<PAGE>
As filed with the Securities and Exchange Commission on January 25, 2000
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------
NOOSH, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 7379 77-0495080
(State or other
jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or
organization) Classification Code Number) Identification Number)
</TABLE>
--------------
3401 Hillview Avenue, Palo Alto, California, 94304
(650) 320-6000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
Ofer Ben-Shachar
President, Chief Executive Officer and Chairman
3401 Hillview Avenue, Palo Alto, California 94304
(650) 320-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
Copies To:
<TABLE>
<S> <C>
Laura A. Berezin, Esq. Steven B. Stokdyk, Esq.
Cooley Godward LLP Sullivan & Cromwell
Five Palo Alto Square 1888 Century Park East Blvd., 21st Floor
3000 El Camino Real Los Angeles, California 90067
Palo Alto, CA 94306-2155 (310) 712-6600
(650) 843-5000
</TABLE>
--------------
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>
Proposed Maximum
Title of Each Case of Aggregate Amount of
Securities to be Registered Offering Price(1) Registration Fee
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.001 par value................................ $58,000,000 $15,312
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o).
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment that specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section
8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. These +
+securities may not be sold until the registration statement filed with the +
+Securities and Exchange Commission is effective. This preliminary prospectus +
+is not an offer to sell nor does it seek an offer to buy these securities in +
+any jurisdiction where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated January 25, 2000.
Shares
[LOGO]
NOOSH, Inc.
Common Stock
----------
This is an initial public offering of common stock of NOOSH, Inc. All of the
shares of common stock are being sold by NOOSH.
Prior to this offering, there has been no public market for our common stock.
We estimate the initial public offering price will be between $ and $
per share. We have applied to have our common stock listed for quotation on the
Nasdaq National Market under the symbol "NOOS".
See "Risk Factors" beginning on page 6 to read about factors you should
consider before buying shares of our common stock.
----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price.................................. $ $
Underwriting discount.......................................... $ $
Proceeds, before expenses, to NOOSH............................ $ $
</TABLE>
To the extent that the underwriters sell more than shares of common
stock, the underwriters have the option to purchase up to an additional
shares from NOOSH at the initial public offering price less the
underwriting discount.
----------
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
Goldman, Sachs & Co. Robertson Stephens
Banc of America Securities LLC
PaineWebber Incorporated
E*OFFERING
----------
Prospectus dated , 2000
<PAGE>
[Description of Inside Front Cover Graphic: Graphic depicts the print job
work-flow and communication process before and after Noosh.com.
The graphic on the left-hand side of the page depicts the process before
Noosh.com and contains circles, squares and triangles, arranged in a circular
pattern, representing the parties involved in the print production process. In
the center of the circle is a square representing a print broker, a circle
representing the printing sales representative and a triangle representing the
print buyer. Connecting the three parties in the center of the circle with the
parties forming the outside of the circle are numerous lines representing the
multiple interactions among the multiple parties prior to deploying our
Noosh.com service.
The graphic on the right-hand side of the page depicts the process after
Noosh.com and also contains circles, squares and triangles, arranged in a
circular pattern, representing the parties involved in the print production
process. In the center of the circle is the Noosh logo. Lines connect the
Noosh logo with each of the parties forming the outside of the circle
representing the fact that Noosh acts as a central location enabling
collaboration among all the parties involved in the print production process.]
<PAGE>
[Description of gatefold graphics: Graphic depicts Web site page views of our
Noosh.com service. In the center is a depiction of the first page of our Web
site. Underneath, in a semi-circle, are five additional graphics depicting
other Web site page views correlating to features available on Noosh.com.
Features highlighted are "open job", "request/accept estimates", "invite team
members to collaborate", "track current jobs" and "ship completed jobs." The
gatefold also contains logos of our users.]
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding NOOSH, Inc., and our financial statements and the related
notes appearing elsewhere in this prospectus. Unless otherwise indicated, this
summary and all the information in this prospectus assumes the automatic
conversion of all outstanding shares of our preferred stock into shares of
common stock upon the closing of this offering, the reincorporation of NOOSH in
Delaware and no exercise of the underwriters' over-allotment option.
Our Business
We are a leading provider of business-to-business e-commerce solutions for
the printing industry. We have developed and operate Noosh.com, an Internet-
based communication and collaboration service for managing the design,
procurement and production of print orders. Our service can be used to manage
print products as diverse as business cards and stationery, promotional
brochures and direct mail, customized packaging and labels, and books and
magazines. It leverages the benefits of the Internet to enable print buyers,
print vendors and other providers of related services to communicate and
collaborate efficiently through the complex, multi-step process of a print job.
