlord's Agents of any covenant, representation or
warranty under this Lease, or (b) any negligence or willful misconduct of
Landlord or Landlord's Agents.
(ii) Landlord shall indemnify, defend, protect and hold Tenant
harmless of and from any and all loss, liens,
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liability, claims, causes of action, damage, injury, cost or expense arising out
of or in connection with, or related to the acts or omissions of Landlord or
Landlord's Agents, except to the extent arising out of: (a) the breach by Tenant
or Tenant's officers, directors, agents, employees, invitees, licensees or
contractors of any covenant, representation or warranty under this Lease, or (b)
any negligence or willful misconduct of Tenant or Tenant's officers, directors,
agents, employees, invitees, licensees or contractors. Landlord's
indemnification shall extend to the officers, directors, shareholders, partners,
employees, agents and representatives of Tenant.
B. TENANT'S INSURANCE. Tenant agrees to maintain in full force and
effect at all times during the Term, at its sole cost and expense, for the
protection of Tenant and Landlord, as their interests may appear, policies of
insurance issued by a responsible carrier or carriers acceptable to Landlord
which afford the following coverages.
(i) Commercial general liability insurance in an amount not
less than Three Million Dollars ($3,000,000) combined single limit for both
bodily injury and property damage, with a limit of not less than One Million
Dollars ($1,000,000) per occurrence and not less than Two Million Dollars
($2,000,000) in excess liability coverage, which includes blanket contractual
liability broad form property damage, personal injury, completed operations, and
products liability, which policy shall name Landlord and Landlord's Agents as
additional insureds and shall contain a provision that "the insurance provided
Landlord hereunder shall be primary and non-contributing with any other
insurance available to Landlord with respect to any damage, loss, liability or
expense covered by Tenant's indemnity obligations under PARAGRAPH 21.A of the
Lease."
(ii) Causes of loss-special form property insurance (including,
without limitation, vandalism, malicious mischief, inflation endorsement, and
sprinkler leakage endorsement) on Tenant's Personal Property located on or in
the Premises. Such insurance shall be in the full amount of the replacement
cost, as the same may from time to time increase as a result of inflation or
otherwise. As long as this Lease is in effect, the proceeds of such policy shall
be used for the repair and replacement of such items so insured. Landlord shall
have no interest in the insurance proceeds on Tenant's Personal Property.
Notwithstanding the foregoing, Tenant shall have the right, at
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its election, to self-insure with respect to any loss or damage to Tenant's
Personal Property.
(iii) Boiler and machinery insurance, including steam pipes,
pressure pipes, condensation return pipes and other pressure vessels and HVAC
equipment, including miscellaneous electrical apparatus, in an amount
satisfactory to Landlord.
(iv) Workers compensation insurance in the manner and to the
extent required by applicable law and with limits of liability not less than the
minimum required under applicable law, covering all employees of Tenant having
any duties or responsibilities in or about the Premises.
Any policy required to be maintained by Tenant under this Lease may be
maintained under a so-called "blanket policy" insuring other parties and/or
other locations, so long as the amount of insurance and type of coverage
required to be provided hereunder is not thereby diminished, changed or
adversely affected.
C. BUILDING INSURANCE. During the Term Landlord shall maintain
causes of loss-special form property insurance (including inflation endorsement,
sprinkler leakage endorsement, and, at Landlord's option, earthquake and flood
coverage; provided, however, that Landlord shall not be entitled to pass through
to Tenant the cost of earthquake insurance unless such insurance is obtained at
commercially reasonable rates) on the Building, excluding coverage of all
Tenant's Personal Property located on or in the Premises, but including the
Tenant Improvements; such insurance shall be for the full replacement value of
the Building, if such full replacement coverage is available from insurers, and
at commercially reasonable rates, reasonably acceptable to Landlord. Such
insurance shall also include insurance against loss of rents, including, at
Landlord's option, coverage for earthquake and flood, in an amount equal to the
Monthly Rent and Additional Rent, and any other sums payable under the Lease,
for a period of at least twelve (12) months commencing on the date of loss. Such
insurance shall name Landlord and Landlord's Agents as named insureds and
include a lender's loss payable endorsement in favor of Landlord's lender (Form
438 BFU Endorsement). Tenant shall reimburse Landlord monthly, as Additional
Rent, for Tenant's Building Share of one-twelfth (12th) of the annual cost of
such insurance on the first day of each calendar month of the Term, prorated for
any partial month, or on such other periodic basis as Landlord shall
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elect. If the insurance premiums are increased after the Commencement Date for
any reason, including without limitation due to an increase in the value of the
Building or its replacement cost, Tenant shall pay Tenant's Building Share of
such increase within ten (10) days of notice of such increase; provided,
however, that if any increase in such insurance premiums is due to any action or
failure to act of Tenant, including without limitation Tenant's use of the
Premises or any improvements installed by Tenant at the Premises, Tenant shall
pay the entire amount of such increase within ten (10) days of notice of such
increase. Landlord may, in its sole discretion, maintain the insurance coverage
described in this PARAGRAPH 21.C as part of an umbrella insurance policy
covering other properties owned by Landlord.
D. INCREASED COVERAGE. Upon demand, Tenant shall provide Landlord,
at Tenant's expense, with such increased amount of existing insurance, and such
other insurance as Landlord or Landlord's lender may reasonably require,
consistent with prudent industry practice, to afford Landlord and Landlord's
lender adequate protection.
E. FAILURE TO MAINTAIN. If Tenant fails to maintain any insurance
coverage that Tenant is required to maintain under this PARAGRAPH 21, and
Landlord incurs any liability to its insurance carrier arising out of Tenant's
failure to so maintain such insurance coverage, then any and all loss or damage
Landlord shall sustain by reason thereof, including attorneys' fees and costs,
shall be borne by Tenant and shall be immediately paid by Tenant upon its
receipt of a bill therefor and evidence of such loss. Nothing contained in this
PARAGRAPH 21.E shall be deemed to limit or affect any other remedies or rights
available to Landlord under this Lease that arise from Tenant's failure to so
maintain such insurance coverage.
F. INSURANCE REQUIREMENTS. All insurance shall be in a form
satisfactory to Landlord and shall be carried in companies that have a general
policy holder's rating of not less than "A" and a financial rating of not less
than Class "X" in the most current edition of BEST'S INSURANCE REPORTS; and
shall provide that such policies shall not be subject to material alteration or
cancellation except after at least thirty (30) days' prior written notice to
Landlord. The policy or policies, or duly executed certificates for them,
together with satisfactory evidence of payment of the premiums thereon shall be
deposited
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with Landlord prior to the Commencement Date, and upon renewal of such policies,
not less than thirty (30) days prior to the expiration of the term of such
coverage. If Tenant fails to procure and maintain the insurance it is required
to maintain under this PARAGRAPH 21, Landlord may, but shall not be required to,
order such insurance at Tenant's expense and Tenant shall reimburse Landlord
therefor. Such reimbursement shall include all costs incurred by Landlord in
obtaining such insurance including Landlord's reasonable attorneys' fees, with
interest thereon at the Interest Rate.
G. WAIVER AND RELEASE. Except to the extent due to the negligence or
willful misconduct of Landlord, Landlord shall not be liable to Tenant or
Tenant's employees, agents, contractors, licenses or invitees for, and Tenant
waives as against and releases Landlord and Landlord's Agents from, all claims
for loss or damage to any property or injury, illness or death of any person in,
upon or about the Premises and/or any other portion of the Project, arising at
any time and from any cause whatsoever (including without limitation any claim
cause in whole or in part by the act, omission, or neglect of other tenants,
contractors, licensees, invitees or other occupants of the Project or their
agents or employees; and any claim arising from any construction activities
taking place in, upon or about the Premises and/or any other portion of the
Project). Landlord and Landlord's Agents shall not be liable for any latent
defect in the Premises.
22. WAIVER OF SUBROGATION.
Landlord and Tenant each hereby waive all rights of recovery against
the other on account of loss or damage occasioned by such waiving party to its
property or the property of others under its control, to the extent that such
loss or damage would be covered by any causes of loss-special form policy of
insurance or its equivalent required to be or actually carried under Paragraph
21. Tenant and Landlord shall, upon obtaining policies of insurance required
hereunder, give notice to the insurance carrier that the foregoing mutual waiver
of subrogation is contained in this Lease and Tenant and Landlord shall cause
each insurance policy obtained by such party to provide that the insurance
company waives all right of recovery by way of subrogation against either
Landlord or Tenant in connection with any damage covered by such policy.
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23. DAMAGE OR DESTRUCTION.
A. LANDLORD'S OBLIGATION TO REBUILD. If all or any part of the
Premises or the Building is damaged or destroyed, Landlord shall promptly and
diligently repair the same unless it has the right to terminate this Lease as
provided herein and it elects to so terminate.
B. RIGHT TO TERMINATE. Landlord shall have the right to terminate
this Lease in the event any of the following events occur:
(i) insurance proceeds from the insurance Landlord is required
to carry pursuant to PARAGRAPH 21.C, or that Landlord actually carries, are not
available to pay one hundred percent (100%) of the cost of such repair,
excluding any applicable deductibles, for which Tenant shall be responsible;
provided, however, that if Tenant pays to Landlord, in immediately available
funds, within thirty (30) days after such casualty, any shortfall in such
insurance proceeds, as reasonably determined by Landlord, then Landlord shall
have no right to terminate the Lease pursuant to this item (i); provided
further, that if insurance proceeds are not available to pay one hundred percent
(100%) of the cost of such repair due solely to the fact that Landlord has
failed to carry the insurance described in PARAGRAPH 21.C, then Landlord shall
not have the right to terminate this Lease pursuant to this PARAGRAPH 23.B(i).
Notwithstanding anything to the contrary set forth above, if (a) all or any part
of the Premises or the Building is damaged or destroyed by a casualty event that
is covered by the insurance Landlord is required to carry pursuant to PARAGRAPH
21.C, or that Landlord actually carries, (b) proceeds from such insurance are
not available to pay one hundred percent (100%) of the cost of such repair,
excluding any applicable deductibles, (c) Landlord terminates the Lease pursuant
to its rights under this PARAGRAPH 23.B(i), (d) Landlord eventually receives
proceeds from such insurance due to such casualty event, and (e) a subsequent
tenant of the Premises that occupies the Premises prior to the tenth (10th)
anniversary of the Commencement Date elects to utilize the Tenant Improvements,
then Landlord shall pay to Tenant an amount equal to the present value of the
lesser of (x) the cost savings enjoyed by Landlord during the
originally-scheduled ten (10) year term of this Lease due to the use of the
Tenant Improvement by such subsequent tenant (with the amount of such savings to
be reasonably determined by Landlord), and (y) the unamortized
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Tenant Improvement Costs (as defined in EXHIBIT B) for the initial Tenant
Improvements, as of the date such subsequent tenant opens for business in the
Premises, with the Tenant Improvement Costs being amortized on a straight-line
basis over a period of ten (10) years, commencing on the Commencement Date and
ending as of the date that is the mid-way point between the date this Lease is
terminated and the date on which such subsequent tenant opens for business in
the Premises;
(ii) either the Premises or the Building cannot, with
reasonable diligence, be fully repaired by Landlord within three hundred sixty
(360) days after the date of the damage or destruction; or
(iii) either the Premises or the Building cannot be safely
repaired because of the presence of hazardous factors, including, but not
limited to, earthquake faults, radiation, Hazardous Materials and other similar
dangers.
If Landlord elects to terminate this Lease, Landlord may tie Tenant written
notice of its election to terminate within thirty (30) days after such damage or
destruction, and this Lease shall terminate fifteen (15) days after the date
Tenant receives such notice and both Landlord and Tenant shall be released of
all further liability under this Lease (except to the extent any provision of
this Lease expressly survives termination). If Landlord elects not to terminate
the Lease, subject to Tenant's termination right set forth below, Landlord shall
promptly commence the process of obtaining necessary permits and approvals and
repair of the Premises or Building as soon as practicable, and this Lease will
continue in full force and affect. All insurance proceeds from insurance under
PARAGRAPH 21, excluding proceeds for Tenant's Personal Property, shall be
disbursed and paid to Landlord. Tenant shall be required to pay to Landlord an
amount equal to that portion of any deductibles payable in connection with any
insured casualties that is allocable to the Premises, unless the casualty was
caused by the sole negligence or willful misconduct of Landlord.
Tenant shall have the right to terminate this Lease if the Premises
cannot, with reasonable diligence, be fully repaired within two hundred seventy
(270) days from the date of damage or destruction. The determination of the
estimated repair periods in this PARAGRAPH 23 shall be made by an independent,
licensed contractor or engineer within thirty (30) days after such damage
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or destruction. Landlord shall deliver written notice of the repair period to
Tenant after such determination has been made and Tenant shall exercise its
right to terminate this Lease, if at all, within ten (10) days of receipt of
such notice from Landlord. Upon such termination both Landlord and Tenant
shall be released of all further liability under this Lease (except to the
extent any provision of this Lease expressly survives termination).
C. LIMITED OBLIGATION TO REPAIR. Landlord's obligation, should it
elect or be obligated to repair or rebuild, shall be limited to the basic
portion of the Building in which the Premises are situated and the Tenant
Improvements, and shall not include any Alterations made by Tenant.
D. ABATEMENT OF RENT. Rent shall be temporarily abated
proportionately, during any period when, by reason of such damage or
destruction, Tenant's use of the Premises is impaired. Such abatement of Rent
shall be proportional to the extent of such impairment (with the extent of
such impairment to be reasonably determined by Landlord), and shall commence
upon such damage or destruction and end upon substantial completion by
Landlord of the repair or reconstruction which Landlord is obligated or
undertakes to perform. Tenant shall not be entitled to any compensation or
damages from Landlord for loss of the use of the Premises, damage to Tenant's
Personal Property or any inconvenience occasioned by such damage, repair or
restoration. Tenant hereby waives the provisions of Section 1932, Subdivision
2, and Section 1933, Subdivision 4, of the California Civil Code, and the
provisions of any similar law hereinafter enacted.
E. DAMAGE NEAR END OF TERM. Anything herein to the contrary
notwithstanding, if the Premises is destroyed or materially damaged during
the last twelve (12) months of the Term (unless Tenant has properly exercised
the option to Extend), then either Landlord or Tenant may, at its option,
cancel and terminate this Lease as of the date of the occurrence of such
damage, by delivery of written notice to the other party and, in such event,
upon such termination both Landlord and Tenant shall be released of all
further liability under this Lease (except to the extent any provision of
this Lease expressly survives termination). If neither Landlord nor Tenant
elects to terminate this Lease, the repair of such damage shall be governed
by PARAGRAPHS 23.A and 23.B.
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24. CONDEMNATION.
If title to all of the Premises is taken for any public or
quasi-public use under any statute or by right of eminent domain, or so much
thereof is so taken so that reconstruction of the Premises will not, in
Landlord's sole discretion, result in the Premises being reasonably suitable
for Tenant's continued occupancy for the uses and purposes permitted by this
Lease, this Lease shall terminate as of the date that possession of the
Premises or part thereof is taken, and upon such termination both Landlord
and Tenant shall be released of all further liability under this Lease
(except to the extent any provision of this Lease expressly survives
termination). A sale by Landlord to any authority having the power of eminent
domain, either under threat of condemnation or while condemnation proceedings
are pending, shall be deemed a taking under the power of eminent domain for
all purposes of this PARAGRAPH 24.
If any part of the Premises is taken and the remaining part is
reasonably suitable for Tenant's continued occupancy for the purposes and
uses permitted by this Lease, this Lease shall, as to the part so taken,
terminate as of the date that possession of such part of the Premises is
taken, and upon such termination both Landlord and Tenant shall be released
of all further liability under this Lease with respect to that portion of the
Premises that is taken (except to the extent any provision of this Lease
expressly survives termination). The Rent and other sums payable hereunder
shall be reduced in the same proportion that Tenant's use and occupancy of
the Premises is reduced. If any portion of the Common Area is taken, Tenant's
Rent shall be reduced only if such taking materially interferes with Tenant's
use of the Common Area and then only to the extent that the fair market
rental value of the Premises is diminished by such partial taking. If the
parties disagree as to the amount of Rent reduction, the matter shall be
resolved by arbitration and such arbitration shall comply with and be
governed by the California Arbitration Act, Sections 1280 through 1294.2 of
the California Code of Civil Procedure. Each party hereby waives the
provisions of Section 1265.130 of the California Code of Civil Procedure
allowing either party to petition the Superior Court to terminate this Lease
in the event of a partial taking of the Premises.
All compensation or damages awarded or paid for any taking hereunder
shall belong to and be the property of Landlord, whether such compensation or
damages are awarded or paid as
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compensation for diminution in value of the leasehold, the fee or otherwise,
except that Tenant shall be entitled to any award allowed to Tenant for the
taking of Tenant's Personal Property, for the interruption of Tenant's
business, for its moving costs, or for the loss of its good will, and for
that portion of the unamortized cost of any tenant improvements to the
Premises paid for by Tenant, including but not limited to the initial Tenant
Improvements, that is allocable to the remainder of the Term as of the date
of such taking. Except for the foregoing allocation, no award for any partial
or entire taking of the Premises shall be apportioned between Landlord and
Tenant, and Tenant assigns to Landlord its interest in the balance of any
award which may be made for the taking or condemnation of the Premises,
together with any and all rights of Tenant arising in or to the same or any
part thereof.
25. ASSIGNMENT AND SUBLETTING.
A. LANDLORD'S CONSENT. Subject to the provisions of PARAGRAPH
25.G below, Tenant shall not enter into a Sublet without Landlord's prior
written consent, which consent shall not be unreasonably withheld. Any
attempted or purported Sublet without Landlord's prior written consent shall
be void and confer no rights upon any third person and, at Landlord's
election, shall terminate this Lease. Each Subtenant shall agree in writing,
for the benefit of Landlord, to assume, to be bound by, and to perform the
terms, conditions and covenants of this Lease to be performed by Tenant, as
such terms, conditions and covenants apply to the Sublet premises.
Notwithstanding anything contained herein, Tenant shall not be released from
liability for the performance of each term, condition and covenant of this
Lease by reason of Landlord's consent to a Sublet unless Landlord
specifically grants such release in writing.
B. TENANT'S NOTICE. If Tenant desires at any time to Sublet all
or any portion of the Premises, Tenant shall first notify Landlord in writing
of its desire to do so.
C. INFORMATION TO BE FURNISHED. If Tenant desires at any time to
Sublet all or any portion of the Premises, then Tenant shall submit in writing
to Landlord. (i) the name of the proposed Subtenant; (ii) the nature of the
proposed Subtenant's business to be carried on in the Premises; (iii) the terms
and provisions of the proposed Sublet and a copy of the proposed form of Sublet
agreement containing a description of the subject
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premises; and (iv) such financial information, including financial
statements, as Landlord may reasonably request concerning the proposed
Subtenant.
D. LANDLORD'S ALTERNATIVES. At any rime Within ten (10) days
after Landlord's receipt of the information specified in PARAGRAPH 25.C.,
Landlord may, by written notice to Tenant, elect. (i) to consent to the
Sublet by Tenant; or (ii) to refuse its consent to the Sublet. If Landlord
consents to the Sublet, Tenant may thereafter enter into a valid Sublet of
the Premises or applicable portion thereof, upon the terms and conditions and
with the proposed Subtenant set forth in the information furnished by Tenant
to Landlord, subject, however, at Landlord's election, to the condition that
fifty percent (50%) of any excess of the Subrent (the "Excess Subrent") over
the Rent required to be paid by Tenant under this Lease (or, if only a
portion of the Premises is Sublet, the pro rata share of the Rent
attributable to the portion of the Premises being Sublet) less (v) reasonable
attorneys' fees, (w) leasing commissions (which shall not include the cost of
any trade fixtures, equipment or personal property, (x) that portion of the
unamortized Tenant Improvement Costs (as defined in EXHIBIT B) for the
initial Tenant Improvements allocable to the portion of the Premises being
Sublet (for the purposes of this clause (x), the Tenant Improvement Costs
shall be amortized over a period of ten (10) years, at a per annum interest
rate equal to the reference rate, or succeeding similar index, announced from
time to time by the Bank of America's main San Francisco office, plus one
percent (1%), (y) the cost of any tenant improvements (other than the initial
Tenant Improvements) paid for by Tenant and installed in the portion of the
Premises being Sublet for the specific purpose of carrying out such Sublet,
and (z) other reasonable subletting costs paid by Tenant on the Sublet, shall
be paid to Landlord.
E. PRORATION. If a portion of the Premises is Sublet, the pro
rata share of the Rent attributable to such partial area of the Premises
shall be determined by Landlord by dividing the Rent payable by Tenant
hereunder by the total square footage of the Premises and multiplying the
resulting quotient (the per square foot rent) by the number of square feet of
the Premises which are Sublet.
F. PARAMETERS OF LANDLORD'S CONSENT. Except as otherwise provided
herein, Landlord shall have the right to base its consent to any Sublet
hereunder upon such factors and
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considerations as Landlord reasonably deems relevant or material to the
proposed Sublet and the best interests of the Project's operations. Without
limiting the generality of the foregoing, Tenant acknowledges that it shall
be reasonable for Landlord to withhold its consent to any Sublet hereunder if
Tenant has not demonstrated that: (i) the proposed Subtenant is financially
responsible, with sufficient net worth and net current assets, properly and
successfully to operate its business in the Premises and meet the financial
and other obligations of this Lease; (ii) the proposed Subtenant possesses
sound and good business judgment, reputation and experience, and proven
management skills in the operation of a business or businesses substantially
similar to the uses permitted in the Premises under PARAGRAPH 11.A, and (iii)
the use of the Premises proposed by such Subtenant conforms to the permitted
uses specified under PARAGRAPH 11.A, and involves either no Hazardous Use or
only such Hazardous Use as shall be acceptable to Landlord in its sole
discretion.
G. PERMITTED TRANSFERS. Notwithstanding the provisions of PARAGRAPH
25.A above, Tenant shall have the right to enter into a Sublet, and Landlord
shall not withhold its consent thereto (provided that all of the conditions set
forth in clauses (A), (B) and (C) below shall be met), if such Sublet is one of
the following "Permitted Transfers". (i) a Sublet to the surviving entity of a
merger or consolidation involving the corporate entity constituting the Tenant
under this Lease; or (ii) a Sublet to any subsidiary or Affiliate of the Tenant
originally named in this Lease. However, the foregoing Permitted Transfers shall
be exempt from the requirement of Landlord's consent only if all of the
following conditions shall be met. (A) there shall be no change in the use or
operation of the Premises; (B) Tenant shall have provided to Landlord all
information to allow Landlord to determine, and Landlord shall have determined,
that the proposed transfer is a Permitted Transfer which is exempt from the
requirement of Landlord's consent; and (C) as of the effective date of such
Sublet, the proposed Subtenant has a net worth and net current assets equal to
or greater than those of the original Tenant under this Lease as of the date of
this Lease. No Sublet of the type described in this PARAGRAPH 25.G, nor any
other transfer of all or any portion of Tenant's interest in the Lease or the
Premises, shall release Tenant of its obligations under this Lease. In addition,
any sale or transfer of the capital stock of Tenant shall be deemed a Permitted
Transfer if (1) such sale or transfer occurs in connection with
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any bona fide financing or capitalization for the benefit of Tenant, or (2)
Tenant becomes a publicly traded corporation, or (3) such sale or transfer is
made to any publicly traded corporation. Notwithstanding the provisions of
PARAGRAPH 25.D, Landlord shall not be entitled to any Excess Subrent in
connection with any Permitted Transfer.
In addition, Tenant shall have the right to sublease to one or more
subtenants one entire floor of the Premises with Landlord's prior written
consent, which shall not be unreasonably withheld, and without payment of any
Excess Subrent to Landlord as provided in PARAGRAPH 25.D in connection with
such sublease, provided (w) there shall be no change in the use or operation
of the Premises, (x) Tenant is not in default of its obligations hereunder,
which default is continuing after notice and the expiration of any applicable
grace period, at the time of entering into any such sublease, (y) Tenant is
in possession of the remainder of the Premises and remains primarily liable
for all of its obligations hereunder, and (z) no such sublease shall have a
term that expires beyond the thirty-sixth (36th)month following the
Commencement Date. Landlord acknowledges that the foregoing right is a
material inducement for Tenant to enter into this Lease. Tenant acknowledges
that this grammatical paragraph shall not apply to any assignment or
attempted assignment of all or any portion of its interest in this Lease, nor
to any sublease of all or any portion of the Premises by Tenant for a term
that expires beyond the thirty-sixth (36th) month following the Commencement
Date. The rights described in this grammatical paragraph are personal to the
Tenant originally named in this Lease, and shall not be exercised by any
assignee or successor of such Tenant.
26. DEFAULT.
A. TENANT'S DEFAULT. A default under this Lease by Tenant shall
exist if any of the following occurs.
(i) If Tenant fails to pay, within five (5) days after
written notice from Landlord, any Rent or any other sum required to be paid
hereunder when due, including, without limitation, any Tenant Improvement
Costs payable by Tenant under EXHIBIT B; or
(ii) If Tenant fails to perform any term, covenant or condition
of this Lease except those requiring the
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payment of money, and Tenant fails to cure such breach withint thirty (30)
days after written notice from Landlord where such breach could reasonably be
cured within such 30-day period; provided, however, that where such failure
could not reasonably be cured within the 30-day period, that Tenant shall not
be in default if it commences such performance within the 30-day period and
diligently thereafter prosecutes the same to completion; or
(iii) If Tenant assigns its assets for the benefit of its
creditors; or
(iv) If the sequestration or attachment of or execution on
any material part of Tenant's Personal Property essential to the conduct of
Tenant's business occurs, and Tenant fails to obtain a return or release of
such Tenant's Personal Property within thirty (30) days thereafter, or prior
to sale pursuant to such sequestration, attachment or levy, whichever is
earlier; or
(v) If Tenant abandons the Premises; or
(vi) If a court makes or enters any decree or order other
than under the bankruptcy laws of the United States adjudging Tenant to be
insolvent; or approving as properly filed a petition seeking reorganization
of Tenant; or directing the winding up or liquidation of Tenant and such
decree or order shall have continued for a period of sixty (60) days.
(vii) If, at any time that Landlord or its Affiliate is also
the owner of the premises leased by Tenant under that certain Lease between
Martin/Campus Associates No. 2, L.P. and Tenant dated February 5, 1997, as
amended by that certain First Amendment to Lease dated December 3, 1997 (the
"575-595 Broadway Lease"), Tenant is in default under the 575-595 Broadway
Lease beyond any applicable notice and cure period.
B. REMEDIES. Upon a default, Landlord shall have the following
remedies, in addition to all other rights and remedies provided by law or
Otherwise provided in this Lease, to which Landlord may resort cumulatively
or in the alternative.
(i) Landlord may continue this Lease in full force and effect,
and this Lease shall continue in full force and effect as long as Landlord does
not terminate this Lease, and Landlord shall have the right to collect Rent when
due. Without
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limiting the foregoing, Landlord has the remedy set forth in Section 1951.4
of the California Civil Code.
(ii) Landlord may terminate Tenant's right to possession of
the Premises at any time by giving written notice to that effect, and relet
the Premises or any part thereof. Tenant shall be liable immediately to
Landlord for all costs Landlord incurs in reletting the Premises or any part
thereof, including, without limitation, broker's commissions, expenses of
cleaning and redecorating the Premises required by the reletting and like
costs. Reletting may be for a period shorter or longer than the remaining
Term of this Lease. No act by Landlord other than giving written notice of
termination to Tenant shall terminate this Lease. Neither acts of
maintenance, nor efforts to relet the Premises, nor the appointment of a
receiver on Landlord's initiative to protect Landlord's interest under this
Lease shall not constitute a termination of Tenant's right to possession. On
termination, Landlord has the right to remove all Tenant's Personal Property
and store the same at Tenant's sole cost and expense and to recover from
Tenant as damages.
(a) The worth at the time of award of the unpaid Rent
and other sums due and payable which had been earned at the time of
termination; plus
(b) The worth at the time of award of the amount by
which the unpaid Rent and other sums due and payable which would have been
payable after termination until the time of award exceeds the amount of such
Rent loss that Tenant proves could have been reasonably avoided; plus
(c) The worth at the time of award of the amount by
which the unpaid rent and other sums due and payable for the balance of the
Term after the time of award exceeds the amount of such Rent loss that Tenant
proves could be reasonably avoided; plus
(d) Any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which, in the ordinary course of things, would
be likely to result therefrom, including, without limitation, any costs or
expenses incurred by Landlord. (i) in retaking possession of the Premises; (ii)
in maintaining, repairing, preserving, restoring, replacing, cleaning, altering
or rehabilitating the Premises or
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any portion thereof, including such acts for reletting to a new tenant or
tenants; (iii) for leasing commissions; or (iv) for any other costs necessary
or appropriate to relet the Premises; plus
(e) At Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from time to time
by the laws of the State of California.
The "worth at the time of award" of the amounts referred to in
PARAGRAPHS 26.B (ii) (a) and 26.B.(ii)(b) is computed by allowing interest at
the Interest Rate on the unpaid rent and other sums due and payable from the
termination date through the date of award. The "worth at the time of award"
of the amount referred to in PARAGRAPH 26.B(ii)(c) is computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San Francisco
at the time of award plus one percent (1%). Tenant waives redemption or
relief from forfeiture under California Code of Civil Procedure Sections 1174
and 1179, or under any other present or future law, in the event Tenant is.
evicted or Landlord takes possession of the Premises by reason of any default
of Tenant hereunder.
(iii) Landlord may, with or without terminating this Lease,
re-enter the Premises and remove all persons and property from the Premises;
such property may be removed and stored in a public warehouse or elsewhere at
the cost of and for the account of Tenant. No reentry or taking possession of
the Premises by Landlord pursuant to this PARAGRAPH 26.B. (iii) shall be
construed as an election to terminate this Lease unless a written notice of
such intention is given to Tenant.
C. LANDLORD'S DEFAULT. Landlord shall not be deemed to be in default
in the performance of any obligation required to be performed by it hereunder
unless and until it has failed to perform such obligation within thirty (30)
days after receipt of written notice by Tenant to Landlord specifying the nature
of such default; provided, however, that if the nature of Landlord's obligation
is such that more than thirty (30) days are required for its performance, then
Landlord shall not be deemed to be in default if it shall commence such
performance within such 30-day period and thereafter diligently prosecute the
same to completion.
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27. SUBORDINATION.
A. SUBORDINATION. This Lease is or may become subject and
subordinate to underlying leases, mortgages, deeds of trust, easements, and
CC&Rs (collectively, "ENCUMBRANCES") which may now or hereafter affect the
Premises, and to all renewals, amendments, modifications, consolidations,
replacements and extensions thereof; provided, however, if the holder or
holders of any such Encumbrance (collectively, "HOLDER") shall require that
this Lease be prior and superior thereto, within fifteen (15) days of written
request of Landlord to Tenant, Tenant shall execute, have acknowledged and
deliver any and all documents or instruments, in the form presented to
Tenant, which Landlord or Holder deems reasonably necessary or desirable for
such purposes. Subject to PARAGRAPH 27.C below, Landlord shall have the right
to cause this Lease to be and become and remain subject and subordinate to
any and all Encumbrances which are now or may hereafter be executed covering
the Premises or any renewals, modifications, consolidations, replacements or
extensions thereof, for the full amount of all advances made or to be made
thereunder and without regard to the time or character of such advances,
together with interest thereon and subject to all the terms and provisions
thereof; provided only, that in the event of termination of any such lease or
upon the foreclosure of any such mortgage or deed of trust, so long as Tenant
is not in default, Holder agrees to recognize Tenant's rights under this
Lease as long as Tenant shall pay the Rent and observe and perform all the
provisions of this Lease to be observed and performed by Tenant. Within
fifteen (15) days after Landlord's written request, Tenant shall execute any
and all documents reasonably required by Landlord or the Holder to make this
Lease subordinate to any lien of the Encumbrance (including, without
limitation, subordination to all CC&Rs), including without limitation a
Subordination, Non-Disturbance and Attornment Agreement in the fore attached
hereto as EXHIBIT E ("SNDA"). Subject to PARAGRAPH 27.C below, if Tenant
fails to do so, such failure shall constitute a default under this Lease, and
it shall be deemed that this Lease is subordinated to such Encumbrance.
B. ATTORNMENT. Notwithstanding anything to the contrary set forth in
this PARAGRAPH 27, Tenant hereby attorns and agrees to attorn to any entity
purchasing or otherwise acquiring the Premises at any sale or other proceeding
or pursuant to the exercise of any other rights, powers or remedies under such
Encumbrance.
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C. NON-DISTURBANCE. Notwithstanding anything to the contrary in
this Lease, if an Encumbrance, other than any CC&R's, is created after the
execution of this Lease, as a condition to the subordination of this Lease
thereto under PARAGRAPH 27.A above, Landlord shall obtain from the Holder of
such Encumbrance, other than CC&R's, a SNDA in a commercially reasonable form
or in a form reasonably acceptable to Tenant. Without in any way limiting the
type or form of SNDA that may be required by such Holder, Tenant hereby
agrees that a SNDA in the form attached to this Lease as EXHIBIT E shall be
reasonable. Only upon Landlord's delivery of a SNDA in the form of EXHIBIT E
or in a commercially reasonable form or in a form reasonably acceptable to
Tenant, shall this Lease be automatically subject and subordinate to such
Encumbrance, other than CC&R's. Within fifteen (15) business days after full
execution of this Lease, Landlord shall use reasonable efforts to provide
Tenant with a SNDA in the form attached to this Lease as EXHIBIT E from each
Holder of any Encumbrance in effect as of the date of this Lease, confirming
that the existence of the "automatic subordination" language contained in
PARAGRAPH 27.A above shall not (without the occurrence of some other act or
event that constitutes a default by Tenant under the Lease constitute a
default by Tenant under this Lease). If Landlord fails to deliver the
required SNDA(s) within the 15-day period, then, as Tenant's sole and
exclusive remedy, Tenant shall have the right to terminate this Lease by
giving Landlord a written notice of termination within five (5) business days
after expiration of such 15-day period, upon which Landlord shall promptly
return to Tenant any Rent paid in advance and the Security Deposit. If Tenant
does not exercise such termination right within such 5-business day period,
then Tenant shall have no further right to terminate this Lease pursuant to
this PARAGRAPH 27.C and Tenant shall have no other rights or remedies with
respect to Landlord's failure to deliver such SNDA(s).
28. NOTICES.
Any notice or demand required or desired to be given under this Lease
shall be in writing and shall be personally served or in lieu of personal
service may be given by certified mail, facsimile, or overnight courier service.
All notices or demands under this Lease shall be deemed given, received, made or
communicated on the date personal delivery is effected; or, if sent by certified
mail, on the delivery date or attempted delivery date shown on the return
receipt; or, if sent by
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facsimile, on the date sent by the sender; or, if sent by overnight courier
service, on the delivery date or attempted delivery date shown on such
service's records. At the date of execution of this Lease, the addresses of
Landlord and Tenant are as set forth in PARAGRAPH 1. After the Commencement
Date, the address of Tenant shall be the address of the Premises. Either
party may change its address by giving notice of same in accordance with this
PARAGRAPH 28.
29. ATTORNEYS' FEES.
If either party brings any action or legal proceeding for damages
for an alleged breach of any provision of this Lease, to recover Rent, or
other sums due, to terminate the tenancy of the Premises or to enforce,
protect or establish any term, condition or covenant of this Lease or right
of either party, the prevailing party shall be entitled to recover as a part
of such action or proceedings, or in a separate action brought for that
purpose, reasonable attorneys' fees and costs, including without limitation
any and all costs and expenses arising from (i) collection efforts, (ii) any
appellate proceedings, and (iii) any bankruptcy, insolvency or arbitration
proceedings.
30. ESTOPPEL CERTIFICATES.
A. TENANT ESTOPPEL. Tenant shall within fifteen (15) days
following written request by Landlord.
(i) Execute and deliver to Landlord any documents, including
estoppel certificates, in the form prepared by Landlord (a) 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 (b) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord, or, if there are
uncured defaults on the part of the Landlord, stating the nature of such uncured
defaults, (c) evidencing the status of the Lease as may be required either by a
lender making a loan to Landlord to be secured by deed of trust or mortgage
covering the Premises or a purchaser of the Premises from Landlord, and (d) such
other matters as may be reasonably requested by Landlord. Tenant's failure to
deliver an estoppel certificate within fifteen (15) days after delivery of
Landlord's written request therefor shall be conclusive upon Tenant (a) that
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this Lease is in full force and effect, without modification except as may be
represented by Landlord, (b) that there are now no uncured defaults in
Landlord's performance, and (c) that no Rent has been paid in advance. If
Tenant fails to so deliver a requested estoppel certificate within the
prescribed time it shall be conclusively presumed that this Lease is
unmodified and in full force and effect except as represented by Landlord.
(ii) Deliver to Landlord the current financial statements of
Tenant, and financial statements of the two (2) years prior to the current
financial statements year, with an opinion of a certified public accountant,
including a balance sheet and profit and loss statement for the most recent
prior year, all prepared in accordance with generally accepted accounting
principles consistently applied.
B. LANDLORD ESTOPPEL. Landlord shall, within fifteen (15) days
following written request by Tenant, execute and deliver to Tenant an
estoppel certificate, in the form prepared by Tenant, (a) 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 (b) acknowledging that there
are not, to Landlord's knowledge, any uncured defaults on the part of Tenant,
or, if there are uncured defaults on the part of the Tenant, stating the
nature of such uncured defaults, and (c) such other matters as may be
reasonably requested by Tenant. Landlord's failure to deliver an estoppel
certificate within fifteen (15) days after delivery of Tenant's written
request therefor shall be conclusive upon Landlord (a) that this Lease is in
full force and effect, without modification except as may be represented by
Tenant, (b) that there are now no uncured defaults in Tenant's performance,
and (c) that no Rent has been paid in advance. If Landlord fails to so
deliver a requested estoppel certificate within the prescribed time it shall
be conclusively presumed that this Lease is unmodified and in full force and
effect except as represented, by Tenant.
31. TRANSFER OF THE PREMISES BY LANDLORD.
In the event of any conveyance of the Premises and assignment by
Landlord of this Lease, Landlord shall be and is hereby entirely released from
all liability under any and all of its covenants and obligations contained in or
derived from this
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Lease occurring after the date of such conveyance and assignment, and Tenant
agrees to attorn to such transferee provided such transferee assumes
Landlord's obligations under this Lease.
32. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS.
If Tenant shall at any time fail to make any payment or perform any
other act on its part to be made or performed under this Lease, and such
failure shall continue after the expiration of any applicable grace or cure
periods provided in this Lease, Landlord may, but shall not be obligated to
(and without waiving or releasing Tenant from any obligation of Tenant under
this Lease), make such payment or perform such other act to the extent
Landlord may deem desirable, and in connection therewith, pay expenses and
employ counsel. All sums so paid by Landlord and all penalties, interest,
expenses and costs in connection therewith shall be due and payable by Tenant
on the next day after any such payment by Landlord, together with interest
thereon at the Interest Rate from such date to the date of payment by Tenant
to Landlord, plus collection costs and attorneys' fees. Landlord shall have
the same rights and remedies for the nonpayment thereof as in the case of
default in the payment of Rent.
33. TENANT'S REMEDY.
Landlord shall never be personally liable under this Lease, and Tenant
shall look solely to the net cash flow received by Landlord from its ownership
of the Building, for recovery of any damages for breach of this Lease by
Landlord or on any judgment in connection therewith. None of the persons or
entities comprising or representing Landlord (whether partners, shareholders,
officers, directors, trustees, employees, beneficiaries, agents or otherwise)
shall ever be personally liable under this Lease or for any such damages or
judgment, and Tenant shall have no right to effect any levy of execution against
any assets of such persons or entities on account of any such liability or
judgment. Any lien obtained by Tenant to enforce any such judgment, and any levy
of execution thereon, shall be subject and subordinate to all Encumbrances as
specified in PARAGRAPH 27 above.
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34. MORTGAGEE PROTECTION.
If Landlord defaults under this Lease, Tenant shall give written
notice of such default to any beneficiary of a deed of trust or mortgagee of
a mortgage covering the Premises, and offer such beneficiary or mortgagee a
reasonable opportunity to cure the default, including time to obtain
possession of the Premises by power of sale or a judicial foreclosure, if
such should prove necessary to effect a cure.
35. BROKERS.
Landlord and Tenant acknowledge and agree that they have utilized
the services of real estate brokers (with Cornish and Carey Commercial
representing Tenant, and BT Commercial representing Landlord) with respect to
the transactions between Landlord and Tenant that are represented by this
Lease. Tenant warrants and represents that it has had no dealings with any
other real estate broker or agent in connection with the negotiation of this
Lease, and that it knows of no other real estate broker or agent who is or
might be entitled to a commission in connection with this Lease.
36. ACCEPTANCE.
This Lease shall only become effective and binding upon full
execution hereof by Landlord and delivery of a signed copy to Tenant. This
Lease shall not be recorded. Upon execution of this Lease, the parties shall
execute and acknowledge a Memorandum of Lease in the fore attached hereto as
EXHIBIT F, which may be recorded by either Landlord or Tenant at such party's
sole expense. Upon the expiration or earlier termination of this Lease,
Tenant shall upon Landlord's request execute and acknowledge any and all
documents that in Landlord's discretion may be required in order to terminate
the Memorandum of Lease or otherwise remove the lien of the Memorandum of
Lease from the Building.
37. PARKING.
Tenant shall have the non-exclusive right, in common with any other
tenants or occupants of the Project, to use up to 3.33 unassigned parking spaces
per each one thousand (1,000) square feet of Rentable Area in the Premises, upon
terms and conditions, as may from time to time be reasonably established by
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<PAGE>
Landlord. Should parking charges or surcharges of any kind be imposed on the
parking facilities by a governmental agency, Tenant shall reimburse Landlord
for such charges and/or surcharges or, if possible, shall pay such charges
and/or surcharges directly to the governmental agency and, in such event,
Tenant shall provide Landlord with proof that such charges and/or surcharges
have been paid by Tenant.
38. GENERAL.
A. CAPTIONS. The captions and headings used in this Lease are for
the purpose of convenience only and shall not be construed to limit or extend
the meaning of any part of this Lease.
B. EXECUTED COPY. Any fully executed copy of this Lease shall be
deemed an original for all purposes.
C. TIME. Time is of the essence for the performance of each term,
condition and covenant of this Lease.
D. SEPARABILITY. If one or more of the provisions contained
herein, except for the payment of Rent, is for any reason held invalid,
illegal or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of this Lease, but this
Lease shall be construed as if such invalid, illegal or unenforceable
provision had not been contained herein.
E. CHOICE OF LAW. This Lease shall be construed and enforced in
accordance with the laws of the State of California. The language in all
parts of this Lease shall in all cases be construed as a whole according to
its fair meaning and not strictly for or against either Landlord or Tenant.