Through December 31, 1999, we did not generate any revenues. Since we
initiated testing of our Noosh.com service in July 1999 through December 31,
1999, over 80 print buyers and print vendors have successfully processed over
350 print orders using Noosh.com. These print orders were processed by
companies using our service for evaluation purposes, and we received no
revenues from them. Our service is primarily targeted at companies with large
print-buying requirements and their print vendors. Print vendors who use our
service generally will pay us a transaction fee based on the size and volume of
the print order, and print buyers who use our service generally will pay us a
monthly fee. A number of major corporations have entered into user agreements
with us and have deployed our Noosh.com service, including Bank of America
Corp. and Wells Fargo & Company. In addition, to promote the acceptance of our
service by large print-buying companies, we have entered into strategic
agreements with leading vendors in the print industry. To date, these vendors
include Consolidated Graphics, Inc., R.R. Donnelley & Sons Company and Wallace
Computer Services, Inc.
Our Strategy
To grow our business and customer base and increase usage of our service we
intend to:
. Exploit our first-mover advantage;
. Build brand recognition;
. Develop strategic relationships with leading industry participants;
. Maintain technology leadership;
. Foster our commitment to customer service; and
. Pursue additional revenue opportunities.
Corporate Information
We were incorporated in California in August 1998 and reincorporated in
Delaware in 2000. Our corporate offices are located at 3401 Hillview
Avenue, Palo Alto, California 94304. Our telephone number at that location is
(650) 320-6000. Information contained on our Web site does not constitute part
of this prospectus. We have filed for federal trademark registration for NOOSH,
the NOOSH logo and LiveJobsSM. Other trademarks and tradenames appearing in
this prospectus are the property of their holders.
3
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by NOOSH.............. shares
Common stock to be outstanding after this
offering.................................. shares
Use of proceeds............................ For working capital and general
corporate purposes. See "Use of
Proceeds".
Proposed Nasdaq National Market symbol..... "NOOS"
</TABLE>
The number of shares of common stock to be outstanding after this offering is
stated as of January 25, 2000 and includes:
. shares of common stock to be issued upon completion of this offering;
and
. 35,000 shares of common stock issuable upon exercise of a portion of an
outstanding warrant at an exercise price of $7.45 per share prior to this
offering.
The number of shares of common stock to be outstanding after this offering
excludes:
. 14,950,000 shares of common stock authorized for issuance under our employee
stock option plans, non-employee directors' stock option plan and our
employee stock purchase plan, of which 4,038,907 shares, at a weighted
average exercise price of $0.98, were subject to outstanding options as of
January 25, 2000;
. warrants for 1,141,309 shares of common stock that are exercisable as of
January 25, 2000 at a weighted average exercise price of $10.67; and
. warrants for an additional 2,148,850 shares of common stock that may become
exercisable in the future based on the holders meeting stated volume targets
for business conducted over our service.
4
<PAGE>
SUMMARY FINANCIAL DATA
The following summary financial data are derived from our financial
statements included elsewhere in this prospectus. The pro forma balance sheet
data reflects the receipt of net proceeds of $15.6 million upon the issuance
and sale of 1,418,182 shares of series D preferred stock to R.R. Donnelley and
two other investors in January 2000. The pro forma as adjusted balance sheet
data reflects the receipt of net proceeds from the sale of shares of
common stock offered by us at an assumed initial public offering price of
$ per share after deducting an assumed underwriting discount and
estimated offering expenses payable by us and assumes the exercise of a portion
of an outstanding warrant for a total of 35,000 shares of common stock at an
exercise price of $7.45 per share prior to this offering.
<TABLE>
<CAPTION>
Period from Period from
August 3, August 3,
1998 (date 1998 (date
of of
inception) inception)
to Year Ended to
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ------------
(in thousands, except share and
per share data)
<S> <C> <C> <C>
Statements of Operations Data:
Costs and expenses:
Research and development............. $ 111 $ 3,053 $ 3,164
Sales and marketing.................. 96 9,412 9,508
General and administrative........... 107 1,795 1,902
Value of warrants granted in
connection with
marketing agreements................ -- 1,058 1,058
Amortization of deferred stock
compensation........................ -- 2,379 2,379
--------- ---------- ---------
Total operating expenses........... 314 17,697 18,011
Interest income, net................... -- (648) (648)
--------- ---------- ---------
Net loss............................... $ (314) $ (17,049) $ (17,363)
========= ========== =========
Net loss per share--basic and diluted.. $ (0.12) $ (3.99) $ (4.61)
========= ========== =========
Shares used in per share calculation--
basic and diluted..................... 2,521,485 4,275,090 3,763,399
========= ========== =========
Pro forma net loss per share--basic and
diluted............................... $ (1.11)
==========
Shares used in pro forma net loss per
share--basic and diluted.............. 15,356,918
==========
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1999
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- ---------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................ $48,349 $63,949 $
Working capital.................................. 47,238 62,838
Total assets..................................... 53,029 68,629
Long-term debt................................... 79 79
Total stockholders' equity....................... 50,892 66,492
</TABLE>
5
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Risks and
uncertainties, in addition to those we describe below, that are not presently
known to us or that we currently believe are immaterial may also impair our
business operations. If any of the following risks actually occurs, our
business, operating results and financial condition could be seriously harmed.