F. GENDER; SINGULAR, PLURAL. When the context of this Lease
requires, the neuter gender includes the masculine, the feminine, a
partnership or corporation or joint venture, and the singular includes the
plural.
G. BINDING EFFECT. The covenants and agreement contained in this
Lease shall be binding on the parties hereto and on their respective
successors and assigns to the extent this Lease is assignable.
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<PAGE>
H. WAIVER. The waiver by Landlord of any breach of any term,
condition or covenant, of this Lease shall not be deemed to be a waiver of
such provision or any subsequent breach of the same or any other term,
condition or covenant of this Lease. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach at the time of acceptance of such payment. No covenant, term or
condition of this Lease shall be deemed to have been waived by Landlord
unless such waiver is in writing and signed by Landlord. The waiver by Tenant
of any breach of any term, condition or covenant, of this Lease shall not be
deemed to be a waiver of such provision or any subsequent breach of the same
or any other term, condition or covenant of this Lease. No covenant, term or
condition of this Lease shall be deemed to have been waived by Tenant unless
such waiver is in writing and signed by Tenant.
I. ENTIRE AGREEMENT. This Lease is the entire agreement between
the parties, and there are no agreements or representations between the
parties except as expressed herein. Except as otherwise provided herein, no
subsequent change or addition to this Lease shall be binding unless in
writing and signed by the parties hereto.
J. AUTHORITY. If Tenant is a corporation or a partnership, each
individual executing this Lease on behalf of said corporation or partnership,
as the case may be, represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of said entity in accordance with
its corporate bylaws, statement of partnership or certificate of limited
partnership, as the case may be. Landlord, at its option, may require a copy
of such written authorization to enter into this Lease.
K. EXHIBITS. All exhibits, amendments, riders and addenda
attached hereto are hereby incorporated herein and made a part hereof.
L. LEASE SUMMARY. The Lease Summary attached to this Lease is
intended to provide general information only. In the event of any
inconsistency between the Lease Summary and the specific provisions of this
Lease, the specific provisions of this Lease shall prevail.
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<PAGE>
39. EQUIPMENT LEASING/LANDLORD'S LIEN.
Notwithstanding anything herein to the contrary, Landlord waives
any and all rights, title and interest Landlord now has, or hereafter may
have, whether statutory or otherwise, to Tenant's inventory, equipment,
furnishings, trade fixtures, books and records, and personal property paid
for by Tenant located at the Premises (singly and/or collectively, the
"COLLATERAL"). Landlord acknowledges that Landlord has no lien, right, claim,
interest or title in or to the Collateral. Landlord further agrees that
Tenant shall have the right, at its discretion, to mortgage, pledge,
hypothecate or grant a security interest in the Collateral as security for
its obligations under any equipment lease or other financing arrangement
related to the conduct of Tenant's business at the Premises. Landlord further
agrees to execute and deliver within three (3) business days any UCC filing
statement or other documentation required to be executed by Landlord in
connection with any such lease or financing arrangement, including but not
limited to a Landlord's Waiver and Consent form.
40. RIGHT OF EARLY ENTRY.
Tenant shall have the right to enter the Premises prior to the
commencement of the Term to take reasonable preparatory measures for its
occupancy of the Premises including, without limitation, the installation of
its trade fixtures, furnishings, and telephone, telecommunications and
computer equipment, so long as Tenant does not materially interfere with the
construction of the Improvements by Landlord and Landlord's contractor. Such
entry shall be subject to all of the terms and conditions of this Lease,
except that Tenant shall not be required to pay any Rent on account thereof.
Tenant shall indemnify, defend, protect, and hold harmless Landlord from and
against any and all losses, costs, damages, liability, claims and expenses
arising from any such entry onto the Premises by Tenant.
THIS LEASE is effective as of the date the last signatory necessary
to execute the Lease shall have executed this Lease.
[SIGNATURES FOLLOW ON NEXT PAGE]
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TENANT:
BROADVISION, INC.,
a Delaware corporation
By:
----------------------------------------
Its:
---------------------------------------
Date:
--------------------------------------
By:
----------------------------------------
Its:
---------------------------------------
Date:
--------------------------------------
LANDLORD:
MARTIN/CAMPUS ASSOCIATES NO. 4, L.P.,
a Delaware limited partnership
By: Martin/Redwood Associates, L.P., a California limited
partnership
Its General Partner
By: TMG Redwood LLC,
a California limited liability company
Its General Partner
By: The Martin Group
of Companies, Inc.
a California corporation
Its General Partner
By:
----------------------------------------
Its:
--------------------------------------
Date:
-------------------------------------
By:
----------------------------------------
Its:
--------------------------------------
Date:
-------------------------------------
75
<PAGE>
Exhibit A-1
Floor Plan
Of Premises
<PAGE>
Exhibit A-2
Floor Plan
of Premises
<PAGE>
EXHIBIT B
WORK LETTER AGREEMENT
THIS WORK LETTER ("Agreement") is made and entered into by and
between Landlord and Tenant as of the date of the Lease. This Agreement shall
be deemed a part of the Lease to which it is attached. Capitalized terms
which are used herein and defined in the Lease shall have the meanings given
in the Lease.
1. GENERAL.
1.1. CAPITAL IMPROVEMENTS. Prior to the Commencement Date, at
Landlord's sole cost and expense, Landlord shall do the following (collectively,
the "CAPITAL IMPROVEMENTS").
- Remove all existing interior improvements in the Premises with the
exception of two (2) existing elevators, but including all existing
restrooms.
- Remove all existing HVAC equipment currently located on roof.
- Remove all existing fire sprinkler improvements back to the fire riser
except the main line which penetrates the steel beams. Landlord
covenants that the fire riser shall be in working condition. Any
repairs to the main line shall be a Tenant improvement Cost. tenant
shall pay for fire monitoring equipment and connection costs.
- Provide 150 tons of new HVAC equipment to be located on the roof of
the Building. As part of the Capital Improvements, the supply and
return ducting shall be run from the HVAC equipment onto each floor of
the Premises. All other ducting, distribution, and controls shall be
part of the Tenant Improvements.
- Provide 2000 amp, 480 volt electrical service to the Building. The
Capital Improvements will include a transformer to be located on a pad
on the exterior of the Building with the PG&E pull section into the
main electric room. All conduit, wiring devices and controls
downstream of the main
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panel and any walls or ceiling needed for the electric room shall be
part of the Tenant Improvements. Electrical conduit and wiring to the
main HVAC equipment will be a Capital Improvement.
- Remove the existing roof and replace it with a three-ply built-up
roof with a mineral-surfaced cap sheet.
- Perform any exterior ADA and exterior code-related work required
by the City of Redwood City in connection with the initial
construction of the Premises per the site plan as shown in
EXHIBIT B-2 attached hereto.
- Remove all interior friable and non-friable asbestos within the
Building and basement areas (excluding transite panels on curtain
wall of the Building).
- Remove the security screen around the perimeter of the Building
and change the existing vision glass as shown on EXHIBIT B-1.
Repaint the exterior of the Building.
- Provide two (2), four-inch (4") empty telephone conduits from an
area on the street designated by the utility company to the
electric room in the Building.
- Modify the area adjacent to the Building in substantial
conformity with the site plan as shown in EXHIBIT B-2.
- On the north elevation of the Building, construct a new canopy at
the Building's main entry and install slate on the existing sheer
wall element as shown on the attached EXHIBIT B-1. Any and all
Tenant signage shall be a part of the Tenant Improvements.
- Any insulation required for Title 24 compliance shall be part of
the Tenant Improvements.
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<PAGE>
- Install one hydraulic passenger elevator 2,500 pound capacity
(may be holeless or not holeless) in the approximate location as
shown on the floor plans attached hereto as EXHIBIT A, in
accordance with all applicable laws, including but not limited to
the ADA (as defined in the Lease).
- Landlord intends to abandon in place the electrical and
mechanical equipment currently housed in the basement of the
Building.
- Tenant will be permitted to install a back-up generator on the
exterior of the Building in a mutually agreed-upon location. All
of the costs associated with the generator, including screening
will be part of the Tenant Improvements.
- Leave the slab, walls and roof deck in good, clean condition.
Notwithstanding Landlord's agreement to construct the Capital Improvements at
its sole cost, Landlord and Tenant agree to share equally the cost of any
necessary filling in or leveling of the interior concrete floor deck provided
that the cost thereof does not exceed Fifty Thousand and 00/100 Dollars
($50,000.00). If the cost does exceed Fifty Thousand and 00/100 Dollars
($50,000.00), Landlord shall pay such excess cost. Tenant shall pay its
proportionate share of such costs within thirty (30) days after receipt of
Landlord's statement therefor. Landlord shall exercise commercially
reasonable judgment pursuant to industry building standards in determining
the amount of leveling to be done in the Premises.
Except for its obligation to perform the Capital Improvements and the Tenant
Improvements as set forth in this Lease and the Work Letter, Landlord shall have
no obligation whatsoever to do any work or perform any improvements whatsoever
to any portion of the Premises or the Building; provided, however, that the
Tenant Improvements shall be performed at the sole cost and expense of Tenant.
Landlord shall cause Contractor (as defined below) to perform all initial
leasehold improvements, in accordance with the approved Final Plans and as
otherwise may be required to comply with applicable law (collectively, the
"TENANT IMPROVEMENTS"). The parties acknowledge and agree that the Capital
Improvements and the Tenant Improvements constitute all
3
<PAGE>
of the work required to enable Tenant to occupy, and operate its business in,
the Premises. If Landlord materially alters the current landscape, parking
and lighting plans for the Project before the Commencement Date, then
Landlord shall consult with Tenant's regarding such modification, but Tenant
shall have no approval rights regarding such modification. Landlord shall (i)
cause, through Contractor, the Capital Improvements to be performed in a good
and workmanlike manner using new materials and in accordance with all
applicable legal requirements, and (ii) use its best efforts to cause,
through Contractor, the Improvements to be performed in accordance with the
schedule attached hereto as EXHIBIT B-3 the ("Schedule"); provided, however,
that Landlord's obligation to use reasonable efforts to cause the Tenant
Improvements to be performed in accordance with the Schedule shall be subject
to and dependent upon Tenant's compliance with the Schedule and the terms of
this Agreement and to Force Majeure Delays as defined in PARAGRAPH 4.B of the
Lease. Landlord, at its sole cost, shall obtain all premises, licenses and
authorizations required in connection with the Capital Improvements. All
Landlord design work for the shell condition shall be designed and submitted
to the City of Redwood City for permit prior to Tenant submitting its plans
for the Tenant Improvements to the City for permit.
1.2. TENANT IMPROVEMENT COSTS. The cost of performing the
Tenant Improvements, including without limitation the costs described in
PARAGRAPH 6 below (collectively, the "TENANT'S IMPROVEMENT COSTS") shall be
paid by Tenant in the manner set forth in PARAGRAPH 5 below.
2. APPROVAL OF PLANS FOR TENANT IMPROVEMENTS.
2.1. ARCHITECT. Tenant has selected HPC Architecture
("ARCHITECT") for the design and preparation of plans for the Tenant
Improvements. Tenant shall retain Architect's administrative services
throughout the performance of the Tenant Improvements.
2.2. SUBMITTAL OF PLANS.
2.2.1. PRELIMINARY Plans. Tenant shall cause Architect
to prepare preliminary plans (the "PRELIMINARY PLANS") for the Tenant
Improvements to be performed at the Premises. Tenant shall cause Architect to
deliver the Preliminary Plans to Landlord in accordance with the Schedule
attached as EXHIBIT B-3.
4
<PAGE>
Within five (5) days after Landlord's receipt of the Preliminary Plans,
Landlord shall either approve or disapprove the Preliminary Plans, which
approval shall not be unreasonably withheld. Failure of Landlord to approve
or disapprove the Preliminary Plans within such five-day period shall be
deemed to constitute Landlord's approval of the Preliminary Plans. If
Landlord disapproves the Preliminary Plans, then Landlord shall state in
reasonable detail the changes which Landlord requires to be made thereto.
Tenant shall submit to Landlord revised Preliminary Plans within five (5)
days after Tenant's receipt of Landlord's disapproval notice. Following
Landlord's receipt of the revised Preliminary Plans from Tenant, Landlord
shall have the right to review and approve the revised Preliminary Plans
pursuant to this PARAGRAPH 2.2.1. Landlord shall give Tenant written notice
of its approval or disapproval of the revised Preliminary Plans within five
(5) days after the date of Landlord's receipt thereof. Failure of Landlord to
approve or disapprove the Preliminary Plans within such five-day period shall
be deemed to constitute Landlord's approval of the revised Preliminary Plans.
If Landlord disapproves the revised Preliminary Plans, then Landlord and
Tenant shall continue to follow the procedures set forth in this PARAGRAPH
2.2.1 until Landlord and Tenant approve the Preliminary Plans in accordance
with this PARAGRAPH 2.2.1.
2.2.2. PRELIMINARY BUDGET. Landlord intends to retain
Devcon Construction ("CONTRACTOR") as the general contractor for the
construction of the Tenant Improvements, Air Systems for the mechanical
design-build work and Frank Electric for the electrical design-build work.
Within the time period provided in the Schedule attached as EXHIBIT B-3,
Contractor shall prepare a preliminary budget for the Tenant Improvements
based upon the approved Preliminary Plans, which Contractor shall submit to
Tenant for its review and approval. Within the time period provided in the
Schedule attached as EXHIBIT B-3, Tenant and Landlord shall review and
approve or disapprove the Preliminary Plans and the preliminary budget.
2.2.3 FINAL PLANS. Within the time period provided in
the Schedule attached as EXHIBIT B-3, Tenant shall cause Architect to
commence preparing complete plans, specifications and working drawings which
incorporate and are consistent with the approved Preliminary Plans and
preliminary budget, and which show in detail the intended design,
construction and finishing of all portions of the Tenant
5
<PAGE>
Improvements described in the Preliminary Plans (collectively, the "FINAL
PLANS"). Tenant shall cause Architect to deliver the Final Plans to Landlord,
for Landlord's review and approval within the time period provided in the
Schedule attached as EXHIBIT B-3. Within five (5) days after Landlord's
receipt of the Final Plans, Landlord shall either approve or disapprove the
Final Plans, which approval shall not be unreasonably withheld. Landlord's
failure to approve or disapprove the Final Plans within such five-day period
shall be deemed to constitute Landlord's approval of the Final Plans. If
Landlord disapproves the Final Plans, then Landlord shall state in reasonable
detail the changes which Landlord requires to be made thereto. Tenant shall
submit to Landlord revised Final Plans within five (5) days after Tenant's
receipt of Landlord's disapproval notice. Following Landlord's receipt of the
revised Final Plans from Tenant, Landlord shall have the right to review and
approve the revised Final Plans pursuant to this PARAGRAPH 2.2.3. Landlord
shall give Tenant written notice of its approval or disapproval of the
revised Final Plans within five (5) days after the date of Landlord's receipt
thereof. Landlord's failure to approve or disapprove the Final Plans within
such five-day period shall be deemed to constitute Landlord's approval of the
revised Final Plans. If Landlord disapproves the revised Final Plans, then
Landlord and Tenant shall continue to follow the procedures set forth in this
PARAGRAPH 2.2.3 until Landlord and Tenant reasonably approve such Final Plans
in accordance with this PARAGRAPH 2.2.3.
3. CONSTRUCTION BUDGET. Upon approval by Landlord and Tenant of the
Final Plans, Landlord shall instruct Contractor to obtain competitive bids
for the Tenant Improvements from at least three (3) qualified subcontractors
for each of the major subtrades (excluding the mechanical, electrical and
fire sprinkler trades, which shall be on a design/build basis, unless
Landlord elects to competitively bid these trades) and to submit the same to
Tenant for its review and approval. Upon selection of the subcontractors and
approval of the bids, Contractor shall prepare a cost estimate for the Tenant
Improvements described in such Final Plans, based upon the bids submitted by
the subcontractors selected. Within the time period provided in the Schedule
attached as EXHIBIT B-3, Contractor shall submit such cost estimate to Tenant
for its review and approval. Tenant may approve or reject such cost estimate
in its reasonable sole discretion. If Tenant rejects such cost estimate,
Tenant shall resolicit bids based on such Final Plans, in accordance with the
6
<PAGE>
procedures specified above. Following any resolicitation of bids by Tenant
pursuant to this PARAGRAPH 3, Tenant shall again follow the procedures set
forth in this PARAGRAPH 3 with respect to the submission and reasonable
approval of the cost estimate from Contractor; provided, however, that Tenant
shall only be permitted to resolicit bids once following Tenant's rejection
of the cost estimate and Tenant shall select from the bids received in the
second solicitation of bids.
4. LANDLORD TO CONSTRUCT. Landlord shall cause Contractor to construct
the Tenant Improvements in a good and workmanlike manner, in accordance with
the approved Final Plans and in compliance with all applicable laws.
Architect shall be responsible for obtaining all necessary building permits
and approvals and other authorizations from governmental agencies required in
connection with the Tenant Improvements. The cost of all such permits and
approvals, including inspection and other building fees required to obtain
the permits for the Tenant Improvements, shall be included as part of the
Tenant Improvement Costs. Tenant shall have the benefit of any warranties
provided by Contractor, the subcontractors and suppliers in connection with
the Tenant Improvements.
5. PAYMENT FOR TENANT IMPROVEMENTS. The Tenant Improvement Costs
shall be paid solely by Tenant as follows.
5.1. TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide funds, to
be used for the payment of Tenant Improvement Costs, in an amount not to
exceed Ten and 00/100 Dollars per square foot of Rentable Area (the "Tenant
Improvement Allowance"). Tenant shall pay all of the Tenant Improvement Costs
in excess of the Tenant Improvement Allowance (the "Excess Costs") in
accordance with PARAGRAPH 5.2.
5.2. SET-ASIDE FUNDS. Within five (5) days after Tenant has
approved the cost estimate for the Tenant Improvements pursuant to PARAGRAPH
3 above, Tenant shall deposit into a separate account with any financial
institution designated by Landlord, subject to restrictions in favor of such
financial institution, an amount (the "SET-ASIDE FUNDS") equal to the Excess
Costs, based on the assumption that the cost of the Tenant Improvements shall
equal the Tenant Improvement Allowance and the Excess Cost estimate. Landlord
shall instruct such financial institution to hold the Set-Aside Funds in a
separate interest-bearing account with interest to accrue for Tenant's
account, and
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<PAGE>
shall utilize the Set-Aside Funds to pay for the Tenant Improvement Costs in
the manner set forth in this PARAGRAPH 5.
5.3. PAYMENT. As and when any Excess Costs become due and payable,
and so long as Landlord has delivered to Tenant copies of unconditional lien
releases from Contractor and the major subcontractors covering the work for
which such Tenant Improvement Costs are payable, Landlord shall request such
financial institution to utilize the remaining Set-Aside Funds to pay any
amount of Excess Costs; provided, however, that if at any time there are
insufficient Set-Aside Funds to pay any amount of the Excess Costs, Tenant
shall pay any and all such Excess Costs to Landlord within ten (10) days
after the date of Tenant's receipt of Landlord's written request therefor;
and provided further, that Landlord shall use reasonable efforts to provide
for commercially reasonable holdbacks, with respect to the payment of the
Tenant Improvement Costs. Any failure by Tenant to pay any Excess Costs as
and when required under this Agreement shall constitute a default by Tenant
under the Lease.
5.4. PENALTIES. To the extent that any contractor or subcontractor
working on the Tenant Improvements imposes upon Landlord any penalty or late
charge due to Tenant's failure to pay to Landlord any amount due under this
PARAGRAPH 5.4 as and when such amount is due, Tenant shall be solely
responsible for paying such penalty or late charge.
6. TENANT IMPROVEMENT COSTS. The Tenant Improvement Costs shall
include all reasonable costs incurred in connection with the Tenant
Improvements (but not the Capital Improvements), as determined by Landlord in
its reasonable discretion, including the following:
(a) All costs of space plans and other architectural and
engineering plans and specifications for the Tenant Improvements, including
engineering costs associated with completion of the State of California
energy utilization calculations under Title 24 legislation required in
connection with the Tenant Improvements and the base Building mechanical;
(b) All costs of obtaining building permits and other necessary
authorizations from the City of Redwood City;
8
<PAGE>
(c) All costs of interior design and finish schedule plans and
specifications, including as-built drawings by Architect;
(d) All direct and indirect costs of procuring, constructing and
installing the Tenant Improvements in the Premises, including, but not
limited to, the construction fee of four and one-half percent (4 1/2%) payable
to the Contractor for overhead and profit, and the cost of all on-site
supervisory and administrative staff, office, equipment and temporary
services rendered by Contractor in connection with construction of the Tenant
Improvements;
(e) All fees payable to Architect and Landlord's engineering firm
if they are required by Tenant to redesign any portion of the Tenant
Improvements following Tenant's approval of the Final Plans;
(f) Sewer connection fees (if any);
(g) All direct and indirect construction costs associated with
complying with Title 24 legislation and ADA compliance for all interior
improvements;
(h) All direct and indirect construction costs associated with
complying with Title 24 legislation and ADA compliance resulting from changes
to the exits from the Building; and
(i) A construction management fee payable to Landlord equal to
Forty Thousand and 00/100 Dollars ($40,000.00).
In no event shall the Tenant Improvement Costs include any costs of
procuring, constructing or installing in the Premises any of Tenant's
Personal Property, trade fixtures, equipment, inventory, computer network,
communications system, promotional materials, signage or related expenses.
7. CHANGE REQUESTS. No revisions to the approved Final Plans shall be
made by either Landlord or Tenant unless approved in writing by both parties.
Landlord agrees to make all changes (i) required by any public agency to
conform with governmental regulations, or (ii) requested in writing by Tenant
and approved in writing by Landlord, which approval shall not be unreasonably
withheld. Any costs related to such changes shall be added to
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<PAGE>
the Tenant Improvement Costs and shall be paid for in accordance with
PARAGRAPH 5. The billing for such additional costs shall be accompanied by
evidence of the amounts billed as is customarily used in the business. Costs
related to changes shall include, without limitation, any architectural,
structural engineering, or design fees, and the Contractor's price for
effecting the change. Any change order which may extend the date of
substantial completion of the Tenant Improvements may be disapproved by
Landlord unless Tenant agrees that for all purposes under this Lease, the
Tenant Improvements shall be deemed to have been substantially completed on
that date on which such Tenant Improvements would have been substantially
completed without giving effect to the change order in question.
[SIGNATURES FOLLOW ON NEXT PAGE]
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<PAGE>
Exhibit B-1
Midpoint Technology Park
405 Broadway, Redwood City
[IMAGE]
A project of THE MARTIN GROUP
<PAGE>
EXHIBIT B-2
Site Plan
MidPoint Technology Park
405 Broadway
[IMAGE]
<PAGE>
Exhibit C
MidPoint Technology Park
Master Plan
[IMAGE]
<PAGE>
EXHIBIT D
COMMENCEMENT DATE MOMENTUM
LANDLORD: Martin/Campus Associates No. 4, L.P.
TENANT: Broadvision, Inc.
LEASE DATE: January , 1999
PREMISES: 405 Broadway, Redwood City, California
Pursuant to PARAGRAPH 4.A. of the above referenced Lease, the commencement date
is hereby established for 405 Broadway, Redwood City, CA 94063. The Commencement
Date as defined in PARAGRAPH 4.A shall be ______________________, 1999.
TENANT:
BROADVISION, INC.,
a Delaware corporation
By:
--------------------------
Its:
-------------------------
Date:
------------------------
By:
--------------------------
Its:
-------------------------
Date:
------------------------
[SIGNATURES FOLLOW ON NEXT PAGE]
1
<PAGE>
LANDLORD:
MARTIN/CAMPUS ASSOCIATES NO. 4, L.P.,
a Delaware limited partnership
By: Martin/Redwood Associates, L.P., a California
limited partnership
Its General Partner
By. TMG Redwood LLC,
a California limited liability company
Its General Partner
By. The Mart: in Group
of Companies, Inc.
a California corporation
Its General Partner
By:
---------------------------
Its:
--------------------------
Date:
-------------------------
By:
---------------------------
Its:
--------------------------
Date:
-------------------------
2
<PAGE>
Exhibit E
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Fremont Investment & Loan
175 N. Riverview Drive
Anaheim, California 92808
Attention: Commercial Real Estate
Loan No.: 950113100
- -------------------------------------------------------------------------------
NONDISTURBANCE AND ATTORNMENT AGREEMENT
THIS NONDISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement") is made as
of by and among MARTIN/CAMPUS ASSOCIATES NO. 4, L.P., a Delaware limited
partnership (Landlord whose address is 100 Bush Street, 25th Floor, San
Francisco, California 94104 whose address is
and FREMONT INVESTMENT & LOAN, a California
Industrial loan association ("Lender"), whose address is 175 N. Riverview Drive,
Anaheim, California 92808, Attn: Commercial Real Estate Department, Loan No.
950113100, with respect to the following Recitals:
RECITALS
A. Landlord is the owner of the real property described on EXHIBIT A
attached hereto, together with the improvements now or hereafter located thereon
(collectively, the "Project").
B. Landlord and Lender are the parties to that certain Loan and Security
Agreement of even date herewith (the "Loan Agreement"), pursuant to the terms of
which Lender has agreed to make a loan of up to Sixteen Million Five Hundred
Thousand Dollars ($16,500,000) (the "Loan") to Landlord. The Loan is evidenced
by that certain Secured Promissory Note of even date herewith, in the original
principal amount of the Loan, executed by Landlord in favor of Lender (the
"Note"). The Note is secured, INTER ALIA by that certain Deed of Trust and
Fixture Filing of even date herewith executed by Landlord, as trustor, to the
trustee named therein, in favor of Lender, as beneficiary (the "Deed of Trust")
encumbering the Project, recorded concurrently herewith in the Official Records
of San Mated County, California
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(the "Official Records"), and by that certain Assignment of Rents and Leases
of even date herewith executed by Landlord in favor of Lender (the
"Assignment of Rents") encumbering the Project, recorded concurrently
herewith in the Official Records. The Loan Agreement, the Note, the Deed of
Trust, the Assignment of Rents and all other documents securing, or executed
in connection with the Loan, together with all renewals, substitutions,
extensions, modifications or replacements thereof, are collectively referred
to herein as the "Loan Documents."
C. Tenant and Landlord are the current parties to that certain lease
dated between Tenant and
between Tenant and Martin/Campus (as amended, the "Lease"), pursuant to
which Landlord is leasing to Tenant a portion of the Project more particularly
described in the Lease (the Leased Premises").
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NOW, THEREFORE, in consideration of the foregoing recitals and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. LOAN DISBURSEMENTS.
Tenant agrees and acknowledges that in making disbursements of the Loan,
Lender is under no obligation or duty, nor has Lender represented that it
will, see to the application of the Loan proceeds by the person or persons to
whom Lender disburses the Loan proceeds, and any application or use of the
Loan proceeds for purposes other than those provided for in the Loan
Documents shall not defeat in whole or In part the agreements set forth
herein.
2. NONDISTURBANCE AND ATTORNMENT.
If the interest of Landlord under the Lease is transferred by reason of any
foreclosure of the Deed of Trust or by deed in lieu or in aid thereof Purchaser
(as hereinafter defined) shall be bound to Tenant, and Tenant shall be bound to
Purchaser, under all or the terms, covenant and conditions or the Lease (except
as provided in SECTION 5 hereof) for the balance of the term thereof, with the
same force and effect as if Purchaser were the original landlord under the
Lease, Tenant does hereby attorn to Purchase as the landlord under the Lease,
which attornment shall be effective and self-operate (notwithstanding whether
Tenant is then in default under the Lease) without the execution of any further
instruments upon Purchaser's succeeding to the interest of the landlord under
the Lease; provided, however, that nothing set forth herein shall (i) give or
be construed to have given Tenant the right to asset that the foregoing
nondisturbance and attornment agreements are not effective in the event Tenant
is in default under the Lease, whether or not any applicable notice and cure
periods specifically provided far under the Lease with respect to Tenant's
default have expired, and/or (ii) waive or be deemed a waiver by Purchaser of
its rights under the Lease upon Tenant's defaults thereunder beyond any
applicable notice and cure periods, regardless of when such default occurred.
Without limiting the generality of this SECTION 2, within fifteen (15) calendar
days after the request of Landlord, Lender or any Purchaser, Tenant shall
execute and deliver such documents as are reasonably requested by such party to
reflect such attornment. Within twenty (20) calendar days after the request of
any Purchaser or Tenant, such parties shall enter into a new lease of
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the Leased Premises for the balance of the then remaining term of the Lease
and upon the same terms and conditions as are then contained in the Lease. As
used herein, "Purchaser" shall mean a transferee (including, without,
limitation, Lender and its affiliates and subsidiaries) which acquires the
Interest of Landlord in the Leased Premises through a foreclosure of the Deed
of Trust or a deed In lieu or in aid thereof, and its successors and assigns.
3. TENANT AGREEMENTS.
TENANT AGREES THAT:
A. Pursuant to SECTION 34 of the Lease, Tenant shall send a copy of any
notice of a default by Landlord under the Lease to Lender at the same time such
notice is sent to Landlord; and
B. without Lender's prior written consent, Tenant shall not (i) pay any
rent (however denominated) or other charges under the Lease more than one (1)
month in advance or (ii) cancel, terminate or surrender the Lease, except at the
normal expiration of the Lease term or as expressly provided in the Lease or
pursuant to applicable law. Any amendment or modification to the Lease entered
into without Lender's prior written consent to the extent such consent is
required under the Loan Document shall not be binding upon Lender or any
Purchaser; and
C. Upon the occurrence of any event of default by Landlord under the Loan
Documents and the expiration of any applicable cure periods expressly provided
For under the Loan Documents, Lender, at all
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times, independent of Landlord, shall have the standing and right to enforce,
by injunction or otherwise, all or any provisions in the Lease as though
Lender originally was a party thereto.
4. ASSIGNMENT OF RENTS.
Tenant agrees to recognize the assignment from Landlord to Lender of the
Lease and the amounts payable thereunder pursuant to the Assignment of Rents
and, in the event of any default by Landlord under the Loan Documents and the
expiration of any applicable cure period expressly set forth therein, Tenant
shall pay to Lender, as such assignee, the rents and other amounts which are or
become due under the Lease from and after the date on which Lender gives Tenant
notice that such rent and other amounts are to be paid to Lender pursuant to the
Assignment or Rents. In complying with the Provisions of this SECTION 4. Tenant
shall be entitled to rely solely upon the notices given by Lender pursuant to
the Assignment of Rent and Landlord hereby indemnifies and agrees to defend and
hold Tenant, harmless from and against any and all expenses, loss, claims,
damage or liability arising out of Tenants compliance with such notice or
performance of the obligations under the Lease by the Tenant made in good faith
in reliance on and pursuant to such notice, Tenant shall be entitled to full
credit under the Lease for any rents paid to Lender in accordance with the
provisions hereof. Any dispute between Lender (or any other Purchaser) and
Landlord as to the existence or nature of a default by Landlord under the terms
or the Loan Documents or with respect to the foreclosure of the Deed of Trust,
shall be dealt with and adjusted solely between Lender (or such other Purchaser)
and Landlord, and Tenant shall be made a party thereto (unless joinder is
required by law).
5. LENDER'S OBLIGATIONS.
Nothing in this Agreement and no action taken by Lender to enforce any
provision in the Lease shall be deemed or construed to constitute an agreement
by Lender to perform or assume any covenant of Landlord as landlord under the
Lease unless and until Lender obtains title to the Leased Premises by
foreclosure of the Deed of Trust or a deed in lieu or in aid thereof. Without
limiting any of Tenant's rights against Landlord under the Lease, in the event
Lender acquires title to the Leased Premises, Lender shall:
A. be liable only for any damages or other relief attributable to any
act or omission during Lender's period of
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ownership of the Leased Premises, regardless of whether such act or omissions
commenced prior to such period or ownership. For example, if the Lease
provides that the failure of the Landlord to repair a hole in the roof
occurred 60 days prior to Lender's acquisition of title and was not repaired
for another 30 days thereafter, Tenant would only be entitled to offset
against its rental obligations owed to Lender 30 days rental and would retain
a claim against Landlord for 60 days rental;
B. only be responsible for representations, warranties and covenants of
Landlord the extent that such representations, warranties and covenants apply to
the Project and relate to the operation of the Project during Lender's period of
ownership of the Leased Premises;
C. be liable only for any security deposit actually delivered to Lender;
and
D. have its obligations and liabilities limited to the then
interest, if any, of Lender in the Project, without consideration of any
mortgage liens placed on the Project by Lender. Tenant's shall look exclusively
to such interest of Lender, if any, in the Project (including any insurance
proceeds thereof and the proceeds of the sale thereof) the payment and discharge
of any obligations imposed upon Lender hereunder or under the Lease and Tenant
releases Lender from any ether liability hereunder and under the Lease.
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Nothing contained In this Section shall be deemed to limit or affect Tenant's
claims against Landlord for any breaches of the Landlord's obligations under
the Lease, or for any breaches of Landlord's representations, warranties and
covenants under the Lease, or for return of any security deposit under the
Lease, and no transfer of the Project to Lender shall release Landlord from
any of its Lease obligations, notwithstanding anything to the contrary in the
Lease.
6. ESTOPPEL CERTIFICATE.
Pursuant to SECTION 30 of the Lease, Tenant agrees, from time to time,
within fifteen (15) days after Lender's request, to execute and deliver to
Lender or Lenders designee, any estoppel certificate reasonably requested by
Lender, stating that the Lease is in full force and effect, to date to which
rent has been paid, that Landlord is not in default under the Lease (or
specifying in detail the nature at Landlord's default), and such other matters
relating to the Lease as may be reasonably requested by Lender,
7. NO MERGER.
The parties agree that, without Lenders prior written torment, Landlord's
estate in and to the Project and the leasehold estate created by the Lease shall
not merge but shall remain separated and distinct, notwithstanding the union of
such estates in Landlord, Tenant or any third party by purchase, assignment or
otherwise.
8. ENTIRE AGREEMENT.
This Agreement shall be the whole and only agreement with regard to the
matters set forth herein and shall supersede and cancel any prior agreements
with respect thereto, including, without limitation, any provisions contained in
the Lease relating thereto.
9. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. Signature and acknowledgment pages may be detached from the
counterparts and attached to a single copy of this Agreement to physically form
one document, which may be recorded.
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10. MODIFICATIONS, SUCCESSORS AND ASSIGNS.
This Agreement may only be modified in writing signed by all of the parties
hereto or their respective successors in interest. This Agreement, Including
without limitation, the provisions of SECTION 5, shall inure to the benefit of,
and be binding upon, the parties hereto and their respective successors and
assigns.
11. ATTORNEYS' FEES.
If any lawsuit or other proceeding Is commenced which arises out of, or
which relates to this Agreement, including any alleged tort, action, the
prevailing party shall be entitled to recover from each other party such sums as
the court or other party presiding over such action or proceeding may adjudge to
be reasonable attorneys' fees and cost in the action or proceeding, In addition
to cost and expenses otherwise allowed by law. Any such attorneys' fees and case
incurred by any party in enforcing a judgment in its favor under this Agreement
shall be recoverable separately from and in addition to any other amount
included in such judgement and shall survive and not be merged into any such
judgment.
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The obligation to pay such attorneys' fees and casts is intended to be severable
from the other provisions of this Agreement.
12. GOVERNING LAW.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of California.
13. NOTICES.
Any notice, or other document or demand required or permitted under this
Agreement shall be in writing addressed to the appropriate address set forth
above and shall be deemed delivered on the earliest of (a) actual receipt, (b)
the next business day after the date when sent by recognized overnight courier,
or (c) the second business day after the date when sent by registered or
certified mail, postage prepaid. Any party may, from time to time, change the
address at, which such written notices or other document or demands are to be
sent, by giving the other parties written notice of such change in the manner
hereinabove provided.
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EXHIBIT F
MEMORANDUM OF LEASE
RECORDING REQUESTED BY, AND:
WHEN RECORDED, RETURN TO:
- -------------------------
- -------------------------
- -------------------------
- -------------------------
- -------------------------
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE ("Memorandum"), dated as of the _____ day of
____, 1999, is made and entered into by and between MARTIN/CAMPUS ASSOCIATES
NO. 4, L.P., a Delaware limited partnership ("Landlord"),and BROADVISION,
INC., a Delaware corporation ("Tenant").
RECITALS
This Memorandum is entered into on the basis of the following facts,
understandings and intentions of the parties:
A. Landlord and Tenant have entered into that certain Lease
Agreement dated as of January _____, 1999 (collectively, together with any
and all amendments and supplements thereto, hereinafter referred to as the
"Lease"). Pursuant to the terms, covenants and conditions of the Lease,
Tenant has leased from Landlord a portion of that certain real property (the
"Real Property") and all improvements thereon, as more particularly described
in EXHIBITS A-1 AND A-2 hereto. That portion of the Real Property being
leased by Tenant is hereafter called the "Premises", and is more particularly
described in EXHIBIT B hereto. A copy of the Lease is being held by Tenant at
its office at the Premises.
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B. Landlord and Tenant desire to enter into this Memorandum which
is to be recorded in order that third parties may have notice of the estate
of Tenant in the Premises.
NOW THEREFORE, in consideration of the mutual covenants and
promises of the parties, the parties hereto agree as follows.
1. LEASE OF PREMISES. Landlord leases the Premises to Tenant and
Tenant hires the Premises from Landlord, on the terms, covenants and
conditions set forth in the Lease, for the Term, defined in the Lease.
2. TERM. The term of the Lease shall commence on the Lease
Commencement Date, as defined in the Lease, and shall terminate on December
4, 2007, subject to extension by Tenant for one (1) period of five (5) years,
pursuant to PARAGRAPH 4 of the Lease (collectively, the "Term").
3. COVENANTS RUN WITH THE LAND. All of the provisions,
agreements, rights, powers, covenants, conditions and obligations contained
in the Lease shall be binding upon and inure to the benefit of the parties
hereto, their respective heirs, successors (by merger, consolidation or
otherwise) and assigns, devisees, administrators, representatives, lessees,
and all other persons acquiring the Premises, or any portion thereof, or any
interest therein, whether by operation of law or in any manner whatsoever,
unless and until modified as provided in the Lease. All of the provisions of
the Lease, for the Term of the Lease, including any permitted hold-over
period, shall be covenants running with the land pursuant to applicable law.
It is expressly acknowledged that each covenant to do or refrain from doing
some act on the Premises is for the benefit of the Premises and is a burden
upon the Premises, runs with the Premises, and shall benefit or be binding
upon each successive owner during its ownership of the Premises, or any
portion thereof, and each person having an interest therein derived in any
manner through any owner thereof, or any portion thereof.
4. LEASE TO CONTROL. All of the terms, conditions, provisions and
covenants of the Lease are incorporated in this Memorandum by reference as
though written out at length herein and both the Lease and this Memorandum
shall be deemed to constitute a single instrument or document. If any
inconsistency shall exist between the Lease and this Memorandum, the Lease
shall control. This Memorandum and the Lease, and the covenants
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and agreements herein and therein contained, shall bind and inure to the
benefit of the parties hereto, their heirs, successors, executors,
administrators and assigns.
5. SIGNATURE PAGE. For convenience, the signatures of the parties
to this Memorandum may be executed on separate pages, which when attached to
this Memorandum shall constitute this as one complete Memorandum.
IN WITNESS WHEREOF, the parties hereto have executed this
Memorandum as of the day and year first above written.
"TENANT"
BROADVISION, INC.,
a Delaware corporation
By:
--------------------------
Its:
-------------------------
By:
--------------------------
Its:
-------------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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"LANDLORD"
MARTIN/CAMPUS ASSOCIATES NO. 4, L.P.,
a Delaware limited partnership
By: Martin/Redwood Associates, L.P.,
a California limited partnership
Its General Partner
By: TMG Redwood LLC,
a California limited liability company
Its General Partner
By: The Martin Group
of Companies, Inc.,
a California corporation
Its General Partner
By:
----------------------
Its:
---------------------
Date
--------------------
By:
----------------------
Its:
---------------------
Date:
--------------------
attach notaries
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Second Floor - Floor Plan
EXHIBIT B
[Image]
<PAGE>
EXHIBIT C
- - BroadVision WILL supply the refrigerators on the second floor of the
building. Microwaves will need to be provided by RealNames.
- - SECURITY: The security guards that work for The Martin Group patrol the
entire property.
- - CARD KEYS FOR 405: Yes, BroadVision will provide them for RealNames. It
will require a $15.00 deposit per key. The deposit will be returned when the
keys are returned. If one is to get lost, there is a $15.00 charge to replace
the key. The charge for lost keys is not refundable. This is for the main
lobby entrance into the building, the second floor entrance and the second
floor server room. There are also two other entrances with stairwells to the
second floor which we will supply door keys to (same key fits both doors) at
$5.00 deposit per key. If one is to be lost, there is a non-refundable $5.00
charge.
- - ADDRESS TO BE USED BY REAL NAMES RealNames can use the 405 Broadway
address as their main address.
- - SIGNAGE: Small street signage base to be provided. Patsy, David Wright
(landlord) needs a camera-ready disc with your art to complete the sign. Or,
you can forward the disc directly to Jim Mag @ Arrow Signs @ 510.533.7693.
This base sign will have both BroadVision and RealNames on it. There will
also be signage on the glass doors (at the front of the building). All
signage of RealNames is at RealName's expense. RealNames to obtain final
approval from BroadVision for ALL signage.
- - RealNames to provide signage in the lobby which directs those entrancing
to the the stairwell that leads to the second floor.
FURNITURE FOR 2ND FLOOR OF 405:
- - BroadVision will supply furniture for 21 hardwall offices which includes
a free standing desk, two pedestals and a bookcase.
- - BroadVision will supply furniture for 99 8` x 8` cubicles complete
w/overhead bins and organizers and pedestals.
- - BroadVision will supply furniture for 7 conference rooms which will
include seating.
- - Note: Although BroadVision is quoting numbers above (as to how many
hard-wall offices, cubicles and conference rooms that are in the building on
the second floor), the buildout plan may change due to circumstances. We
<PAGE>
will supply furniture to complete AS BEST WE CAN, the available spaces on the
second floor. However, if the number of cubicles change, for example, we are
not bound by the numbers quoted above. Bottom line: We will adequately
furnish the space.
- - Chairs will be provided.
- - MIS/TELEPHONY: Exhibit D: BroadVision will supply three 19" cabinets, wire
managers, (NO PATCH CORDS), and power. BroadVision will provide phone blocks in
the Server Room (voice will be terminated on BV side of the blocks).
- - Real Names to provide tie to MPOE in Basement.
<PAGE>
PREMISES BUILDOUT - MIS/TELEPHONY
EXHIBIT D
2ND FLOOR SERVER ROOM
[IMAGE]
<PAGE>
JANITORIAL SPECIFICATIONS
<TABLE>
<S> <C>
Areas to be serviced 5 days per week.