In addition, the trading price of our common stock could decline due to the
occurrence of any of these risks, and you may lose all or part of your
investment. See "Note Regarding Forward-Looking Statements".
Risks Related to Our Business
Because our limited operating history makes it difficult to evaluate our
business, our future financial performance may disappoint securities analysts
or investors and result in a decline in our common stock price.
We were incorporated in August 1998 and have a limited operating history,
which makes an evaluation of our current business and prospects difficult.
Through December 31, 1999, we did not generate any revenues, and, due to our
limited operating history, it will be difficult to predict accurately our
future revenues or results of operations. This may result in one or more
quarters where our financial performance falls below expectations of analysts
and investors. As a result, the price of our common stock may decline.
In addition, because of our limited operating history, we have a limited
insight into trends that may emerge in our market and affect our business. Our
ability to succeed is subject to the risks and difficulties associated with
establishing a new business in the new and rapidly evolving market for
Internet-based print management services. Some of the specific risks and
difficulties we face include our ability to:
. turn our users into revenue-generating customers;
. increase the use of our service;
. educate prospective customers about the benefits of an Internet-based
service for managing the design, procurement and production of print orders;
. develop and enhance the NOOSH brand;
. develop and maintain relationships with print vendors;
. adapt to rapidly changing technologies and developing markets; and
. manage the growth of our operations and the increasing use of our services
effectively.
If our Internet-based service for managing the design, procurement and
production of print orders does not achieve widespread commercial acceptance,
we will be unable to generate and increase our revenues.
Widespread commercial acceptance of our service is critical to our future
success. If our potential customers do not recognize the value of, or choose
not to adopt our service, we will be unable to generate and increase our
revenues. The market for Internet-based print management services is new and
rapidly evolving. Most print buyers and print vendors currently coordinate the
procurement and management of customized print orders through either a
combination of telephone, facsimile and paper or through proprietary software
solutions. The acceptance of our service may be hindered by:
. the reluctance of prospective customers to change their existing print
purchasing habits and alter the nature of their direct print vendor
relationships;
6
<PAGE>
. our failure to effectively communicate the value of our service to
prospective customers;
. the inability of our strategic partners to effectively co-market our service
to their customers; and
. the emergence of new technologies or industry standards that could cause our
service to be less competitive.
We expect to incur significant future operating losses and may never achieve
profitability, which may cause our stock price to decline.
We did not generate any revenues through December 31, 1999, and we have never
been profitable. We incurred a net loss of $11.1 million for the quarter ended
December 31, 1999 and a net loss of $17.0 million for the year ended December
31, 1999. We anticipate that we will continue to incur operating losses and net
losses for the foreseeable future. To become profitable, we must begin
generating revenues by converting our current users to paying customers and
obtaining new customers. Moreover, we currently expect to increase our
operating expenses significantly in connection with:
. expanding our sales and marketing organization and activities;
. continuing to develop our services and technology; and
. hiring additional personnel.
As a result, our losses may continue to increase in future periods, which may
cause our stock price to decline.
If we are unable to convert our existing users to revenue-generating customers
and attract new customers, we will be unable to achieve a critical mass of
print buyers and vendors, and our ability to expand our business will be
hindered.
Substantially all of the current users of our service are using it for
evaluation purposes and are not paying for its use. In addition, our user
agreements do not obligate our users to use our service in the future. We
cannot assure you that we will be able to convert our existing users to
revenue-generating customers or what price these customers will be willing to
pay for our service. In addition, large print buyers or vendors may be
unwilling to spend the time or money to adopt our service since the
implementation of our service can be complex and time consuming. Therefore, to
sell our service successfully, we must educate our potential customers on the
uses and benefits of our service, which can require significant time and
resources on our part. Consequently, we can not assure you that we will be able
to attract new customers. If we are unable to convert our existing users to
revenue-generating customers or attract new customers, our ability to expand
our business will be hindered.
Intense competition in our industry could substantially impair our business and
our operating results.
We expect competition in the market for print management services to
intensify significantly in the future because new competitors can enter the
market with little difficulty and can launch new Internet-based services for a
relatively low cost. Competitors may offer services superior to our current or
proposed offerings. Increased competition is likely to cause price reductions
and seriously harm our business. If we do not achieve market acceptance before
our competitors offer more attractive services, we will lose customers and our
market share will decline.
We currently or potentially will compete with a number of other companies,
including print vendors offering traditional methods of buying and managing
print orders and companies that offer
7
<PAGE>
business-to-business Internet-based procurement systems or proprietary
management software. In addition, existing print vendors, including some of our
strategic partners, may develop competing Internet-based communication and
collaboration services for the management of print orders. Many of our
competitors have well-established relationships with our current users and
potential customers and have extensive knowledge of our industry. Print buyers
may be unwilling to adopt a new Internet-based system or may be more
comfortable adopting the Internet-based services offered by their current print
vendors.