1. Lobbies and hallways . . . . . . . . . . . . . . . . . . . . . . . .Daily
2. Office areas . . . . . . . . . . . . . . . . . . . . . . . . . . . .Daily
3. Cafe and break areas ( appliances included) . . . . . . . . . . . . .Daily
4. Restrooms and lounges . . . . . . . . . . . . . . . . . . . . . . . .Daily
5. Computer rooms . . . . . . . . . . . . . . . . . . . . . . . . . . .Daily
6. Elevators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Daily
Areas to be dusted:
1. Wall and partitions Weekly
2. Window sill . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weekly
3. Picture frames . . . . . . . . . . . . . . . . . . . . . . . . . . Weekly
4. Chalk rails . . . . . . . . . . . . . . . . . . . . . . . . . . . . Daily
5. HVAC Vents . . . . . . . . . . . . . . . . . . . . . . . . . . . Annually
6. Chairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weekly
7. Other equipment and furniture . . . . . . . . . . . . . . . . . . . Weekly
8. Detail clean . . . . . . . . . . . . . . . . . . . . . . . . . . . Weekly
Restrooms:
1. Sanitize toilets and urinals . . . . . . . . . . . . . . . . . . . .Daily
2. Clean and sanitize sinks . . . . . . . . . . . . . . . . . . . . . .Daily
3. Clean mirrors . . . . . . . . . . . . . . . . . . . . . . . . . . . .Daily
4. Clean all chrome . . . . . . . . . . . . . . . . . . . . . . . . . .Daily
5. Damp mop and sanitize floors . . . . . . . . . . . . . . . . . . . .Daily
6. Clean partitions . . . . . . . . . . . . . . . . . . . . . . . . . .Daily
7. Fill all dispensers . . . . . . . . . . . . . . . . . . . . . . . . .Daily
8. Empty all receptacles . . . . . . . . . . . . . . . . . . . . . . . .Daily
9. Clean and sanitize showers . . . . . . . . . . . . . . . . . . . . .Daily
Cleaning Tasks:
1. Trash receptacles . . . . . . . . . . . . . . . . . . . . . . . . .Daily
2. Drinking fountains . . . . . . . . . . . . . . . . . . . . . . . . .Daily
3. Sand urns . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Daily
4. Janitorial closets . . . . . . . . . . . . . . . . . . . . . . . . .Daily
5. Refrigerators(inside) . . . . . . . . . . . . . . . . . . . . . . . Weekly
6. Microwave (inside) . . . . . . . . . . . . . . . . . . . . . . . . Weekly
<PAGE>
<S> <C>
Floor Service:
1. Sweep and / or mop. . . . . . . . . . . . . . . . . . . . . . . . . .Daily
2. Spot clean . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Daily
3. Spray buff . . . . . . . . . . . . . . . . . . . . . . . . . . .Quarterly
4. Refinish VCT tile . . . . . . . . . . . . . . . . . . . . . . . . Annually
Carpets:
1. Vacuum, general cleaning. . . . . . . . . . . . . . . . . . . . . . .Daily
2. Vacuum, detail . . . . . . . . . . . . . . . . . . . . . . . . . . Weekly
3. Spot clean . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Daily
4. Complete carpet cleaning (dry clean method) . . . . . . . . . . . Annually
Windows:
1. Interior glass office doors . . . . . . . . . . . . . . . . . . . . .Daily
2. Interior glass partitions . . . . . . . . . . . . . . . . . . . . . Weekly
3. Lobby side windows. . . . . . . . . . . . . . . . . . . . . . . . .Monthly
4. Exterior entry doors . . . . . . . . . . . . . . . . . . . . . . . .Daily
</TABLE>
Special services
1. Secure building, lights, alarms and doors . . . . . . . . . . . . . .Daily
2. Janitors are to report all uncommon events (i.e. leaky faucets, non-closing
doors, etc.).
3. MSDS sheets can be provided for all chemicals kept on sight.
Owner liaison
1. Monthly meetings and or reports reviewing quality and performance.
2. Meetings upon request regarding problems and/or levels of service.
Miscellaneous
1. All paper and cleaning Supplies will be provided and included in monthly
pricing.
<PAGE>
MISCELLANEOUS MAINTENANCE
Miscellaneous maintenance repairs will be covered in this contract under the
following conditions:
1. PLUMBING REPAIRS
a. All interior plumbing repairs are included in this contract. They will be
responded to as emergencies 24 hours a day 7 days a week.
b. The main water lines that service the building are not included in this
contract.
c. This only includes repairing and replacing the plumbing parts to their
original state. This contract does not include repairing the damage that might
have been caused to the building structure or the furnishings therein.
2. ELECTRICAL REPAIRS
a. All interior electrical repairs will be included in this contract. The only
exclusions are vandalism, fixture replacement, and modifications.
b. This only includes repairing and replacing the electrical parts to their
original state. This contract does not include repairing the damage that might
have been caused due to the building structure or the furnishings therein.
3. MISCELLANEOUS REPAIRS
a. Miscellaneous repairs will be Santa Clara Valley Corporation's
responsibility. These repairs might include repairing or adjusting doors,
repairing partitions, replacing molding, replacing damaged ceiling tiles,
repairing bathroom problems, etc.
b. The repairs that are covered under this contract are only genuine
maintenance repairs, not tenant improvements.
c. SCVC is willing to provide additional maintenance services at RealNames
cost. SCVC will invoice RealNames directly.
Any damages caused by Santa Clara Valley Corporation's negligence will be
repaired at our expense.
<PAGE>
EXTERIOR INTERIOR LIGHT MAINTENANCE
EXTERIOR
Exterior light maintenance will be performed on a monthly basis. During this
inspection replacement of all bulbs, tubes and ballasts will be performed as
needed. Alternating months we will be monitoring the timers on the lights at
sunrise and sunset to make sure they turn on and off at the proper times in
order to not waste energy. Vandalism, fixture replacement and modifications are
the only light maintenance expenses that are not included in this contract.
INTERIOR
Interior light maintenance will be performed on a weekly basis. This will
include a complete inspection of the interior of the complex. During the
inspection, replacement of all bulbs, tubes and ballasts will be performed as
needed. Vandalism, fixture replacement and modifications are the only items that
are not included in this contract.
<PAGE>
Exhibit 10.8
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
LICENSE & MARKETING AGREEMENT
This LICENSE & MARKETING AGREEMENT (the "Agreement") is entered into and
effective as of June 2, 1999 (the "Effective Date") by and between MICROSOFT
CORPORATION, a Washington corporation located at One Microsoft Way, Redmond,
Washington 98052 and CENTRAAL CORPORATION, a Delaware corporation located at
Two Circle Star Way, San Carlos, California 94070, each a "Party" and
collectively, the "Parties".
RECITALS
WHEREAS, Centraal (i) is the developer and operator of an Internet
service known as the "REALNAMES SERVICE" (defined below), (ii) maintains
associated databases of such relationships which include, without limitation,
directories of the registered words and phrases (each a "REALNAME"), if
appropriate, the URL of the unique Web page associated with each RealName and
related content and/or commentary. Each and every RealName is assigned to the
unique registered user either (i) with a subscription paid by the registrant
to Centraal, whether such subscription is paid as a fixed annual subscription
fee, as a "per resolution" royalty, or as any other form of payment (such a
RealName being referred to herein as a "SUBSCRIBED REALNAME") or (ii) under
certain circumstances, without any compensation paid to Centraal. The
RealNames Service also includes RealNames Extensions (as defined below).
WHEREAS, Microsoft desires to obtain from Centraal the below specified
grant of certain license rights to the Namespace (as defined below) database
solely as necessary to provide the RealNames Service on the Authorized
Microsoft Products (as defined below), as it is updated and enhanced
throughout the term of this Agreement, and Centraal is willing to grant such
rights to Microsoft, on the terms and conditions set forth herein.
NOW THEREFORE, the Parties agree as follows:
AGREEMENT
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings:
1.1 "AFFILIATES" means, with respect to a party, a person or entity
(i) which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such party, or (ii)
which beneficially owns or holds 20% or more of any class of the voting stock
of such party or (iii) 20% or more of the voting stock (or in the case of a
person or entity which is not a corporation, 20% or more of the equity
interest) of which is beneficially owned or held by such party. The term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person or
entity, whether through the ownership of voting securities, by contract or
otherwise.
1.2 "AUTHORIZED MICROSOFT PRODUCTS" shall mean MSN Search and the
AutoSearch feature of Microsoft Internet Explorer, as they may exist and/or
evolve from time to time throughout the Term, and such other Microsoft owned
or controlled online properties as the Parties may hereafter agree upon in
writing. For the purposes hereof, "MSN Search" and "AutoSearch" shall mean the
Web-based search engines currently available at http://search.msn.com and
http://auto.search.msn.com, respectively, wherever and however such search
engines may be accessed in whole or in part (including without limitation
through Web sites other than those specifically referenced in this sentence).
1.3 "COMMAND LINE" shall mean the address line of Microsoft's
Internet Explorer v5 (and all future versions thereof) ("IE5"), where a user
may currently enter a unique URL and via AutoSearch be directed directly to
the World Wide Web site associated with such unique URL.
1.4 "DOCUMENTATION" shall mean the materials listed in EXHIBIT A
hereto and any updates thereto provided by Centraal.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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1.5 "MICROSOFT" shall mean Microsoft Corporation and any and all
Affiliates of Microsoft.
1.6 "NAMESPACE" shall collectively refer to any and all RealNames
and certain information associated with each of the RealNames such as whether
the RealNames are subscribed or not, the description of the Web Site or Web
page associated with the RealNames, the prefix and rules associated with
RealNames Extensions (if applicable). Without limiting the generality of the
foregoing, the following fields will be included in the Namespace: (1)
Subscribed RealNames sold under various pricing models; (2) other
unsubscribed RealNames incorporated into the database through editorial work
designed to offer a comprehensive Namespace to users; (3) a description of
the Web site or Web page associated with each subscribed and unsubscribed
RealName; (4) the prefix and rules associated with RealNames Extensions; (5)
the MSN ID; (6) subscription status; (7) type of subscription (e.g., free,
flat fee or price-per-resolution ("PPR")); and (8) language.
1.7 "REALNAMES EXTENSION" shall mean a Centraal approved RealName
prefix followed by a rules-based dynamic syntax query to be applied at the
host (subscriber) Web site. The Centraal resolvers will recognize the format
of a RealNames Extension from a user's query, transform the RealNames
Extension into an appropriate query for the host Web site for the RealName
Extension subscriber, and, following such host Web site query, redirect the
World Wide Web user directly to the third party URL appropriate to such
RealNames Extension. By way of example "SEC [Ticker]" would be a RealNames
Extension with SEC serving as the RealName prefix and [Ticker] serving as the
dynamic syntax query that would be processed by the server located at the URL
associated with the SEC RealName. RealNames Extensions may either be with or
without compensation to Centraal. Fees, if charged, may be on a PPR basis (a
"PPR-based RealNames Extension"), on an annual subscription fee basis, or by
another method.
1.8 "REALNAMES RESULT" shall mean the appearance of a particular
RealName as a result of a search query on an Authorized Microsoft Product (or
Command Line query on IE5). A RealNames Result will be a precise match to the
search or Command Line query (a "PRECISE MATCH") or, in the event that there
is no Precise Match, a match or matches which are close to such search or
Command Line query (a "CLOSE MATCH").
1.9 "REALNAMES SERVICE" means Centraal's proprietary Internet
addressing and search service whereby Centraal (i) assigns a particular word
or phrase, in any language, to a unique Web page to assist in and allow Web
navigation to such page using such word or phrase, and (ii) reviews,
approves, and includes such approved word or phrase in the name of the owner
of such Web site in the Namespace, and (iii) resolves a RealName such that an
Internet user's browser is directed to the unique Web page associated with
such RealName.
1.10 "RESOLUTION" shall mean the process by which a search query or
Command Line query that generates a RealNames Result may be used by a user of
an Authorized Microsoft Product to direct such user to the URL associated
with the RealName. A Resolution also occurs when a user inputs a Precise
Match Command Line query and the user is directed to the URL associated with
such RealName. The mere display of a RealNames Result shall not constitute a
Resolution unless the user is directed to the URL associated with the RealName.
1.11 "TERM" shall mean the term of this Agreement, which shall
commence on the Effective Date and continue thereafter for two years, subject
to earlier termination pursuant to Section 11. Following the initial Term,
this Agreement may be renewed for successive one year Terms upon the written
consent of both Parties at least 90 days prior to the end of the then-current
Term.
1.12 "URL" means a unique uniform resource locator address for a
World Wide Web Site, e.g., www.msn.com and www.msn.com/news and
www.carpoint.msn.com are each a URL.
All other capitalized terms shall have the meanings herein assigned to them
herein.
2. USE OF THE NAMESPACE AND SOFTWARE.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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2.1 DELIVERY. On the first business day after the Effective Date,
Centraal agrees to deliver to Microsoft (i) one (1) copy of the Namespace,
current as of the Effective Date, in the manner set forth in EXHIBIT A (which
is attached hereto and incorporated herein by this reference) (ii) one copy
of the software described on EXHIBIT A ("SOFTWARE") in object code form; and
(iii) one copy of the Documentation. Each day thereafter, throughout the term
of this Agreement, Centraal will deliver to Microsoft a version of the
Namespace current through the immediately preceding day, in the manner set
forth in EXHIBIT A. Notwithstanding anything to the contrary contained in
this Agreement, Centraal will use reasonable commercial efforts to provide to
Microsoft the Namespace such that it will be possible for Microsoft to
compare search queries and command queries against the then-current Namespace
so as to redirect such queries to Centraal's resolvers.
2.2 DISPLAY OF REALNAMES RESULTS IN SEARCH RESULTS. Microsoft, at
its own expense (except for Centraal's reasonable technical assistance which
shall be provided at Centraal's reasonable expense) may, but is not obligated
to, integrate the RealNames Service with the Authorized Microsoft Products,
such that the Authorized Microsoft Products will access and use the Namespace
to provide and display RealNames Results, in connection with end user
searches and Command Line queries undertaken through the Authorized Microsoft
Products as follows: (a) the Authorized Microsoft Products may include an
input mechanism to prompt the user for a key word or search term; (b)
Microsoft may, but is not obligated to, cause the Authorized Microsoft
Products to determine which key words are appropriate for RealNames
Resolutions based upon the Namespace provided to Microsoft hereunder; (c) to
the extent that Microsoft integrates the RealNames Services, Microsoft shall
cause its computer servers processing such determination to communicate such
key words to the computer servers of Centraal, at an address and according to
specifications reasonably required by Centraal; (d) Centraal, upon receipt of
such key word, will cause its computer servers to perform RealNames
Resolutions, and will communicate to the applicable Authorized Microsoft
Product a list of the RealNames Results that correspond with such key word or
search term and corresponding URLs. Nothing contained in this Agreement will
be deemed to obligate Microsoft to display or use any RealName or the
RealNames Service or to process or present a search string in any particular
manner, except that Microsoft agrees, that if it causes any RealName to be
displayed in any search result using the RealNames Service, then such
RealName will appear with an "RN" superscript. The Parties agree to use good
faith efforts to provide for the reporting of tracking of impressions of
RealNames on the Authorized Microsoft Products, and the provision of such
data to Centraal under mutually acceptable terms. Subject to Section 7, to
the degree that Microsoft elects to integrate the RealNames Service with the
Authorized Microsoft Products, Microsoft will endeavor to implement the
RealNames Service on MSN Search by September 1, 1999 and on AutoSearch by
August 1, 1999.
2.3 PROVISION OF REALNAMES RESOLUTIONS. In the event a user of an
Authorized Microsoft Product clicks on a RealNames Result, as displayed in
Section 2.2 above, or if such user has entered a query that is a Precise
Match on the Command Line and is to be sent to the unique URL associated with
the applicable RealName, Microsoft will direct a query which includes the
RealName associated with such RealNames Result to Centraal's resolvers in a
manner more fully described in EXHIBIT B (or as otherwise agreed in writing
by the parties), and the user of the Authorized Microsoft Product will be
directed to the unique URL associated with such RealName.
2.4 LICENSE. In furtherance of the foregoing, and subject to the
limitations expressly set forth herein, Centraal grants to Microsoft and its
Affiliates (i) a non-exclusive, non transferable license (without the right
to sub-license except as provided below) to access, display and transmit
portions of the Namespace data (as updated periodically as set forth
herein), solely as necessary to provide the RealNames Service on the
Authorized Microsoft Products in accordance with this Agreement; (ii) a
non-exclusive, non-transferable license (without the right to sub-license
except as provided below) to use, display or perform the Software, in object
code or binary code form only, only as part of providing the RealNames
Service on the Authorized Microsoft Products; (iii) a non-exclusive,
non-transferable license (without the right to sub-license except as provided
below) to use the Software solely to provide technical support for the
RealNames Service on the Authorized Microsoft Products; (iv) a non-exclusive,
non-transferable license (without the right to sub-license except as provided
below) to use and reproduce the Software, in object code or binary code form
only, solely for Microsoft's own internal business purposes in providing the
RealNames Service on the Authorized Microsoft Products and solely as
necessary to exercise the rights granted in this Section 2; (v) a
non-exclusive, non-transferable license (without the right to sub-license
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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except as provided below) to use and reproduce the
Documentation, solely for Microsoft's own internal business purposes in
providing the RealNames Service on the Authorized Microsoft Products and
solely as necessary to exercise the rights granted in this Section 2; and
(vi) a non-exclusive, non-transferable license (without the right to
sub-license except as provided below) to use, reproduce, transmit, and
distribute those portions of the Documentation applicable to the promotion
and marketing of RealNames and the RealNames Service, solely in connection
with Microsoft's promotion and marketing activities contemplated hereunder.
Microsoft may sublicense the foregoing rights in connection with the
distribution of the MSN portal or other services, products, or technologies
that incorporate the Authorized Microsoft Products provided (i) any
sublicenses shall be under terms and restrictions at least as protective of
Centraal's interests as those set forth herein and (ii) Microsoft shall not
be entitled to sublicense its rights to use Namespace database.
2.5 OWNERSHIP IN CENTRAAL MATERIALS. As between Centraal and
Microsoft, Centraal will retain all right, title, and interest in the
Namespace, the Software, the Documentation, other Confidential Information
(as defined in Section 9 below) disclosed by Centraal (collectively,
"CENTRAAL MATERIALS") and all intellectual property rights therein. Microsoft
will not, and will not authorize any third party to translate, disable,
decompile, disassemble, reverse compile, reverse engineer, or decode the
Software or in any other manner reduce the Software to human perceivable
form, except and only to the extent that such activity is expressly permitted
by applicable law notwithstanding this limitation. Microsoft will not, and
will not authorize any third party to (i) create derivative works of, or
alter or ha any way modify the Centraal Materials without the prior written
consent of Centraal, or (ii) use any proprietary Centraal Materials or other
proprietary Namespace data to construct, reverse engineer or assemble any
database or Internet addressing tool, including without limitation, a URL
database, except and only to the extent that such activity is expressly
permitted by applicable law notwithstanding this limitation. Microsoft shall
not export the Namespace outside of the United States without Centraal's
prior written permission, which permission shall not unreasonably be withheld
or delayed, provided that the foregoing shall not be deemed to restrict or
prohibit the ability of Microsoft to allow end users outside the United
States to access or use the Namespace or the RealNames Service via Authorized
Microsoft products. Centraal hereby reserves all rights not expressly granted
to Microsoft in this Agreement. On each copy of the Centraal Materials
reproduced or displayed, Microsoft shall reproduce all copyright or other
proprietary notices contained on Centraal Materials. Microsoft will not
remove, modify, or obscure any copyright or other proprietary notices on the
Centraal Materials.
2.6 MICROSOFT REALNAMES RESOLVED VIA AUTHORIZED MICROSOFT PRODUCTS.
Notwithstanding anything to the contrary contained in this Agreement or any
other agreement between Microsoft and Centraal, during the term of this
Agreement, Microsoft shall not be obligated to pay Centraal any compensation
whatsoever (including without limitation PPR subscription royalties) in
connection with any Resolution of any RealName subscribed by Microsoft, if
such Resolution is generated through a search request submitted through an
Authorized Microsoft Product.
3. MAINTENANCE AND GROWTH OF NAMESPACE. Centraal agrees to use all
commercially reasonable efforts to expand, distribute, and manage and
maintain the Namespace and the RealNames Service. Without limiting the
generality of the foregoing, Centraal will use its commercially reasonable
efforts to: (a) market and distribute the RealNames Service internationally
through a wide variety of sales channels; (b) administer all RealNames
subscriptions (and disputes relating thereto), and assign all RealNames in
compliance with all applicable laws; (c) extend its intellectual property
databases from other database sources (for example, Thomson & Thomson), as
appropriate; (d) maintain at the state-of-the-art level its software and
database tools; (e) expand its language services to localize adjudication
processes; and (f) expand its resolution-based revenue model with major
marketer accounts.
4. TECHNICAL SUPPORT. Throughout the term of this Agreement, Centraal
shall provide, at its expense, reasonable technical and other assistance as
requested by Microsoft to assist Microsoft to use the Namespace in accordance
with this Agreement. Such assistance shall include without limitation a
"walkthrough" of the data schema of the Namespace at Centraal's offices
within thirty (30) clays after the Effective Date. Without limiting the
generality of the foregoing, Centraal will provide reasonable advance warning
of material changes to the Namespace schema and such reasonable technical
support and other
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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reasonable assistance necessary to understand those changes such that
Microsoft can continue to receive and use the Namespace throughout the term
of this Agreement and in accordance with the terms and conditions of this
Agreement. Throughout the term of this Agreement Centraal shall respond to
and use commercially reasonable efforts to promptly correct any material
errors in the Centraal Materials.
5. CROSS-MARKETING AND PROMOTION OBLIGATIONS.
5.1 PROMOTION OF THE REALNAMES SERVICE BY MICROSOFT. Throughout
the term of this Agreement, Microsoft will include, or cause to be included,
promotional links to Centraal's Web site for the RealNames Service (presently
located at www.realnames.com) (the "RealNames Site") in various online and
offline Microsoft products (including, by way of example only, MSN and
channels therein (such as the Small Business Channel), Sidewalk, Hotmail and
LinkExchange) in a manner that Microsoft may determine in its sole
discretion. Notwithstanding the above, at a minimum, Microsoft will cause
LinkExchange to promote the RealNames Service as follows:
5.1.1 Pursuant to the terms and conditions of Section 5.2 below,
LinkExchange will include RealNames subscriptions in its Registration
services so that LinkExchange customers looking up, reserving and/or
registering and purchasing domain names will also have the opportunity
to purchase RealNames subscriptions. Specifically, LinkExchange will
promote the registration services with (a) persistent text links on the
LinkExchange front page and all LinkExchange product account control
pages, (b) LinkExchange site and network banner advertising totaling at
least [*] impressions/month, (c) inserts in e-mail to LinkExchange
customers totaling at least [*] million impressions/month. At least [*]
of all LinkExchange registration services promotion will include
promotional reference to the RealNames Service;
5.1.2 LinkExchange will include text links to RealNames
subscriptions from the LinkExchange Premium product promotional, sign-up
and purchase pages and/or confirmations;
5.1.3 LinkExchange will include a promotional reference to the
RealNames Service in promotional email communications LinkExchange sends
to substantial portions of its subscriber base once every six months,
and in "welcome" email messages it sends to new owners of its Catapult
product who are not subscribers to the RealNames Service;
5.1.4 LinkExchange will participate in an introductory trial
promotion involving 60 free days of a subscription to the RealNames
Service (subject to its approval of the details of such promotion, and
subject to the participation of other third parties in such promotional
offer); and
5.1.5 Notwithstanding anything contained in this Section 5.1 to
the contrary, in no event shall LinkExchange be obligated to include any
promotion of the RealNames Service in any Web sites having start pages
co-branded with any third party, or in any LinkExchange products or
services licensed to or distributed by third parties.
Centraal will be solely responsible for creating any and all promotional
materials used by Microsoft pursuant to this Section 5.1, provided that all
aspects (including but not limited to the form, content and technical format
thereof) of any and all such materials displayed or distributed by Microsoft
shall be subject to Microsoft's prior approval, which shall not be unreasonably
withheld.
5.2 REALNAMES SUBSCRIPTIONS. Attached as EXHIBIT C hereto is a copy
of Centraal's current Subscription Agreement and registration subscription
form. Centraal may alter, at will, and from time to time, the Subscription
Agreement, prices, availability schedules, and other terms and conditions for
the subscription and maintenance of RealNames upon written notice to
Microsoft. Each order for the subscription of a RealName will be subject to
and governed by the prices, Subscription Agreement, availability, schedules,
and other terms and conditions in effect at the time the order is accepted by
Centraal. Orders for RealNames subscriptions referred by Microsoft may take
place through a co-branded HTML registration page(s) on a Microsoft World
Wide Web site that is linked to Centraal's subscription service World Wide
Web site via an XML application programming interface (API). All completed
orders for RealNames subscriptions will be processed by Centraal or its
designee, and Centraal or its designee will perform the subscription
registration, collect the fees for the subscription, and send via electronic
mail
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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Centraal's then-current acknowledgements, or other materials, to the
RealNames subscriber. All orders solicited through such Web site are subject
to acceptance by Centraal. Microsoft will have no authority to make any
acceptance or commitments to customers on behalf of Centraal. Centraal
specifically reserves the right to reject any order or any part thereof for
any reason.
5.3 PROMOTION OF PPR REALNAMES AND PPR-BASED REALNAMES EXTENSION
RESOLUTIONS BY MICROSOFT PERSONNEL.
5.3.1 PROMOTION. Microsoft may, but is not obligated to,
directly promote the sales of PPR RealNames and PPR-based RealNames Extension
Resolutions and may refer sales leads for the same to Centraal. To assist
Microsoft's promotional efforts, Centraal will supply Microsoft with its
standard sales materials in connection with Microsoft's sales efforts
pursuant to this Section 5.3, and Centraal will use reasonable efforts to
complete agreements with Microsoft Referrals subject to Centraal's standard
sales terms and conditions. "MICROSOFT REFERRALS" means those persons or
entities (i) actually contacted by Microsoft for the purpose of soliciting
RealNames subscriptions, (ii) which do not appear on the PPR List (as defined
below), (iii) which are not currently (i.e., as of the date that Microsoft
provides the Microsoft Referral to Centraal) being processed by Centraal or
its designee for RealNames subscriptions or otherwise have a RealName
existing in the Namespace, and (iv) which subsequently sign a Centraal
agreement providing for PPR RealNames or PPR-based RealNames Extension
Resolutions. In the event of a dispute between the parties as to whether a
customer qualifies as a Microsoft Referral the parties shall meet and make
good faith efforts to determine whether such entity qualifies as a Microsoft
Referral. An entity shall be considered a Microsoft Referral with respect to
any additional RealNames acquired by such customer within ninety (90) days
after the actual referral date.
5.3.2 RESTRICTIONS. Each order for the subscription of a
RealNames referred by Microsoft shall be subject to and governed by the
Centraal's then current Subscription Agreement, availability, schedules, and
other terms and conditions in effect at the time the order is accepted by
Centraal. In no event will Microsoft make any representations, guarantees or
warranties concerning the RealNames Service except as expressly authorized by
Centraal in writing. Centraal reserves the right to directly or indirectly
solicit the subscription of RealNames and RealNames Service. In the event
that Centraal provides a list of its PPR, its PPR RealNames and/or PPR based
RealNames Extension Subscribers (the "PPR LIST"), Microsoft shall not use the
PPR List or any information reflected therein for any purpose other than in
furtherance of the activities contemplated in this Section 5.3. The PPR List
shall be deemed the Confidential Information of Centraal pursuant to Section
9 of this Agreement, and in no event shall Microsoft provide the PPR List to
a third party without Centraal's prior written approval
5.4 PROMOTION OF LINKEXCHANGE BY CENTRAAL. Centraal Will promote
LinkExchange's Catapult and Banner Network products as follows:
5.4.1 Centraal will include Link Exchange logo links (subject to
Microsoft's then-current standard link logo policies for such logos) and
promotional text links to one or more LinkExchange Web page(s) (as
designated by LinkExchange) above the fold on the following Web pages of
its RealNames Site: "promotion", "description", "purchase" and "account
control";
5.4.2 Centraal will include a Link Exchange logo link (subject to
Microsoft's then-current standard link logo policies for such logos) to a
Web page designated by LinkExchange above the fold on the default start
page of the RealNames Site; and
5.4.3 Centraal will include a promotional reference to
LinkExchange in Centraal's broadcast email service at least once every
six months, and in "welcome" email messages it sends to new owners of a
RealName who it reasonably believes are not LinkExchange customers.
LinkExchange will be solely responsible for creating any and all promotional
materials used by Centraal pursuant to this Section 5.4, and for supplying to
Centraal the LinkExchange logo to be used as the logo links referred to in
subsections 5.4.1 and 5.4.2, provided that all aspects (including but not
limited to the form, content and technical format thereof) of any and all such
materials displayed or distributed by Centraal shall be subject to Centraal's
prior approval, which shall not be unreasonably withheld.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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5.5 PROMOTION OF PASSPORT. Centraal agrees to test, evaluate, and
use, take sign ups for and accept the IDs for Microsoft's proprietary
authentication service ("Passport") on the Centraal web site, and all of
Centraal's existing profiling and authentication mechanisms will also take
sign ups for and accept the IDs for Passport. Centraal shall use Passport in
accordance with the terms of the standard Microsoft Online ID Evaluation
Program Agreement and such further standard terms and conditions that are
offered in addition to or as a replacement for those currently contained in
such agreement.
5.6 BANNER EXCHANGE NETWORK. Centraal shall become and remain a
member of LinkExchange's Banner Exchange Network throughout the term of this
Agreement, in accordance with the standard membership terms and conditions of
the Banner Exchange Network as described at WWW.LINKEXCHANGE.COM. Throughout
the term of this Agreement, Centraal will not participate in any other
program which would reasonably be considered to be similar to or competitive
with LinkExchange's Banner Exchange Network program.
5.7 CLICKTRADE AFFILIATE. Centraal shall become and remain a member
of LinkExchange's ClickTrade Affiliate program throughout the term of this
Agreement, in accordance with the standard membership terms and conditions of
the ClickTrade Affiliate program as described at www.linkexchange.com.
6. REVENUE SHARING.
6.1 REVENUE SHARING ON MICROSOFT SUBSCRIPTIONS
6.1.1 During the term of this Agreement, Centraal will pay to
Microsoft a sliding scale commission, ("COMMISSION") for each paid
subscription for a RealName generated through the co-branded registration
page(s) described in Section 5.2 above ("MICROSOFT SUBSCRIPTION"). The
Commission for Microsoft Subscriptions shall be calculated as follows: [*] in
the case of a first time Microsoft Subscription, by multiplying the initial
Annual Net Subscription Fee (defined below) by the applicable percentage
described in Section 6.1.3 [*]
6.1.3 COMMISSION RATES
(a) During the first year of this Agreement, (i) in the
event there are between [*] and [*] initial Microsoft Subscriptions
paid in such first year, the Commission will be [*] of the Annual Net
Subscription Fee (ii) in the event there are between [*] and [*]
Microsoft Subscriptions paid in such first year, the Commission on those
sales will increase for such Microsoft Subscriptions during such year to
[*] of the Annual Net Subscription Fee (iii) in the event there are more
than [*] Microsoft Subscriptions paid in such first year, the
Commission will increase for such Microsoft Subscriptions during such
first year to [*] of the Annual Net Subscription Fee.
(b) During the second year (and any subsequent years)
of this Agreement, (i) in the event there are between [*] and [*]
initial Microsoft Subscriptions paid in such second or subsequent year,
as the case may be, the Commission will be [*] of the Annual Net
Subscription Fee (ii) in the event there are more between [*] and
[*] initial Microsoft Subscriptions paid in such second or
subsequent year, as the case may be, the Commission will increase for
such Microsoft Subscriptions during such second year to [*] of the
Annual Net Subscription Fee and (iii) in the event there are more than
[*] initial Microsoft Subscriptions paid in such second or
subsequent year, as the case may be, the Commission will increase for
such Microsoft Subscriptions during such second year to [*] of the
Annual Net Subscription Fee.
6.2 COMPENSATION FOR PPR REALNAMES AND PPR-BASED REALNAMES EXTENSIONS
RESOLUTIONS.
6.2.1 During the term of this Agreement, for Resolutions
generated by RealNames (other than RealNames Extensions) on the Authorized
Microsoft Products, Centraal will pay to Microsoft a
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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commission which equals [*] of Net RealNames Resolution Fees and [*] of Net
Additional Resolution Fees.
6.2.2 During the term of this Agreement, for Resolutions
generated by PPR-based RealNames Extensions only, Centraal will pay to
Microsoft a commission which equals [*] of Net RealNames Resolution Fees and
[*] of Net Additional Resolution Fees.
6.2.3 "Net RealNames Resolution Fees" shall mean gross
RealNames resolution fees actually generated from the Authorized Microsoft
Products (but specifically excludes resolution fees generated from Microsoft
Referrals pursuant to Section 5.3 above), less any payments actually paid or
payable to third parties who provide services for the RealNames Service
(including without limitation payments to Network Solutions, Inc.), taxes,
discounts, allowances and adjustments, refunds, and bad debts. Centraal may
set such discounts, or make such allowances and adjustments, or provide
refunds to its customers, in a commercially reasonable manner.
6.2.4 "Net Additional Resolution Fees" shall mean gross
RealNames resolution fees, if any, actually generated from the Authorized
Microsoft Products due to Microsoft Referrals pursuant to Section 5.3 (over
and above Net RealNames Resolution Fees), less any payments actually paid or
payable to third parties who provide services for the RealNames Service
(including without limitation payments to Network Solutions, Inc.), taxes,
discounts, allowances and adjustments, refunds, and bad debts. Centraal may
set such discounts, or make such allowances and adjustments, or provide
refunds to its customers, in a commercially reasonable manner.
6.2.5 Microsoft acknowledges and understands that in certain
instances Centraal establishes negotiated caps under its PPR RealNames and
PPR-based RealNames Extension subscriptions, pursuant to which Centraal
derives no additional revenue for the balance of the subscription term after
resolutions for the applicable RealName or RealNames Extension reach the
applicable cap. Any Net Additional Resolution Fees shall not be considered
in determining whether a subscriber has reached a Centraal-negotiated, PPR
based cap.
6.3 Accountings. Centraal shall develop, implement and maintain
the technology required to track Resolutions. Within fifteen (15) days
following the end of each month beginning with the Effective Date, Centraal
will deliver to Microsoft a complete and accurate written report covering
such month, including, the amount payable to Microsoft and sufficient detail
to reasonably calculate the basis for such payment. Concurrently with the
submission of each such written report by Centraal, Centraal shall pay to
Microsoft all amounts then owed to Microsoft pursuant to Sections 6.1 and 6.2.
Each party shall raise any questions or issues regarding the accuracy of such
report (and payments in accordance therewith) within two years following the
submission of such reports or payments. Failure to raise any question or
issue within such two year period, shall be deemed acceptance of such report
and payment.
6.4 Audits. During the period in which Centraal is required to
account to Microsoft pursuant to Section 6.3, and for one year thereafter,
Central agrees to keep all usual and proper entries relating to the
calculation of amounts owed to Microsoft by Centraal hereunder. During the
above-referenced period, Microsoft shall have the right to cause an audit
and/or inspection to be made of the applicable records of Centraal in order
to verify statements issued by Centraal (an "Audit"). Any such Audit shall
be conducted by an independent certified public accountant (other than on a
contingent fee basis) mutually acceptable to the parties (the "Auditor").
Except as specified herein, Microsoft shall be responsible for all costs and
attorney fees related to such Audits. Centraal agrees to provide the Auditor
reasonable access to the relevant records upon reasonable notice and during
regular business hours. Such Audits shall be made no more often than once
every twelve (12) months. If an audit reveals that reports provided by
Centraal are inaccurate in the amount of by ten percent (10%) or more then
the reasonable cost of such Audit shall be paid by Centraal. In the event
that the Audit establishes that Centraal owes additional amounts to
Microsoft, then Centraal shall promptly pay such amounts to Microsoft. In
the event that the Audit establishes that Centraal has overcompensated
Microsoft, then Centraal shall have the right to withhold such amounts from
future payments to Microsoft. The results of such Audits shall be deemed to
be Confidential Information under Section 9.
7. INDEPENDENT DEVELOPMENT
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 8 OF 254
<PAGE>
7.1 Nothing in this Agreement will be construed as restricting
Microsoft's ability to acquire, license, develop, manufacture, or distribute
for itself, or have others acquire, license, develop, manufacture, or
distribute for Microsoft similar technology, information or data performing
or having the same or similar functions, features or information, as the
RealNames Service and Namespace in addition to, or in lieu of, the RealNames
Service and Namespace, provided, however, that the foregoing shall not be
deemed to constitute a license or authorization from Centraal for Microsoft
to use or have others use any of the Centraal Materials, Namespace, or
RealNames Service (exclusive of residuals relating to any of the foregoing,
as the term residuals is used in the nondisclosure agreement referenced in
Section 9 below) in connection with such independent licensing, development,
manufacture or distribution under this Section 7.
7.2 Subject to any restrictions of confidentiality with third
parties, Microsoft shall endeavor to provide Centraal with at least thirty
days' notice prior to Microsoft's public distribution or availability of a
service that provides substantially the same functions, features or
information, as the RealNames Service and Namespace ("COMPETING SERVICE") and
such notice shall include the then-current anticipated date of such public
distribution or availability of the Competing Service. Upon the commercial
public distribution or availability of the Competing Service but only for a
period of ten (10) days thereafter, Centraal shall have the right to
terminate this Agreement upon ten (10) days notice to Microsoft.
8. REPRESENTATIONS. WARRANTIES AND INDEMNITY.
8.1 REPRESENTATIONS AND WARRANTIES. Centraal warrants and
represents as of the Effective Date of this Agreement, that:
8.1.1 It has sufficient authority to enter into this
Agreement;
8.1.2 the Centraal Materials, RealNames Results, and any
other materials supplied hereunder by Centraal to Microsoft and/or end users
of the Microsoft Authorized Products do not infringe the copyrights, patents,
trademarks, service marks or any other proprietary right of any third party;
8.1.3 the functionality of the RealNames Services and the
Namespace, the methods used to collect data for and from the RealNames
Service and the Namespace, and the structure, sequence and organization of
the RealNames Service and the Namespace do not infringe the copyrights,
trademarks, patents, service marks, or other proprietary rights of any third
party;
8.1.4 the Centraal Materials and the RealNames Results do
not contain any libelous, materially false, or materially misleading
statements;
8.1.5 the Centraal Materials and the RealNames Service are
in compliance with all applicable laws;
8.1.6 As of the Effective Date Centraal is not aware of any
third party claims concerning the Centraal Materials, RealNames Results, or
RealNames Service which if true, would constitute of violation of the
representations and warranties set forth in subsections 8.1.1 through 8.1.5
above; and
8.1.7 the Centraal Logos (as defined in Section 12 below)
do not infringe or otherwise violate the rights of any third party.
EXCEPT AS SET FORTH IN THIS SECTION 8.1, CENTRAAL MAKES NO ADDITIONAL
WARRANTIES REGARDING THE CENTRAAL MATERIALS OR THE REALNAMES SERVICE, AND
CENTRAAL SPECIFICALLY DISCLAIMS ANY AND ALL WARRANTIES OTHER THAN THOSE SET
FORTH IN SECTION 8.1, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
8.2. INDEMNITY.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 9 OF 254
<PAGE>
8.2.1 INDEMNITY BY CENTRAAL. Centraal will defend, hold
harmless and indemnify Microsoft from and against any loss, claim, liability,
damage, action or cause of action (including, without limitation, reasonable
attorneys' fees) brought against Microsoft by a third party and arising from
or related to any breach by Centraal of any of the warranties set forth in
Section 8.1 above, and any third-party claim which if proven would constitute
such a breach of Section 8.1, provided that Microsoft provides Centraal with:
(i) prompt written notice of such claim, (ii) exclusive control over the
defense and settlement of such claim with counsel acceptable to Microsoft
which acceptance shall not unreasonably be withheld or delayed, and (iii)
proper and full information and assistance to settle or defend any such claim
with counsel acceptable to Microsoft provided that Centraal shall not settle
any claim without Microsoft's prior written approval which approval shall not
be unreasonably withheld or delayed. Microsoft may also engage its own
counsel, at its sole cost and expense, in connection with such claim.
Centraal shall not be responsible for any settlements by Microsoft without
Centraal's prior written approval which approval shall not be unreasonably
withheld or delayed. Notwithstanding the above, Centraal assumes no liability
for infringement claims arising from (i) combination of the RealNames Service
with products or services not provided by Centraal, and not arising from the
RealNames Service standing alone or (ii) using the Centraal Materials in a
manner apart from the implementation or marketing of the RealNames Service as
contemplated herein.
8.2.2 INJUNCTIONS. If Centraal reasonably believes that it is
likely that Microsoft will be enjoined from exercising its right to use the
RealNames Service, Centraal Materials, or Centraal Logos as provided under
this Agreement, then Centraal may, at its sole option and expense: (i)
procure the right to use the RealNames Service, Centraal Materials, or
Centraal Logos as provided under this Agreement, (ii) replace the RealNames
Service, Centraal Materials, or Centraal Logos (subject to Microsoft's
prior-review and approval with such approval not to be unreasonably withheld
or delayed) with other non-infringing services with equivalent functionality
or logos, (iii) suitably modify the RealNames Service, Centraal Materials, or
Centraal Logos so that it does not infringe, or (iv) terminate this Agreement
upon reasonable notice to Microsoft. Centraal shall have no obligation to
indemnify Microsoft for liability incurred by Microsoft for use of the
RealNames Service, Centraal Materials, or Centraal Logos after a reasonable
period of time (at least ten (10) days) following Centraal's notice of
termination pursuant to (iv) above.
8.2.3 THE FOREGOING PROVISIONS OF THIS SECTION 8.2 STATE THE
ENTIRE LIABILITY AND OBLIGATIONS OF CENTRAAL AND THE EXCLUSIVE REMEDY OF
MICROSOFT, WITH RESPECT TO ANY ACTUAL OR ALLEGED INFRINGEMENT OF ANY
INTELLECTUAL PROPERTY RIGHTS RELATING TO THE REALNAMES SERVICES OF CENTRAAL
MATERIALS.
9. CONFIDENTIALITY.
9.1 Microsoft and Centraal acknowledge and agree that the terms and
conditions of the Microsoft Corporation Non-Disclosure Agreement dated as of
even date herewith ("NDA"), attached hereto as EXHIBIT E, are incorporated
into this Agreement and that all of the terms of this Agreement and all
discussions and negotiations related thereto are considered Confidential
Information as defined in the NDA. In the event that any of the incorporated
terms of the NDA are inconsistent with or conflict with this Agreement, then
the terms of this Agreement shall control. The terms and conditions of this
Agreement shall be deemed to be Confidential Information under the NDA. In
addition, the PPR list, the Namespace, and any source code provided by
Centraal hereunder shall be deemed to be Confidential Information of Centraal
provided that Microsoft's obligation to maintain the confidentiality of such
materials shall last until such materials (i) are or subsequently become
publicly available without Microsoft's breach of any obligation owed
Centraal; (ii) became known to Microsoft from a source other than Centraal
other than by the breach of an obligation of confidentiality owed to
Centraal; or (iii) are independently developed by Microsoft.
10. LIMITATION OF LIABILITIES. NEITHER PARTY SHALL BE LIABLE FOR ANY
INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES, EVEN IF SUCH PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 10 OF 254
<PAGE>
11. TERMINATION.
11.1 TERMINATION FOR CAUSE. In addition to any other rights and/or
remedies that either Party may have under the circumstances, all of which are
expressly reserved, either Party may terminate this Agreement immediately
upon written notice at any time if:
11.1.1 The other Party is in material breach of any material
warranty, representation, term, condition or covenant of this Agreement,
other than those in Sections 9 or 13.4, and fails to cure that breach within
thirty (30) days after written notice thereof; or
11.1.2 The other Party is in material breach of Section 9 or is
entitled to terminate as provided in Section 13.4 or 13.8; or
11.1.3 Either Party becomes insolvent or makes any assignment
for the benefit of creditors or similar transfer evidencing insolvency; or
suffers or permits the commencement of any form of insolvency or receivership
proceeding; or has any petition under any bankruptcy law filed against it,
which petition is not dismissed within sixty (60) days of such filing; or has
a trustee or receiver appointed for its business or assets or any part
thereof.
11.2 TERMINATION AT WILL. Notwithstanding anything to the contrary
contained herein, either Party will have the right at any point during the
term of this Agreement, in such Party's sole and absolute discretion, to
terminate this Agreement upon ninety (90) days written notice to the other
Party.
11.3 EFFECT OF TERMINATION. In the event of termination or
expiration of this Agreement for any reason, each and every clause which by
its nature is intended to survive the termination of this Agreement,
including without limitation, Sections 1, 2.5, 6.1 (only with respect to
Microsoft Subscriptions sold during the Term), 6.2 (only with respect to
RealNames Resolutions generated during the Term), 6.3, 6.4, 7-10, 11.3, 11.4,
and 13, shall survive such termination or expiration. Neither Party shall be
liable to the other for damages of any sort resulting solely from terminating
this Agreement in accordance with its terms. Upon expiration or termination
of this Agreement, all of Microsoft's rights and licenses with respect to the
Centraal Materials will automatically and immediately terminate.
11.4 RETURN OF CENTRAAL MATERIALS. In the event of termination or
expiration of this Agreement, all information and materials provided or
delivered to Microsoft under this Agreement, including without limitation the
Centraal Materials, and all copies or portions of copies and any summaries
thereof, will be promptly returned to Centraal or, if requested by Centraal
in writing, destroyed. Within thirty (30) days after the termination of this
Agreement, Microsoft will certify in writing that all such materials have
been either returned to Centraal's or destroyed per Centraal's request.
12. USE OF CENTRAAL LOGOS.
12.1 BRANDING. Microsoft will apply the "RealNames (sm) enabled"
and/or "RealNames (sm)" logo (a copy of which is attached as EXHIBIT D-1) on
the co-branded page(s) created pursuant to Section 5.2, in a manner mutually
agreed upon by the parties.
12.2 USE OF CENTRAAL LOGOS.
12.2.1 Central hereby grants to Microsoft a non-exclusive,
non-transferable, personal license to use the Centraal logos attached hereto
as EXHIBIT D-1 (the "Centraal Logos") only in connection with (i) Microsoft's
implementation of the RealNames Services on Authorized Microsoft Products and
the co-branded page(s) referenced created pursuant to Section 5.2 above and
(ii) Microsoft's promotion of the RealNames Service. Except as provided in
this Section 12.2, this Agreement does not grant Microsoft any right, title,
interest, or license in or to any of Centraal Logos names, logos, trade
dress, designs, or other trademarks. Unless otherwise provided herein or
agreed upon by the parties, Microsoft's use shall be mutually approved in
advance.
12.2.2 Microsoft acknowledges, as between Microsoft and
Centraal only, Centraal's sole ownership of the Centraal Logos and worldwide
and all associated goodwill. Microsoft's use of the
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 11 OF 254
<PAGE>
Centraal Logos, as between the parties, shall inure solely to the benefit of
Centraal. Microsoft hereby assign and shall assign in the future to Centraal
all rights they may acquire during the term of this Agreement by operation of
law or otherwise in the Centraal Logos, including all applications or
registrations therefore, along with the goodwill associated therewith.
12.2.3 Microsoft, shall take commercially reasonable steps to
fully correct and remedy any deficiencies in its use of the Centraal Logos
and/or the quality of implementation of the RealNames Service on Authorized
Microsoft Products, upon reasonable notice from Centraal.
12.2.4 Centraal shall have the sole right to and in its sole
discretion may commence, prosecute or defend, and control any action
concerning the Centraal Logos. During the term of this Agreement, Microsoft
shall not contest the validity of, jeopardize, or take any action
inconsistent with, Centraal's rights or goodwill in the Centraal Logos in any
country, including attempted registration of the Centraal Logos or attempted
registration of any mark confusingly similar thereto.
12.2.5 Notwithstanding anything to the contrary, nothing in
this Section 12.2 requires Microsoft to use any of the CentraalLogos.
13. GENERAL
13.1 Notices. All notices and requests in connection with this
Agreement shall be deemed given as of the day they are received either by
messenger, delivery service, or IN the United States of America mails,
postage prepaid, certified or registered, return receipt requested, and
addressed as follows:
<TABLE>
<CAPTION>
TO MICROSOFT TO CENTRAAL:
------------ ------------
<S> <C>
Microsoft Corporation Centraal Corporation
One Microsoft Way Two Circle Star Way, 2nd Floor
Redmond, WA 98052-6399 San Carlos, CA 94070
Attention: Hyer Bercaw Attention: J. Michael Arrington, Esq.
Telephone: (425) 882-8080 Telephone: (650) 298-5570
Facsimile: (425) 936-7329 Facsimile: (650) 298-8085
With a copy to: Law & Corporate Affairs With a copy to: James Strawbridge Esq.
Wilson Sonsini Goodrich &
Rosati
650 Page Mill Road
Palo Alto, CA 94304
Telephone: (425) 882-8080 Telephone: (650) 493-9300
Facsimile: (425) 936-7409 Facsimile: (650)493-6811
</TABLE>
or to such other address as a Party may designate pursuant to this notice
provision.
13.2 NO AGENCY RELATIONSHIP. Nothing in this Agreement shall be
construed as creating an employer-employee relationship, a partnership, or a
joint venture between the Parties.
13.3 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Washington as though entered into between Washington residents
and to be performed entirely within the State of Washington, and Centraal
consents to jurisdiction and venue in the state and federal courts sitting in
King County, the State of Washington. In any action or suit to enforce any
right or remedy under this Agreement or to interpret any provision of this
Agreement, the prevailing Party shall be entitled to recover its costs,
including reasonable attorneys' fees.
13.4 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of each Party's respective successors and lawful assigns;
provided, however, that (1) Centraal may not assign this
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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<PAGE>
Agreement, in whole or in part, or any rights or obligations hereunder,
whether by contract or by operation of law, except in the context of a
material change in Centraal's capital structure, control or ownership
(including by way of an initial public offering of stock), without the
express written consent of Microsoft, and (2) Microsoft may not assign this
Agreement in whole or part, or any rights or obligations hereunder, to any
competitor of Centraal. Any attempted assignment by a party in violation of
this Section 13.4 shall be void and shall allow the other party to
immediately terminate this Agreement.
13.5 CONSTRUCTION. If for any reason a court of competent
jurisdiction finds any provision of this Agreement, or portion thereof, to be
unenforceable, that provision of the Agreement will be enforced to the
maximum extent permissible so as to effect the intent of the Parties, and the
remainder of this Agreement will continue in full force and effect. Failure
by either Party to enforce any provision of this Agreement will not be deemed
a waiver of future enforcement of that or any other provision. This Agreement
has been negotiated by the Parties and their respective counsel and will be
interpreted fairly in accordance with its terms and without any strict
construction in favor of or against either Party. The section headings used
in this Agreement are intended for convenience only and shall not be deemed
to affect in any manner the meaning or intent of this Agreement or any
provision hereof.
13.6 ENTIRE AGREEMENT. This Agreement does not constitute an offer
by Microsoft and it shall not be effective until signed by both Parties. This
Agreement and the NDA constitute the entire agreement between the Parties
with respect to the subject matter hereof and merge all prior and
contemporaneous communications. It shall not be modified except by a written
agreement dated subsequent to the date of this Agreement and signed on behalf
of Centraal and Microsoft by their respective duly authorized
representatives. No waiver of any breach of any provision of this Agreement
shall constitute a waiver of any prior, concurrent or subsequent breach of
the same or any other provisions hereof, and no waiver shall be effective
unless made in writing and signed by an authorized representative of the
waiving Party.
13.7 LEGAL COMPLIANCE. Each party agrees to comply with applicable
laws in the performance of its obligations hereunder. Microsoft understands
and acknowledges that the Centraal is subject to regulation by agencies of
the United States Government, including, but not limited to, the U.S.
Department of Commerce, which prohibit export or diversion of certain
technology to certain countries. Any obligations of Centraal to provide
services are subject in all respects to such United States laws and
regulations as from time to time govern the license and delivery of
technology and services outside the United States. Microsoft will comply with
all applicable laws, and will not export, reexport, transfer, divert or
disclose, directly or indirectly, including via remote access, the Software,
any confidential information contained or embodied in the Software, or any
direct product thereof, except as authorized under the Export Administration
Regulations or other United States laws and regulations governing exports in
effect from time to time.
13.8 FORCE MAJEURE. If either Party is in material breach of a term
of this Agreement as a result (wholly or in primary part) due to causes
beyond reasonable control of the party charged with a default, including, but
not limited to, causes such as strikes, lockouts or other labor disputes,
riots, civil disturbances, actions or in actions of governmental authorities
or suppliers, epidemics, war, embargoes, severe weather, fire, earthquakes,
acts of God or the public enemy, nuclear disasters, or default of a common
carrier and which it could not by reasonable diligence have avoided, then
without limiting the other Party's rights in any such event, such other Party
shall have the option, without liability, to suspend their performance for
the duration of any such breach but in no event longer than twenty (20)
consecutive days or thirty (30) days total ("Suspension Period") with respect
to any single or proximately related cause(s), by giving the other Party
written notice thereof detailing the reason and expected duration of such
suspension; provided that during such Suspension Period the non-notifying
Party's obligations (but not its rights) shall also be suspended; and further
provided that if the notifying Party has not cured its material breach by end
of the Suspension Period, the non-notifying Party may immediately upon notice
to the notifying Party terminate this Agreement pursuant to 12.1.2.
In Witness Whereof, the Parties have entered into this Agreement as of the
Effective Date written above.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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<PAGE>
CENTRAAL CORPORATION MICROSOFT CORPORATION
BY: /s/Edward F. West BY: /s/Matt Kursh
--------------------- ------------------------
Edward F. West MATT KURSH
--------------------- ------------------------
(printed name) (printed name)
Exec VP BUSINESS UNIT MANAGER
--------------------- ------------------------
(title) (title)
Date: June 2, 1999 Date: 6/4/99
------------------- -----------------------
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 14 OF 254
<PAGE>
EXHIBIT A
DELIVERY REQUIREMENTS; DESCRIPTION OF SOFTWARE
1. DELIVERY PROCESS
Real Names System Data Format and Delivery Process
Real Names System Data Format
The Real Names System will be presented in the format known to the parties as
"Orbiter" or such other format which is subsequently mutually agreed upon by
the parties. There will be five fields per record:
cn = the common name in its presentation form (also known as a RealName)
dsc = the Web page description
lc = the locale (e.g. "en:US" the US English language)
pm= pricing model ("flt" is flat rate, "ppr" is price per resolution)
ns = namespace ("rn.0" is a paid RealName, "rn.1" is a editorialized
RealName, "rn.2" is a crawled RealName)
Example:
< rn cn="Disney" dsc="The Web Site For Families." lc="en-US" pm="ppr"
ns="rn.0"/ >
Delivery Process
A data file containing the entire RNS (Real Names System) will be delivered
from Centraal Corporation to Microsoft. The data file will conform to the
layout described in the above section called RNS Data Format. Centraal
assumes responsibility for the delivery of this data file, and will manage
the processes around its successful delivery.
Centraal will build this data file every 24 hours, from its primary RNS
database. After the successful completion of the build, Centraal will
compress the file using PKZip. Centraal will FTP the file to a designated,
Microsoft controlled FTP server. The file name inside of the pkzip will be
rn.xml. The ZIP file will be named rn-mmddyy.zip (where mm=month, dd=day,
yy=year is the date when the upload occurs).
It is the responsibility of Microsoft to provide Centraal's primary technical
contact with the hostname, user name and password to enable the upload. The
account should have write capabilities at all times. The desired upload path
should be set to the default login path of the user account supplied. The
user account/machine should have sufficient disk space available to upload a
file size of 150 Megabytes daily.
It is also Microsoft's responsibility to designate a time of day for the file
to be uploaded, and communicate such time to Centraal's primary technical
contact.
In the event that Centraal encounters a problem delivering the data file that
is not surmountable within 1 hour of scheduled delivery time (e.g.
insufficient disk space, machine unreachable, invalid account, etc.), it is
the responsibility of Centraal to contact the Microsoft Technical Point of
Contact within 24 hours of encountering the problem.
In the event that Microsoft encounters a technical problem (e.g. file was not
delivered at the mutually agreed upon time, data file incomplete, etc.), it
is the responsibility of Microsoft to contact the Centraal Technical Point of
Contact within 24 hours of encountering the problem.
Microsoft
Primary Technical Point of Contact:
Name: Bill Bliss
Title: General Manager
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 15 OF 254
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Phone: (425) 882-8080
Alternate:
-----------------------
Email: [email protected]
Alternate Technical Point of Contact
Name: Eric Berman
Title: Group Program Manager
Phone: (425) 882-8080
Alternate:
-----------------------
Email: [email protected]
Centraal
Technical Point of Contact:
Name: Dave Roletto
Title: Global Operations Network Engineer
Phone: 650-298-5532
Alternate: pager 650-590-8688
Email: [email protected]
Alternate Technical Point of Contact:
Name: Edward Louie
Title: Global Operations Network Engineer
Phone: 650-298-5537
Alternate: pager 650-590-8696
Email: [email protected]
2. DESCRIPTION OF SOFTWARE
Such software subsequently and mutually agreed upon by the parties in writing
for the implementation of the RealNames Service by Microsoft as contemplated
herein.
3. DESCRIPTION OF DOCUMENTATION
Materials useful and necessary to the marketing of RealNames and materials
useful and necessary for technical implementation of the RealNames Services
by Microsoft.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 16 OF 254
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EXHIBIT B
PROCESS FOR GENERATING REALNAMES RESOLUTIONS
EXPLANATION OF REALNAMES RESOLVERS
To the extent that Microsoft implements the RealNames Services in
accordance with the provisions of this Agreement, the provisions of this
EXHIBIT B shall be applicable. If Microsoft does not implement the RealNames
Service, none of the provisions of this Exhibit B shall be applicable.
Microsoft will implement Centraal's resolution process methodology
(the "Ternary Responder") for exact matches. Exact matches will be determined
by comparing the user query to the static and rule based RealNames supplied
by Centraal as part of the periodical RealNames database updates. Centraal
will provide Microsoft with an initial electronic dump of the RealNames
Database and then with an electronic update of the RealNames database. The
RealNames database updates will be periodically propagated to Microsoft live
implementation of the ternary responder.
The RealNames database provided by Centraal will include the following fields:
<TABLE>
<S> <C>
RealName: The RealName string (e.g. "Internet Explorer 5")
Locale: The language of the Web page (e.g. "en-US")
RealNames link: The resolver URL. This URL points to the RealNames
resolver and embeds the RealName string, provider
identifier and locale information.
RealNames Pricing Model: The type of pricing model for the RealName. The
possible values are PPR (priced per resolution) or
FLT (flat maintenance fee).
RealNames Namespace Code: A namespace identifier code (e.g. "rn.0.s" means
paid for static RealNames "rn.0.r" rule based
RealNames, rn.l" means editorialized RealNames,
"rn.2" means crawled RealNames)
</TABLE>
Microsoft will provide a schema specification for serializing and encoding
the RealNames data.
When a user performs a search, Microsoft's implementation of the Ternary
Responder will assess whether there is an exact match in the RealNames
database. If there is, two different cases need to be considered.
The first case occurs in the context of an IE5 auto-search where Microsoft's
implementation will immediately redirect the user to the RealNames URL. In
turn, the RealNames resolver will redirect the user to the URL associated
with the specified RealName. For example, a user types the query string
"Internet Explorer 5" in IE5. "Internet Explorer 5" is an exact match.
Microsoft will redirect the user to RealNames link for "Internet Explorer 5":
http://navigation.realnames.com/Resolver.dll?action=navigation&providerID=
15&realname=internet+explorer+5+&locale=en-US
The second case occurs in the context of a traditional search on MSN. When a
user performs a search query on the search engine, if there is an exact
match, Microsoft will display the RealNames text on the results page. The
RealNames text is made of the RealNames string with the RN superscript, and a
brief description of the RealName. The RealNames string is hyper-linked using
the RealNames link URL. For example, a user types the query string "Internet
Explorer 5" on MSN. "Internet Explorer 5" is an exact match. Thus, MSN
displays the RealNames text that contains the RealNames link. The RealNames
text at the MSN site can be displayed as agreed upon by both Microsoft and
Centraal.
INTERNET EXPLORER 5RN
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 17 OF 254
<PAGE>
The RealNames link takes you directly to Internet Explorer 5.
The URL associated with the RealNames link "Internet Explorer 5" that
identifies MSN as the source of the resolutions is:
http://navagation.realnames.com/Resolver.dll?action=navigate&providerID=
101&realname=internet+explorer+5
When the user clicks on the RealNames link for "Internet Explorer 5", a
resolution request is sent to the RealNames resolver located on Centraal
servers. This request embeds the RealName "Internet Explorer 5" as well as a
provider ID that uniquely identifies MSN as the originator for the
resolution. The RealNames resolver located on Centraal server looks up the
URL associated with the RealName address "Internet Explorer 5", logs the
resolution parameters and redirects the user to that URL.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 18 OF 254
<PAGE>
EXHIBIT C
FORM OF SUBSCRIPTION AGREEMENT
REALNAMES SUBSCRIPTION AGREEMENT
A. INTRODUCTION.
This RealNames Subscription Agreement ("Agreement") is
submitted to CENTRAAL CORPORATION ("CENTRAAL") for the purpose of subscribing
to CENTRAAL's RealNames Service (SM) on the Internet through CENTRAAL's
subscription system also known as the RealNames System (SM). If this
Agreement is accepted by CENTRAAL, and a RealNames (SM) address is allocated
in CENTRAAL's Web address system to the Subscriber ("Subscriber"), Subscriber
agrees to be bound by the terms of this Agreement.
B. FEES AND PAYMENTS.
Subscriber agrees to pay a NON-REFUNDABLE fee of one hundred United States
dollars (US $100) per year in consideration of each subscribed RealNames
address. The payment may be made payable either directly to "CENTRAAL
Corporation," or indirectly to CENTRAAL through a certified reseller.
This NON-REFUNDABLE fee covers a period of one (1) year for each new
subscription or reservation of a RealNames address. This NON-REFUNDABLE fee
includes any permitted modification(s) to the RealNames address record
during the subscription or reservation. It also covers up to ten thousand
(10,000) uses of the RealNames address per calendar month; CENTRAAL reserves
the right to stop processing uses of the RealNames address after ten thousand
(10,000) uses in a calendar month. Subscribers will be notified by CENTRAAL
when a RealNames address usage exceeds ten thousand (10,000) uses per
calendar month. Subscribers of a RealNames address which usage exceeds ten
thousand (10,000) uses per calendar month will be subject to additional usage
fees, at a rate to be agreed upon by CENTRAAL and Subscriber in advance of
such charges. In the event that CENTRAAL and Subscriber cannot agree on such
fees, Subscriber understands and agrees that CENTRAAL may terminate this
Agreement without liability, including Subscriber's use of any RealNames
address.
All payments will be due within thirty (30) days from the date of invoice.
Subscriber understands and agrees that CENTRAAL may cancel Subscriber's
subscription or reservation in the event that any payment is not made when
due.
On the date of expiration, RealNames address subscriptions will be
automatically renewed for the period of one year, unless the Subscriber
notifies CENTRAAL in writing of its intention not to renew the RealNames
subscription. Notification to cancel automatic renewals must be communicated
to CENTRAAL by fax (1-650-298-8085) or email ([email protected]) at least
ten days prior to the RealNames subscription expiration date. Automatic
renewals will be billed at CENTRAAL's then-current annual subscription price.
C. ALLOCATION OF REALNAMES ADDRESSES BY CENTRAAL.
Subscriber agrees that allocation of RealNames addresses by CENTRAAL is
subject to CENTRAAL's discretion. CENTRAAL may at any time, with notice to
Subscriber that is reasonable in the circumstances (including immediate
notice when that is appropriate) reallocate a RealNames address previously
or currently used by Subscriber. Any notice provided to Subscriber will be at
the last address furnished by Subscriber to CENTRAAL. Subscriber understands
that all systems of address with respect to the Internet are subject to
varied and occasionally inconsistent principles, jurisdictions, and claims of
right. Subscriber understands and agrees that CENTRAAL requires absolute
discretion over the allocation of RealNames addresses in light of the
uncertain and often conflicting principles that are at work in the current
state of the Internet. Subscriber understands and agrees that, because of
CENTRAAL's discretion, CENTRAAL has the absolute right to allocate RealNames
addresses, withdraw them, and reallocate them according to its own judgment
as to what constitutes an optimal service and system. Subscriber further
recognizes that CENTRAAL, with a view to optimizing its RealNames Service and
RealNames Services, may apply standards of decision
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 19 OF 254
<PAGE>
regarding allocation, reallocation, or withdrawal of RealNames addresses that
evolve or change over time. If CENTRAAL does not approve any RealNames
address requested by Subscriber, or withdraws approval of, a RealNames
address, CENTRAAL will attempt to provide an alternative RealNames address
that is acceptable to both CENTRAAL and Subscriber. Subscriber accords to
CENTRAAL the right to make decisions that it deems best in each context.
Subscriber understands that CENTRAAL has no dispute resolution system.
Subscriber also agrees that all goodwill in any RealNames address as an
address in the RealNames Service, and all property rights in any RealNames
address as an address in the RealNames Service, belong exclusively to
CENTRAAL. Subscriber's use of the RealNames Service confers no property,
business, or competition rights upon Subscriber.
D. DISPUTES.
In the event that Subscriber's subscription, reservation, RealNames address,
or any other aspect of the RealNames Services, or any conduct by the
Subscriber results in any challenge, claim, demand, or action to or against
CENTRAAL, Subscriber agrees that CENTRAAL shall have the right to decide in
its sole discretion what actions to take, including without limitation
whether to continue to provide Subscriber's subscription, reservation,
RealNames address, reservation or any other aspect of the RealNames Services
affected by such claim. Subscriber understands and agrees that it has no
vested interest or right in any procedures or rules of dispute resolution.
E. INDEMNITY.
Subscriber agrees to defend and indemnify CENTRAAL, as well as CENTRAAL's
officers, employees, agents, resellers and representatives, against claims,
demands, damages, costs, and liabilities arising from Subscriber's use,
reference to, or advertising of a RealNames address; from the allocation by
CENTRAAL of a RealNames address to Subscriber; and from the Subscriber's
subscription, reservation or use of the RealNames Services or RealNames
Service. Subscriber agrees that the financial obligation of Subscriber to
CENTRAAL pursuant to this indemnity may be incorporated in CENTRAAL's
invoices for services and are due when the invoices are due.
F. BREACH.
Subscriber understands and agrees that its failure to abide by any provision
of this Agreement may be considered by CENTRAAL to be a basis for
cancellation of the subscription or reservation, withdrawal of the assigned
RealNames address, and/or cancellation of the subscription or reservation.
G. AGENTS.
Subscriber agrees that if this Agreement is completed by an agent for the
Subscriber, such as an ISP or Administrative Contact/Agent, the Subscriber is
nonetheless bound as a principal by all terms and conditions herein.
H. USAGE STATISTICS.
Subscriber understands and agrees that CENTRAAL has the right to compile
usage statistics and other data regarding use of CENTRAAL's RealNames
Services and to sell and provide any and all such data to third parties.
I. LIMITATION OF LIABILITY.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 20 OF 254
<PAGE>
Subscriber agrees that CENTRAAL, its officers, employees, agents, resellers
and representatives shall have no liability to the Subscriber for any loss
Subscriber may incur in connection with CENTRAAL's processing of this
Agreement, in connection with CENTRAAL's processing of any authorized
modification to the RealNames Service (including without limitation the
RealNames address) during the covered period, as a result of the Subscriber's
ISP's failure to pay either the initial subscription or reservation fee or
renewal fee. Subscriber agrees that in no event shall the maximum liability
of CENTRAAL, officers, employees, agents, resellers and representatives under
this Agreement for any matter exceed and aggregate of five hundred United
States dollars (US $500).
J. NO GUARANTY.
Subscriber agrees that, by subscription or reservation of a RealNames
address, such subscription or reservation does not confer immunity from
objection to either the subscription, reservation or use of the RealNames
address. CENTRAAL DOES NOT WARRANT THAT THE OPERATION OF THE REALNAMES
SERVICE AND/OR ANY REALNAMES ADDRESS WILL BE WITHOUT INTERRUPTION OR ERROR
FREE. CENTRAAL DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. IN NO EVENT WILL CENTRAAL BE LIABLE TO SUBSCRIBER OR ANY
OTHER THIRD PARTY FOR ANY FAILURE, DISRUPTION, DOWNTIME, INCORRECT LINKAGE OR
OTHER NON-PERFORMANCE OF THE REALNAMES SERVICE.
K. RIGHT OF REFUSAL.
CENTRAAL, in its sole discretion, reserves the right to refuse to enter into
an agreement for any Subscriber. Subscriber agrees that the submission of
this Agreement does not obligate CENTRAAL to accept this Agreement.
Subscriber agrees that CENTRAAL shall not be liable for loss or damages that
may result from CENTRAAL's refusal to accept this Agreement.
L. ENTIRETY.
Subscriber agrees that this Agreement comprises the complete and exclusive
agreement between Subscriber and CENTRAAL regarding the subscription or
reservation of Subscriber's RealNames address. This Agreement supersedes all
prior agreements and understandings.
M. GOVERNING LAW.
Subscriber agrees that this Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of California, United
States of America, without regard to conflicts-of-law principles, applicable
to contracts formed in California for services rendered in California. By
submitting this Agreement, Subscriber consents to the exclusive and personal
jurisdiction and venue of the federal and state courts located in the
Northern District of California. This Agreement shall be deemed accepted at
the offices of CENTRAAL in Palo Alto, California, U.S.A.
CENTRAAL CORPORATION REALNAMES SUBSCRIPTION AGREEMENT (0.3)
- -C- 1998 Centraal Corporation
2 Circle Star Way, Second Floor
PO Box 3500
San Carlos, CA 94303-0750
Tel: +1 650 298 8080
Fax: +1 650 298 8085
[email protected]
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 21 OF 254
<PAGE>
EXHIBIT D-1
Centraal Trademarks
[LOGO]
RealNames Standardized Logo
Font: OCRB
[LOGO]
RealNames Enabled Logo
Font: OCRB
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 22 OF 254
<PAGE>
EXHIBIT E
---------
NONDISCLOSURE AGREEMENT
-----------------------
MICROSOFT CORPORATION NON-DISCLOSURE AGREEMENT
(STANDARD RECIPROCAL)
THIS AGREEMENT (the "Agreement") is made between MICROSOFT CORPORATION,
a Washington corporation, and CENTRAAL CORPORATION ("COMPANY") and entered
into this __________ day of ___________, 1999.
In consideration of the mutual promises and covenants contained in this
Agreement, the mutual disclosure of confidential information to each other,
the parties hereto agree as follows:
1. CONFIDENTIAL INFORMATION AND CONFIDENTIAL MATERIALS
(a) "Confidential Information" means nonpublic information that
Disclosing Party designates as being confidential or which, under the
circumstances surrounding disclosure ought to be treated as confidential.
"Confidential Information" includes, without limitation, information relating
to released or unreleased Disclosing Party software or hardware products, the
marketing or promotion of any Disclosing Party product, Disclosing Party's
business policies or practices, and information received from others that
Disclosing Party is obligated to treat as confidential. Confidential
Information disclosed to Receiving Party by any Disclosing Party Subsidiary
and/or agents is covered by this Agreement.
(b) Confidential Information shall not include any information that:
(i) is or subsequently becomes publicly available without Receiving Party's
breach of any obligation owed Disclosing Party; (ii) became known to
Receiving Party prior to Disclosing Party's disclosure of such information to
Receiving Party; (iii) became known to Receiving Party from a source other
than Disclosing Party other than by the breach of an obligation of
confidentiality owed to Disclosing Party; or (iv) is independently developed
by Receiving Party.
(c) "Confidential Materials" shall mean all tangible materials
containing Confidential Information, including without limitation written or
printed documents and computer disks or tapes, whether machine or user
readable.
2. RESTRICTIONS
(a) Receiving Party shall not disclose any Confidential Information to
third parties for five (5) years following the date of its disclosure by
Disclosing Party to Receiving Party, except to Receiving Party's consultants
as provided below. However, Receiving Party may disclose Confidential
Information in accordance with judicial or other governmental order, provided
Receiving Party shall give Disclosing Party reasonable notice prior to such
disclosure and shall comply with any applicable protective order or
equivalent.
(b) Receiving Party shall take reasonable security precautions, at
least as great as the precautions it takes to protect its own confidential
information, to keep confidential the Confidential Information. Receiving
Party may disclose Confidential Information or Confidential Material only to
Receiving Party's employees or consultants on a need-to-know basis. Receiving
Party will have executed or shall execute appropriate written agreements with
its employees and consultants sufficient to enable it to comply with all the
provisions of this Agreement.
(c) Confidential Information and Confidential Materials may be
disclosed, reproduced, summarized or distributed only in pursuance of
Receiving Party's business relationship with Disclosing Party, and only as
otherwise provided hereunder. Receiving Party agrees to segregate all such
Confidential Materials from the confidential materials of others in order to
prevent commingling.
(d) Receiving Party may not reverse engineer, decompile or disassemble
any software disclosed to Receiving Party.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 23 OF 254
<PAGE>
3. RIGHTS AND REMEDIES
(a) Receiving Party shall notify Disclosing Party immediately upon
discovery of any unauthorized use or disclosure of Confidential Information
and/or Confidential Materials, or any other breach of this Agreement by
Receiving Party, and will cooperate with Disclosing Party in every reasonable
way to help Disclosing Party regain possession of the Confidential
Information and/or Confidential Materials and prevent its further
unauthorized use.
(b) Receiving Party shall return all originals, copies,
reproductions and summaries of Confidential Information or Confidential
Materials at Disclosing Party's request, or at Disclosing Party's option,
certify destruction of the same.
(c) Receiving Party acknowledges that monetary damages may not be a
sufficient remedy for unauthorized disclosure of Confidential Information and
that Disclosing Party shall be entitled, without waiving any other rights or
remedies, to such injunctive or equitable relief as may be deemed proper by a
court of competent jurisdiction.
(d) Disclosing Party may visit Receiving Party's premises, with
reasonable prior notice and during normal business hours, to review Receiving
Party's compliance with the terms of this Agreement.
4. MISCELLANEOUS
(a) All Confidential Information and Confidential Materials are and
shall remain the property Of Disclosing Party. By disclosing information to
Receiving Party, Disclosing Party does not grant any express or implied right
to Receiving Party to or under Disclosing Party patents, copyrights,
trademarks, or trade secret information.
(b) If either party provides pre-release software as Confidential
Information or Confidential Materials under this Agreement, such pre-release
software is provided "as is" without warranty of any kind. Receiving Party
agrees that neither Disclosing Party nor its suppliers shall be liable for
any damages whatsoever relating to Receiving Party's use of such pre-release
software.
(c) Any software and documentation provided under this Agreement is
provided with RESTRICTED RIGHTS. Use, duplication, or disclosure by the
Government is subject to restrictions as set forth in subparagraph (c)(1)(ii)
of The Rights in Technical Data and Computer Software clause at DFARS
252.227-7013 or subparagraphs (c)(1) and (2) of the Commercial Computer
Software --Restricted Rights at 48 CFR 52.227-19, as applicable. Manufacturer
is Microsoft Corporation/One Microsoft Way/Redmond, WA 98052-6399.
(d) Both parties agree that they do not intend nor will they,
directly or indirectly, export or re-export (i) any Confidential Information
or Confidential Materials, or (ii) any product (or any part thereof), process
or service that is the direct product of the Confidential Information or
Materials to (A) any country that is subject to U.S. export restrictions
(currently including, but not necessarily limited to, Iran, Iraq, Syria,
Cuba, North Korea, Libya, and Sudan), or to any national of any such country,
wherever located, who intends to transmit or transport the products back to
such country; (B) to any end-user who either party knows or has reason to
know will utilize them in the design, development or production of nuclear,
chemical or biological weapons; or (C) to any end-user who has been
prohibited from participating in U.S. export transactions by any federal
agency of the U.S. government.
(e) The terms of confidentiality under this Agreement shall not be
construed to limit either party's right to independently develop or acquire
products without use of the other party's Confidential Information. Further,
either party shall be free to use for any purpose the residuals resulting
from access to or work with such Confidential Information, provided that such
party shall maintain the confidentiality of the Confidential Information as
provided herein. The term "residuals" means information in non-tangible form,
which may be retained by persons who have had access to the Confidential
Information, including ideas, concepts, know-how or techniques contained
therein. Neither party shall have any obligation to limit or restrict the
assignment of such persons or to pay royalties for any work resulting from
the use of residuals. However, the foregoing shall not be deemed to grant to
either party a license under the other party's copyrights or patents.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 24 OF 254
<PAGE>
(f) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof. It shall not be modified
except by a written agreement dated subsequent to the date of this Agreement
and signed by both parties. None of the provisions of this Agreement shall be
deemed to have been waived by any act or acquiescence on the part of
Disclosing Party, its agents, or employees, but only by an instrument in
writing signed by an authorized officer of Disclosing Party. No waiver of any
provision of this Agreement shall constitute a waiver of any other
provision(s) or of the same provision on another occasion.
(g) If either party employs attorneys to enforce any rights arising
out of or relating to this Agreement, the prevailing party shall be entitled
to recover reasonable attorneys' fees. This Agreement shall be construed and
controlled by the laws of the State of Washington, and both parties further
consent to jurisdiction by the state and federal courts sitting in the State
of Washington. Process may be served on either party by U.S. Mail, postage
prepaid, certified or registered, return receipt requested, or by such other
method as is authorized by the Washington Long Arm Statute.
(h) Subject to the limitations set forth in this Agreement, this
Agreement will inure to the benefit of and be binding upon the parties, their
successors and assigns.
(i) If any provision of this Agreement shall be held by a court of
competent jurisdiction to be illegal, invalid or unenforceable, the remaining
provisions shall remain in full force and effect.
(j) All obligations created by this Agreement shall survive change
or termination of the parties' business relationship.
5. SUGGESTIONS AND FEEDBACK
Either party may from time to time provide suggestions, comments or other
feedback to the other party with respect to Confidential Information provided
originally by the other party (hereinafter "Feedback"). Both parties agree that
all Feedback is and shall be entirely voluntary and shall not, absent separate
agreement, create any confidentiality obligation for the Receiving Party.
However, the Receiving Party shall not disclose the source of any feedback
without the providing party's consent. Feedback shall be clearly designated as
such and, except as otherwise provided herein, each party shall be free to
disclose and use such Feedback as it sees fit, entirely without obligation of
any kind to the other party. The foregoing shall not, however, affect either
party's obligations hereunder with respect to Confidential Information of the
other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
COMPANY: CENTRAAL CORP. MICROSOFT CORPORATION
----------------------------
Address: 2 Circle Star Way By: /s/ Matt Kursh
----------------------------- ---------------------------
San Carlos, California 94070 Name: MATT KURSCH
----------------------------- ------------------------------
By: /s/ Edward F. West Title: BUSINESS UNIT MANAGER
---------------------------------- ------------------------------
Name: Edward F. West Date: 6/4/99
-------------------------------- -------------------------------
Title: EXEC VICE PRESIDENT MS Contact:
------------------------------- -------------------------
Date: June 2, 1999
--------------------------------
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PAGE 25 OF 254
<PAGE>
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
Exhibit 10.9
REALNAME SALES REPRESENTATIVE AGREEMENT
BETWEEN CENTRAAL CORPORATION AND NETWORK SOLUTIONS, INC.
This RealName Sales Representative Agreement ("AGREEMENT") is made as
of DECEMBER 8, 1998 ("EFFECTIVE DATE") by and between Network Solutions, Inc.
("NSI") and Centraal Corporation ("CENTRAAL").
WHEREAS, NSI is the leading Internet domain name registration services
provider worldwide, and also provides Internet consulting services to businesses
that desire to establish or enhance their Internet presence; and
WHEREAS, Centraal is in the business of providing "REALNAMES SERVICES,"
which allow users to access sites on the World Wide Web that are registered with
Centraal's service by using an appropriate trademark, brand name, short word or
phrase in lieu of a Uniform Resource Locator ("URL"); and
WHEREAS, the parties wish to establish the terms and conditions for a
relationship under which NSI will act as Centraal's sales representative to
provide RealNames Services.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS. For the purposes of this Agreement, the terms below
have the following meanings:
1.1 "ACTIVE" means that a RealName Subscription (i) has been
approved and adjudicated by Centraal for listing in the RealName database and
(ii) fully paid for by the subscriber. For example, a RealName Subscription that
was Sold by NSI prior to December 31, 1999, but which was not renewed prior to
December 31, 2000, will be considered "Active" as of December 31, 1999, but not
"Active" as of December 31, 2000.
1.2 "CHANGE OF CONTROL OF CENTRAAL" means any merger,
consolidation or reorganization of Centraal with or into any other entity or
entities, or any sales of all or substantially all of the assets of Centraal, or
a series of related similar such transactions in which the holders of the
Company's capital stock on the Effective Date will, as a result of such
transaction, hold less than 50% of the voting power of the surviving entity
after the consummation of the transaction.
1.3 "CUSTOMER INFORMATION" means the following customer
contact information, to be collected in connection with RealName Subscriptions:
contact name, address, email address,
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
telephone and credit card number. "Customer Information" does not include
customer contact information collected by NSI in connection with NSI's domain
name registrations.
1.4 "IMPLEMENTATION DATE" means that date on which Centraal
reasonably determines that NSI is capable of meeting the service requirements
and quality criteria set forth in ATTACHMENT 1.
1.5 "MY REALNAME CUSTOMERS" means persons or entities who are
provided a Web page through a community service such as Tripod or Geocities, and
in connection therewith and subscribe to RealNames Services from Centraal free
of charge.
1.6 "NSI AFFILIATE" means any third party that is (i) an
Internet Service Provider or Web hosting company and (ii) has been identified to
Centraal in the report described in Section 2.2 as currently participating in
NSI's "Alliance," "Premier," or "Affiliate" programs. In no event will
LookSmart, Compaq Computer Corporation ("COMPAQ"), Compaq's subsidiary,
AltaVista Search Services, Inc., Infoseek, Bigfoot International, Inc.,
Neoplanet or ICQ, or any of such parties' affiliates, sublicensees or resellers
be deemed "NSI Affiliates."
1.7 "NSI CUSTOMERS" means those customers to whom NSI has Sold
RealNames Services.
1.8 "NON-NSI SOLD CUSTOMERS" means all customers of RealNames
Services, other than NSI Customers, Key Accounts, and My RealName Customers.
1.9 "REALNAME INFORMATION" means the following information
comprising the RealName object, to be collected in connection with RealName
Subscriptions: RealName, URL, organization, Geocode/region code, description,
language, RealName category, trademarks and suitability.
1.10 "SOLD" means that a subscription to a RealName was (i)
solicited by NSI on Centraal's behalf, (ii) approved and adjudicated by Centraal
for listing in the RealName database, and (iii) fully paid for by the
subscriber.
2. SALE OF THE REALNAMES SERVICES.
2.1 APPOINTMENT. Subject to Section 2.5, Centraal hereby
appoints NSI as Centraal's [*] sales representative to solicit subscriptions
for RealNames Services ("REALNAME SUBSCRIPTIONS"). NSI will have the right to
appoint NSI Affiliates as sub-representatives, provided that NSI remains
primarily responsible for the performance of such NSI Affiliates, and
appoints such sub-representatives according to a written agreement as
protective of Centraal as this Agreement.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
2.2 [*]
2.3 GOVERNMENT APPROVALS. In the event that, subsequent to the
Effective Date, any governmental approval is required in order for NSI to offer
RealNames with domain names, and such approval is not obtained within 90 days
after a party first receives notice of such necessary approval, Centraal's
obligations under Section 2.2 will cease. [*]
2.4 SALES. NSI and the NSI Affiliates (a) shall use
reasonable efforts to promote the sale of RealName Subscriptions, and shall
solicit sales for RealName Subscriptions only according to the terms of
Centraal's then-current subscription agreement; (b) shall not make any
representations or warranties regarding the RealNames Services, other than with
the prior written approval of Centraal. Notwithstanding the foregoing, NSI may
represent that the RealNames Services allow users to access sites on the World
Wide Web that are registered with Centraal's service by using an appropriate
trademark, brand name, short word or phrase in lieu of a Uniform Resource
Locator without the prior written consent of Centraal. Without limiting the
foregoing, NSI, at its sole discretion, may solicit sales of RealName
Subscriptions customers through its current inbound telesales operation.
2.5 KEY ACCOUNTS. NSI acknowledges that Centraal markets
RealNames Services directly to certain key customers who pay for such services
on a per resolution basis ("KEY ACCOUNTS"). Centraal shall report quarterly in
writing to NSI its Key Accounts. NSI shall not solicit sales of RealName
Subscriptions from Key Accounts who have been identified in advance to NSI by
Centraal, and Centraal will not be obligated to (a) accept RealName
Subscriptions Sold to such previously identified Key Accounts by NSI, or (b) pay
NSI any Commission for any RealName Subscriptions Sold to such previously
identified Key Accounts by NSI.