Because our quarterly operating results are difficult to predict and likely to
fluctuate in future periods, we may fail to meet financial forecasts, which may
cause the market price of our common stock to decrease.
Operating results are difficult to predict and are likely to vary
significantly from quarter to quarter in the future. We compete in the general
printing market, which is characterized by individual orders from customers for
specific printing projects rather than long-term contracts. Continued
engagement for successive print orders depends on the customers' satisfaction
with our service. Therefore, the number, size and profitability of print orders
may fluctuate from quarter to quarter. As a result, our quarterly operating
results are difficult to predict and may fall below market analysts'
expectations in some future quarters, which could lead to a significant decline
in the market price of our stock.
In addition, our operating results will be impacted to the extent we incur
non-cash charges associated with stock-based arrangements with employees and
non-employees. In particular, we expect to incur substantial non-cash charges
associated with the grant of warrants to three print vendors and one print
buyer. For example, for the quarter ended December 31, 1999, we recorded a
charge of $1,058,000 in connection with portions of warrants issued to two
print vendors and we expect to record a charge of $3,180,813 in the quarter
ending March 31, 2000 in connection with a portion of the warrant issued to the
third print vendor. The remaining portions of these warrants and the entire
warrant to the print buyer are exercisable when the holders meet stated volume
targets for business conducted on or through our Noosh.com service. The
magnitude of each additional charge will be measured and the charge will be
taken when it becomes probable that the applicable volume targets will be
achieved. Accordingly the magnitude of these potential charges cannot be
currently calculated. However we expect that the charges will be relatively
large, and our operating results will be reduced correspondingly.
If we are unable to expand our sales, marketing and customer support
infrastructure successfully, our ability to increase sales of our service will
be compromised.
Our ability to expand our business will depend in part on recruiting and
training additional direct sales, marketing and customer support personnel,
including additional personnel in new geographic markets as we expand.
Competition for qualified sales, marketing and customer support personnel is
intense. We may not be able to expand our direct sales force successfully,
which would limit our ability to expand our customer base. We may be unable to
hire highly trained customer support personnel, which would make it difficult
for us to meet customer demands. Any difficulties we may have in expanding our
sales, marketing or customer support organizations will have a negative impact
on our ability to attract new customers and retain existing users.
If we are unable to retain our current management and product development
personnel and attract additional key personnel, we may not be able to manage
our business successfully or pursue our strategic objectives.
Our future success depends on the continued services of our current
management and product development personnel, including Ofer Ben-Shachar, our
President and Chief Executive Officer, David Hannebrink, our Vice President of
Marketing and Business Development, and Larry Slotnick, our Vice President of
Engineering. Our future success also depends on our continuing ability to
8
<PAGE>
attract, hire, train and retain a substantial number of highly skilled
managerial, and technical personnel. Competition for top management and
technical personnel is intense, and we may not be able to recruit and retain
the personnel we need. In addition, many of our existing management personnel
have been employed by us for less than a year. Therefore, we cannot be certain
that we will be able to allocate responsibilities satisfactorily and that the
new members of our executive team will succeed in their roles. The loss of any
one of our key management personnel, or the inability to attract, retain and
integrate additional qualified personnel, would make it difficult for us to
manage our business successfully and pursue our strategic objectives.
If we cannot continuously enhance our technology and services in response to
rapid changes in customer needs, competitive offerings, industry standards and
technology, our service may become obsolete and we will be unable to compete.
Our future success will depend on our ability to maintain and develop
competitive technologies, to continue to enhance our current service and to
develop and introduce new services in a timely and cost-effective manner. If we
are unable to adapt to changing conditions, including evolving customer needs,
new competitive service offerings, emerging industry standards and rapidly
changing technology, our business will be harmed. Both the market for Internet-
based print management services and Internet commerce in general are subject to
rapidly changing technology and standards, changes in customer requirements and
frequent new product introductions and enhancements. We may be unable to
develop and market service enhancements or new services that respond to
changing market conditions or that will be accepted by print buyers. For
example, we may be unable to design the features or functionality that our
users require on a timely basis. Any failure by us to anticipate or to respond
quickly to changing market conditions, or any significant delays in the
development of new services or in the introduction of new features, could cause
users to delay or decide against purchasing our services.
We may incur substantial expenses pursuing new or complementary business
objectives, which may harm our operating results.
To the extent we expand internationally or pursue new or complementary
business opportunities outside the printing industry, we may not be able to
expand our service offerings and related operations in a cost-effective or
timely manner. Expansion of our business into other industries will require
significant additional expenditures and strain our personnel and resources. For
example, we may need to incur significant marketing expenses to develop
relationships with new suppliers and customers. We cannot be certain that we
will be able to expand our service outside the printing industry in a timely
and cost-effective manner. Even if we are successful in this regard, any
expanded service offerings may not achieve market acceptance, which could
damage our reputation.