2.6 ORDERS. Orders for RealNames Services by customers
solicited by NSI and NSI Affiliates will take place through a series of HTML
registration pages to be developed according to specifications agreed upon by
the parties, or as otherwise agreed by the parties. These pages will be
co-branded (e.g., "RealNames from Network Solutions") as agreed by the
parties in advance in writing. Notwithstanding the foregoing, NSI will have
complete control over all design and functional aspects of all NSI Web sites.
All completed orders for the RealNames Services will be processed by Centraal
within the time period set forth in Attachment 2. Centraal shall perform the
registration and send via electronic mail Centraal's then-current
acknowledgments, software browser plug-ins or other customer materials to the
customer and
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
will provide NSI with information regarding orders in process and processed
orders in a timely manner to assist NSI to perform the customer support
services set forth in Section 3 below. All RealName Subscriptions Sold by NSI
and NSI Affiliates are subject to acceptance by Centraal. Centraal may accept
or reject any RealName Subscription in its sole discretion.
2.7 FEES. Centraal shall set the subscription fees, if any,
for the initial one-year term and all one-year renewal terms to be charged to
customers for RealName Subscriptions Sold by NSI and NSI Affiliates (the "NSI
CUSTOMER SUBSCRIPTION FEES"). NSI shall collect the NSI Customer Subscription
Fees, if any, on Centraal's behalf, and shall pay to Centraal the full amount of
all NSI Customer Subscription Fees, less any amounts for refunds, credit card
chargebacks and bad debt, and less Commissions earned by NSI as set forth in
Section 2.8 below, less fees earned by NSI as set forth in Section 3.2 below, no
later than 10 days after the quarter in which the related RealName Subscriptions
are first Sold and the NSI Customer Subscription Fees are collected. In no event
will NSI withhold commissions under Section 2.8 for NSI Customer Subscription
Fees that are refunded or uncollectible.
2.8 COMMISSIONS. NSI may retain (or, if the parties so agree,
Central shall pay to NSI) a commission ("COMMISSION") for each RealName
Subscription from which a NSI Customer Subscription Fee, if any, arose as
follows:
[*] for the initial one-year term of any RealName
Subscription Sold by NSI or an NSI Affiliate, the greater of (i) [*], or (ii)
[*] of each NSI Customer Subscription Fee[*]
[*]
For the purposes of this Section 2.8, a RealName Subscription that is not
renewed upon its renewal date, but is renewed within 90 days from the date
thereof, will be deemed a "renewal" subject to the Commission described in
subsection (b). Notwithstanding the foregoing, in the event that Centraal
changes the term of the RealName Subscription or any renewal thereof, the
parties agree to modify the commissions due to NSI.
2.9 TERM; TERMINATION. The terms of this Section 2 will remain
in effect from the Effective Date until the later of (a) December 31, 2000, if
there is no Change of Control of Centraal before December 31, 2000; and (b)
December 31,2001, if there is a Change of Control of Centraal before December
31, 2000; unless terminated as set forth in Section 8.2. This Agreement will
automatically renew for an additional 2-year term if, at the end of the initial
term described above, there are outstanding at least 150,000 RealName
Subscriptions that (i) have been Sold by NSI and (ii) are Active.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
2.10 [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
2.11 ADDITIONAL FEES. Centraal shall pay to NSI, no later
than 10 days after the end of each calendar quarter, [*] of any fee that is
based upon resolution traffic and which is received by Centraal from
customers with RealName Subscriptions who pay for RealNames Services on a
"per-resolution" basis; provided, however, that Centraal shall pay no such
fee for amounts collected by Centraal from customers with RealName
Subscriptions due to resolution traffic from Compaq, LookSmart, Bigfoot
International, Inc., Neoplanet, ICQ, or Infoseek pursuant to agreements
between Centraal and such parties.
2.12 DATABASE ACCESS. NSI hereby grants to Centraal a
non-exclusive, non-transferable license to allow Centraal reasonable access and
use of the NSI registry "WHOIS" and "RWHOIS" databases, and any successor
databases with similar capabilities, via FTP, such that Centraal shall have
access to and use of information relating to all existing domain names and the
ownership of such domain names, for the sole purpose of maintaining and
resolving a comprehensive listing of Web companies in Centraal's "RealNames
Index 1," an index editorially managed by Centraal and will not be used as a
separate product or directory service or as an enhancement to the RealName Index
1 or for any other purpose.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
2.13 REVIEW. NSI and Centraal will meet quarterly in a "Senior
Management Review" meeting to discuss the development, planning, implementation
and results of all joint marketing, sales and customer service activities under
this Agreement.
2.14 DOMAIN NAME SALES. Centraal will generate leads for
Domain Names sales from the RealNames subscription site at URL www.realnames.com
by placing a hypertext link from such site to NSI's site at URL
www.networksolutions.com.
2.15 TECHNICAL ADVISORY BOARD. Centraal shall appoint David
Holtzman to the Centraal Corporation technical advisory board for a one-year
term commencing on January 1, 1999, subject to Mr. Holtzman executing Centraal's
standard form of technical advisory board agreement. The parties agree that no
options or other consideration will be granted by Centraal to NSI or Mr.
Holtzman in connection with such participation on the technical advisory board,
notwithstanding any plan or program of Centraal to issue stock, options or other
consideration to members of its technical advisory board.
3. CUSTOMER SERVICE.
3.1 SERVICES: QUALITY.
(a) SUPPORT. Beginning no later than June 1, 1999,
NSI shall provide customer support, help desk and related services according to
the plan described in ATTACHMENT 1 ("FIRST LEVEL SUPPORT") in a timely manner,
as required by customers of the RealNames Services. NSI may subcontract with a
third party for the provision of such services with Centraal's prior written
approval, not to be unreasonably withheld. As between the parties, Centraal is
solely responsible for providing the necessary services to adjudicate and
approve orders for RealName Subscriptions. In addition, Centraal will provide
adjudication-related and other mutually agreed upon support as described in
ATTACHMENT 2 ("SECOND LEVEL SUPPORT") for all customers of RealNames Services.
Centraal shall provide such Second Level Support in a timely manner, as required
by such customers.
(b) QUALITY CRITERIA. The services to be provided by
NSI pursuant to 3.1 (a) must meet the quality criteria set forth in ATTACHMENT
1.
(c) QUARTERLY REVIEW. The description of services to
be provided by NSI and the quality criteria that NSI must meet in the
performance of such services will be subject to quarterly changes mutually
agreed upon by Centraal and NSI, which agreement will not be unreasonably
withheld by either party.
(d) PHASE-IN PERIOD. For a period of 60 days
commencing on the date NSI begins to provide services under Section 3.1 (a)
("PHASE-IN PERIOD"), NSI shall perform First Level Support only for NSI
Customers. During the Phase-in Period, in the event Centraal
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
reasonably determines that NSI is not capable of meeting the service
requirements and quality criteria set forth in Attachment 1, then NSI will have
a reasonable period, not to exceed 90 days, to meet such service requirements
and quality criteria. If, after such 90 day period, NSI is not meeting the
service requirements or quality criteria set forth in ATTACHMENT 1, then
Centraal may immediately upon written notice terminate the right and obligations
set forth in this Section 3. Commencing on the Implementation Date, NSI shall
provide First Level Support for all RealName Subscription customers (excluding
Key Accounts and My RealName Customers).
(e) PARITY. After the Implementation Date, NSI
will provide the services described in Section 3.1 to Non-NSI Sold Customers
in the same manner and of the same quality as NSI will provide such services
to customers to whom NSI has Sold RealName Subscriptions.
3.2 FEES. In consideration of the services to be provided by
NSI under Section 3.1, NSI may withhold from the Subscription Fees, if any, to
be paid to Centraal pursuant to Section 2.7 of this Agreement (or, if the
parties so agree, Centraal shall pay to NSI):
[*] for the initial one year period of each RealName
Subscription approved and adjudicated by Centraal after the Effective Date, the
greater of (i) [*] of the Subscription Fee or (ii) [*]
[*]
During the Phase-In Period, NSI may only withhold such amounts for RealName
Subscriptions accepted by Centraal for NSI Customers. After the Phase-in Period,
NSI may also withhold such amounts for RealName Subscriptions accepted by
Centraal for Non-NSI Sold Customers. In no event will NSI withhold commissions
under this Section 3.2 for Subscription Fees that are refunded or uncollectible.
3.3 TERM; TERMINATION. The terms of this Section 3 will remain
in effect from the Effective Date until (a) December 31, 2002, if there is no
Change of Control of Centraal before December 31, 2002; and (b) December 31,
2003, if there is a Change of Control of Centraal before December 31, 2002;
unless earlier terminated under Section 3.1 (d), this Section 3.3, or Section
8.2. Notwithstanding the foregoing, if, at any time, Centraal is not reasonably
satisfied that NSI has provided customer service in accordance with the
standards set forth in ATTACHMENT 1, which lack of quality is not cured by NSI
within 60 days after written notice thereof by Centraal, then Centraal, in its
sole discretion, may upon 30 days' prior written notice to NSI, terminate all
rights and obligations set forth in this Section 3. In the event that,
subsequent to the dates set forth in Section 2.10, Centraal fails to maintain a
quantity of total Active RealName Subscriptions equal to 2 times the lesser of
(i) the target number of Active RealName Subscriptions Sold by NSI by the
corresponding dates set forth in Section 2.10, or (ii) the actual
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
number of Active RealName Subscriptions Sold by NSI as of such date, then NSI
may terminate all right and obligations set forth in this Section 3 upon 30
days' prior written notice.
4. COMMON STOCK WARRANTS.
4.1 MILESTONES. Upon the achievement of each of the following
milestones (each, a "MILESTONE NUMBER") by the dates set forth below (each, a
"MILESTONE DATE"), Centraal will issue to NSI a non-transferable (other than by
merger or consolidation or to a transferee of all or substantially all of the
assets of NSI) warrant in the form set forth in ATTACHMENT 3 (a "WARRANT"),
exercisable for 120 days (except as otherwise set forth herein), to purchase the
number of shares ("WARRANT SHARES") of Centraal's Common Stock, par value $0.001
per share ("COMMON STOCK") set forth below; provided, however, that (i) in no
event will NSI be issued Warrants hereunder to purchase an aggregate number of
Warrant Shares greater than 4,196,726 (subject to adjustment for stock splits,
stock dividends, recapitalizations, etc.); and (ii) no Warrant will be issued
for any Milestone not achieved by its respective Milestone Date:
(a) if, on or prior to December 31, 1999, at least
50,000 RealNames have been Sold by NSI, then Centraal shall issue to NSI a
Warrant to purchase a number of Warrant Shares equal to 423,912 (subject to
adjustment for stock splits, stock dividends, recapitalizations, etc.)
promptly after such date;
(b) if, on or prior to December 31, 2000, at least
150,000 RealNames have been Sold by NSI, then Centraal shall issue to NSI a
Warrant to purchase a number of Warrant Shares equal to 847,824 (subject to
adjustment for stock splits, stock dividends, recapitalizations, etc.)
promptly after such date;
(c) if, on or prior to December 31,2001, at least
375,000 RealNames have been Sold by NSI, then Centraal shall issue to NSI a
Warrant to purchase a number of Warrant Shares equal to 1,271,735 (subject to
adjustment for stock splits, stock dividends, recapitalizations, etc.)
promptly after such date; and
(d) if, on or prior to December 31, 2001, Centraal
enters into an agreement providing for the distribution of RealNames through
any of the following companies, then Centraal shall issue to NSI a Warrant to
purchase a number of Warrant Shares equal to 1,271,735 (subject to adjustment
for stock splits, stock dividends, recapitalizations, etc.) for each such
agreement promptly after the closing date of each such transaction: Netscape,
Microsoft, Yahoo, Excite, Lycos, or AOL. The parties agree that NSI and
Centraal will make joint and separate presentations and proposals to such
companies. To facilitate such and other transactions involving Centraal, NSI
will commit one full time business development manager within 120 days from
the date hereof, and one additional full time business development manager no
later
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
than January 1, 2000. NSI shall pay employment compensation and other costs
associated with such business development managers.
4.2 EXERCISE PRICE. The exercise price for any Warrant issued
pursuant to Section 4.1, subsections (a)-(d) above will be as follows (subject
to adjustments for stock splits, stock dividends, recapitalizations, etc.):
(a) Any Warrant issued on or prior to December 31,
1998, will be exercisable at a price of $1.65 per Warrant Share;
(b) Any Warrant issued after December 31, 1998 and
on or prior to March 31, 1999, will be exercisable at a price of $1.86 per
Warrant Share;
(c) Any Warrant issued after March 31, 1999 and on
or prior to June 30, 1999, will be exercisable at a price of $2.09 per
Warrant Share;
(d) Any Warrant issued after June 30, 1999 and on or
prior to September 30, 1999, will be exercisable at a price of $2.35 per Warrant
Share;
(e) Any Warrant issued after September 30, 1999 and
on or prior to December 31, 1999, will be exercisable at a price of $2.64 per
Warrant Share;
(f) Any Warrant issued after December 31, 1999 and on
or prior to March 31, 2000, will be exercisable at a price of $2.97 per Warrant
Share;
(g) Any Warrant issued after March 31, 2000 and on or
prior to June 30, 2000, will be exercisable at a price of $3.35 per Warrant
Share;
(h) Any Warrant issued after June 30, 2000 and on
or prior to September 30, 2000, will be exercisable at a price of $3.76 per
Warrant Share;
(i) Any Warrant issued after September 30, 2000
and on or prior to December 31, 2000, will be exercisable at a price of $4.23
per Warrant Share;
(j) Any Warrant issued after December 31, 2000 and
on or prior to March 31, 2001, will be exercisable at a price of $4.76 per
Warrant Share;
(k) Any Warrant issued after March 31,2001 and on
or prior to June 30, 2001, will be exercisable at a price of $5.36 per
Warrant Share;
(l) Any Warrant issued after June 30, 2001 and on
or prior to September 30, 2001, will be exercisable at a price of $6.03 per
Warrant Share; and
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
(m) Any Warrant issued after September 30, 2001
and on or prior to December 31,2001, will be exercisable at a price of $6.78
per Warrant Share.
4.3 IPO WARRANTS. In addition to the provisions above relating
to the issuance of Warrants, if Centraal files a registration statement pursuant
to the Securities Act of 1933, as amended, for an initial public offering of its
Common Stock (an "IPO"), or an amendment thereto, which filing contains the
initial price range per share for such offering (the "PRICE RANGE FILING"), and
on such date of filing (the "PRICE RANGE FILING DATE"), at least the Pro Rata
Number (as defined below) of RealNames have been Sold by NSI, then Centraal
shall issue to NSI promptly after such date, a non-transferable (other than by
merger or consolidation or to a transferee of all or substantially all of the
assets of NSI) Warrant (the "IPO WARRANT") to purchase that number of Warrant
Shares (subject to adjustment for stock splits, stock dividends,
recapitalizations, etc.) which, when aggregated with all other Warrant Shares
issued or issuable upon exercise of Warrants issued hereunder, will equal
4,196,726. Centraal shall provide NSI with notice of its intention to make a
Price Range Filing as soon as practical prior to such filing. The IPO Warrant
and any other outstanding unexercised Warrants issued hereunder must be
exercised within 10 days after the Price Range Filing Date. For purposes of this
paragraph, the "PRO RATA NUMBER" shall equal:
A + [(B-A) x (C/365)]
Where:
A = the Milestone Number associated with the most
recent previous Milestone Date, if any, that occurred
prior to such Price Range Filing;
B = the Milestone Number associated with the next
occurring Milestone Date following the Price Range
Filing Date; and
C = the number of days that have elapsed or have
partially elapsed since the previous Milestone Date.
The exercise price for the IPO Warrant will be:
(i) with respect to the following number
of Warrant Shares, the then appropriate exercise price determined in accordance
with Section 4.2 above:
(C/365 x D);
where,
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
D = the number of Shares subject to a Warrant upon
achievement of the next Milestone Number; and
(ii) with respect to all remaining
Warrant Shares under the IPO Warrant, 90% of the low end of the price range
per share contained in the Price Range Filing.
Notwithstanding anything herein to the contrary, no Warrant, including
the IPO Warrant, shall be issued hereunder after December 31,2001.
5. OTHER ARRANGEMENTS. Centraal and NSI may, from time to time, each
acting in its sole business discretion, negotiate the following business
arrangements, which would be memorialized in a written agreement separate from
this Agreement:
(a) joint proposals to develop key strategic
relationships in "smart browsing," or cascaded name navigation or search
solutions, with Netscape, Microsoft, Yahoo and AOL, where appropriate;
(b) joint marketing and sales of Domain Names,
RealNames, and related traffic-building and tracking services, through direct
sales to Key Accounts by Centraal;
(c) joint marketing, sales and development of
domain names, Centraal's "Personal Names" product, and related personal
naming and identity services; or
(d) joint development of business and personal
directory services, using Domain Names and RealNames.
6. NON-DISCLOSURE. The parties agree to the provisions of this Section
6 and confirm their prior agreement that the terms set forth in this Section 6
also apply to any information disclosed by one party to another in the course of
negotiating this Agreement or the Draft Memorandum of Understanding between the
parties dated September 25, 1998.
6.1 "CONFIDENTIAL INFORMATION" means any information disclosed
by either party to the other party, either directly or indirectly, in writing,
orally or by inspection of tangible objects (including without limitation
documents, prototypes, samples, plants and equipment), which is designated as
"Confidential," "Proprietary" or some similar designation. Information
communicated orally will be considered Confidential Information if such
information is confirmed in writing as being Confidential Information within 30
days after the initial disclosure. Confidential Information may also include
information disclosed to a disclosing party by third parties. Confidential
Information will not, however, include any information which (i) was publicly
known and made generally available in the public domain prior to the time of
disclosure by the disclosing party; (ii) becomes publicly known and made
generally available after disclosure by the disclosing party to the receiving
party through no action or inaction of the
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
receiving party; (iii) is already in the possession of the receiving party at
the time of disclosure by the disclosing party as shown by the receiving party's
files and records immediately prior to the time of disclosure; (iv) is obtained
by the receiving party from a third party without a breach of such third
party's obligations of confidentiality; (v) is independently developed by the
receiving party without use of or reference to the disclosing party's
Confidential Information, as shown by documents and other competent evidence in
the receiving party's possession; or (vi) is required by law to be disclosed by
the receiving party, provided that the receiving party gives the disclosing
party prompt written notice of such requirement prior to such disclosure and
assistance in obtaining an order protecting the information from public
disclosure. NSI and Centraal further agree that all Customer Information and
RealName Information is Confidential Information of Centraal, notwithstanding
whether such Customer Information or RealName Information was collected by
Centraal, NSI or other parties.
6.2 NON-USE AND NON-DISCLOSURE. Each party agrees not to use
any Confidential Information of the other party for any purpose except to
exercise its right and perform its obligations under this Agreement. Each party
agrees not to disclose any Confidential Information of the other party to third
parties or to such party's employees, except to those employees of the receiving
party with a need to know. Neither party shall reverse engineer, disassemble or
decompile any prototypes, software or other tangible objects which embody the
other party's Confidential Information and which are provided to the party
hereunder.
6.3 MAINTENANCE OF CONFIDENTIALITY. Each party shall take
reasonable measures to protect the secrecy of and avoid disclosure and
unauthorized use of the Confidential Information of the other party. Without
limiting the foregoing, each party shall take at least those measures that it
takes to protect its own most highly confidential information and shall ensure
that its employees who have access to Confidential Information of the other
party have signed a nonuse and non-disclosure agreement in content similar to
the provisions hereof, prior to any disclosure of Confidential Information to
such employees. Each party shall make copies of the Confidential Information of
the other party only as necessary to fulfill its obligations hereunder, unless
previously approved in writing by the other party. Each party shall reproduce
the other party's proprietary rights notices on any such approved copies, in the
same manner in which such notices were set forth in or on the original.
6.4 THIRD-PARTY INFORMATION. Each party shall not use in the
course of its performance hereunder, and shall not disclose to the other party,
any confidential information of any third party (including without limitation
competitors of either party) unless the party using or disclosing such
information is authorized in writing by such third party to do so.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
7. TRADEMARKS AND TRADE NAMES
7.1 CENTRAAL TRADEMARKS.
(a) USE. Centraal will provide NSI with a copy of
the authorized "Real Name System" logos in JPEG, BMP and GIF format. During the
term of this Agreement, NSI may indicate to the public that it is an authorized
representative of the RealNames Services and advertise the RealNames Services
under the trademarks, marks, and trade names that Centraal may adopt from time
to time ("CENTRAAL MARKS"). NSI may sublicense such rights to NSI Affiliates in
connection with the activities of such NSI Affiliates as sub-representatives of
NSI, but only pursuant to a written agreement containing substantially the terms
of this Section 7.
(b) APPROVAL OF REPRESENTATIONS. All representations
of the Centraal Marks that NSI intends to use must be exact copies of those used
by Centraal or shall first be submitted to Centraal for approval of design,
color, and other details.
(c) ASSIGNMENT OF GOODWILL. If NSI or any NSI
Affiliate, in the course of performing its services hereunder, acquires any
goodwill or reputation in any of the Centraal Marks, all such goodwill or
reputation will automatically vest in Centraal when and as, on an on-going
basis, such acquisition of goodwill or reputation occurs, as well as at the
expiration or termination of this Agreement, without any separate payment or
other consideration of any kind to NSI or the NSI Affiliates, and NSI shall,
and shall cause each NSI Affiliate to, take all such actions to effect such
vesting. NSI shall not contest the validity of any of the Centraal Marks or
Centraal's exclusive ownership of them. During the term of this Agreement,
NSI shall not adopt, use, or register, whether as a corporate name,
trademark, service mark or other indication of origin, any of the Centraal
Marks, or any word or mark confusingly similar to them in any jurisdiction.
7.2 NSI TRADEMARKS.
(a) USE. NSI will provide Centraal with a copy of
NSI's logo in JPEG, BMP and GIF format. During the term of this Agreement,
Centraal may display the hyperlink referenced in Section 2.14 using the
trademarks, marks, and trade names that NSI may adopt from time to time ("NSI
MARKS").
(b) APPROVAL OF REPRESENTATIONS. All
representations of the NSI Marks that Centraal intends to use must be exact
copies of those used by NSI or shall first be submitted to NSI for approval
of design, color, and other details.
(c) ASSIGNMENT OF GOODWILL. If Centraal, in the
course of exercising the license in Section 7.2(a), acquires any goodwill or
reputation in any of the NSI Marks, all such
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
goodwill or reputation will automatically vest in NSI when and as, on an
on-going basis, such acquisition of goodwill or reputation occurs, as well as at
the expiration or termination of this Agreement, without any separate payment or
other consideration of any kind to Centraal, and Centraal shall take all such
actions to effect such vesting. Centraal shall not contest the validity of any
of the NSI Marks or NSI's exclusive ownership of them. During the term of this
Agreement, Centraal shall not adopt, use, or register, whether as a corporate
name, trademark, service mark or other indication of origin, any of the NSI
Marks, or any word or mark confusingly similar to them in any jurisdiction.
8. TERM AND TERMINATION
8.1 TERM. This Agreement will commence in effect on the
Effective Date and terminate upon the later of the termination of the
obligations set forth in Section 2, or the termination of the obligations set
forth in Section 3, hereof; except Sections 6, 7.l(c), 7.2(c), 8.3, 9, 10, and
11, which will survive any expiration or termination of this Agreement.
8.2 TERMINATION. If either party defaults in the performance
of any provision of this Agreement, then the non-defaulting party may give
written notice to the defaulting party that if the default is not cured within
30 days the Agreement will be terminated. If the non-defaulting party gives such
notice and the default is not cured during the 30 day period, then the Agreement
will automatically terminate at the end of that period. This Section 8.2 will
not be construed to limit any party's right to terminate Section 2 or Section 3
of this Agreement, as described under Sections 2.9 and 3.3.
8.3 RETURN OF MATERIALS. Each party shall return all
information and materials embodying confidential information provided or
delivered under this Agreement within 30 days after the termination of this
Agreement.
9. INDEMNIFICATION: REMEDIES.
9.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY CENTRAAL.
Centraal, at it own expense, will defend, indemnify and hold harmless NSI, its
officers, directors, employees, stockholders, and NSI Affiliates (collectively,
the "NSI INDEMNIFIED PERSONS") for, and will pay to the NSI Indemnified Persons
the amount of, any liability, claims, damages, defense costs and reasonable
attorneys' fees, resulting from third-party claims (collectively, "DAMAGES"),
arising from Centraal's provision of RealNames Services under this Agreement,
including without limitation Centraal's RealName application, ordering,
assignment, and adjudication process, and including, without limitation, the
infringement, or alleged infringement, of any copyright, patent, trade secret,
trade name, trademark or service mark right of any third party in connection
therewith. Centraal's obligations under this Section 9.1 will be NSI's sole
remedy, and Centraal's sole liability, for any such third party claims.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
9.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY NSI. NSI, at its
own expense, will defend, indemnify and hold harmless Centraal, its officers,
directors, employees, and stockholders (collectively, the "CENTRAAL INDEMNIFIED
PERSONS"), and will pay to the Centraal Indemnified Persons the amount of, any
Damages arising from the provision by NSI of the services described in Section 3
of this Agreement, and NSI's and the NSI Affiliates' solicitation of sales of
RealNames Services under Section 2 of this Agreement, including, without
limitation, claims of fraud, unfair business practices, misrepresentation,
breach of warranty, or other violations of third party rights. NSI's obligations
under this Section 9.2 will be Centraal's sole remedy and NSI's sole liability
for any such third party claims.
9.3 PROCEDURES FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party
of notice of the commencement of any proceeding against it, such indemnified
party will, if a claim is to be made against an indemnifying party under this
Section 9, give notice to the indemnifying party of the commencement of such
claim, but the failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the defense
of such action is prejudiced by the indemnifying party's failure to give such
notice.
(b) If any proceeding in the previous paragraph is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such proceeding, the indemnifying party will be
entitled to assume the defense of such proceeding with counsel of its choice
and, after notice from the indemnifying party to the indemnified party of its
intention to assume the defense of such proceeding, the indemnifying party
will not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 9 for any fees of other counsel or any
other expenses with respect to the defense of such proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense
of such proceeding. The indemnified party may, at its sole expense,
participate in such defense with counsel reasonably acceptable to the
indemnifying party. Once the indemnifying party assumes the defense of a
proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims
may be effected by the indemnifying party without the indemnified party's
consent unless there is no finding or admission of any violation of law or
any violation of the rights of any person and no effect on any other claims
that may be made against the indemnified party, and the sole relief provided
is monetary damages that are paid in full by the indemnifying party; and
(iii) the indemnified party will have no liability with respect to any
compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any
proceeding and the indemnifying party does not, within 30 days after the
indemnified party's notice is given, give notice to the indemnified party of
its intention to assume the defense of such
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
proceeding, the indemnifying party will be bound by any determination made in
such proceeding or any compromise or settlement effected by the indemnified
party.
9.4 Notwithstanding the forgoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice of the indemnifying party, assume the exclusive
right to defend, compromise, or settle such proceeding, but the indemnifying
party will not be bound by any determination of a proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
10. LIMITATION OF LIABILITY.
10.1 LIABILITY ON TERMINATION. In the event of termination by
either party in accordance with any of the provisions of this Agreement, neither
party will be liable to the other, because of such termination, for
compensation, reimbursement or damages on account of the loss of prospective
profits or anticipated sales or on account of expenditures, investments, or
commitments in connection with the business or goodwill of Centraal or NSI.
10.2 LIMITATION. EXCEPT FOR LIABILITY ARISING OUT OF SECTION 6
OR FROM THIRD PARTY CLAIMS UNDER SECTION 9, IN NO EVENT WILL EITHER PARTY BE
LIABLE TO THE OTHER PARTY OR ANY OTHER ENTITY FOR ANY LOST PROFITS OR ANY
SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, HOWEVER CAUSED ON ANY
THEORY OF LIABILITY (INCLUDING NEGLIGENCE).
11. MISCELLANEOUS
11.1 NONASSIGNMENT/BINDING AGREEMENT. Neither this Agreement
nor any rights under this Agreement may be assigned or otherwise transferred by
either party, in whole or in part, whether voluntary or by operation of law
without the prior written consent of the other party, which consent will not be
unreasonably withheld. Notwithstanding the above, either party may assign its
rights and obligations under this Agreement to a successor in connection with a
sale of all or substantially all of such party's assets, or pursuant to a
merger, acquisition, or corporate reorganization; provided such successor agrees
in writing to be bound by the terms and conditions of this Agreement, and
provided that such successor is not a direct competitor of the other party.
Subject to the foregoing, this Agreement will be binding upon and will inure to
the benefit of the parties and their respective successors and assigns.
11.2 INDEPENDENT CONTRACTORS. The relationship of the parties
under this Agreement is that of independent contractors. Neither party will be
deemed to be an employee,
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
agent, partner or legal representative of the other for any purpose and neither
will have any right, power or authority to create any obligation or
responsibility on behalf of the other.
11.3 NOTICES. Any notice required or permitted under the terms
of this Agreement or required by law must be in writing and must be (a)
delivered in person, (b) sent by first class registered mail, or air mail, as
appropriate, or (c) sent by overnight air courier, in each case properly posted
and fully prepaid to the appropriate address set forth below. Either party may
change its address for notice by notice to the other party given in accordance
with this Section 11.3. Notices will be considered to have been given at the
time of actual delivery in person, 3 business days after deposit in the mail as
set forth above, or one day after delivery to an overnight air courier service.
NOTICE ADDRESS IF TO CENTRAAL:
Ted West
Executive Vice President of Sales and Marketing
Centraal Corporation
811 Hansen Way
P.O. box 50750
Palo Alto, CA 94303 - 0750
WITH A COPY TO:
Susan Rotella
Vice President of Subscription Sales and Marketing
Centraal Corporation
811 Hansen Way
P.O. box 50750
Palo Alto, CA 94303 - 0750
NOTICE ADDRESS IF TO NSI:
Jon Emery
General Counsel
505 Huntmar Park Drive
Herndon, VA 20170
11.4 FORCE MAJEURE. Neither party will be liable to the other
party on account of any loss or damage resulting from any delay or failure to
perform all or any part of this
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Agreement if such delay or failure is caused, in whole or in part, by events,
occurrences, or causes beyond the control and without negligence of the parties.
Such events, occurrences, or causes will include, without limitation, acts of
God, strikes, lockouts, riots, acts of war, earthquake, fire and explosions, but
the inability to meet financial obligations is expressly excluded.
11.5 WAIVER. Any waiver of the provisions of this Agreement or
of a party's rights or remedies under this Agreement must be in writing to be
effective. Failure, neglect, or delay by a party to enforce the provisions of
this Agreement or its rights or remedies at any time, will not be construed and
will not be deemed to be a waiver of such party's rights under this Agreement
and will not in any way affect the validity of the whole or any part of this
Agreement or prejudice such party's right to take subsequent action. No exercise
or enforcement by either party of any right or remedy under this Agreement will
preclude the enforcement by such party of any other right or remedy under this
Agreement or that such party is entitled by law to enforce.
11.6 SEVERABILITY. If any term, condition, or provision in
this Agreement is found to be invalid, unlawful or unenforceable to any extent,
the parties shall endeavor in good faith to agree to such amendments that will
preserve, as far as possible, the intentions expressed in this Agreement. If the
parties fail to agree on such an amendment, such invalid term, condition or
provision will be severed from the remaining terms, conditions and provisions,
which will continue to be valid and enforceable to the fullest extent permitted
by law.
11.7 INTEGRATION. This Agreement (including the Attachments
and any addenda hereto signed by both parties) contains the entire agreement of
the parties with respect to the subject matter of this Agreement and supersedes
all previous communications, representations, understandings and agreements,
either oral or written, between the parties with respect to said subject matter,
including without limitation the Draft Memorandum of Understanding between the
parties dated the September 25, 1998. This Agreement may not be amended, except
by a writing signed by both parties.
11.8 CONFIDENTIALITY AND PRESS RELEASE. Neither party shall
disclose any terms of this Agreement to any third party without the consent of
the other party, except as required by securities or other applicable laws or to
prospective and other investors or such party's accountants, attorneys and other
professional advisors, provided such parties are acting under a duty of
confidentiality. The parties shall use reasonable efforts to agree upon and
release a joint press release regarding this Agreement that is mutually
acceptable in timing and content, as soon as reasonably possible after the
Effective Date.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
11.9 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which so executed will be deemed to be an original and
such counterparts together will constitute one and the same agreement.
11.10 GOVERNING LAW. This Agreement will be interpreted and
construed in accordance with the laws of the State of California and the United
States of America, without regard to conflict of law principles. All disputes
arising out of this Agreement will be subject to the exclusive jurisdiction of
the state and federal courts located in Santa Clara County, California, and
Fairfax County, Virginia, and each party hereby consents to the personal
jurisdiction thereof.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
CENTRAAL CORPORATION NETWORK SOLUTIONS, INC.
By: /s/Keith Teare By:
----------------------------- -------------------------------
Title: President Title:
----------------------------- -------------------------------
Date: 12/8/98 Date:
----------------------------- -------------------------------
[SIGNATURE PAGE TO SALES REPRESENTATIVE AGREEMENT]
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
CENTRAAL CORPORATION NETWORK SOLUTIONS, INC.
By: By: /s/ Robert J. Korzeniewski
-------------------------------- -------------------------------
Keith Teare
President
Title: Robert J. Korzeniewski,CFO
-------------------------------
Date: Date:
-------------------------------- -------------------------------
[SIGNATURE PAGE TO SALES REPRESENTATIVE AGREEMENT]
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
ATTACHMENT 1
NSI SUPPORT OBLIGATIONS
1. NSI SUPPORT. NSI shall provide first level support through
telephone, email and fax to customers of RealName Subscriptions. NSI will only
be obligated to provide support in US English, but may provide support in other
languages if NSI deems it appropriate to do so.
1.1 SCHEDULE. NSI shall make a Customer Service Representative
available to customers 7-days per week, 24 hours per day.
1.2 SUPPORT FUNCTIONS. NSI shall perform the following
support functions:
(a) Resolve questions on the use of the Web-based
interface for purchase of RealName Service subscriptions.
(b) Resolve questions from customers on the status of
RealName Service subscriptions.
(c) Resolve questions from customers regarding the
billing of RealName Service subscriptions.
(d) Interface with RealName Second Level Support on
behalf of the customer as required.
(e) Forward customers with adjudication questions to
the RealName Adjudication center.
(f) Answer basic questions about installation of
the RealName Service XML registration file on the customer's computer.
(g) Answer questions about the statistics
information provided through the RealName Web site.
(h) Describe the RealName adjudication process to
customers at a summary level.
1.3 SERVICE LEVEL. NSI shall provide support according to the
following level of service requirements, for customer interaction that does not
require Second Level Support from Centraal:
(a) 8% maximum average abandon rate for ACD.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
(b) 30 second maximum average speed of answer, to
be measured from the time the customer begins to wait in an ACD queue.
(c) 24-hour maximum average email response time;
provided that adequate access is provided to Centraal's systems and
information to facilitate a timely resolution.
(d) 24-hour maximum average fax resolution time;
provided that adequate access is provided to Centraal's systems and
information to facilitate a timely resolution.
(e) The parties will cooperate to ensure that
NSI's staff is adequately trained so that the percentage of calls escalated
to Second Level Support will be limited to an agreed-upon target percentage.
2. BILLING. NSI shall bill NSI Customers for Real Name Subscription
fees, and collect RealName Subscription fees. NSI shall send renewal notices for
RealName Subscriptions to NSI Customers and Non-NSI Sold Customers, according to
a schedule to be determined by the parties.
3. NSI OPERATIONS SUPPORT. NSI shall provide operations support for all
NSI-operated software, hardware, data communications equipment and
telecommunications equipment. The definition of severity levels for operations
support will be as agreed by the parties.
3.1 SCHEDULE. NSI shall make its operations support personnel
available via telephone or pager 24 hours per day, 7 days per week.
3.2 SERVICE LEVEL. NSI shall provide operations support to
address any problems reported by Centraal, in accordance with the following
problem response objectives. For the purposes of this paragraph the following
definitions and obligations are imposed:
Severity 1 - A Critical function cannot be performed. NSI shall assign Severity
1 problems to a technician within 30 minutes and resolve such problems within 6
hours on average.
Severity 2 - An important, but not critical function, cannot be performed. NSI
shall assign Severity 2 problems to a technician within 2 hours and resolve such
problems within 1 working day on average.
Severity 3 - A non-critical function that does not meet the criteria for
Severity 1 or Severity 2. NSI shall assign Severity 3 problems to a technician
within 1 day and resolve such problems within 7 working days on average.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
All time periods for responses to problems reported by Centraal will commence
when Centraal initially reports a problem to NSI operations personnel. NSI shall
notify Centraal immediately by telephone once any reported problem has been
assigned, and again once the problem is resolved.
3.3 OUTAGES. NSI shall notify Centraal of any scheduled outage
at least 48 hours in advance of the outage, via both telephone and email. NSI
shall notify Centraal immediately in the event of an unscheduled outage, via
telephone.
4. TRAINING. NSI shall train personnel performing First Level Support
on the details of the RealName Service and Centraal billing system. NSI shall
train personnel performing all NSI supplied telesales functions if these
services are offered. Centraal and NSI will cooperate to develop training
materials for such training.
5. SECURITY. NSI shall utilize industry-accepted methods for protecting
information systems from sabotage, impersonation, or unauthorized access to
data.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
ATTACHMENT 2
Centraal Support Obligations
1. REALNAME SECOND LEVEL SUPPORT. Centraal shall provide Second Level
Support for problems that cannot be resolved through NSI First Level Support or
RealName First Level Support. Centraal shall provide status information to NSI
on all unresolved second level problems on a regular basis.
1.1 SCHEDULE. Centraal shall provide Second Level Support 12
hours per day, Monday through Friday, excluding Centraal-observed holidays.
1.2 SERVICE LEVEL. Centraal shall adhere to the following
service level requirements for calls received Monday through Friday, excluding
Centraal-observed holidays:
(a) 12-hour maximum average response to problems
submitted by telephone.
(b) 12-hour maximum average response to problems
submitted by email.
(c) 12-hour maximum average response to problems
submitted by fax.
2. REALNAME ADJUDICATION. Centraal shall provide services to all
customers of RealNames Services to adjudicate disputes regarding RealName
Subscriptions, via telephone, email and fax.
2.1 SCHEDULE. Centraal shall provide RealName adjudication
support 9 a.m. through 9 p.m. Eastern time, Monday through Friday, Centraal
observed holidays excluded.
2.2 SERVICE LEVEL. Centraal shall provide RealName
adjudication support according to the following service level requirements:
(a) Centraal shall review and respond to 99% of all
RealName Service subscriptions submitted in US English within an average of 24
hours after submission.
(b) Centraal shall resolve 99% of all RealName
Service subscriptions submitted in US English that are initially rejected,
within 72 hours of submission, provided the customer is available and
cooperates regarding such resolution.
3. CENTRAAL OPERATIONS SUPPORT. As between the parties, Centraal shall
provide operations support for all Central-operated software, hardware, data
communications equipment
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
and telecommunications equipment that is used to provide RealNames Services.
The definition of severity levels for operations support will be as agreed to
by the parties.
3.1 SCHEDULE. Centraal shall make its operations support
personnel available via telephone or pager 24 hours per day, 7 days per week.
3.2 SERVICE LEVEL. Centraal shall provide operations support
to address any problems reported by NSI in accordance with the following problem
response objectives. All time periods for responses to problems reported by NSI
will commence when NSI initially reports a problem to Centraal operations
personnel. For the purposes of this paragraph the following definitions and
obligations are imposed:
Severity 1 - A Critical function cannot be performed. Centraal shall assign
Severity 1 problems to a technician within 30 minutes and resolve such problems
within 6 hours on average.
Severity 2 - An important, but not critical function, cannot be performed.
Centraal shall assign Severity 2 problems to a technician within 2 hours and
resolve such problems within 1 working day on average.
Severity 3 - A non-critical function that does not meet the criteria for
Severity 1 or Severity 2. Centraal shall assign Severity 3 problems to a
technician within 1 day and resolve such problems within 7 working days on
average.
3.3 Centraal shall notify NSI immediately by telephone once
any reported problem has been assigned, and again once the problem is resolved.
3.4 OUTAGES. Centraal shall notify NSI of any scheduled outage
at least 48 hours in advance of the outage, via both telephone and email.
Centraal shall notify NSI immediately in the event of an unscheduled outage, via
telephone.
4. CUSTOMER SERVICE TOOLS. Centraal shall provide existing Web-based
customer service tools for use by NSI in connection with its First Level Support
obligations, and telesales, if any, subject to any applicable licensing terms.
These customer service tools will be modified by Centraal according to a
specification jointly agreed to by the parties to provide the functionality
required for first level support and telesales functions.
5. TRAINING. Centraal will provide Second Level Support to NSI training
personnel as required to answer questions and resolve problems related to
training issues.
6. SECURITY. Centraal shall utilize industry-accepted methods for
protecting information systems from sabotage, impersonation, or unauthorized
access to data.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
ATTACHMENT 3
FORM OF WARRANT
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUED UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE AFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE WARRANT EVIDENCED HEREBY IS NON-TRANSFERRABLE.
NO. NSI-___ CENTRAAL CORPORATION [DATE OF ISSUE]
COMMON STOCK PURCHASE WARRANT
This certifies that, for good and valuable consideration, Network
Solutions, Inc. ("NSI") is entitled, upon the terms and subject to the
conditions hereinafter set forth, to acquire from Centraal Corporation (the
"COMPANY"), in whole or from time to time in part, up to _________ fully paid
and nonassessable shares of Common Stock, par value $0.001 per share, of the
Company ("WARRANT STOCK") at a purchase price per share of $________ (the
"EXERCISE PRICE"). Such number of shares, type of security and Exercise Price
are subject to adjustment as provided herein, and all references to "Warrant
Stock" and "Exercise Price" herein shall be deemed to include any such
adjustment or series of adjustments.
1. EXERCISE OF WARRANT
(a) EXPIRATION TIME. The term "EXPIRATION TIME" means the
close of business on [DATE OF EXPIRATION].
(b) EXERCISE PROCEDURE. The purchase rights represented by
this Warrant are exercisable, in whole or in part, at any time and from time to
time at or after the date hereof and at or prior to the Expiration Time, by the
surrender of this Warrant and the Notice of Exercise form attached hereto duly
executed to the office of the Company at 811 Hansen Way, Palo Alto, California
94303, Attn: Corporate Secretary (or such other office or agency of the Company
as it may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company), and upon payment
of the Exercise Price for the shares thereby purchased (by wire transfer, by
certified bank check payable to the order of the Company, by cancellation of
indebtedness of the Company to the holder hereof, if any, at the time of
exercise, or by any combination thereof, in an amount, payable in United States
dollars, equal to the purchase price of the shares thereby purchased); whereupon
the holder of this Warrant shall be entitled to receive from the Company a stock
certificate in proper form representing the number of shares of Warrant Stock so
purchased, and a new Warrant in substantially identical form for the purchase of
that number of shares of Warrant Stock equal to the difference, if any, between
the number of shares of Warrant Stock subject hereto and the number of shares of
Warrant Stock as to which this Warrant is so exercised.