Third parties may increase the fees they charge us for their technology or
refuse to license technology to us, which may increase our costs or harm our
service.
We rely on third parties to provide us with some software and hardware, for
which we pay fees. Although this technology is currently available, third
parties may increase their fees significantly or refuse to license their
software or provide their hardware to us. While other vendors may provide
similar technology, we cannot be certain that we would be able to obtain the
required technology on favorable terms or at all. If we cannot obtain the
required technology at a reasonable cost or this technology is inadequate, we
may incur additional expenses or experience delays or disruptions in our
service.
Our inability to protect our intellectual property rights from third-party
challenges may significantly impair our competitive position.
If we fail to protect our proprietary rights adequately, our competitors
could offer similar services, potentially harming our competitive position. We
rely on a combination of copyright, trademark and
9
<PAGE>
trade secret laws and restrictions on disclosure to protect our intellectual
property rights. To date, we do not have any issued patents. We cannot be
certain that the steps we have taken to protect our intellectual property
rights will be adequate or that third parties will not infringe or
misappropriate our proprietary rights. We also cannot be sure that competitors
will not independently develop technologies that are substantially equivalent
or superior to the proprietary technologies employed in our Internet-based
service.
Our services may infringe on the intellectual property rights of third parties,
which may result in lawsuits and prevent us from selling our service.
In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights, including companies
in the Internet industry. We cannot be certain that our business activities
will not infringe on the proprietary rights of others, or that other parties
will not assert infringement claims against us. Any claim of infringement of
proprietary rights of others, even if ultimately decided in our favor, could
result in substantial costs and diversion of resources. If a claim is asserted
that we infringed the intellectual property of a third-party, we may be
required to seek licenses to that technology. We cannot be sure that licenses
to third-party technology will be available to us at a reasonable cost or at
all. If we were unable to obtain a license on reasonable terms, we could be
forced to cease using the third-party technology.
Risks Related to the Internet Industry
We depend on the increasing use of the Internet and on the growth of electronic
commerce. If businesses do not accept Internet-based print management services,
our business will fail.
For us to succeed, the Internet must continue to be adopted as a significant
business-to-business tool for managing enterprise-critical functions. To date,
many businesses have been deterred from using the Internet for a number of
reasons, including:
. unavailability of cost-effective, high-speed Internet access;
. inconsistent quality of service;
. potentially inadequate development of the global Internet infrastructure;
and
. the difficulty of integrating existing business software applications with
online systems.
Although the Internet has been widely adopted for business transactions, it
may not achieve broad market acceptance for managing the design, procurement
and production of print orders. Companies that have already invested
substantial resources in traditional methods of managing and producing printed
business materials may be reluctant to adopt new Internet-based services.
Any damage to or failure of our service could disrupt our business and
undermine our reputation.
Our success in attracting and retaining customers and convincing them to
increase their reliance on our Internet-based print management service depends
on our ability to offer customers reliable, secure and continuous service. This
requires us to ensure continuous and error-free operation of our systems. As
the volume of data traffic on our Web site and other systems increases, we must
continuously upgrade and enhance our technical infrastructure to accommodate
the increased demands placed on our systems. Our operations also depend in part
on our ability to protect our systems against physical damage from fire,
earthquakes, power loss, telecommunications failures, computer viruses, hacker
attacks, physical break-ins and similar events. Any software or hardware damage
or failure that causes interruption or an increase in response time of our
online service could reduce customer satisfaction and decrease usage of our
service.
10
<PAGE>
In addition, we have entered into a colocation agreement with AboveNet, Inc.
to provide data center colocation, Internet connectivity, conditioned power and
support and maintenance of our hardware and software at AboveNet's San Jose,
California facility. Our operations depend on AboveNet's ability to protect its
and our systems against damage or interruption. We cannot be certain, and
AboveNet does not guarantee, that our service will be uninterrupted, error-free
or secure. Any interruptions, errors or breaches of security could harm our
business and our reputation.
Security risks and concerns may deter the use of the Internet for conducting e-
commerce, which may inhibit the use of our service and limit our growth.
Secure transmission of confidential information over public networks is
critical for conducting e-commerce. Advances in computer capabilities, new
discoveries in the field of cryptography or other events or developments could
result in compromises or breaches of our security systems. If any
well-publicized compromises of security were to occur, they could have the
effect of substantially reducing the use of the Internet for commerce and
communications, which could reduce usage of our service and harm our business.
Anyone who circumvents our security measures could misappropriate proprietary
information or cause interruptions in our service or operations. In the past,
computer viruses or software programs that disable or impair computers, have
been distributed and have rapidly spread over the Internet. Computer viruses
could be introduced into our systems or those of our users, which could disrupt
our network or make it inaccessible to users. We may be required to expend
significant capital and other resources to protect against the threat of
security breaches or to alleviate problems caused by breaches. To the extent
that our activities may involve the storage and transmission of proprietary
information, security breaches could expose us to a risk of loss or litigation
and possible liability. Our security measures may be inadequate to prevent
security breaches, and our business would be harmed if we do not prevent them.
Increasing governmental regulation on electronic commerce and legal
uncertainties could limit our growth.
The adoption of new laws or the adaptation of existing laws to the Internet
may decrease the growth in the use of the Internet, which could in turn
decrease the demand for our services, increase our cost of doing business or
otherwise harm our business. Few laws or regulations currently directly apply
to access to commerce on the Internet. Federal, state, local and foreign
governments are considering a number of legislative and regulatory proposals
relating to Internet commerce. As a result, a number of laws or regulations may
be adopted regarding Internet user privacy, taxation, pricing, quality of
products and services, and intellectual property ownership. How existing laws
will be applied to the Internet in areas such as property ownership, copyright,
trademark, trade secret, obscenity and defamation is uncertain. The recent
growth of Internet commerce has been attributed by some to the lack of sales
and value-added taxes on interstate sales of goods and services over the
Internet. Numerous state and local authorities have expressed a desire to
impose such taxes on sales to consumers and businesses in their jurisdictions.
The Internet Tax Freedom Act of 1998 prevents imposition of such taxes through
October 2001. If the federal moratorium on state and local taxes on Internet
sales is not renewed, or if it is terminated before its expiration, sales of
goods and services over the Internet could be subject to multiple overlapping
tax schemes, which could substantially hinder the growth of Internet-based
commerce, including sales of our service.
Risks Related to this Offering
In the future, we may need to raise additional capital to fund our operations.
Any difficulty in obtaining additional financial resources could force us to
curtail our operations or prevent us from pursuing our growth strategy.
We believe that the net proceeds of this offering, together with our existing
cash and cash equivalents, will be sufficient to meet our anticipated cash
needs for working capital and capital
11
<PAGE>
expenditures for at least the next twelve months. However, after this period or
if our plans change, we may need to raise additional capital in order to fund
our operations and to pursue our growth strategy. Our future capital
requirements will depend on many factors that are difficult to predict,
including our rate of revenue growth, our operating losses, the cost of
obtaining new customers, the cost of upgrading and maintaining our
infrastructure and other systems and the size, timing and structure of any
acquisition that we complete. As a result, we cannot predict with certainty the
timing or amount of our future capital needs. We have no commitments for
additional financing, and we may experience difficulty in obtaining additional
funding on favorable terms or at all. Any difficulty in obtaining additional
financial resources could force us to curtail our operations or prevent us from
pursuing our growth strategy.
Any future funding may dilute the ownership of our stockholders or impose
limitations on our operations.
Our stock price may be volatile, and you may not be able to resell your shares
at or above the initial public offering price.
Prior to this offering, there has been no public market for our common stock.
The initial public offering price of our common stock will be determined
through negotiations between us and the representatives of the underwriters.
We cannot predict whether the market price of our common stock following this
offering will remain at or above its initial offering price. We also cannot be
certain whether an active trading market in the common stock will develop
following this offering and how liquid that market will be. As a result, if you
decide to purchase our shares, you may not be able to resell your shares at or
above the initial public offering price.
The market price for our shares of common stock is likely to be very volatile
due to a number of factors, including:
. variations in our quarterly operating results;
. changes in revenue and earnings estimates by analysts;
. changes in market valuations of similar companies;
. the gain or loss of significant customers;
. announcements of significant contracts by us or our competitors;
. acquisitions, strategic partnerships, joint ventures or capital commitments;
. additions or departures of key personnel;
. release of lock-up or other transfer restrictions on our outstanding shares
of common stock or sales of additional shares of common stock;
. general conditions in the Internet commerce and printing industries; and
. other events or factors that negatively affect the stock market.
In addition, the stock market in general has experienced extreme price and
volume fluctuations that have been unrelated to the operating performance of
particular companies. This is particularly characteristic of many companies in
the technology and emerging growth sectors. These broad market fluctuations
could materially adversely affect the market price of our common stock.
Our existing stockholders will be able to exercise significant control over all
matters requiring stockholder approval.
On completion of this offering, our executive officers, directors and 5%
stockholders, and other affiliates, will beneficially own, in the aggregate,
approximately % of our outstanding common
12
<PAGE>
stock. As a result, these stockholders, acting together, would be able to
exercise significant control over all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions, which may have the effect of delaying or preventing a third party
from acquiring control over us.
Provisions of our charter documents and Delaware law contain provisions that
may discourage a takeover, which could limit the price investors might be
willing to pay in the future for our common stock.