2. ISSUANCE OF SHARES; NO FRACTIONAL SHARES OR SCRIP
Certificates for shares purchased hereunder shall be delivered
within a reasonable time after the date on which this Warrant shall have been
exercised in accordance with the terms hereof. The Company hereby represents
and warrants that all shares of Warrant Stock which may be issued upon the
exercise of this Warrant will, upon such exercise, be duly and validly
authorized and issued, fully paid and nonassessable and free from all taxes,
liens and charges in respect of the issuance thereof (other than liens or
charges
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
created by or imposed upon the holder of the Warrant Stock). The Company agrees
that the shares so issued shall be and shall for all purposes be deemed to have
been issued as of the close of business on the date on which this Warrant shall
have been exercised in accordance with the terms hereof. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise of
this Warrant, an amount equal to such fraction multiplied by the Fair Market
Value (as determined in good faith by the Company's Board of Directors) of a
share of Warrant Stock on the date of exercise shall be paid in cash or check to
the holder of this Warrant.
3. CHARGES, TAXES AND EXPENSES
The holder shall pay all issue and transfer taxes and other incidental
expenses in respect of the issuance of certificates for shares of Warrant Stock
upon the exercise of this Warrant, and such certificates shall be issued in the
name of the holder of this Warrant.
4. NO RIGHTS AS A STOCKHOLDER
This Warrant does not entitle the holder hereof to any voting rights
or other rights as a stockholder of the Company prior to the exercise hereof.
5. RESTRICTIONS ON TRANSFER; LOCK-UP
(a) RESTRICTIONS ON WARRANT. This Warrant is not
transferable, whether by sale, pledge or other disposition, voluntarily or by
operation of law or otherwise without the prior written consent of the
Company, which consent may be withheld in the Company's sole discretion. Any
transfer in violation hereof shall be void and the Warrant shall terminate
immediately upon any such purported transfer.
(b) RESTRICTIONS ON TRANSFER OF WARRANT STOCK. In no event
will the holder make a disposition of the Warrant Stock unless and until (i) it
shall have notified the Company of the proposed disposition in writing, and (ii)
if requested by the Company, it shall have furnished the Company with an opinion
of counsel satisfactory to the Company and its counsel to the effect that (A)
appropriate action necessary for compliance with the Securities Act of 1933, as
amended (the "SECURITIES ACT") provisions relating to sale of an unregistered
security has been taken, or (B) an exemption from the registration requirements
of the Securities Act is available. Notwithstanding the foregoing, the
restrictions imposed upon the transferability of the Warrant Stock shall
terminate as to any particular share of Warrant Stock when (1) such security
shall have been sold without registration in compliance with Rule 144 under the
Securities Act, or (2)a letter shall have been issued to the holder at its
request by the staff of the Securities and Exchange Commission or a ruling shall
have been issued to the holder at its request by such Commission stating that no
action shall be recommended by such staff or taken by such Commission, as the
case may be, if such security is transferred without registration under the
Securities Act in accordance with the conditions set forth in such letter or
ruling and such letter or ruling specifies that no subsequent restrictions on
transfer are required, or (3) such security shall have been registered under the
Securities Act and sold by the holder thereof in accordance with such
registration.
(c) LOCK-UP. In the event of any registration of the Company's
securities, the holder will not, upon request of the Company or the underwriters
managing any underwritten offering of the Company's securities, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of the Warrant Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Warrant Stock,
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
-2-
<PAGE>
whether or not any such transaction described in clause (i) or (ii) above is
to be settled by delivery of such Warrant Stock, in cash or otherwise,
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 180 days) from the
effective date of such registration as may be requested by the Company or
such managing underwriters.
(d) NO PUBLIC MARKET. At the date of issuance of this Warrant,
no public market exists for any of the securities of the Company, and the
Company makes no assurances that a public market will ever exist for the
Company's securities.
(e) RESTRICTIVE LEGENDS. The certificates representing the
Warrant Stock and any securities of the Company issued with respect thereto
shall be imprinted with legends restricting transfer except in compliance with
the terms hereof and with applicable Federal and state securities laws.
6. EXCHANGE AND REGISTRY OF WARRANT
The Company shall maintain at the office or agency referred to in
Section 1(b) hereof a registry showing the name and address of the registered
holder of this Warrant. This Warrant may be surrendered for exercise in
accordance with its terms at such office or agency of the Company, and the
Company shall be entitled to rely in all respects upon such registry.
7. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT
On receipt by the Company of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and in
case of any such loss, theft or destruction of this Warrant, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of such
Warrant, the Company will execute and deliver to the holder, in lieu thereof,
a new Warrant in substantially identical form.
8. SATURDAYS, SUNDAYS AND HOLIDAYS
If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall be a Saturday or a
Sunday or shall be a legal holiday in the United States or the State of
California, then such action may be taken or such right may be exercised on
the next succeeding business day.
9. ADJUSTMENT TO NUMBER AND TYPE OF SECURITIES AND EXERCISE PRICE
The type and number of securities of the Company issuable upon
exercise of this Warrant and the Exercise Price are subject to adjustment as
set forth below:
(a) ADJUSTMENT FOR STOCK SPLITS, STOCK DIVIDENDS,
RECAPITALIZATIONS, ETC. The Exercise Price and the number and type of securities
and/or other property issuable upon exercise of this Warrant shall be
appropriately and proportionately adjusted to reflect any stock dividend, stock
split, combination of shares, reclassification, recapitalization or other
similar event affecting the number or character of outstanding shares of Warrant
Stock, so that the number and type of securities and/or other property issuable
upon exercise of this Warrant shall be equal to that which would have been
issuable with respect to the number of shares of Warrant Stock subject hereto at
the time of such event, had such shares of Warrant Stock then been outstanding.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
-3-
<PAGE>
b) ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
In case of any consolidation or merger of the Company with or into any other
corporation, entity or person, or any other corporate reorganization, in which
the Company shall not be the continuing or surviving entity of such
consolidation, merger or reorganization (any such transaction being hereinafter
referred to as a "REORGANIZATION"), then, in each case, the holder of this
Warrant, on exercise hereof at any time after the consummation or effective date
of such Reorganization, shall receive, in lieu of the Warrant Stock issuable on
such exercise prior to the date of such Reorganization, the stock and other
securities and property (including cash) to which such holder would have been
entitled upon the date of such Reorganization if such holder had exercised this
Warrant immediately prior thereto.
(c) CERTIFICATE AS TO ADJUSTMENTS. In case of any adjustment
in the Exercise Price or number and type of securities issuable on the exercise
of this Warrant, the Company will promptly give written notice thereof to the
holder of this Warrant in the form of a certificate, certified and confirmed by
an officer of the Company, setting forth such adjustment and showing in
reasonable detail the facts upon which such adjustment is based.
10. REPRESENTATIONS AND COVENANTS OF.
NSI represents and covenants to the Company as follows:
(a) INVESTMENT PURPOSE. This Warrant and the Warrant Stock
will be acquired for investment for NSI's own account, and not as a nominee or
agent and not with a view to the distribution of any part thereof. NSI further
represents that it does not have any contract, undertaking agreement or
arrangement with any person to sell, transfer or grant participations to such
person, or to any third person, with respect to this Warrant.
(b) PRIVATE ISSUE. NSI understands (i)that the Warrant and the
Warrant Stock are not registered under the Securities Act, or qualified under
applicable state securities laws on the ground that the issuance of this Warrant
will be exempt from the registration and qualifications requirements thereof,
and (ii) that the Company's reliance on such exemption is predicated on the
representations set forth in this Section 10.
(c) SALES OF COMMON STOCK. NSI represents and warrants that
NSI is familiar with the provisions of Rule 144 promulgated under the Securities
Act which, in substance, permits limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer) in a non-public offering subject to the
satisfaction of certain conditions, including, among other things: (i) the
availability of certain public information about the Company; (ii) the resale
occurring not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and
(iii) in the case of an affiliate, or of a non-affiliate who has held the
securities less than two years, the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as such term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable. NSI
acknowledges that in the event the applicable requirements of Rule 144 are not
met, registration under the Securities Act or compliance with another exemption
from registration will be required for any disposition of the Common Stock
issuable upon exercise of this Warrant.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
-4-
<PAGE>
(d) FINANCIAL RISK. NSI has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) ACCREDITED INVESTOR. NSI is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
11. GOVERNING LAW
This Warrant shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
wholly within such state.
12. COMPLETE AGREEMENT AND MODIFICATIONS
This Warrant and any documents referred to herein or executed
contemporaneously herewith constitute the Company's and NSI's entire agreement
with respect to the subject matter hereof and supersede all agreements,
representations, warranties, statements, promises and understandings, whether
oral or written, with respect to the subject matter hereof. This Warrant may not
be amended, altered or modified except by a writing signed by the Company and
the holder of this Warrant.
13. NOTICES
Except as otherwise provided herein, all notices under this Warrant
shall be in writing and shall be delivered by personal service, facsimile,
courier service promising overnight delivery or certified mail (if such service
is not available, then by first class mail), postage prepaid. Notices shall be
addressed as follows:
If to: Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, Virginia 20170
Facsimile: _____________________
Attention: _____________________
If to the Company: Centraal Corporation
811 Hanson Way
Palo Alto, California 94303
Facsimile: (650) 858-0454
Attention: Corporate Secretary
With a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Facsimile: (415) 493-6811
Attention: James N. Strawbridge, Esq.
14. WAIVERS STRICTLY CONSTRUED
With regard to any power, remedy or right provided herein or otherwise
available to any party hereunder (i) no waiver or extension of time shall be
effective unless expressly contained in a writing signed
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
-5-
<PAGE>
by the waiving party; and (ii) no alteration, modification or impairment shall
be implied by reason of any previous waiver, extension of time, delay or
omission in exercise, or other indulgence.
15. SEVERABILITY
The validity, legality or enforceability of the remainder of this
Warrant shall not be affected even if one or more of its provisions shall be
held to be invalid, illegal or unenforceable in any respect.
* * *
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
-6-
<PAGE>
IN WITNESS WHEREOF, the Company and NSI have caused this Warrant to be
executed by their duly authorized representatives.
CENTRAAL CORPORATION,
a Delaware corporation
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
NETWORK SOLUTIONS, INC.
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
[SIGNATURE PAGE TO COMMON STOCK PURCHASE WARRANT]
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
NOTICE OF EXERCISE
To: Centraal Corporation, a Delaware corporation
(1) The undersigned hereby elects to purchase ________shares of
Common Stock of Centraal Corporation, a Delaware corporation, pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full.
(2) The undersigned represents that the aforesaid shares are
being acquired for the account of the undersigned for investment and not with
a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling
such shares, except in compliance with applicable Federal and state
securities laws.
(3) The undersigned accepts such shares subject to the
restrictions on transfer set forth in the attached Warrant.
Holder:
-------------------------
By:
----------------------------
- --------------------- Name:
(Date) --------------------------
Title:
-------------------------
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
AMENDMENT #1 TO REALNAME SALES REPRESENTATIVE AGREEMENT
This Amendment is made as of February 18th, 1999 (the "Effective Date")
by and between Network Solutions, Inc. ("NSI") and Centraal Corporation
("Centraal") for the purpose of modifying the RealName Sales Representative
Agreement between the parties dated as of December 8, 1998 ("Agreement").
WHEREAS, the parties have entered into the Agreement which provides for NSI to
solicit sales of RealNames Services (as such term is defined in the Agreement);
and
WHEREAS, the parties wish Centraal's logo and hyperlink to appear on NSI's "Dot
Com Toolkit" Web page to enable the direction of NSI's customers to Centraal's
transactional web site and thereby facilitate sales by Centraal of it RealNames
Services.
Now, therefore, the parties agree as follows:
1. Section 7.1(a) (Use of Centraal's Trademarks) of the Agreement will be
changed by adding the following:
In addition, during the term of this Agreement, NSI may display a hyperlink
using the Centraal Marks as provided in Section 2.16(b).
2. The following will be added to Section 1 of the Agreement
1.11 "Centraal Home Page" means the entry page on the WWW located at the
URL address http://www.realnames.com which is the page a user's web browser
will generate as a result of requesting such URL or any other URL with
which that the Parties replace such URL.
1.12 "Centraal Web Site" means the Centraal Home Page and other web pages
sharing a similar URL that are connected to it.
1.13 "Dot Com Toolkit" means the area on the NSI Web Site that users are
referred to for the presentation of offerings to assist small and medium
size businesses in building, establishing or promoting their Internet
identity or conducting business on the Internet by offering easy access to
tools, products and services to facilitate the development, enhancement and
promotion of their web site.
1.14 "Dot Com Toolkit Page" means the content area of the Dot Com Toolkit
for the Centraal product/service offering descriptions.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
1.15 "Host" means a computer system that carries a web site or sites.
1.16 "Hyper Link" or "hyperlink" means the icon, logo, highlighted or
colored text, figure, or image representing a URL provided by each Party to
the other under this Agreement, which allows an Internet user to move from
one web site to another web site.
1.17 "NSI Home Page" means the entry page on the WWW located at the URL
address http://www.networksolutions.com which is the page a user's web
browser will generate as a result of requesting such URL or any other URL
with which NSI replaces such URL.
1.18 "NSI Web Site" means the NSI Home Page and the other pages, sharing a
similar URL, which are connected to it.
3. Section 1.10 (Definition of "Sold") will be changed as follows:
"(i) solicited by NSI on Centraal's behalf" will be changed to "(i)
solicited by NSI on Centraal's behalf, including without limitation through
referral from the Dot Com Toolkit Page"
4. The following new Section 2.16 will be added to the Agreement.
2.16 DOT COM TOOLKIT
2.16 (a) CENTRAAL'S OBLIGATIONS
2.16 (a) (i) DEVELOPMENT. As between the parties, Centraal will be
responsible to develop and maintain the content of the Centraal Web Site,
in a manner of Centraal's choosing at its sole discretion, for the offering
of the RealNames Services under this Agreement.
2.16 (a) (ii) DOT COM TOOLKIT PAGE. Centraal shall prepare its Dot Com
Toolkit Page content pursuant to the specifications and requirements
provided by NSI, which may be changed from time to time in NSI's
reasonable discretion. Centraal shall provide NSI with the URL where its
Dot Com Toolkit Page is located to enable NSI to harvest such content for
the purpose of incorporating into the Dot Com Toolkit. The Dot Com Toolkit
Page will have a Hyper Link to the Centraal Web Site to enable customers
and visitors of the NSI Web Site ("NSI Customers") to purchase the Central
RealNames Services.
2.16(a)(iii) HOSTING OF THE CENTRAAL WEB SITE. As between the parties,
Centraal will be responsible to Host the Centraal Web Site on its web
server, in a manner of Centraal's choosing at its sole discretion.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
2.16(b) NSI'S OBLIGATIONS
2.16(b)(i) DEVELOPMENT OF DOT COM TOOLKIT. NSI, at its sole cost, will
develop and maintain the Dot Com Toolkit web site. The Dot Com Toolkit will
be compatible with version 3.0 or better web browsers. The Dot Com Toolkit
will contain a listing of categories identifying the types of
products/service offerings available from parties under contract to NSI.
NSI will maintain a Hyper Link on the Centraal Dot Com Toolkit page to
enable NSI Customers to go to the Centraal Web Site to purchase the
RealNames Services. Centraal will provide its logo and other identifier
information, in the format requested by NSI, to enable NSI to establish the
Hyper Link.
2.16(b)(ii) DEVELOPMENT OF DOT COM TOOL KIT CATEGORY PAGE. NSI will
develop, maintain and Host individual category pages within the Dot Com
Tool Kit for different categories of product/service offerings with a
description of specific offerings available from parties under contract to
NSI. NSI will provide Centraal with a specification regarding the
individual Dot Com Toolkit Page requirements for storage space, content,
artwork, logo size, product/service offering descriptions and other
applicable requirements.
2.16(b)(iii) REPORTING AND TRACKING. NSI will provide Centraal an
individual electronic bi-weekly report of the number of click-throughs from
Centraal's Dot Com Toolkit page to the Centraal Web Site. NSI will provide
Centraal with procedures for accessing its weekly report.
2.16(b)(iv) CUSTOMER SUPPORT. NSI will provide support to NSI Customers for
all issues relating to the Dot Com Toolkit.
5. Section 3.1(a) (Customer Services; Support) will be changed by adding the
following after the first sentence:
The parties acknowledge that prior to the date NSI begins to provide such
customer support under this Section 3.1(a), as between the parties,
Centraal will be responsible for providing customer support for the
Centraal Web Site, in a manner of Centraal's own choosing at its sole
discretion.
6. The following new Section 11.11 will be added to the Agreement:
11.11 AUDIT. Each party reserves the right to audit, at its sole cost and
expense, no more than one per year, upon 10 business days advance written
notice, the appropriate records of the other party to verify any amounts
due under this Agreement. Such audits shall be conducted by an independent
certified public accounting firm in accordance with generally accepted
auditing standards, limited to records for the 12 month period immediately
preceding the month of the audit. If any audit reveals an underpayment of
10% or more for the period under audit, then the audited party will
immediately pay the auditing party for all underpaid commission fees and
the reasonable costs of the audit.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
7. Except as amended by this Amendment, the terms and conditions of the
Agreement will remain in full force and effect.
CENTRAAL CORPORATION NETWORK SOLUTIONS, INC.
Signed: /S/TED WEST Signed: /S/JAMES M. ULAM
--------------------------- -----------------------
By: TED WEST By: JAMES M. ULAM
------------------------------ --------------------------
Title: EVP - SALES & MARKETING Title: COUNSEL
---------------------------- ------------------------
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
AMENDMENT #2 TO REALNAME SALES REPRESENTATIVE AGREEMENT
This Amendment is made as of the 25th day of May, 1999 (the "Effective Date") by
and between Network Solutions, Inc. ("NSI") and Centraal Corporation
("Centraal") for the purpose of modifying the RealNames Sales Representative
Agreement between the parties dated as of December 8, 1998 ("Agreement").
WHEREAS, the parties have entered into the Agreement, which provides for NSI to
solicit sales of RealNames Services (as such term is defined in the Agreement);
and
WHEREAS, the parties wish to modify the Agreement to reflect a short term
promotional incentive program and changes to the Parties customer Support
obligations.
NOW, THEREFORE, in consideration of the mutual covenants and premises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which hereby is acknowledged, Centraal and NSI hereby agree to amend the
Agreement as follows:
1. DEFINED TERMS. Except as otherwise provided herein, all of the capitalized
terms used herein shall have the same meanings as provided in the
Agreement.
2. CENTRAAL/NSI PROMOTIONAL INCENTIVE FOR ISP CHANNELS - THE FOLLOWING CHANGES
ARE MADE TO SECTION 2 OF THE AGREEMENT:
2.5 For the remaining term of this Agreement, Centraal agrees to accept
RealNames Subscriptions ordered through any NSI Affiliate from Key Accounts and
to pay Commissions to NSI for such RealNames Subscriptions in accordance with
Section 2.8 of the Agreement.
2.8 For the period of June 1, 1999 through September 30, 1999, Centraal
agrees to pay NSI an additional Commission of [*] of the NSI Customer
Subscription Fee plus the standard Commission (the greater of (i) [*] , or
(ii) [*] for each NSI Customer Subscription Fee acquired through any NSI
Affiliate that NSI elects to pass on such additional commission as an
additional incentive to stimulate interest in selling RealNames
Subscriptions. NSI agrees that the additional Commission of [*] of the NSI
Customer Subscription Fee will be paid directly to the respective NSI
Affiliate. For NSI Affiliates that NSI elects to provide the additional [*]
Commission, NSI agrees to pay a minimum of [*] per each RealName
subscription sold through the NSI Affiliates for the same period of time and
in addition to the [*] commission. The minimum commission to each of the NSI
Affiliates that NSI elects to provide the additional [*] Commission during
the promotional incentive period will thus be [*] of the RealName
Subscription Fee plus [*] . Centraal will pay the commission directly to NSI
for distribution to the NSI Affiliates after sales are made and funds
collected. NSI will provide Centraal with information reasonably necessary to
validate actual partner subscription sales and commission payments.
3. CUSTOMER SUPPORT - THE FOLLOWING CHANGES ARE MADE TO SECTION 3 OF THE
AGREEMENT:
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
3.1 (a) Centraal will continue to provide First Level Support past June 1,
1999 according to the plan described in Attachment 1 to the Agreement in a
timely manner pending NSI's readiness for providing such services. NSI agrees to
use its best efforts to commence providing First Level Support on or before
January 1, 2000.
3.2 Until such time as NSI commences providing First Level Support, it
agrees not to withhold commissions according to the section 3.2 of the agreement
from RealNames Subscription Fees.
IN WITNESS WHEREOF, the parties hereto caused this Amendment to be signed by
duly authorized officers or representatives as of May 25, 1999.
Centraal Corporation
By: /S/J MICHAEL ARRINGTON
------------------------------
Name: J. Michael Arrington
Title: Vice President, Business Development, and General Counsel
Network Solutions, Inc.
By: /S/JAMES M. ULAM
-----------------------------
Name: James M. Ulam
Title: Counsel
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMMITED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Exhibit 10.10
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
REALNAMES SERVICE AGREEMENT
BETWEEN CENTRAAL AND ALTAVISTA
This Agreement regarding RealNames Service (the "AGREEMENT") is entered
into as of April 1, 1999 ("EFFECTIVE DATE") by and between Centraal Corporation,
a Delaware corporation with offices at 2 Circle Star Way, 2nd Floor San Carlos,
CA 94070-1350 ("CENTRAAL") and AltaVista Company, a Delaware corporation with
offices at 529 Bryant Street, Palo Alto, CA, U.S.A. 94301 ("ALTAVISTA").
WHEREAS, Centraal is a provider of "RealNames Service", which allows
users of the Internet to access the World Wide Web sites of RealNames
Subscribers, by using a short key word, trade name or phrase in lieu of a
Uniform Resource Locator ("URL"); and
WHEREAS, ALTAVISTA is a provider of Internet services which allow
Internet users to search the World Wide Web; and
WHEREAS, Centraal and ALTAVISTA desire to offer RealNames Service in
conjunction its World Wide Web search engines on the terms and conditions set
forth below; and
WHEREAS, ALTAVISTA and Centraal desire to supersede all previous
agreements relating to the provision of the RealNames Service on ALTAVISTA's
World Wide Web services.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS.
1.1 "ALTAVISTA PRODUCT" means the ALTAVISTA World Wide Web
services described in EXHIBIT A hereto and other Internet properties of
ALTAVISTA and all corrections, updates, upgrades, patches or other
modifications or additions thereto during the term of this Agreement.
1.2 "ANNUAL NET SUBSCRIPTION FEE" means gross annual
subscription fee less any payments actually paid to third parties who
directly provide services for the RealNames Service (not to exceed thirty
percent (30%) of such annual subscription fee where applicable) and less
taxes, discounts, allowances and adjustments, refunds, and bad debts.
Centraal may set such discounts, or make such allowances and adjustments, or
provide refunds to its customers, as it deems advisable.
1.3 "CENTRAAL COMPETITOR" means as of the Effective Date,
NetWord and Labrador Software and such other competitors as the parties may
mutually agree upon from time to time in writing.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
1.4 "CENTRAAL MATERIALS" means the Software, Documentation,
RealNames Data or Confidential Information disclosed by Centraal and any part
or combination thereof.
1.5 "DOCUMENTATION" means the Centraal documents and
materials described in EXHIBIT A hereto.
1.6 "INTEGRATED PRODUCT" means an ALTAVISTA Product that is
combined with the Software in object code form in order to provide RealNames
Service integrated with the ALTAVISTA Product.
1.7 "LOCALIZATION" and "Localized" means the translation of
English language Centraal Materials described in EXHIBIT A into a non-English
language designated in EXHIBIT A such that a user fluent in such non-English
language would be able to understand and/or operate such Centraal Materials
to the same extent a user fluent in English would be able to understand
and/or operate such Centraal Materials in English.
1.8 "NET PAID ADVERTISING FEES" means gross advertising fees
actually paid to ALTAVISTA less agency or advertising representation from
commissions (or the internal equivalent ALTAVISTA cost to generate gross
revenues not to exceed 30%) and less credits, discounts, taxes, and
technology or content distribution royalty fees where actually paid.
1.9 "NET REALNAMES RESOLUTION FEES" means gross RealNames
Resolution fees less any payments actually paid to third parties who provide
services for the RealNames Service (not to exceed thirty percent (30%) of
such gross RealNames Resolution fees and less taxes, discounts, allowances
and adjustments, refunds, and bad debts. Centraal may set such discounts, or
make such allowances and adjustments, or provide refunds to its customers, as
it deems advisable.
1.10 "PRECISE RESULTS" means when the term searched by a an
Internet user in RealNames Resolution results in an identical match to the
term used by the Internet user.
1.11 "REALNAMES ADDRESS" means the proprietary natural
language address assigned by Centraal to a RealNames Subscriber which can be
translated into a URL address through RealNames Resolution.
1.12 "REALNAMES DATA" means the proprietary address
information database maintained by Centraal relating to RealNames Addresses
for RealNames Subscribers' URLs.
1.13 "REALNAMES ENABLER" means a software extension which is
proprietary to Centraal and which allows Internet users to perform RealNames
Resolutions in the browser.
1.14 "REALNAMES ENABLED RESULTS" means those results in an
Integrated Product which shows the Internet User the results of a RealNames
Resolution. RealNames Enabled Results includes both Precise Results and
Relevant Results.
1.15 "REALNAMES IMPRESSION" means the appearance of a
particular RealNames Subscriber's RealNames Address on RealNames Enabled
Results either as a Precise Result or a Relevant Result.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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1.16 "REALNAMES RESOLUTION" means the process by which a
natural language or other search term that generates a RealNames Impression
may be used by an Internet user to direct the Internet user to the URL of a
RealNames Subscriber.
1.17 "REALNAMES SERVICE" means the provision of a RealNames
Address to a RealNames Subscriber and the provision of RealNames Resolution
services.
1.18 "REALNAMES SUBSCRIBER" means a third party entity with a
World Wide Web page which has entered into a Subscriber Agreement and has
been granted a RealNames Address.
1.19 "RELEVANT RESULTS" means when the term searched by an
Internet user in RealNames Resolution results in a match that is not
identical, but close to, the exact search term used by the Internet user.
1.20 "SOFTWARE" means the Centraal software described in
EXHIBIT A in object code only and any Updates thereto.
1.21 "SUBSCRIBER AGREEMENT" means the Subscriber Agreement
attached as EXHIBIT E hereto which may be amended by Centraal in its sole
discretion.
1.22 "UPDATE" means any correction, update, upgrade, patch or
other modification or addition to the Software supplied by Centraal in its
sole discretion.
2. LICENSE GRANTS.
2.1 LICENSE TO SOFTWARE. Subject to the terms and conditions
of this Agreement, Centraal hereby grants to ALTAVISTA the following licenses:
(a) A non-exclusive, non-transferable license to
display or perform the Software, in object code or binary form only, only as
part of Integrated Products;
(b) A non-exclusive, non-transferable license to use
the Software solely to provide technical support for the Integrated Products;
and
(c) A non-exclusive, non-transferable license to use
and reproduce the Software (in object code form or binary form only) and
Documentation solely for ALTAVISTA's own internal business purposes on
Integrated Products, solely as necessary to exercise the rights granted in
this Section 2.
2.2 LICENSE TO REALNAMES DATA. Subject to the terms and
conditions of this Agreement, Centraal further grants to ALTAVISTA a
non-exclusive license to access, display and transmit portions of the
RealNames Data (as may be provided by Centraal in its sole discretion),
solely as necessary to provide RealNames Service on an Integrated Product in
accordance with this Agreement.
2.3 SUB-LICENSE. ALTAVISTA may sublicense to third parties,
solely in connection with the simultaneous license of an ALTAVISTA Product,
the rights under Sections
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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2.1 and 2.2, pursuant to a written agreement which is at least as protective
of Centraal's intellectual property rights and is consistent with the terms
and conditions of this Agreement, but only with the prior written approval of
Centraal.
2.4 PROPRIETARY NOTICES. On each copy of the Software or
RealNames Data reproduced or displayed, ALTAVISTA shall reproduce all
copyright or other proprietary notices contained on the Software, RealNames
Data or other Centraal Materials.
2.5 OWNERSHIP IN CENTRAAL MATERIALS. As between Centraal and
ALTAVISTA, Centraal will retain all right, title, and interest in the
Centraal Materials and RealNames Data, and all intellectual property rights
therein. ALTAVISTA shall not remove, modify, or obscure any copyright or
other proprietary notices on the Centraal Materials and RealNames Data.
ALTAVISTA shall not, and shall not authorize any third party to (1) create
derivative works of, alter or in any way modify the Centraal Materials or
RealNames Data without the prior written consent of Centraal, (2) translate,
decompile, disassemble, reverse compile, reverse engineer, or decode the
Software or in any other manner reduce the Software to human perceivable
form, or (3) use any Centraal Materials or RealNames Data to construct,
reverse engineer or assemble any database, including without limitation, a
URL database. Centraal hereby reserves all rights not expressly granted to
ALTAVISTA in this Agreement.
3. LOCALIZATION.
3.1 LOCALIZATION. Centraal agrees to provide the Centraal
Materials described in EXHIBIT A in the languages described in EXHIBIT A. In
the event that the parties agree that additional Localization work shall be
performed, the parties shall agree in writing which materials shall be
Localized, which languages and which party shall be responsible for such
Localization. All Localization shall be done at each party's respective
costs, unless agreed otherwise in writing. ALTAVISTA represents and warrants
that all ALTAVISTA employees, agents, contractors or consultants that will be
provided access to Centraal Materials have signed agreements with customary
terms containing confidentiality provisions and assignment of inventions.
ALTAVISTA covenants that during the term of this Agreement, it will continue
to require all ALTAVISTA employees, agents, contractors or consultants which
have access to Centraal Materials to sign an Employee NDA/Invention Agreement
providing for an assignment of intellectual property rights to ALTAVISTA.
3.2 OWNERSHIP OF LOCALIZED CENTRAAL MATERIALS. Centraal
shall own all right, title, and interest in the Localization of the Centraal
Materials regardless of which party shall perform such Localization.
ALTAVISTA hereby irrevocably transfers, conveys and assigns to Centraal in
perpetuity all right, title, and interest in such Localization of the
Centraal Materials, including without limitation all copyrights including the
right to make derivative works and collective works with respect thereto, it
being understood, however, that ALTAVISTA has, and transfers, no rights with
respect to the underlying Centraal Materials. Centraal shall have the
exclusive right to apply for or register copyrights and such other
proprietary protections as it wishes. ALTAVISTA agrees to execute such
documents, render such assistance, and take such other action as Centraal may
reasonably request, at Centraal's expense, to apply for, register, perfect,
confirm, and protect Centraal's rights in the Localization of the Centraal
Materials including (without limitation) an assignment of copyright in the
form
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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attached hereto as EXHIBIT D. Without limiting the foregoing, Centraal shall
have the exclusive right to commercialize, prepare and sell products based
upon, sublicense, prepare derivative works from, or otherwise use or exploit
the Localization of the Centraal Materials.
3.2.1 WAIVER OF MORAL RIGHTS. ALTAVISTA hereby waives
any and all moral rights, including any right to identification of authorship
or limitation on subsequent modification, that ALTAVISTA (or its employees,
agents or consultants) has or may have in any Localization of the Centraal
Materials.
3.2.2 POWER OF ATTORNEY. In the event that Centraal is
unable to secure ALTAVISTA's signature to any document required for any
copyright or other intellectual property application or registration with
respect to any Localization of the Centraal Materials, ALTAVISTA hereby
irrevocably designates and appoints Centraal and its duly authorized officers
and agents as its agents and attorneys-in-fact, to act for and in its behalf
and instead of ALTAVISTA, to execute and file any such application, and to do
all other lawfully permitted acts to further the prosecution and issuance of
intellectual property rights thereon with the same legal force and effect as
if executed by ALTAVISTA. This power of attorney shall be deemed coupled with
an interest and shall be irrevocable.
4. APPOINTMENT AS A PROVIDER OF REALNAMES SERVICE.
4.1 APPOINTMENT AS PROVIDER OF REALNAMES SERVICE. Subject to
the terms and conditions herein, Centraal hereby appoints ALTAVISTA as a
non-exclusive RealNames Service provider, and ALTAVISTA hereby accepts such
appointment. Centraal reserves the right to provide RealNames Service
directly, and to appoint third-parties as providers of RealNames Service.
4.2 PROMOTION OF THE REALNAMES SERVICE. ALTAVISTA shall, at
its own expense and in a manner that it shall determine: (i) promote the use
of the RealNames Service in the ALTAVISTA Products, (ii) provide links from
the ALTAVISTA's World Wide Web site that provide RealNames Service
information and access; and (iii) integrate the ALTAVISTA Product and
RealNames Service in accordance with Section 4.3 below. In no event shall
ALTAVISTA make any representations, guarantees or warranties concerning the
RealNames Service except as expressly authorized by Centraal in writing.
4.3 INTEGRATION OF REALNAMES SERVICE INTO ALTAVISTA PRODUCT.
4.3.1 PRODUCT INTEGRATION. ALTAVISTA shall, at its own
expense (except for Centraal's reasonable technical assistance which shall be
provided at Centraal's expense) integrate the RealNames Service into the
ALTAVISTA Product for use by Internet users who wish to search for a
RealNames Address or subscribe to a RealNames Address. The RealNames Enabled
Results shall be marked with a "RN" superscript to indicate those results
which have RealNames Addresses.
4.3.2 CO-BRANDED PAGES. The parties shall, at their own
expense, develop a World Wide Web page which carries each parties' Trademarks
(as defined in Section 6 below) that display the RealNames Enabled Results
(the "Co-Branded Page") based upon the
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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criteria developed in Section 4.3.2.1 and 4.3.2.2 for the Integrated Product.
ALTAVISTA shall have the option to cease display of the Co-Branded page on
sixty (60) days' prior written notice. ALTAVISTA shall seek to obtain and
maximize advertising or other promotional revenues from the Co-Branded Page
and compensate Centraal in accordance with EXHIBIT B.
4.3.2.1 RANKING AND RELEVANCE. The parties shall
agree in writing to mutually agreeable relevance and ranking criteria for
displaying RealNames Enabled Results on a Co-Branded Page.
4.3.2.2 CO-BRANDED PAGE LOOK AND FEEL. The
parties shall agree in writing to the "look and feel" for the Co-Branded Page
so as to approximate the "look and feel" of similar pages on the ALTAVISTA
Product. Notwithstanding anything herein to the contrary, AltaVista shall
maintain control over all aspects of the "look and feel" of its web sites.
4.4 REALNAMES SUBSCRIPTIONS. Subject to the terms and
conditions of this Agreement, ALTAVISTA shall have the non-exclusive
authority to solicit applications for RealNames Subscriptions by providing a
link to a registration site designated by Centraal in writing. Centraal
reserves the right to directly or indirectly solicit the subscription of
RealNames Addresses.
4.4.1. PRICES AND TERMS OF SALE. Attached as EXHIBIT E
hereto is a copy of Centraal's current Subscriber Agreement and registration
subscription form. Centraal may alter, at will, the Subscriber Agreement,
prices, availability schedules, and other terms and conditions for the
RealNames Service upon written notice to ALTAVISTA. Each order shall be
governed by the prices, Subscriber Agreement, availability schedules, and
other terms and conditions in effect at the time the order is accepted by
Centraal.
4.4.2. ORDERS AND ACCEPTANCE. Orders for RealNames
Address subscriptions solicited by ALTAVISTA shall take place through a
series of HTML registration pages on a Centraal World Wide Web site. All
completed orders for the RealNames Service will be processed by Centraal or
its designee, and Centraal or its designee will perform the subscription
registration, collect the fees for the subscription (where applicable), and
send via electronic mail Centraal's then-current acknowledgements, software
browser plug-ins, or other materials, to the RealNames Subscriber. All orders
solicited by ALTAVISTA are subject to acceptance by Centraal. ALTAVISTA shall
have no authority to make any acceptance or commitments to customers on
behalf of Centraal. Centraal specifically reserves the right to reject any
order or any part thereof for any reason. ALTAVISTA shall have no right to
data or information gathered from RealNames Subscribers by Centraal.
4.5 PROVISION OF REALNAMES RESOLUTION. Subject to the terms
and conditions of this Agreement, Centraal hereby appoints ALTAVISTA as a
non-exclusive provider of RealNames Resolution services on the Integrated
Product, and ALTAVISTA hereby accepts such appointment. Centraal shall
perform RealNames Resolutions for ALTAVISTA, as follows: (a) the Integrated
Products shall include, an input mechanism to prompt the World Wide Web user
for a key word or search term; (b) ALTAVISTA shall cause its computer servers
to determine which key words are appropriate for RealNames Resolutions; (c)
ALTAVISTA shall cause its computer servers to communicate such key words to
the computer servers of Centraal,
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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at an address and according to specifications reasonably required by Central;
(d) Central, upon receipt of such key word, will cause its computer servers
to perform RealNames Resolutions, and will display a list of results of such
RealNames Resolutions that correspond with such key word or search term and
corresponding URLs on the co-branded RealNames Enabled Results page created
pursuant to Section 4.3.2; (e) the RealNames Enabled Results shall be marked
with a "RN" superscript to denote those results which have a RealNames
Address; and (f) should the World Wide Web user click on one of the search
results displayed on the RealNames Enabled Results page that are produced
through the RealNames Resolutions process the Internet user will be directed
to the correct URL through the RealNames Resolvers.
4.6 EXCLUSIVITY. During the term of this Agreement,
ALTAVISTA shall not provide a subscriber based keyword matching system of a
Centraal Competitor.
4.7 SUB-DISTRIBUTORS. ALTAVISTA shall not sub-license or
appoint sub-distributors of its rights and obligations under Section 4
without Centraal's prior written consent.
5. COMPENSATION.
5.1 FEES. Fees will be paid as described in EXHIBIT B.
6. USE OF TRADEMARKS.
6.1 BRANDING. ALTAVISTA shall apply the "RealNames (sm)
enabled" and/or RealNames (sm)" logo (a copy of which is attached as EXHIBIT
F-1) on the Co-Branded page created pursuant to Section 4.3.2, in a manner
agreed upon by the parties. ALTAVISTA shall also include the phase, "-C- 1999
Centraal Corporation. All rights reserved. REALNAMES (sm) is a service mark
of Centraal Corporation" with each use of the Centraal Trademark.
6.2 USE OF CENTRAAL TRADEMARKS.
6.2.1. AUTHORIZED USES. During the term of this
Agreement, ALTAVISTA may state that the Integrated Product includes the
RealNames Service, and may use in its packaging, marketing, promotional and
advertising materials of the Integrated Products such applicable trademarks,
trade names and logos of Centraal (collectively, the "Centraal Trademarks")
in connection therewith, but only as set forth, and in the manner indicated,
on EXHIBIT F-1 or as Centraal may otherwise provide in writing. ALTAVISTA may
also indicate to the public that it is an authorized provider of Centraal's
RealNames Service and advertise such RealNames Service under Centraal's
Trademarks. Before any such use of a Centraal Trademark, ALTAVISTA must
provide to Centraal samples of any such materials, and ALTAVISTA shall not
engage in any use of any Centraal Trademark not approved by Central. If
Centraal does not object within five (5) business days after receipt of such
samples, the materials will be deemed approved. Centraal will not
unreasonably withhold on delay its approval of such materials.
6.2.2. OWNERSHIP BY CENTRAAL. Nothing herein will grant
ALTAVISTA any right, title or interest in Centraal's Trademarks. Any and all
good will arising from ALTAVISTA's use of the Centraal Trademarks will inure
solely to the benefit of Centraal ALTAVISTA shall not assert any claim to the
Centraal Trademarks (or any confusingly similar
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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mark) or such good will. ALTAVISTA shall execute such documents as Centraal
may reasonably request from time to time to record or effectuate Centraal's
ownership of the Centraal Trademarks and related good will. ALTAVISTA shall
not register any Centraal Trademark, or any mark confusingly similar thereto
for any products or services in any jurisdiction. If ALTAVISTA registers or
applies for such registration in any jurisdiction, Centraal may require (in
Centraal's sole discretion) ALTAVISTA to assign (at ALTAVISTA's expense) all
of the rights pertaining to such registration or application to Centraal or
withdraw from all such procedures.
6.2.3. REGISTERED USER AGREEMENTS. To the extent
necessary to properly protect Centraal's rights, ALTAVISTA and Centraal shall
enter into registered user agreements with respect to Centraal's Trademarks
pursuant to applicable trademark law requirements. ALTAVISTA shall be
responsible for proper filing of the registered user agreement with
appropriate government authorities and shall pay all costs or fees associated
with such filing.
6.3 USE OF ALTAVISTA TRADEMARKS.
6.3.1. AUTHORIZED USES. During the term of this
Agreement, Centraal may use in its packaging, marketing, promotional and
advertising materials such applicable trademarks, trade names and logos of
ALTAVISTA (collectively, the "ALTAVISTA Trademarks") in connection therewith,
but only as set forth, and in the manner indicated, on EXHIBIT F-2 or as
ALTAVISTA may otherwise provide in writing. Before any such use of a
ALTAVISTA Trademark, Centraal must provide to ALTAVISTA samples of any such
materials, and Centraal shall not engage in any use of any ALTAVISTA
Trademark not approved by ALTAVISTA. If ALTAVISTA does not object within five
(5) business days after receipt of such samples, the materials will be deemed
approved. ALTAVISTA will not unreasonably withhold on delay its approval of
such materials.
6.3.2. OWNERSHIP BY ALTAVISTA. Nothing herein will grant
Centraal any right, title or interest in ALTAVISTA's Trademarks. Any and all
good will arising from Centraal's use of the ALTAVISTA Trademarks will inure
solely to the benefit of ALTAVISTA. Centraal shall not assert any claim to
the ALTAVISTA Trademark (or any confusingly similar mark) or such good will.
Centraal shall execute such documents as ALTAVISTA may reasonably request
from time to time to record or effectuate ALTAVISTA's ownership of the
ALTAVISTA Trademarks and related good will. Centraal shall not register any
ALTAVISTA Trademark, or any mark confusingly similar thereto for any products
or services in any jurisdiction. If Centraal registers or applies for such
registration in any jurisdiction, ALTAVISTA may require (in ALTAVISTA's sole
discretion) Centraal to assign (at Centraal's expense) all of the rights
pertaining to such registration or application to ALTAVISTA or withdraw from
all such procedures.