Provisions of our certificate of incorporation and our bylaws may have the
effect of delaying or preventing an acquisition, a merger in which we are not
the surviving company or changes in our management. In addition, because we
reincorporated in Delaware, we are governed by the provisions of Section 203 of
the Delaware General Corporation Law. These provisions may prohibit large
stockholders, in particular those owning 15% or more of the outstanding voting
stock, from consummating a merger or combination including us. These provisions
could limit the price that investors might be willing to pay in the future for
our common stock.
Future sales of our common stock may depress our stock price.
Sales of our common stock into the market could cause the market price of
our common stock to drop significantly, even if our business is doing well.
After this offering, we will have outstanding shares of common stock
assuming no exercise of the underwriters' over-allotment option. All the
shares sold in this offering will be freely tradable at the date of
this prospectus. The remaining 32,275,626 shares of our common stock that will
be outstanding after this offering will be eligible for sale as follows:
<TABLE>
<CAPTION>
Number of Shares Date eligible for sale
---------------- ----------------------
<S> <C>
19,870,033 180 days after the date of this prospectus, if sales
meet the restrictions under federal securities laws
12,405,593 Beginning in November 2000, if sales meet the
restrictions under federal securities laws
</TABLE>
The table above gives effect to lockup agreements with the underwriters or
agreements with us under which our directors, officers, employees and other
stockholders have agreed not to sell, transfer or otherwise dispose of their
shares of common stock for 180 days after the date of this prospectus. Goldman,
Sachs & Co. may, in its sole discretion and at any time without prior notice,
release all or any portion of the common stock subject to lock-up agreements.
Additionally, of the 4,038,907 shares that may be issued upon the exercise of
outstanding options as of January 25, 2000, approximately 606,796 shares will
be vested and eligible for sale 180 days after the date of this prospectus. As
of January 25, 2000, warrants for 1,141,309 shares of common stock were
exercisable and warrants for an additional 2,148,850 shares of common stock may
become exercisable in the future based on the holders meeting stated volume
targets for business conducted over our service. If exercised, the earliest
that these shares will be eligible for sale under Rule 144 is December 2000.
For a further description of the eligibility of shares for sale into the public
market following this offering, see "Shares Eligible for Future Sale".
13
<PAGE>
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary", "Risk Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Business" and elsewhere in this prospectus constitute forward-
looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different than any expressed or implied by these statements. In some cases, you
can identify statements by terminology such as "may", "will", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential", "continue" or the negative of these terms or other comparable
terminology.
Although we believe that the expectations reflected in the statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. We are under no duty to update any of the statements after the
date of this prospectus to conform these statements to actual results or events
except to the extent required under law.
14
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the shares being
offered will be $ million, at an assumed initial public offering price of
$ per share after deducting an assumed underwriting discount and estimated
offering expenses payable by us. If the underwriters exercise their over-
allotment option in full, then we estimate that the net proceeds to us from the
sale of the shares being offered will be $ million.
The principal purposes of this offering are to fund our operations, create a
public market for our common stock, facilitate our future access to the public
capital markets and increase our visibility in the marketplace. We intend to
use the proceeds for working capital and general corporate purposes. In
particular, we expect to incur significant operating expenses in connection
with:
. expanding our sales and marketing organization and activities;
. continuing to develop our service and technology; and
. hiring additional personnel.
We may also use a portion of the net proceeds to acquire complementary
technologies or businesses. However, we currently have no commitments or
agreements and are not involved in any negotiations involving any of these
transactions. Pending use of the net proceeds of this offering, we intend to
invest the net proceeds in interest-bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain any future earnings to finance the expansion of our business.
15
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999 on
an actual, pro forma and pro forma as adjusted basis. The pro forma column
reflects the receipt of net proceeds of $15.6 million upon the issuance and
sale of 1,418,182 shares of series D preferred stock to R.R. Donnelley and two
other investors in January 2000 and the automatic conversion of all shares of
outstanding preferred stock, including series D, into 21,000,745 shares of
common stock upon the closing of this offering. The pro forma as adjusted
column reflects our pro forma capitalization plus:
. our sale of shares of common stock at an assumed initial public
offering price of $ per share, after deducting an assumed
underwriting discount and estimated offering expenses payable by us; and
. 35,000 shares of common stock issuable upon exercise of a portion of an
outstanding warrant at an exercise price of $7.45 per share prior to this
offering.
None of the columns reflect:
. 14,950,000 shares of common stock authorized for issuance under our employee
stock option plans, non-employee directors' stock option plan and our
employee stock purchase plan as of January 24, 2000, of which 4,038,907
shares were subject to outstanding options;
. warrants for 1,141,309 shares of common stock that were exercisable as of
January 24, 2000 at a weighted average exercise price of $10.67;
. warrants for an additional 2,148,850 shares of common stock outstanding as
of January 24, 2000 that may become exercisable in the future based on the
holders meeting stated volume targets for business conducted over our
service; and
. the issuance of 1,825,208 shares of common stock in connection with the
exercise of stock options after December 31, 1999.