6.3.3. REGISTERED USER AGREEMENTS. To the extent
necessary to properly protect ALTAVISTA's rights, ALTAVISTA and Centraal
shall enter into registered user agreements with respect to ALTAVISTA's
Trademarks pursuant to applicable trademark law requirements. Centraal shall
be responsible for proper filing of the registered user agreement with
appropriate government authorities and shall pay all costs or fees associated
with such filing.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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7. TRAINING. SUPPORT AND MAINTENANCE.
Centraal's obligations regarding training, support and maintenance for
the RealNames Service; the respective rights and responsibilities of Centraal
and ALTAVISTA for such training, support and maintenance; and any charges to
ALTAVISTA for such training, support or maintenance, are set forth in EXHIBIT
C.
8. TERM AND TERMINATION.
8.1 TERM. This Agreement will commence on the Effective Date
and continue for an initial term which will expire on December 31, 2000,
unless earlier terminated as set forth herein. Thereafter, this Agreement
will be automatically renewed for successive one (1) year terms, unless, at
least sixty (60) days prior to the commencement of an additional one (1) year
term, a party notifies the other party in writing of its intention not to
renew the Agreement. Either party may terminate this agreement for
convenience upon sixty (60) days' written notice to the other party.
8.2 DEFAULT. If either party materially defaults in the
performance of any of its material obligations hereunder and if any such
default is not corrected within sixty (60) days after notice in writing, then
the non-defaulting party, at its option, may, in addition to any other
remedies it may have, thereupon terminate this Agreement by giving written
notice of termination to the defaulting party; provided however, no party
shall be deemed to be in breach of this Agreement, and there shall be no
termination for default, during such time that a party makes diligent efforts
to correct a default which is capable of correction.
8.3 INSOLVENCY. This Agreement may be terminated by either
party, upon written notice: (i) upon the institution by the other party of
insolvency, receivership or bankruptcy proceedings or any other proceedings
for the settlement of its debts, which are not dismissed or otherwise
resolved in its favor within sixty (60) days thereafter, (ii) upon the other
party's making a general assignment for the benefit of creditors, or (iii)
upon the other party's dissolution or ceasing to conduct business in the
ordinary course.
8.4 RETURN OF CENTRAAL MATERIALS. All information and
materials provided or delivered to ALTAVISTA under this Agreement, including
without limitation any source code which may be provided by Centraal, and all
copies or portions of copies and any summaries thereof, shall be promptly
returned to Centraal. Within thirty (30) days after the termination of this
Agreement, ALTAVISTA shall certify in writing that: (1) all such materials
have been returned to Centraal, or (2) all such materials have been destroyed.
8.5 SURVIVAL.
(a) The parties' rights and obligations of Sections 2.4,
2.5, 3.2, 6.2.2, 6.2.3, 6.3.2, 6.3.3, 8.4, 8.5, 9, 10, 11, 12 and 13 will
survive any termination or expiration of this Agreement. In addition, each party
shall be obligated to pay any amounts owing pursuant to Section 5.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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(b) Upon expiration or termination of this Agreement,
all of ALTAVISTA's rights and licenses with respect to the Software will
automatically and immediately terminate.
(c) Upon expiration or termination of this Agreement,
ALTAVISTA shall take all reasonable action which is requested by Centraal for
the orderly transfer of RealNames Service from ALTAVISTA to Centraal or its
designee.
8.6 LIMITATION OF LIABILITY UPON TERMINATION. In the event
of termination by either party in accordance with any of the provisions of
this Agreement, neither party will be liable to the other, because of such
termination, for compensation, reimbursement or damages on account of the
loss of prospective profits or anticipated sales or on account of
expenditures, investments, or commitments in connection with the business or
goodwill.
9. INFRINGEMENT INDEMNITY.
9.1 CENTRAAL'S INDEMNITY. Centraal, at its own expense,
shall defend or at its option settle, any claim brought against ALTAVISTA on
the issue of infringement of any copyright, United States patent, trade
secret or trademark of any third party to the extent attributable to the
RealNames Service, provided that ALTAVISTA provides Centraal with: (i) prompt
written notice of such claim, (ii) control over the defense and settlement of
such claim, and (iii) proper and full information and assistance to settle or
defend any such claim. If Centraal believes, in its sole discretion, that it
is likely that ALTAVISTA will be prohibited from exercising its right to use
the RealNames Service as provided under this Agreement, then Centraal may, at
its sole option and expense: (i) procure the right to use the RealNames
Service as provided herein, (ii) replace the RealNames Service with other
non-infringing services with equivalent functionality, (iii) suitably modify
the RealNames Service so that they do not infringe, or (iv)terminate this
Agreement. Notwithstanding the above, Centraal assumes no liability for
infringement claims arising from combination of the RealNames Service with
products or services not provided by Centraal, but not arising from the
RealNames Service standing alone. THE FOREGOING PROVISIONS OF THIS SECTION
9.1 STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF CENTRAAL, AND THE EXCLUSIVE
REMEDY OF ALTAVISTA, WITH RESPECT TO ANY ACTUAL OR ALLEGED INFRINGEMENT OF
ANY INTELLECTUAL PROPERTY RIGHTS UNDER THIS AGREEMENT.
9.2 ALTAVISTA'S INDEMNITY. ALTAVISTA, at its own expense,
shall defend or at its option settle, any claim brought against Centraal on
the issue of infringement of any copyright, United States patent, trade
secret or trademark of any third-party by the Integrated Product (except to
the extent excluded under Section 9.1), provided that Centraal provides
ALTAVISTA with: (i) prompt written notice of such claim, (ii) control over
the defense and settlement of such claim, and (iii) proper and full
information and assistance to settle or defend any such claim. THE FOREGOING
PROVISIONS OF THIS SECTION 9.2 STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF
ALTAVISTA, AND THE EXCLUSIVE REMEDY OF CENTRAAL, WITH RESPECT TO ANY ACTUAL
OR ALLEGED INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHT UNDER THIS
AGREEMENT.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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10. WARRANTY AND DISCLAIMER. EACH PARTY ACKNOWLEDGES AND AGREES
THAT THE SERVICES OF THE OTHER PARTY PROVIDED HEREUNDER ARE BEING PROVIDED
"AS IS, WITH ALL FAULTS," AND THAT NEITHER PARTY MAKES ANY REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, AND SPECIFICALLY
DISCLAIMS, ON ITS OWN BEHALF ON AND BEHALF OF ITS SUPPLIERS AND LICENSORS,
ANY WARRANTIES AS TO THE USEFULNESS, ACCURACY, RELIABILITY OR EFFECTIVENESS
OF SUCH SERVICES OR THAT ANY OF SUCH SERVICES PROVIDED HEREUNDER WILL BE
ERROR FREE, OR THAT DEFECTS HAVE OR WILL BE CORRECTED, OR THAT SUCH SERVICES
WILL MEET THE NEEDS OF SUCH PARTY OR ANY THIRD PARTY. WITHOUT LIMIT THE
FOREGOING, EACH PARTY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE
OTHER FOR ANY FAILURE, DISRUPTION, DOWNTIME, INCORRECT LINKAGE OR OTHER NON
PERFORMANCE OF EACH OTHER'S SERVICE.
11. LIMITATION OF LIABILITY. CENTRAAL'S LIABILITY ARISING OUT OF
THIS AGREEMENT WILL NOT EXCEED THE AMOUNTS PAID BY CENTRAAL TO ALTAVISTA
PURSUANT TO THIS AGREEMENT. CENTRAAL WILL NOT BE LIABLE FOR LOST PROFITS OR
ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL, OR INDIRECT DAMAGES, HOWEVER CAUSED
AND ON ANY THEORY OF LIABILITY, ARISING OUT OF THIS AGREEMENT WHETHER OR NOT
CENTRAAL HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ALTAVISTA
ACKNOWLEDGES THAT COMMISSIONS AGREED UPON BY CENTRAAL AND ALTAVISTA ARE BASED
IN PART UPON THESE LIMITATIONS, AND THAT THESE LIMITATIONS WILL APPLY
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
12. CONFIDENTIALITY.
12.1 CONFIDENTIAL INFORMATION. The term "Confidential
Information" means any information disclosed by one party to the other
pursuant to this, Agreement that is in written, graphic, machine readable or
other tangible form and is designated "Confidential", "Proprietary" or in
some other manner to indicate its confidential nature. Confidential
Information may also include oral information disclosed by one party to the
other pursuant to this Agreement, provided that such information is
designated as confidential at the time of disclosure and is reduced to
writing by the disclosing party within a reasonable time (not to exceed
thirty (30) days) after its oral disclosure, and such writing is marked in a
manner to indicate its confidential nature and delivered to the receiving
party. Confidential Information shall include (without limitation) any source
code that may be provided by Centraal.
12.2 CONFIDENTIALITY. Each party shall treat as confidential
all Confidential Information of the other party, shall not use such
Confidential Information except to exercise its rights and perform its
obligations under this Agreement herein, and shall not disclose such
Confidential Information to any third party. Without limiting the foregoing,
each of the parties shall use at least the same degree of care it uses to
prevent the disclosure of its own confidential information of like
importance, to prevent the disclosure of Confidential Information of the
other
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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party. Each party shall promptly notify the other party of any actual or
suspected misuse or unauthorized disclosure of the other party's Confidential
Information.
12.3 EXCEPTIONS. Confidential Information excludes
information that: (i) was in the public domain at the time it was disclosed
or has become in the public domain through no fault of the receiving party;
(ii) was known to the receiving party, without restriction, at the time of
disclosure, as demonstrated by files in existence at the time of disclosure;
(iii) is disclosed with the prior written approval of the disclosing party;
(iv) was independently developed by the receiving party without any use of
the Confidential Information; (v) becomes known to the receiving party,
without restriction, from a source other than the disclosing party, without
breach of this Agreement, by the receiving party; or (vi) is disclosed
generally to third parties by the disclosing party without restrictions
similar to those contained in this Agreement. The receiving party may
disclose the other party's Confidential Information to the extent such
disclosure is required by order or requirement of a court, administrative
agency, or other governmental body, but only if the receiving party provides
prompt notice thereof to the disclosing party to enable the disclosing party
to seek a protective order or otherwise prevent or restrict such disclosure.
12.4 CONFIDENTIALITY OF AGREEMENT. Each party may disclose
the existence of this Agreement, but agrees that the terms and conditions of
this Agreement will be treated as Confidential Information; provided,
however, that each party may disclose the terms and conditions of this
Agreement: (i) as required by any court or other governmental body; (ii) as
otherwise required by law; (iii) to legal counsel of the parties; (iv) in
confidence, to accountants, banks, and financing sources and their advisors;
(v) in connection with the enforcement of this Agreement or rights under this
Agreement; or (vi) in confidence, in connection with an actual or proposed
merger, acquisition, or similar transaction. After the Effective Date of this
Agreement, Centraal shall issue a press release announcing this Agreement and
the inclusion of RealNames Service in the ALTAVISTA Product; provided
however, that prior to such press release, Centraal shall submit the press
release to ALTAVISTA for its approval, which shall not be unreasonably
withheld or delayed.
12.5 SOURCE CODE SECURITY. In the event that Centraal
provides source code to ALTAVISTA, ALTAVISTA shall use the source code for
the Software only under carefully controlled conditions at Centraal's
facilities or ALTAVISTA's facilities for the purposes set forth in this
Agreement, and shall inform all employees who are given access to the
Software by ALTAVISTA that the source code of the Software is a confidential
trade secret of Centraal. ALTAVISTA shall restrict access to the Software to
those employees of ALTAVISTA who have agreed to be bound by a confidentiality
obligation substantially in the form of this Section 12, and who have a need
to access the source code to carry out the purposes of this Agreement. Upon
request by Centraal, ALTAVISTA shall provide Centraal with the names of all
individuals who have accessed such materials, and shall take all actions
reasonably required to recover any such materials in the event of loss or
misappropriation, or to otherwise prevent their unauthorized disclosure or
use. ALTAVISTA shall indemnify and hold harmless Centraal for any breach of
such confidentiality obligation or of this Agreement by any of ALTAVISTA's
employees, agents and representatives. Upon conclusion of the Localization in
EXHIBIT A, ALTAVISTA shall return to Centraal, all copies and portions
thereof (in any form) of the Software. Upon Centraal's request, ALTAVISTA
shall promptly certify in writing its compliance with this Section 12.5.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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13. GENERAL.
13.1 INDEMNIFICATION OF CENTRAAL. In addition to the
intellectual property infringement claims provided for under Section 9,
ALTAVISTA shall indemnify and hold Centraal harmless against any liability,
or any litigation cost or expense (including attorneys' fees), arising out of
third party claims against Centraal as a result of ALTAVISTA's use or
distribution of the RealNames Service and Centraal Materials.
13.2 PARTIAL INVALIDITY. If any provision in this Agreement
is found invalid or unenforceable, then the meaning of such provision will be
construed, to the extent feasible, so as to render the provision enforceable,
and if no feasible interpretation would save such provision, it will be
severed from the remainder of this Agreement, which will remain in full force
and effect, and the parties shall negotiate, in good faith, a substitute,
valid and enforceable provision that most nearly effects the parties' intent
in entering into this Agreement.
13.3 INDEPENDENT CONTRACTORS. The parties hereto are
independent contractors. Nothing contained herein will constitute either
party the agent of the other party, or constitute the parties as partners or
joint venturers. ALTAVISTA shall make no representations or warranties on
behalf of Centraal with respect to the Software.
13.4 MODIFICATION. No alteration, amendment, waiver,
cancellation or any other change in any term or condition of this Agreement
will be valid or binding on either party unless the same is mutually agreed
to in writing by both parties.
13.5 WAIVER. The failure of either party to enforce at any
time any of the provisions of this Agreement, or the failure to require at
any time performance by the other party of any of the provisions of this
Agreement, will not be construed to be a waiver of such provisions, or in any
way affect the right of either party to enforce such provision thereafter.
The express waiver by either party of any provision of this Agreement will
not constitute a waiver of any future obligation to comply with such
provision.
13.6 ASSIGNMENT. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that neither party shall assign any of its
rights, obligations, or privileges (by operation of law or otherwise)
hereunder without the prior written consent of the other party.
Notwithstanding the foregoing, either party may assign this Agreement to a
successor in interest (or its equivalent) of all or substantially all of its
relevant assets, whether by sale, merger, or otherwise. In the event that the
ALTAVISTA Product is spun-off as part of a newly formed separate legal
entity, this Agreement shall be promptly and fully assigned to such entity.
Any attempted assignment in violation of this section shall be void.
13.7 NOTICES. Any notice required or permitted to be given by
either party under this Agreement will be in writing and personally delivered
or sent by commercial courier service (e.g., DHL), or by first class airmail
(certified or registered if available), to the other party at its address
below, or such new address as may from time to time be supplied hereunder by
the parties hereto. If mailed, notices will be deemed effective five (5)
working days after deposit, postage prepaid, in the mail:
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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IF TO CENTRAAL:
IF BY COURIER/OVERNIGHT DELIVERY
Centraal Corporation
2 Circle Star Way, 2nd Floor
San Carlos, CA 94070-1350
Attention: J. Michael Arrington, Esq.
General Counsel
IF BY MAIL
Centraal Corporation
P.O. Box 3500
San Carlos, CA 94070-1350
Attention: J. Michael Arrington, Esq.
General Counsel
WITH A REQUIRED COPY TO:
James N. Strawbridge, Esq.
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto CA 94304
Tel: 650-493-9300
IF TO ALTAVISTA:
ALTAVISTA COMPANY
1825 S. Grant Street, Suite 410
San Mateo; CA; 94402
Tel: (650) 295-2500
Fax: (650) 295-3314
Attention: General Manager
WITH A REQUIRED COPY TO:
ALTAVISTA COMPANY
529 Bryant Street
Palo Alto CA 94301
Attention: Legal Department
13.8 EXPORT REGULATIONS. ALTAVISTA understands and
acknowledges that the Centraal is subject to regulation by agencies of the
United States Government, including, but not limited to, the U.S. Department
of Commerce, which prohibit export or diversion of certain technology to
certain countries. Any obligations of the Centraal to provide services are
subject in all respects to such United States laws and regulations as from
time to time govern the license
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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and delivery of technology and services outside the United States. ALTAVISTA
shall comply with all applicable provisions of U.S. Law, and shall not
export, reexport, transfer, divert or disclose, directly or indirectly,
including via remote access, the Software, any confidential information
contained or embodied in the Software, or any direct product thereof, except
as authorized under the Export Administration Regulations or other United
States laws and regulations governing exports in effect from time to time.
13.9 PAYMENT. Payment must be in U.S. Dollars. All references
to "dollars" or "$" in this Agreement mean United States dollars.
13.10 FORCE MAJEURE. Notwithstanding anything else in this
Agreement, no default, delay or failure to perform on the part of either
party will be considered a breach of this Agreement if such default, delay or
failure to perform is shown to be due to causes beyond reasonable control of
the party charged with a default, including, but not limited to, causes such
as strikes, lockouts or other labor disputes, riots, civil disturbances,
actions or inactions of governmental authorities or suppliers, epidemics,
war, embargoes, severe weather, fire, earthquakes, acts of God or the public
enemy, nuclear disasters, or default of a common carrier. A party seeking to
excuse its performance under this Section 13.10, shall provide notice to the
other party, and shall perform its obligations under this Agreement as soon
as reasonably possible under the circumstances.
13.11 ENTIRE AGREEMENT. The terms and conditions of this
Agreement, including all Exhibits hereto, constitute the entire agreement
between the parties and supersede all previous agreements and understandings,
whether oral or written, between the parties hereto with respect to the
subject matter hereof. Nothing in this Agreement shall be construed to
supersede the terms of any non-disclosure agreement previously entered into
by the Parties.
13.12 LANGUAGE. This Agreement is in the English language
only, which language will be controlling in all respects, and all versions
hereof in any other language will not be binding on the parties hereto. All
communications and notices to be made or given pursuant to this Agreement
must be in the English language. The parties hereto confirm that it is their
wish that this Agreement, as well as other documents relating hereto,
including notices, have been and will be written in the English language only.
13.13 TAXES. All payments by ALTAVISTA must be made free and
clear of, and without reduction for, any withholding taxes. Any such taxes
which are otherwise imposed on payments to Centraal will be the sole
responsibility of ALTAVISTA.
13.14 GOVERNING LAW. The rights and obligations of the parties
under this Agreement will not be governed by the 1980 U.N. Convention on
Contracts for the International Sale of Goods; rather such rights and
obligations shall be governed by and construed under the laws of the State of
California, without reference to its conflict of laws principles.
13.15 APPLICABILITY OF PROVISIONS LIMITING CENTRAAL'S
LIABILITY. The provisions of this Agreement under which the liability of
Centraal is excluded or limited, will not apply to the extent that such
exclusions or limitations arc declared illegal or void under law,
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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unless the illegality or invalidity is cured under such laws by the fact that
the law of the State of California (USA) governs this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by duly authorized officers or representatives as of the date first above
written.
CENTRAAL CORPORATION ALTAVISTA COMPANY
By: /s/Keith Teare By: /s/Greg Memo
---------------------------- -------------------------
Print Name: Keith Teare Print Name: Greg Memo
-------------------- -----------------
Title: CEO Title:
------------------------- ----------------------
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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EXHIBIT A
Software and Deliverables
A. CENTRAAL MATERIALS MADE AVAILABLE TO ALTAVISTA:
The following Centraal Materials are to be provided to ALTAVISTA
in a manner and form of Centraal's choosing: (1) Marketing Material, (2)
Resolution Result Page and (3) Software APIs.
The Software API's provided to ALTAVISTA consists of the
following: (1) HTTP APIs for RealNames Resolvers and (2) XML interface
for RealNames Data.
B. ALTAVISTA PRODUCT
The AltaVista Product shall include without limitation the
following, as well as any Updates thereto:
www.altavista.com
www.altavista.de
www.zip2.com
www. shopping.com
C. LOCALIZED CENTRAAL MATERIALS:
All Centraal Materials and RealNames Service shall be provided to
ALTAVISTA in the U.S. English language form unless specified otherwise. In
addition, the following Centraal Materials and RealNames Service shall be
provided by Centraal in a German Localized manner:
Subscriber Agreement, Centraal's privacy policy and additional materials
to be determined in writing by the parties.
Centraal shall notify ALTAVISTA in writing when Localization in
additional languages becomes available. The parties can agree in writing to
update this Exhibit A with such additional Localized languages.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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EXHIBIT B
Fees
A. COMPENSATION FOR SUBSCRIPTIONS.
ALTAVISTA's sole compensation under the terms of this Agreement for
solicitation of RealNames Subscribers shall be in accordance with this
Section A. During the term of this Agreement, ALTAVISTA shall receive a
commission which equals [*] of the initial Annual Net Subscription Fees [*]
actually received by Centraal for each paid subscription for a RealNames
Address generated through the co-branded registration pages on the Integrated
Product as provided for under the Agreement("ALTAVISTA Subscription
Commission").
By way of example, Customer X pays a $100 subscription fee, which
there is a tax owing of $10 which has not been paid by Customer X, and which
Centraal must pay a third party provider of RealNames support services [*]
for Customer X. The payment owing to ALTAVISTA for ALTAVISTA Subscription
Commission of Customer X would be [*] of [*] ($100 less $10 (tax) and less
([*] third party payment)), or [*].
The ALTAVISTA Subscription Commission on a given order will be due and
payable once per quarter. Centraal shall submit to ALTAVISTA at
[email protected] quarterly statements of the commission or annuities
due and payable to ALTAVISTA under the terms of this Section A of EXHIBIT B
within 30 days of the end of each such quarter, and such report shall be
accompanied with payment for such amounts owing in U.S. Dollars.
B. COMPENSATION FOR REALNAMES RESOLUTION.
During the term of this Agreement, ALTAVISTA's sole compensation for
the provision of RealNames Resolution services shall be in accordance with
this Section B. During the term of this Agreement, ALTAVISTA shall receive a
commission which equals [*] of Net RealNames Resolution Fees generated
through an Integrated Product ("ALTAVISTA Resolution Commission). ALTAVISTA
acknowledges and accepts that as of the Effective Date of this Agreement only
a limited number of RealNames Subscribers have agreed to compensate Centraal
on a RealNames Resolution basis.
By way of example, assume that Customer Y pays on a per RealNames
Resolution basis and generates $1000 dollars worth of Real Names Resolutions
during the relevant quarter. Assume also, that 50% of such RealNames
Resolutions took place on an Integrated Product. Further assume that there is
a tax of $100 owing, and Centraal must pay a third party provider of
RealNames support services [*] for Customer Y. The payment owing to ALTAVISTA
for ALTAVISTA Resolution Commission of Customer Y would be [*] of [*] ($500
(50% of the $1000 resolution income) less $100 (tax) and less [*] (third
party payment)), or [*].
The ALTAVISTA Resolution Commission on a given order will be due and
payable once per quarter. Centraal shall submit to ALTAVISTA at
[email protected] quarterly statements of the commission or annuities
due and payable to ALTAVISTA under the terms of
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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this Section B of EXHIBIT B within 30 days of the end of each such quarter,
and such report shall be accompanied with payment for such amounts owing in
U.S. Dollars.
C. COMPENSATION FROM CO-BRANDED PAGES.
During the term of this Agreement, Centraal's sole compensation for
creation and display of the Co-Branded Pages contemplated under Section 4 of
the Agreement shall be in accordance with this Section C. During the term of
this Agreement, Centraal shall receive a commission which equals [*] of the
Net Paid Advertising Fees (including but not limited to Banner Ads) generated
from such Co-Branded Pages ("Centraal Banner Commission).
By way of example, assume that COMPANY Z accrues a bill of $1000 for
banner advertising during the relevant quarter. Further assume that ALTAVISTA
grants a $100 dollar discount off the bill due to service interruption. The
payment owing to Centraal for Centraal Banner Commission of COMPANY Z would
be [*] of $ 900 ($1000 less $100 refund), or [*].
The Centraal Banner Commission on a given order will be due and
payable once per quarter. ALTAVISTA shall submit to Centraal quarterly
statements of the commission or annuities due and payable to Centraal under
the terms of this Section C of EXHIBIT B within 30 days of the end of each
such quarter, and such report shall be accompanied with payment for such
amounts owing in U.S. Dollars.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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EXHIBIT C
TRAINING, SUPPORT AND MAINTENANCE
SUPPORT
During the term of this Agreement, Centraal shall provide a reasonable
amount of telephone, e-mail, or fax back technical support, during Centraal's
normal business hours, to ALTAVISTA's technical staff regarding the operation
and integration of the RealNames Service. ALTAVISTA shall designate one
technical support contact on ALTAVISTA's staff, and Centraal will not be
obligated to provide technical support except pursuant to the request of such
contact; provided, however, that upon written notice to Centraal, ALTAVISTA
may replace such designee. All support will be provided in the U.S. English
language.
MAINTENANCE
During the term of this Agreement, Centraal shall provide all Updates
that are generally released without additional cost to Centraal's other
customers, to ALTAVISTA without such additional cost. Support for previous
Updates Will end six (6) months after the release of the next update. All
maintenance releases will be provided in the U.S. English language.
ORDER ADMINISTRATION
During the term of this Agreement, Centraal or its designee shall be
responsible for the administration of orders for RealNames Subscriptions and
renewals thereof, including billings and collections.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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EXHIBIT D
ASSIGNMENT OF COPYRIGHT
For good and valuable consideration, the receipt of which is hereby
acknowledged, ALTAVISTA located at ________________ (hereinafter referred to as
"ASSIGNOR"), hereby grants and assigns to Centraal Corporation ("Centraal"), 2
Circle Star Way, 2nd Floor San Carlos, CA 94070-1350 all right, title and
interest whatsoever, throughout the world, in and under the following
materials:_____________________________________, to have and to hold the same,
unto Centraal, its successors and assigns, for the full duration of all such
rights, and any renewals and extensions thereof.
This assignment is made pursuant to, and is subject to all of the terms
of the Software Localization and Provider Agreement between ASSIGNOR and
Centraal dated April ,1999.
IN WITNESS THEREOF, I have hereunto set hand and seal this ________
day of______________________________, ______.
(Signature)
NAME:
----------------------
TITLE:
----------------------
NAME OF ASSIGNOR:
----------------------
State of )
)S.S.
County of )
Before me this__________ day of __________________________ ,19
________ personally appeared: ___________________________________ to me known
to be the person who is described in and who executed the foregoing
assignment instrument and acknowledged to me that he/she executed the same of
his/her own free will for the purpose therein expressed.
Notary Public or Consular
Officer of the United State of America
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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EXHIBIT E
SUBSCRIBER AGREEMENT
CENTRAAL CORPORATION REALNAMES SUBSCRIPTION AGREEMENT
A. INTRODUCTION.
This RealNames Subscription Agreement ("Agreement") is submitted to CENTRAAL
CORPORATION ("CENTRAAL") for the purpose of subscribing to CENTRAAL's
RealNames Service (SM) on the Internet through CENTRAAL's subscription system
also known as the RealNames System (SM). If this Agreement is accepted by
CENTRAAL, and a RealNames (SM) address is allocated in CENTRAAL's Web address
system to the Subscriber ("Subscriber"), Subscriber agrees to be bound by the
terms of this Agreement.
B. FEES AND PAYMENTS.
Subscriber agrees to pay a NON-REFUNDABLE fee of ____________(US$_____) per
year in consideration of each subscribed RealNames address. The payment may
be made payable either directly to "CENTRAAL Corporation," or indirectly to
CENTRAAL through a certified reseller.
This NON-REFUNDABLE fee covers a period of one (1) year for each new
subscription or reservation of a RealNames address. This NON-REFUNDABLE fee
includes any permitted modification(s) to the RealNames address record during
the subscription or reservation. It also covers up to ten thousand (10,000)
uses of the RealNames address per calendar month; CENTRAAL reserves the right
to stop processing uses of the RealNames address after ten thousand (10,000)
uses in a calendar month. Subscribers will be notified by CENTRAAL when a
RealNames address usage exceeds ten thousand (10,000) uses per calendar
month. Subscribers of a RealNames address which usage exceeds ten thousand
(10,000) uses per calendar month will be subject to additional usage fees, at
a rate to be agreed upon by CENTRAAL and Subscriber in advance of such
charges. In the event that CENTRAAL and Subscriber cannot agree on such fees,
Subscriber understands and agrees that CENTRAAL may terminate this Agreement
without liability, including Subscriber's use of any RealNames address.
All payments will be due within thirty (30) days from the date of invoice.
Subscriber understands and agrees that CENTRAAL may cancel Subscriber's
subscription or reservation in the event that any payment is not made when
due.
On the date of expiration, RealNames address subscriptions will be
automatically renewed for the period of one year, unless the Subscriber
notifies CENTRAAL in writing of its intention not to renew the RealNames
subscription. Notification to cancel automatic renewals must be communicated
to CENTRAAL by fax (1-650-858-0454) or email ([email protected]) at least
ten days prior to the RealNames subscription expiration date. Automatic
renewals will be billed at CENTRAAL's then-current annual subscription price.
C. ALLOCATION OF REALNAMES ADDRESSES BY CENTRAAL.
Subscriber agrees that allocation of RealNames addresses by CENTRAAL is
subject to CENTRAAL's discretion. CENTRAAL may at any time, with notice to
Subscriber that is reasonable in the circumstances (including immediate
notice when that is appropriate) reallocate a RealNames address previously or
currently used by Subscriber. Any notice provided to Subscriber will be at
the last address furnished by Subscriber to CENTRAAL. Subscriber understands
that all systems of address with respect to the Internet are subject to
varied and occasionally inconsistent principles, jurisdictions, and claims of
right. Subscriber understands and agrees that CENTRAAL requires absolute
discretion over, the allocation of RealNames addresses in light of the
uncertain and often conflicting principles that are at work in the current
state of the Internet. Subscriber understands and agrees that, because of
CENTRAAL's discretion, CENTRAAL has the absolute right to allocate RealNames
addresses, withdraw them, and reallocate them according to its own judgment
as to what constitutes an optimal service and system. Subscriber further
recognizes that CENTRAAL, with a view to optimizing its RealNames Service and
RealNames Services, may apply standards of decision regarding allocation,
reallocation, or withdrawal of RealNames addresses that evolve or change over
time. If CENTRAAL does
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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not approve any RealNames address requested by Subscriber, or withdraws
approval of, a RealNames address, CENTRAAL will attempt to provide an
alternative RealNames address that is acceptable to both CENTRAAL and
Subscriber. Subscriber accords to CENTRAAL the right to make decisions that
it deems best in each context.
Subscriber understands that CENTRAAL has no dispute resolution, system.
Subscriber also agrees that all goodwill in any RealNames address as an
address in the RealNames Service, and all property rights in any RealNames
address as an address in the RealNames Service, belong exclusively to
CENTRAAL. Subscriber's use of the RealNames Service confers no property,
business, or competition rights upon Subscriber.
D. DISPUTES.
In the event that Subscriber's subscription, reservation, RealNames address,
or any other aspect of the RealNames Services, or any conduct by the
Subscriber results in any challenge, claim, demand, or action to or against
CENTRAAL, Subscriber agrees that CENTRAAL shall have the right to decide in
its sole discretion what actions to take, including without limitation
whether to continue to provide Subscriber's subscription, reservation,
RealNames address, reservation or any other aspect of the RealNames Services
affected by such claim. Subscriber understands and agrees that it has no
vested interest or right in any procedures or rules of dispute resolution.
E. INDEMNITY.
Subscriber agrees to defend and indemnify CENTRAAL, as well as CENTRAAL's
officers, employees, agents, resellers and representatives, against claims,
demands, damages, costs, and liabilities arising from Subscriber's use,
reference to, or advertising of a RealNames address; from the allocation by
CENTRAAL of a RealNames address to Subscriber; and from the Subscriber's
subscription, reservation or use of the RealNames Services or RealNames
Service. Subscriber agrees that the financial obligation of Subscriber to
CENTRAAL pursuant to this indemnity may be incorporated in CENTRAAL's
invoices for services and are due when the invoices are due.
F. BREACH.
Subscriber understands and agrees that its failure to abide by any provision
of this Agreement may be considered by CENTRAL to be a basis for cancellation
of the subscription or reservation, withdrawal of the assigned RealNames
address, and/or cancellation of the subscription or reservation.
G. AGENTS.
Subscriber agrees that if this Agreement is completed by an agent for the
Subscriber, such as an ISP or Administrative Contact/Agent, the Subscriber is
nonetheless bound as a principal by all terms and conditions herein.
H. USAGE STATISTICS.
Subscriber understands and agrees that CENTRAAL has the right to compile
usage statistics and other data regarding use of CENTRAAL's RealNames
Services and to sell and provide any and all such data to third parties.
I. LIMITATION OF LIABILITY.
Subscriber agrees that CENTRAAL, its officers, employees, agents, resellers
and representatives shall have no liability to the Subscriber for any loss
Subscriber may incur in connection with CENTRAAL's processing of this
Agreement, in connection with CENTRAAL's processing of any authorized
modification to the RealNames Service (including without limitation the
RealNames address) during the covered period, as a result of the Subscriber's
ISP's failure to pay either the initial subscription or reservation fee or
renewal fee. Subscriber agrees that in no event shall the maximum liability
of CENTRAAL, officers, employees, agents, resellers and representatives under
this Agreement for any matter exceed and aggregate of five hundred United
States dollars (US $500).
J. NO GUARANTY.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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Subscriber agrees that, by subscription or reservation of a RealNames
address, such subscription or reservation does not confer immunity from
objection to either the subscription, reservation or use of the RealNames
address. CENTRAAL DOES NOT WARRANT THAT THE OPERATION OF THE REALNAMES
SERVICE AND/OR ANY REALNAMES ADDRESS WILL BE WITHOUT INTERRUPTION OR ERROR
FREE. CENTRAAL DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. IN NO EVENT WILL CENTRAL BE LIABLE TO SUBSCRIBER OR ANY
OTHER THIRD PARTY FOR ANY FAILURE, DISRUPTION, DOWNTIME, INCORRECT LINKAGE OR
OTHER NON-PERFORMANCE OF THE REALNAMES SERVICE.
K. RIGHT OF REFUSAL.
CENTRAAL, in its sole discretion, reserves the right to refuse to enter into
an agreement for any Subscriber. Subscriber agrees that the submission of
this Agreement does not obligate CENTRAAL to accept this Agreement.
Subscriber agrees that CENTRAAL shall not be liable for loss or damages that
may result from CENTRAAL's refusal to accept this Agreement.
L. ENTIRETY.
Subscriber agrees that this Agreement comprises the complete and exclusive
agreement between Subscriber and CENTRAAL regarding the subscription or
reservation of Subscriber's RealNames address. This Agreement supersedes all
prior agreements and understandings.
M. GOVERNING LAW.
Subscriber agrees that this Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of California, United
States of America, without regard to conflicts-of-law principles, applicable
to contracts formed in California for services rendered in California. By
submitting this Agreement, Subscriber consents to the exclusive and personal
jurisdiction and venue of the federal and state courts located in the
Northern District of California. This Agreement shall be deemed accepted at
the offices of CENTRAAL in Palo Alto, California, U.S.A.
CENTRAAL CORPORATION REALNAMES SUBSCRIPTION AGREEMENT (0.3)
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
Page 24
<PAGE>
EXHIBIT F-1
CENTRAAL TRADEMARKS
[Insert Logo Here]
REALNAMES STANDARDIZED LOGO
Font: OCRB
[Insert Logo Here]
REALNAMES ENABLED LOGO
Font: OCRB
-C-1998 REALNAMES (sm) is a service mark of centraal corporation
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
Page 25
<PAGE>
EXHIBIT F-2
ALTAVISTA Trademarks
--------------------
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
Confidential Page 26 5/18/99
<PAGE>
May 27, 1999
BY HAND DELIVERY, REGISTERED MAIL, AND FAX
Fax: 650-298-8085
CENTRAAL CORPORATION
Two, Circle Star Way, 2nd Floor
P.O. Box 3500
San Carlos, CA 94070-1350
Re: Internet Services Agreement, dated April 2, 1998, between
Digital Equipment Corp. (a wholly-owned SUBSIDIARY OF
COMPAQ) AND CENTRAAL CORPORATION
Gentlemen:
Compaq Computer Corporation ("Compaq") has entered into a Contribution
and Subscription Agreement with the AltaVista Company, a Delaware corporation
and a wholly-owned subsidiary of Compaq ("AltaVista"), dated as of June 1,
1999, pursuant to which Compaq will contribute certain of its assets into
AltaVista and AltaVista will assume certain liabilities of Compaq. In
connection with such contribution, Compaq desires to assign to AltaVista all
of its rights and obligations under the Internet Services Agreement, dated
April 2, 1998, by and between Digital Equipment Corp. (a wholly-owned
subsidiary of Compaq) and Centraal Corporation (the "Agreement").
Please indicate your consent to Compaq's assignment to AltaVista of
its rights and obligations pursuant to the Agreement by signing the attached
copy of this letter and returning it to the undersigned. In the future,
please direct any notices related to the Agreement to AltaVista Company, VP &
General Manager, 1825 S. Grant Street, Suite 410, San Mateo, California
94402.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
1
<PAGE>
Very truly yours,
COMPAQ COMPUTER CORPORATION
By: /S/ Kurt Losert
Name: Kurt Losert
Title: Vice President
Consented to and confirmed as aforesaid:
CENTRAAL CORPORATION
By: /s/ Michael Arrington
Name: Michael Arrington
Title: General Counsel
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
2
<PAGE>
EXHIBIT 10.11
----------------------------------------------
----------------------------------------------
CENTRAAL CORPORATION
SECOND AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
AUGUST 6, 1999
----------------------------------------------
----------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Certain Definitions..........................................................1
2. Restrictions on Transferability..............................................3
3. Restrictive Legend...........................................................3
4. Notice of Proposed Transfers.................................................4
5. Registration.................................................................5
5.1 Requested Registration..............................................5
5.2 Company Registration................................................7
5.3 Registration on Form S-3............................................8
5.4 Subsequent Registration Rights......................................9
5.5 Expenses of Registration............................................9
5.6 Registration Procedures............................................10
5.7 Indemnification....................................................11
5.8 Information by Holder..............................................12
5.9 Rule 144 Reporting.................................................12
5.10 Termination of Registration Rights.................................13
6. Financial Information Rights................................................13
7. Lockup Agreement............................................................14
8. Investors' Option to Sell Shares to the Company.............................15
9. Right of First Refusal......................................................16
10. Vesting of Employee Options.................................................17
11. Employment, Confidential Information and Invention Assignment Agreements....17
12. Transfer of Rights..........................................................17
13. Effectiveness; Amendment and Restatement of Existing Agreement..............18
14. Amendment...................................................................18
15. Governing Law...............................................................18
16. Entire Agreement............................................................18
17. Notices, etc................................................................18
<PAGE>
18. Aggregation of Stock........................................................19
19. Counterparts................................................................19
20. Legal Expenses..............................................................19
21. Titles and Subtitles........................................................19
22. Waiver of Right of First Refusal............................................19
</TABLE>
<PAGE>
CENTRAAL CORPORATION
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
This Second Amended and Restated Investor Rights Agreement (this
"AGREEMENT") is made effective as of August 6, 1999, by and among Centraal
Corporation, a Delaware corporation (the "COMPANY"), and the persons and
entities listed on the Schedule of Investors attached hereto as EXHIBIT A (the
"INVESTORS").
RECITALS
A. In connection with the sale and issuance of its Series B Preferred
Stock, the Company entered into that certain Amended and Restated Investor
Rights Agreement dated December 8, 1998 (the "EXISTING AGREEMENT") with the
purchasers of its Series A Preferred Stock and Series B Preferred Stock (the
"EXISTING PREFERRED INVESTORS").
B. The Company and certain of the Investors (the "PURCHASERS") are parties
to that certain Series C Preferred Stock Purchase Agreement dated as of the date
hereof (the "PURCHASE AGREEMENT") whereby the Company will sell, and the
Purchasers will buy, Series C Preferred Stock of the Company.
C. The obligations of the Company and the Purchasers under the Purchase
Agreement are conditioned, among other things, upon the execution and delivery
of this Agreement by the Company and the Purchasers.
D. Section 14 of the Existing Agreement provides that the written consent
of the Company and the holders of a majority of the (i) outstanding Registrable
Securities (as defined under the Original Agreement) (the "MAJORITY INVESTORS")
and (ii) the outstanding shares of Series B Preferred Stock (or Conversion Stock
issued upon conversion thereof) (the "MAJORITY SERIES B INVESTORS") is required
to amend the Existing Agreement.
E. The Company, the Majority Investors and the Majority Series B Investors
now desire to amend and restate the Existing Agreement in its entirety in order
to add the Purchasers as parties thereto and to make certain other changes.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein, the receipt and sufficiency are hereby acknowledged, the parties hereto
agree to amend and restate the Existing Agreement in its entirety as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
<PAGE>
"COMMISSION" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"CONVERSION STOCK" means the Company's Common Stock issued or issuable
pursuant to conversion of the Preferred Stock.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar federal rule or statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"HOLDER" means (i) any Existing Preferred Investor or Purchaser holding
Registrable Securities and (ii) any person holding Registrable Securities to
whom the rights under this Agreement have been transferred either (a) in
accordance with Section 12 hereof, or (b) prior to the date hereof, in
accordance with either Section 12 of the Existing Agreement or Section 12 of the
Original Agreement (as defined in the Existing Agreement).
"INITIATING HOLDERS" means any Holder or Holders who, in the aggregate,
hold not less than 50% of the Registrable Securities then outstanding.
"PREFERRED STOCK" shall mean the Company's Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock.
"QUALIFIED INITIAL PUBLIC OFFERING" shall mean the Company's initial public
offering pursuant to an effective registration statement under the Securities
Act covering the offer and sale of the Company's Common Stock to the public with
gross proceeds to the Company of not less than $35 million at a per share price
of at least $6.75 (as adjusted for recapitalizations, stock dividends, stock
splits and the like.)
"REGISTRABLE SECURITIES" means shares of (i) the Conversion Stock and (ii)
any Common Stock of the Company issued or issuable in respect of the Preferred
Stock or Conversion Stock upon any stock split, stock dividend, recapitalization
or similar event; PROVIDED, HOWEVER, that securities shall only be treated as
Registrable Securities if and so long as (x) they have not been registered or
sold to or through a broker or dealer or underwriter in a public distribution or
a public securities transaction and (y) the registration rights with respect to
such securities have not terminated pursuant to Section 5.10. Notwithstanding
the foregoing, Registrable Securities shall not include any securities sold in a
transaction in which the transferor's rights to registration are not assigned in
accordance with the terms herein.
The terms "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 the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, except as otherwise stated
below, incurred by the Company in complying with Sections 5.1, 5.2 and 5.3
hereof, including without limitation, all registration, qualification and filing
fees, printing expenses, escrow fees, fees and disbursements of
-2-
<PAGE>
counsel for the Company, blue sky fees and expenses, 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). Registration Expenses shall also include
the fees and disbursements for one special counsel to the selling
stockholders, not to exceed $15,000 per registration, for each registration
pursuant to Section 5.1 and Section 5.2, and up to two registrations pursuant
to Section 5.3 hereof.
"RESTRICTED SECURITIES" shall mean the securities of the Company required
to bear the legends set forth in Section 3 hereof.
"RULE 144" and "RULE 145" shall mean Rules 144 and 145, respectively,
promulgated under the Securities Act, or any similar federal rules thereunder,
all as the same shall be in effect at the time.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal rule or statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and, except as set forth above, all fees and disbursements of
counsel for any Holder.
2. RESTRICTIONS ON TRANSFERABILITY. The Preferred Stock, the Conversion
Stock and any other securities issued in respect of such stock upon any stock
split, stock dividend, recapitalization, merger, or similar event, shall not be
sold, assigned, transferred or pledged except upon the conditions specified in
this Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. Each Holder or transferee will cause any
proposed purchaser, assignee, transferee, or pledgee of any such shares held by
the Holder or transferee to agree to take and hold such securities subject to
the restrictions and upon the conditions specified in this Agreement.
3. RESTRICTIVE LEGEND. Each certificate representing the Preferred Stock,
the Conversion Stock or any other securities issued in respect of such stock
upon any stock split, stock dividend, recapitalization, merger, or similar
event, shall (unless otherwise permitted by the provisions of Section 4 below)
be stamped or otherwise imprinted with legends in substantially the following
form (in addition to any legends required by agreement or by applicable state
securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT
BE TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN
EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE COMPANY,
SUCH TRANSFER MAY BE MADE PURSUANT TO RULE 144 OR REGISTRATION
-3-
<PAGE>
UNDER THE ACT IS OTHERWISE UNNECESSARY IN ORDER FOR SUCH TRANSFER TO
COMPLY WITH THE ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP
PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION
STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH LOCKUP PERIOD IS BINDING ON
TRANSFEREES OF THESE SHARES.
Each Holder consents to the Company making a notation on its records and giving
stop transfer instructions to any transfer agent of its capital stock in order
to implement the restrictions on transfer established in this Agreement.
4. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Without in any way limiting the
immediately preceding sentence, no sale, assignment, transfer or pledge of
Restricted Securities shall be made by any holder thereof to any person unless
such person shall first agree in writing to be bound by the restrictions of this
Agreement. Prior to any proposed sale, assignment, transfer or pledge of any
Restricted Securities, unless there is in effect a registration statement under
the Securities Act covering the proposed transfer, the holder thereof shall give
written notice to the Company of such holder's intention to effect such
transfer, sale, assignment or pledge. Each such notice shall describe the manner
and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and, if requested by the Company, the holder shall also
provide, at such holder's expense, either (i) a written opinion of legal counsel
who shall be, and whose legal opinion shall be, reasonably satisfactory to the
Company addressed to the Company, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the holder to the Company; PROVIDED, HOWEVER, that the Company
shall not request an opinion of counsel or "no action" letter with respect to
(i) a transfer not involving a change in beneficial ownership, (ii) a
transaction involving the distribution without consideration of Restricted
Securities by the holder to its constituent partners or members in proportion to
their ownership interests in the holder, or (iii) a transaction involving the
transfer without consideration of Restricted Securities by an individual holder
during such holder's lifetime by way of gift or on death by will or intestacy.
Each certificate evidencing the Restricted Securities transferred as above
provided shall bear, except if such transfer is made pursuant to Rule 144, the
appropriate restrictive legend set forth in Section 3 above, except that such
certificate shall not bear such restrictive legend if in the opinion of counsel
for such holder and counsel for the Company such
-4-
<PAGE>
legend is not required in order to establish compliance with any provision of
the Securities Act. Notwithstanding the foregoing, each holder of Restricted
Securities agrees that it will not request that a transfer of the Restricted
Securities be made or that the legend set forth in Section 3 be removed from
the certificate representing the Restricted Securities, solely in reliance on
Rule 144(k), if as a result thereof the Company would be rendered subject to
the reporting requirements of the Exchange Act.
5. REGISTRATION.
5.1 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company shall receive
from Initiating Holders a written request that the Company effect any
registration with respect to shares of Registrable Securities, the Company will:
(i) promptly give written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use commercially reasonable
efforts to effect such registration as part of a firm commitment underwritten
public offering with underwriters reasonably acceptable to the Initiating
Holders and the Company (including, without limitation, appropriate
qualification under applicable state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request by delivering a written notice to such effect to the Company within
twenty days after the date of such written notice from the Company.
Notwithstanding the foregoing, the Company shall not be obligated to take
any action to effect or complete any such registration pursuant to this Section
5.1:
(A) Prior to the earlier of (i) six months after the
effective date of the Company's first registered public offering of its Common
Stock or (ii) five years from the date hereof;
(B) Unless the requested registration would have an
aggregate offering price of all Registrable Securities sought to be registered
by all Holders, net of underwriting discounts and commissions, exceeding
$5,000,000;
(C) Following the filing of, and for 180 days
immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan), provided
that the Company is actively employing in good faith commercially reasonable
efforts to cause such registration statement to become effective;
-5-
<PAGE>
(D) After the Company has effected two registrations
pursuant to this Section 5.1(a) in which the Initiating Holders were able to
include in each such registration at least 50% of the Registrable Securities
sought to be included therein and such registrations have been declared or
ordered effective; PROVIDED, HOWEVER, that if the Company includes shares to be
sold by it in a registration requested by the Initiating Holders pursuant to
this Section 5.1(a), such registration will not be considered in determining if
the Company has effected two registrations pursuant to this Section
5.1(a)(ii)(D);
(E) If the Initiating Holders are able to request a
registration on Form S-3 pursuant to Section 5.3 hereof;
(F) Within twelve months after the Company has effected
such a registration pursuant to this Section 5.1(a), and such registration has
been declared or ordered effective; or
(G) If the Company shall furnish to the Initiating
Holders a certificate signed by the President of the Company (i) giving notice
of its bona fide intention to effect the filing of a registration statement with
the Commission, or (ii) stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the Company or its stockholders
for a registration statement to be filed in the near future. In such case, the
Company's obligation to use its commercially reasonable efforts to register,
qualify or comply under this Section 5.1(a) may be deferred one or more times
for a period not to exceed 90 days in the aggregate.
Subject to the foregoing clauses (A) through (G), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) In addition to the registration rights contained in Section
5.1(a) above, and subject to the same limitations stated in Section
5.1(a)(ii)(A)-(C) and Section 5.1(a)(ii)(E)-(G), in the event the Company
receives a written request from holders of not less than 50% of the Registrable
Securities issued or issuable pursuant to conversion of the Series B Preferred
Stock then outstanding (the "INITIATING SERIES B HOLDERS"), the Company will, as
soon as practicable, use commercially reasonable efforts to effect such
registration as part of a firm commitment underwritten public offering with
underwriters reasonably acceptable to the Initiating Series B Holders and the
Company (including, without limitation, appropriate qualification under
applicable state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to take any action to effect or complete any such registration
pursuant to this Section 5.1(b) prior to 180 days after the effective date of
the Company's first registered public offering of its Common Stock.
-6-
<PAGE>
(c) UNDERWRITING. In the event of a registration pursuant to
Section 5.1, the Company shall advise the Holders as part of the notice given
pursuant to Section 5.1(a)(i) that the right of any Holder to registration
pursuant to Section 5.1 shall be conditioned upon such Holder's participation in
the underwriting arrangements required by this Section 5.1, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited to the extent provided herein.
The Company shall, together with all Holders proposing to distribute
their securities through such underwriting, enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders, but subject to the
Company's reasonable approval. Notwithstanding any other provision of this
Section 5.1, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the Registrable Securities to be included in such
registration (i) in the case of the Company's initial public offering, to zero,
and (ii) in the case of any other offering, to an amount no less than 33% of all
shares to be included in such offering. The Company shall so advise all Holders
requesting to be included in the registration and underwriting and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all the Holders requesting to be included
in the registration and underwriting in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by them at the time of
filing the registration statement. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares. If any
Holder of Registrable Securities disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to the Company.
5.2 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to time
the Company shall determine to register any of its equity securities, either for
its own account or for the account of a Holder or other holders, other than (i)
a registration relating solely to employee benefit plans, (ii) a registration
relating solely to a Rule 145 transaction, or (iii) a registration in which the
only equity security being registered is Common Stock issuable upon conversion
of convertible debt securities which are also being registered, the Company
will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualifications including compliance with Blue Sky laws), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within ten days after the date of such written notice from the
Company, by any Holder.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders
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<PAGE>
as a part of the written notice given pursuant to Section 5.2(a)(i). In such
event, the right of any Holder to registration pursuant to Section 5.2 shall
be conditioned upon such Holder's participation in such underwriting and the
inclusion of Registrable Securities in the underwriting shall be limited to
the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision of this Section 5.2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
Registrable Securities to be included in such registration (i) in the case of
the Company's initial public offering, to zero, and (ii) in the case of any
other offering, to an amount no less than 33% of all shares to be included in
such offering. The Company shall so advise all Holders requesting to be included
in the registration and underwriting and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all the Holders requesting to be included in the registration
and underwriting in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by them at the time of filing the
registration statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company or the underwriters may round the number
of shares allocated to any Holder to the nearest 100 shares. If any Holder
disapproves of the terms of any such underwriting, such person may elect to
withdraw therefrom by written notice to the Company.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 5.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
5.3 REGISTRATION ON FORM S-3.
(a) REQUEST FOR REGISTRATION. In the event that the Company shall
receive from Initiating Holders a written request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of Registrable Securities the aggregate price to the public of
which, net of underwriting discounts and commissions, would exceed $3,000,000,
and the Company is a registrant entitled to use Form S-3 to register the
Registrable Securities for such an offering, the Company shall use commercially
reasonable efforts to cause such Registrable Securities to be registered for the
offering on such form and to cause such Registrable Securities to be qualified
in such jurisdictions as such Holder or Holders may reasonably request;
PROVIDED, HOWEVER, that the Company shall not be required to effect more than
one registration pursuant to this Section 5.3 in any twelve month period. If
such offering is to be an underwritten offering, the underwriters must be
acceptable to both the Initiating Holders and the Company. The Company shall
inform the other Holders of the proposed registration and offer them the
opportunity to participate. In the event the registration is proposed to be part
of a firm commitment underwritten public offering, the substantive provisions of
Section 5.1(c) shall be applicable to each such registration initiated under
this Section 5.3.
-8-
<PAGE>
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 5.3:
(i) Following the filing of, and for 180 days immediately
following the effective date of, any registration statement pertaining to
securities of the Company (other than a registration of securities in a Rule 145
transaction or with respect to an employee benefit plan), provided that the
Company is actively employing in good faith commercially reasonable efforts to
cause such registration statement to become effective;
(ii) Within twelve months after the Company has effected such
a registration pursuant to Section 5.3(a), and such registration has been
declared or ordered effective; or
(iii) If the Company shall furnish to the Initiating Holders
a certificate signed by the President of the Company (i) giving notice of its
bona fide intention to effect the filing of a registration statement with the
Commission, or (ii) stating that, in the good faith judgment of the Board of
Directors, it would be seriously detrimental to the Company or its stockholders
for a registration statement to be filed in the near future, then the Company's
obligation to use its commercially reasonable efforts to file a registration
statement may be deferred one or more times for a period not to exceed 90 days
in the aggregate.
5.4 SUBSEQUENT REGISTRATION RIGHTS.
(a) Without the consent of any holder of Registrable Securities
hereunder, the Company may grant to any holder of securities of the Company
registration rights inferior to those granted hereunder.
(b) The Company shall not enter into any agreement granting any
holder or prospective holder of any securities of the Company registration
rights superior to or on a pari passu basis with the rights granted the
Purchasers hereunder without the written consent of the holders of a majority of
the Registrable Securities. Notwithstanding the foregoing, the Company may,
without obtaining any further consent of the holders of Registrable Securities,
amend this Agreement to the extent necessary to grant rights and obligations on
a pari passu basis with the rights and obligations of the Purchasers to
investors in any subsequent round of financing with respect to the securities
purchased by such investors in such financing.
5.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with (i) two registrations pursuant to Section 5.1, (ii) all
registrations pursuant to Section 5.2, and (iii) two registrations pursuant to
Section 5.3, shall be borne by the Company. Notwithstanding the foregoing, in
the event that Initiating Holders cause the Company to begin a registration
pursuant to Section 5.1 or Section 5.3, and the request for such registration is
subsequently withdrawn by the Initiating Holders or such registration is not
completed due to failure to meet the net proceeds requirement set forth in such
section or is otherwise not successfully completed, in each case due to no fault
of the Company, all Holders shall be deemed to have forfeited their right to one
registration under Section 5.1, or a registration at the expense of the Company
under Section 5.3, as applicable,
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unless the Initiating Holders pay for, or reimburse the Company for, the
Registration Expenses incurred in connection with such withdrawn or
incomplete registration. Unless otherwise stated, all Selling Expenses
relating to securities registered on behalf of the Holders and all other
registration expenses shall be borne by the Holders of such securities pro
rata on the basis of the number of shares so registered or proposed to be so
registered.
5.6 REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to this Agreement, the Company will keep each Holder
advised in writing as to the initiation of such registration and as to the
completion thereof. The Company will:
(a) Prepare and file with the Commission a registration statement
and such amendments and supplements as may be necessary and use commercially
reasonable efforts to cause such registration statement to become and remain
effective for at least 180 days or until the distribution described in the
registration statement has been completed, whichever first occurs; and
(b) Furnish to the Holders participating in such registration and
to the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities.
Notwithstanding the foregoing, the Company shall notify each Holder whose
securities are included in a registration of the happening of any event which
makes any statement made in the registration statement or related prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or which requires the making of any changes in
the registration statement or prospectus so that, in the case of the
registration statement, it will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and that in the case of the
prospectus, it will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. In
such event, the Company may suspend use of the prospectus on written notice to
each participating Holder, in which case each participating Holder shall not
dispose of Registrable Securities covered by the registration statement or
prospectus until copies of a supplemented or amended prospectus are distributed
to the participating Holders or until the participating Holders are advised in
writing by the Company that the use of the applicable prospectus may be resumed
(the period of such suspension shall be a "BLACKOUT PERIOD"). The Company shall
use its commercially reasonable efforts to ensure that the use of the prospectus
may be resumed as soon as practicable. The Company shall, upon the occurrence of
any event contemplated by this paragraph, prepare a supplement or post-effective
amendment to the registration statement or a supplement to the related
prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, such prospectus will not contain
an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. In the event that the Company
declares one or more Blackout Periods, the 180-day effectiveness period for the
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applicable registration set forth in Section 5.6(a) shall be extended by the
number of days that constitute any such Blackout Periods.
5.7 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers
and directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration
has been effected pursuant to this Agreement, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or any violation by the Company of
the Securities Act, the Exchange Act, state securities laws or any rule or
regulation promulgated under such laws applicable to the Company in connection
with any such registration, and the Company will reimburse each such Holder,
each of its officers and directors, and each person controlling such Holder, for
any legal and any other expenses reasonably incurred, as such expenses are
incurred, in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Holder for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, indemnify the Company, each of its officers and directors, each person
who controls the Company within the meaning of Section 15 of the Securities Act,
each other holder of the Company's securities covered by such registration
statement, and each such holder's, officers and directors and each person
controlling such holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Holder of the Securities Act, the Exchange Act, state securities laws or any
rule or regulation promulgated under such laws applicable to the Holder, and
will reimburse the Company, such other holders, such officers, directors, or
control persons for any legal or any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating or defending any such
claim, loss, damage, liability or action, but in the case of the Company or the
other holders or their officers, directors, or control persons, only to the
extent that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in
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conformity with information furnished to the Company in writing by such
Holder. Notwithstanding the foregoing, the liability of each Holder under
this subsection 5.7(b) shall be limited to an amount equal to the net
proceeds from the offering received by such Holder, unless such liability
arises out of or is based on willful misconduct or fraud by such Holder.
(c) Each party entitled to indemnification under this Section 5.7
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or there are separate
and different defenses. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party (whose
consent shall not be unreasonably withheld), 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.
(d) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
5.8 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration
referred to in this Agreement.
5.9 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use commercially reasonable efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of a registration statement under the Securities Act or after
the Company becomes subject to the reporting requirements of the Exchange Act;
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(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) So long as a Holder owns any Restricted Securities, to furnish
to the Holder forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 (at any time
after 90 days after the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public), a copy
of the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company as the Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing the Holder
to sell any such securities without registration.
5.10 TERMINATION OF REGISTRATION RIGHTS. The rights granted pursuant
to Sections 5.1, 5.2 and 5.3 of this Agreement shall terminate as to any Holder
upon the earlier of (i) the date four years after the effective date of the
Company's initial public offering and (ii) the date such Holder is able to sell
securities of the Company pursuant to Rule 144 under the Securities Act and
holds 2% or less of the Company's outstanding capital stock.
6. FINANCIAL INFORMATION RIGHTS.
(a) The Company will provide the following documents to each
Investor who continues to hold at least 750,000 shares of Preferred Stock and/or
Conversion Stock (as adjusted for stock splits, stock dividends, stock
combinations and the like):
(i) As soon as practicable after the end of the fiscal year
ending December 31, 1999 and each fiscal year thereafter, and in any event
within 90 days after the end of each such fiscal year, consolidated balance
sheets of the Company and its subsidiaries, if any, as of the end of such fiscal
year, and consolidated statements of operations and consolidated statements of
cash flows and stockholders' equity of the Company and its subsidiaries, if any,
for such year, prepared in accordance with generally accepted accounting
principles and setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and audited by independent
public accountants of national standing selected by the Company, and a
capitalization table in reasonable detail for such fiscal year;
(ii) 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 45 days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of operations and consolidated statements of
cash flows of the Company and its subsidiaries, if any, for such period and for
the current fiscal year to date, prepared in accordance with generally accepted
accounting principles (other than accompanying notes), subject to changes
resulting from year-end audit adjustments, in reasonable detail and signed by
the principal financial or accounting officer of the Company, and a
capitalization table in reasonable detail for such quarterly period;
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(iii) At least thirty days prior to the beginning of each
fiscal year, commencing with the fiscal year beginning January 1, 2000, a budget
as adopted by the Company's Board of Directors for the fiscal year;
(iv) As soon as practicable after the end of the first and
second month of each quarterly accounting period, if available, a consolidated
balance sheet of the Company and its subsidiaries (if any), as of the end of
each such monthly period, and, if available, consolidated statements of
operations and consolidated statements of cash flows of the Company and its
subsidiaries (if any), for such periods and for the current quarter to date,
prepared in accordance with generally accepted accounting principles (other than
accompanying notes), subject to changes resulting from quarter-end and year-end
adjustments, in reasonable detail and signed by the principal financial or
accounting officer of the Company; and
(v) Copies of press releases, reports of adverse developments
and such other documents generally distributed or made available to the
Company's stockholders; provided, however, that the Company shall not be
obligated to provide information which it deems in good faith to be proprietary
or confidential.
(b) For purposes of determining the minimum holdings pursuant to
this Section 6, the holdings of an Investor together with its affiliates and
related persons shall be aggregated and any Investor which is a partnership or
limited liability company shall be deemed to hold any Preferred Stock originally
purchased by such Investor and subsequently distributed to constituent partners
or members of such Investor, but which have not been resold by such partners or
members. If the partnership or limited liability company is still in existence,
the Company may satisfy any obligation to distribute reports to individual
partners of the partnership or members of a limited liability company by
delivering a single copy of each report to the partnership or limited liability
company as agent for the constituent partners or members.
(c) Each Investor or transferee of rights under this Section 6
acknowledges and agrees that any information obtained pursuant to this Section 6
which may be considered nonpublic information will be maintained in confidence
by such Investor or transferee and will not be utilized by such Investor or
transferee in connection with purchases or sales of the Company's securities
except in compliance with applicable state and Federal securities laws.
(d) The covenants of the Company set forth in this Section 6 shall
terminate and be of no further force or effect upon the closing of a firm
commitment underwritten public offering of the Company's Common Stock or at such
time as the Company is required to file reports pursuant to Section 13 or 15(d)
of the Exchange Act, whichever shall occur first.
7. LOCKUP AGREEMENT. Each Investor, Holder and transferee hereby agrees
that, in connection with the Company's Qualified Initial Public Offering, if so
requested by the Company or any representative of the underwriters (the
"MANAGING UNDERWRITER"), such Investor, Holder or transferee shall not sell or
otherwise transfer any securities of the Company, except those securities
acquired in the Qualified Initial Public Offering or in an open-market
transaction thereafter, during the period specified by the Company's Board of
Directors at the request of the Managing
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Underwriter (the "MARKET STANDOFF PERIOD"), with such period not to exceed
180 days following the effective date of a registration statement of the
Company filed under the Securities Act; provided, however, such Market
Standoff Period shall only be imposed if similar contractual lockup
restrictions are placed upon all capital stock of the Company issued now or
hereafter to all (i) current officers and directors of the Company, (ii)
stockholders owning one percent (1%) or more of the outstanding capital stock
of the Company and (iii) holders of registration rights with respect to
capital stock of the Company. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such Market Standoff Period.
8. INVESTORS' OPTION TO SELL SHARES TO THE COMPANY.
(a) Beginning on August 6, 2004, an Investor may elect (the
"Repurchase Option"), by delivery of written notice to the Company (the
"Repurchase Notice"), to require the Company, on the terms set forth in this
Section 8, to repurchase shares of Series A Preferred Stock owned by such
Investor at a price of $0.451 per share and shares of Series B Preferred Stock
owned by such Investor at a price of $1.00 per share and shares of Series C
Preferred Stock owned by such Investor at a price of $4.50 per share (in each
case as adjusted for stock splits, stock dividends, recapitalizations and the
like) plus any declared but unpaid dividends (such price, as applicable, the
"Repurchase Price"); PROVIDED, HOWEVER, that an Investor may only require the
Company to repurchase shares pursuant to this Section 8 if such repurchase is in
each instance for not less than 50% of such Investor's shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as
applicable, initially purchased by such Investor and such repurchase is
permitted by applicable corporate law. The Company shall not be required to
repurchase shares which have been converted into Common Stock.
(b) In the event that an Investor (an "ELECTING INVESTOR")
delivers a Repurchase Notice to the Company to exercise the Repurchase Option
pursuant to Section 8(a), the Company shall promptly, and in any event within
ten (10) days, give each other Investor written notice of the Electing
Investor's exercise of the Repurchase Option. The other Investors shall have ten
(10) days from the date of receipt of such notice to exercise their Repurchase
Option by delivering a Repurchase Notice pursuant to Section 8(a) above.
(c) All Investors who exercise their Repurchase Option pursuant to
Section 8(a) above (the "PARTICIPATING INVESTORS") shall rank on parity with
each other as to the repurchase by the Company of the shares owned by such
Participating Investors and set forth in the Repurchase Notice. If the assets
and funds of the Company legally available to repurchase such shares are
insufficient to permit the payment to all Participating Investors of the
aggregate Repurchase Price to which each Participating Investor is entitled (an
"Insufficiency"), then the assets and funds legally available for the repurchase
of such shares shall be allocated ratably among the Participating Investors
based on the aggregate Repurchase Price to which each such Participating
Investor would otherwise be entitled to receive. Any shares identified in a
Repurchase Notice but not repurchased due to an Insufficiency shall be
repurchased by the Company in accordance with the previous sentence as assets
and funds become legally available therefor.
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(d) The provisions of this Section 8 will terminate and be of no
further force or effect upon the closing of a Qualified Initial Public Offering.
9. RIGHT OF FIRST REFUSAL.
(a) The Company hereby grants to each Investor (each such Investor
referred to herein as a "QUALIFIED INVESTOR"), the right of first refusal to
purchase its Pro Rata Share of New Securities (as defined in this Section 9)
which the Company may, from time to time following the date hereof, propose to
sell and issue. A "PRO RATA SHARE," for purposes of this right of first refusal,
is the ratio that (i) the sum of the number of shares of Common Stock then held
by each Qualified Investor plus the number of shares of Common Stock issuable
upon exercise or conversion of all securities exercisable for or convertible
into, directly or indirectly, Common Stock then held by such Qualified Investor
bears to (ii) the sum of the number of shares of Common Stock then outstanding
plus the number of shares of Common Stock issuable upon exercise or conversion
of all then outstanding securities exercisable for or convertible into, directly
or indirectly, Common Stock.
(b) Except as set forth below, "NEW SECURITIES" shall mean any
shares of capital stock of the Company, including Common Stock and any series of
preferred stock, whether now authorized or not, and rights, options or warrants
to purchase said shares of Common Stock or preferred stock, and securities of
any type whatsoever that are, or may become, convertible into or exchangeable
for said shares of Common Stock or preferred stock. Notwithstanding the
foregoing, "NEW SECURITIES" does not include: (i) Conversion Stock; (ii) Common
Stock offered to the public generally pursuant to a Qualified Initial Public
Offering; (iii) securities issued pursuant to any transaction approved by the
vote of two-thirds of the members of the Board of Directors primarily for the
purpose of (A) a joint venture, technology licensing or research and development
activity, (B) distribution or manufacture of the Company's products or services,
or (C) any other transaction involving a corporate partner that is primarily for
a purpose other than raising capital; (iv) securities issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of all or
substantially all of the assets or other reorganization; (v) any shares of the
Company's Common Stock or related options, warrants or other rights to purchase
such Common Stock issued to employees, officers and directors of, and
consultants to, the Company, pursuant to arrangements approved by the Board of
Directors of the Company, but not exceeding 2,358,493 shares of Common Stock;
(vi) securities issued to equipment lessors, banks, financial institutions or
similar entities in a transaction approved by vote of two-thirds of the members
of the Board of Directors of the Company, the principal purpose of which is
other than the raising of capital through the sale of equity securities of the
Company; (vii) stock issued pursuant to any rights, agreements or convertible
securities, including without limitation options and warrants, provided that the
rights of first refusal established by this Section 9 applied with respect to
the initial sale or grant by the Company of such rights, agreements or
convertible securities; or (viii) stock issued in connection with any stock
split, stock dividend or recapitalization by the Company.
(c) In the event the Company proposes to undertake an issuance of
New Securities, it shall give each Qualified Investor written notice of its
intention, describing the amount
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and type of New Securities, and the price and terms upon which the Company
proposes to issue the same. Each Qualified Investor shall have ten days from
the date of receipt of any such notice to agree to purchase up to its
respective Pro Rata Share of such New Securities for the price and upon the
terms specified in the notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased.
(d) Beginning ten days after the notice given pursuant to Section
9(c) above, the Company shall have 180 days to sell the New Securities not
elected or eligible to be purchased by Qualified Investors at the price and upon
the terms no more favorable to the purchasers of such securities than specified
in the Company's notice. In the event the Company has not sold all of the New
Securities within said 180-day period, the Company shall not thereafter issue or
sell any New Securities without first offering such securities in the manner
provided above.
(e) The provisions of this Section 9 will terminate and be of no
further force or effect upon the closing of a Qualified Initial Public Offering.
10. VESTING OF EMPLOYEE OPTIONS. Unless otherwise agreed to by a majority
of the Directors who are not then employees of the Company, options granted to
employees of the Company under the Company's 1997 Stock Plan or other approved
stock plans will vest, until the option holder's employment with or service to
the Company terminates, on terms no more favorable to the employee than ratably
over three years.
11. EMPLOYMENT, CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT
AGREEMENTS. The Company will cause each person now or hereafter employed by it
or any subsidiary with access to confidential information to enter into an
Employment, Confidential Information and Invention Assignment Agreement
substantially in a form approved by the Board of Directors.
12. TRANSFER OF RIGHTS. The rights granted under Sections 5, 6, 8 and 9 of
this Agreement may be assigned to any transferee or assignee, other than a
Competitor (as defined below) or potential Competitor of the Company in
connection with any transfer or assignment by the Holder of Registrable
Securities or Preferred Stock, provided that: (i) such transfer is otherwise
effected in accordance with applicable securities laws and the terms of this
Agreement; (ii) such assignee or transferee acquires at least 750,000 shares (as
adjusted for stock splits, stock dividends, stock combinations and the like) of
Registrable Securities (including Preferred Stock convertible into Registrable
Securities), (iii) written notice is promptly given to the Company; and (iv)
such transferee or assignee agrees in writing to be bound by the provisions of
this Agreement; provided, however, that items (ii) and (iv) shall not apply to
any transfer or assignment by a Holder to any affiliated person or entity that
is a signatory to this Agreement. Notwithstanding the foregoing, the rights
granted to the Investors hereunder may be assigned without compliance with item
(ii) above to any constituent partner or member of an Investor which is a
partnership or limited liability company, or to an affiliate of an Investor
which is a corporation, partnership or limited liability company. For purposes
of this Section 12, "COMPETITOR" shall mean any company that is primarily
engaged, or which has a business unit that is primarily engaged, in the business
or providing services that enable users to search for and thereafter access
sites on the Internet.
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13. EFFECTIVENESS; AMENDMENT AND RESTATEMENT OF EXISTING AGREEMENT. This
Agreement constitutes an amendment and restatement of the Existing Agreement
pursuant to Section 14 thereof and shall become effective and binding on all
parties thereto and persons bound by the terms thereof upon obtaining the
consent evidenced by execution of this Agreement by the Company, the Majority
Investors and the Majority Series B Investors.
14. AMENDMENT. Except as otherwise provided herein, additional parties may
be added to this Agreement, any provision of this Agreement (other than Section
5.1(b) and Section 7) may be amended or the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of (i) the Company, and (ii) the
Holders of at least a majority of the Registrable Securities then outstanding;
provided, however that Section 5.1(b) and Section 7 may be amended or the
observance thereof may be waived only with the written consent of the holders of
at least a majority of the then outstanding shares of Series B Preferred Stock
or Conversion Stock issued upon conversion thereof that are Registrable
Securities. Any amendment or waiver effected in accordance with Section 5.4 or
this Section 14, as applicable, shall be binding upon each Investor, Holder of
Registrable Securities at the time outstanding, each future holder of any of
such securities, and the Company.
15. GOVERNING LAW. This Agreement shall be governed in all respects by the
internal laws of the State of California without regard to conflict of laws
provisions.
16. ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and Agreement among the parties regarding the matters set forth
herein. 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.
17. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by facsimile
transmission, by hand or by messenger, addressed:
(a) if to a Holder, to such Holder's address as set forth in
EXHIBIT A, or to such other address as such Holder shall have furnished to the
Company.
(b) if to the Company, to:
Centraal Corporation
2 Circle Star Way, 2d Floor
Palo Alto, California 94070
Attn: Keith Teare, President and Chief Executive Officer
Fax: (650) 298-8085
or to such other address as the Company shall have furnished to the
Holders, with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
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Palo Alto, California 94304-1050
Attn: Mark A. Bertelsen, Esq.
Fax: (650) 493-6811
Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when delivered if delivered
personally, if sent by facsimile, the first business day after the date of
confirmation that the facsimile has been successfully transmitted to the
facsimile number for the party notified, or, if sent by mail, at the earlier of
its receipt or 72 hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.
18. AGGREGATION OF STOCK. All shares of Preferred Stock held or acquired
by affiliated entities or persons shall be aggregated for the purpose of
determining the availability of any rights under this Agreement.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one instrument.
20. LEGAL EXPENSES. The prevailing party in any legal action brought by
one party against another and arising out of this Agreement shall be entitled,
in addition to any other rights and remedies it may have, to reimbursement for
its expenses, including court costs and reasonable attorneys' fees.
21. TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
22. WAIVER OF RIGHT OF FIRST REFUSAL. The signatories to this Agreement
who are also parties to the Existing Agreement (other than the Company) hereby
waive, on behalf of all Existing Preferred Investors, their right of first
refusal set forth in Section 9 of the Existing Agreement and any associated
notice rights.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
CENTRAAL CORPORATION INVESTOR
a Delaware corporation By:
---------------------------
By: Name:
------------------------------------ -------------------------
Keith Teare, Title:
President and Chief Executive Officer ------------------------
[SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT]
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
<PAGE>
Exhibit 10.12
FULL-RECOURSE PROMISSORY NOTE
-----------------------------
Palo Alto, California
$270,000 May 29, 1998
FOR VALUE RECEIVED, the undersigned, Keith W. Teare (the "Debtor")
promises to pay to centraal corporation, a Delaware corporation (the
"Company"), or its assigns (the Company, together with its successors and
assigns, is herein referred to as the "Holder"), the principal sum of
$270,000 with interest thereon (computed on a basis of a 360-day year and a
30-day month) at the rate of 7.25% per annum simple interest on the unpaid
balance of the principal sum.
The principal and interest hereof shall be payable in U.S. dollars at the
principal office of the Company, or by mail to the registered address of any
other Holder. The principal amount of this note and all accrued but unpaid
interest shall be due and payable on December 31, 1998 (the "Repayment
Date"); provided, however, that the Holder may accelerate the Repayment Date
to any earlier date upon thirty days prior written notice to the Debtor.
The privilege is reserved to prepay any portion of this note at any time. If
the Debtor shall default in the payment of amounts hereunder when due, the
Holder of this note shall be entitled to payment by the Debtor of all costs
of collection, including, without limitation, reasonable attorneys' fees and
costs incurred in connection with such collection efforts, whether or not
suit on this note is filed.
This is a full-recourse note against all assets of the Debtor, and the Holder
of this note shall not be required to proceed against the collateral securing
this note in the event of default. Further, as security for payment of all
obligations under this note, including without limitation, any extensions,
modifications or renewals thereof, the Debtor hereby grants to the Holder a
security interest in the collateral listed on EXHIBIT A attached hereto,
which collateral has a fair market value at least equal to the principal
hereof. If for any reason the fair market value of such collateral falls
below the outstanding principal hereof, Debtor shall immediately notify the
Holder in writing and shall immediately grant the Holder a security interest
in additional collateral so that the fair market value of all such collateral
is at least equal to the outstanding principal hereof.
The entire unpaid principal sum of this note and any accrued but unpaid
interest shall become immediately due and payable upon the execution by the
Debtor of a general assignment for the benefit of creditors, the filing by or
against the Debtor of any petition in bankruptcy or any petition for relief
under the provisions of any federal, state or other statute relating to
bankruptcy, insolvency or other similar relief for debtors and the
continuation of such petition without dismissal for a period of thirty days
or more, or the appointment of a receiver or trustee to take possession of
the property or assets of the Debtor and the continuation of such appointment
without dismissal for a period of thirty days or more.
This note shall be governed by the laws of the State of California as they
apply to contracts entered into and wholly to be performed within such state.
Acceptance of partial or delinquent payment from the undersigned hereunder,
or the failure of the Holder to exercise any right hereunder shall not
constitute a waiver of any obligation of the undersigned or any right of the
Holder under this note, and shall not affect in any way the right to require
full performance at any time thereafter. The undersigned hereby waives
presentment payment, protest, notice of protest, notice of dishonor and
notice of non-payment of this note.
IN WITNESS WHEREOF, this note has been executed as of the date written above.
/s/ Keith W. Teare
------------------------------
Keith W. Teare
<PAGE>
Amendment and Waiver
This Amendment and Waiver (this "AMENDMENT") to the Full-Recourse
Promissory Note signed by Keith W. Teare (the "HOLDER") on May 29, 1999 (the
"NOTE") is made as of October 4, 1999.
Whereas, RealNames Corporation, a Delaware corporation (the "COMPANY"), desires
to amend the Note so as to extend the maturity date thereof.
Now, therefore, the Company agrees as follows:
1. The Company waives the existing repayment default, but does not waive the
right to be repaid all amounts owing under the Note, which amounts shall be
paid as provided below.
2. The interest on the Note shall continue to accrue at the rate of 7.25%
per annum simple interest.
3. The unpaid principal sum of the Note and any accrued but unpaid interest
shall be due and payable on December 31, 2001, provided, that the Holder may
prepay any portion of the Note any time.
4. This Amendment shall be governed by the terms and conditions of the Note
and all other terms and conditions of the Note shall remain in full effect.
IN WITNESS WHEREOF, the Company has caused this Waiver and Amendment to be
signed by its duly authorized officer or representative as of the date first
above written.
REALNAMES CORPORATION
By: /s/ Jim Strawbridge
Name: Jim Strawbridge
Title: Executive Vice President, Chief Financial and Operating Officer
<PAGE>
Exhibit 10.13
REALNAMES INC. 2735 Byron Street
Palo Alto
CA 94306
USA
Tel: 415-323-5365
April 17, 1997
Nicolas Popp
196 Santa Monica Avenue
Palo Alto
CA 94025
Dear Nico
Further to our recent conversations we would like to offer you the position of
Director of Engineering in RealNames Inc. You will be responsible for the
development of the Go! Service and other future services.
You will report to me.
Your annual salary will be $130,000 payable bi-weekly. You will be offered the
right to purchase 100,000 shares of RealNames Inc. common stock at $0.10 per
share under the employee stock purchase plan. 25,000 shams will vest on the
first anniversary of your hire date. The remainder will vest quarterly over the
following three years.
Each of us will have the right to terminate your employment at will.
Your start date is Monday May 5, 1997, unless otherwise agreed. On the first
date of your employment you will be required to sign an employee confidentiality
and proprietary rights agreement.
Please advise us in writing of your acceptance of our offer no later than 28
April 1997.
Nico, we look forward to you joining the company and playing an important part
in a great project.
Sincerely,
/s/ Jean-Marie Hullot
Jean-Marie Hullot
Chief Technology Officer
- -------------------------------------------------------------------------------
I accept this offer.
Signed:
/s/ Nico Popp
Nico Popp
Date: 4/20/97
<PAGE>
Exhibit 10.14
10 May 1998
Mr. Ted West
22 Venado Drive
Tiburon, CA 94920
Dear Ted,
I am extremely pleased to be able to offer you the position of Executive Vice
President of Sales and Marketing at Centraal Corporation. You will be reporting
directly to myself. I acknowledge your desire to be considered for the title of
Chief Operating Officer (COO) and have constructed a package that reflects that
level of seniority. The board will review your title before the end of 1998.
As EVP Sales & Marketing you will be responsible for Sales, Marketing and
Strategic Partnerships. Rusti Baker (Director Business Development), Amy Katch
(Director of Sales) and Gene McPherson (VP Communications) will report directly
to you.
Your start date will be 5/11/1998. I acknowledge that between this date and
7/1/1998 you will work 3 days a week. I further acknowledge that you will have
unpaid leave between 11-22 June 1998.
Your annual salary will be $150,000, which will be paid on a bi-weekly basis. A
further $50,000 will be paid as bonus during 1998. This will be contingent on
the company achieving its $10m revenue goal for 1998 and will be paid quarterly.
Payment will be proportionate to the percent of goal achieved.
Additionally I will recommend to the Centraal board of directors that the
following stock options be granted:
- - 750,.000 shares of common stock at a $0.10 strike price. These to vest over
4 years on a monthly basis.
- - 50,000 bonus options in 1998, 100,000 in 1999 and 100,000 in 2000 based on
achievement of agreed upon objectives (MBOs). These options will be priced
at the then current strike price and will vest over a four year period from
the date of offer. Vesting will be monthly.
<PAGE>
- - You will have the option to purchase 250,000 shares of common stock,
currently held by myself, at a $0.45 price. The company may agree to loan
you $112,500.00 to pay for these at the appropriate time of excercise.
- - Further, a pool of 500,000 of common stock, currently held by myself, will
be put aside and made available to you for purchase at $0.45 a share. You
will be entitled to purchase these should the company sell additional stock
at any point over the next 24 months. The number you purchase will be
capped at 500,000 and can only be 5% of any additional stock sold. The aim
is to maintain a 5% ownership by yourself up to a further 500,000 common
shares.
The option to buy these shares will last for 30 days from the date of any
additional stock sale. Payment will be within 60 days. The company will
entertain any request to advance a loan for these purchases, and will seek
repayment over 24 months.
There will be various protections for both you and Centraal Corporation built
into this offer:
1. In relationship to the 750,000 options, the company agrees that these will
vest monthly if legally possible. If not then, should the company terminate your
employment before 12 months, you will be permitted to vest the relevant
proportion of the first year options on the first anniversary of your
employment. Should you leave the company of your own volition within 12 months
all options will be cancelled (or returned at the $0.10 purchase price if
already vested).
2. All 1998 bonuses (cash and stock options) will be paid in proportion to the
goal of $10m revenues in 1998. Revenue is calculated as cash received in the
calendar year irrespective of accounting practices. You will be responsible for
objectives being defined and a compensation plan for the whole company being
developed. This will be effective by 1 Jan 1999 at the latest.
3. A promissory note to the company will cover the loan to facilitate the
purchase of common stock from myself. Should you leave the company of your own
volition you will repay this loan within 30 days or return the stock.
In addition to your compensation plan, Centraal offers a competitive benefits
package including the choice of several medical plans, dental, vision,
disability and life insurance, which are paid for by the company. You may choose
to purchase additional life insurance for you and your family at a nominal fee
from 3x to 5x your annual salary, not to exceed $500,000. We offer 3 weeks
vacation per year, as well as 13 paid holidays including a floating holiday to
be appointed by you.
Centraal Corporation reserves the right for either party to cancel employment at
will. This offer is contingent on:
<PAGE>
1. Proof of your eligibility to work in the US. You will receive an "I-9 Form"
for your completion, in accordance with the Immigration Reform and Control
Act.
2. Your signing and returning Centraal's non-disclosure agreement.
3. Your signing and returning this original letter to me no later than
May 11th 1998.
4. The approval of the board on 19 May 1998.
Ted, I really look forward to having you join the team! I know this goes for the
rest of the company.
/s/ Keith Teare
Keith Teare
Chief Executive Officer
- -------------------------------------------------------------------------------
I accept this fantastic offer!
Name: Ted West
Signature: /s/ Ted West
-----------------------------
Start Date: 5/11/98
----------------------------
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated March 12, 1999, except as to the items described in Note 10
which is as of October 5, 1999, relating to the financial statements of
RealNames Corporation (formerly Centraal Corporation), which appear in such
Registration Statement. We also consent to the references to us under the
headings "Experts" and "Selected Financial Data" in such Registration Statement.
PricewaterhouseCoopers LLP
San Jose, California
October 6, 1999
<TABLE> <S> <C>
<PAGE>
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<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 11,290 4,058
<SECURITIES> 0 0
<RECEIVABLES> 489 1,098
<ALLOWANCES> 6 28
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0 0
22 22
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<LOSS-PROVISION> 6 22
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<INCOME-PRETAX> (5,879) (11,044)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (5,879) (11,044)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,879) (11,044)
<EPS-BASIC> (0.40) (0.75)
<EPS-DILUTED> (0.40) (0.75)
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