You should read the table below along with our balance sheet as of December
31, 1999 and the related notes.
<TABLE>
<CAPTION>
As of December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except share
data)
<S> <C> <C> <C>
Cash and cash equivalents...................... $ 48,349 $ 63,949 $
-------- -------- ----
Long-term debt................................. $ 79 $ 79 $ 79
Stockholders' equity:
Preferred stock, par value $0.001; 14,035,000
shares authorized, actual; 15,200,000 shares
authorized pro forma; 5,000,000 shares
authorized, pro forma as adjusted;
13,195,849 shares issued and outstanding,
actual; no shares issued and outstanding,
pro forma and pro forma, as adjusted ....... 13 --
Common stock, par value $0.001; 45,000,000
shares authorized, actual and pro forma;
75,000,000 shares authorized, pro forma as
adjusted; 9,414,673 shares outstanding,
actual; 30,415,418 shares outstanding pro
forma; shares outstanding pro forma as
adjusted ................................... 9 30
Additional paid-in capital................... 81,955 97,547
Deferred stock compensation.................. (13,408) (13,408)
Notes receivable from common stockholders.... (314) (314)
Deficit accumulated during the development
stage....................................... (17,363) (17,363)
-------- --------
Total stockholders' equity ................ 50,892 66,492
-------- --------
Total capitalization..................... $ 99,241 $130,441 $
======== ======== ====
</TABLE>
16
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was $66.5
million, or $2.18 per share. Pro forma net tangible book value per share
represents the amount of our total tangible assets, reduced by the amount of
our total liabilities, divided by the total number of shares of common stock
outstanding after giving effect to the sale and issuance of 1,418,182 shares of
series D preferred stock in January 2000 and the automatic conversion of all
shares of outstanding preferred stock into 21,000,745 shares of common stock
upon the closing of this offering. Dilution in net tangible book value per
share represents the difference between the amount paid per share by purchasers
of shares of common stock in this offering and the net tangible book value per
share of common stock immediately after the completion of this offering. After
giving effect to the sale of the shares of common stock offered by us at
an assumed initial public offering price of $ per share, after deducting
an assumed underwriting discount and estimated offering expenses payable by us
and after giving effect to the issuance of 35,000 shares of common stock upon
the exercise of a portion of a warrant at an exercise price of $7.45 per share
prior to this offering, our pro forma net tangible book value at December 31,
1999 would have been $ million or $ per share of common
stock. This represents an immediate increase in pro forma net tangible book
value of $ per share to existing stockholders and an immediate
dilution of $ per share to new investors purchasing shares at the
assumed initial offering price. The following table illustrates this dilution
on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $
Net tangible book value per share at December 31, 1999............. $
Increase per share attributable to new investors...................
---
Net tangible book value per share after the offering.................
---
Dilution per share to new investors.................................. $
===
</TABLE>
The following table summarizes, as of January 25, 2000, after giving effect
to the series D preferred stock issued, the differences between the existing
stockholders and new investors in this offering with respect to the number of
shares of common stock and preferred stock purchased from us, the total
consideration paid to us and the average price per share paid:
<TABLE>
<CAPTION>
Total
Shares Purchased Consideration Average
------------------ -------------- Price
Number Percent Amount Percent per Share
---------- ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 32,275,626 % $ % $
New investors.......................
---------- --- ----- ---
Totals............................ 100% 100%
========== === ===== ===
</TABLE>
The preceding tables assume no issuance of shares of common stock under
warrants or our stock plans after January 25, 2000. As of January 25, 2000,
there were outstanding:
. 4,038,907 shares subject to outstanding options at a weighted average
exercise price of $0.98 per share;
. warrants for 1,141,309 shares of common stock that are exercisable at a
weighted average exercise price of $10.67; and
. warrants for an additional 2,148,850 shares of common stock that may become
exercisable in the future based on the holders meeting stated volume targets
for business conducted over our service.
If all of these options were exercised, then the total dilution per share to
new investors would be $ .
17
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read together with our
financial statements and related notes, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus. The statements of operations data and the balance sheet
data presented below have been derived from financial statements that have been
audited by PricewaterhouseCoopers, independent accountants, included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
Period from Period from
August 3, August 3,
1998 (date 1998 (date
of of
inception) inception)
to Year Ended to
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ------------
(in thousands, except share and
per share data)
<S> <C> <C> <C>
Statements of Operations Data:
Costs and expenses:
Research and development.............. $ 111 $ 3,053 $ 3,164
Sales and marketing................... 96 9,412 9,508
General and administrative............ 107 1,795 1,902
Value of warrants granted in
connection with marketing
agreements........................... -- 1,058 1,058
Amortization of deferred stock
compensation......................... -- 2,379 2,379
--------- ---------- ---------
Total operating expenses............ 314 17,697 18,011
Interest income, net.................... -- (648) (648)
--------- ---------- ---------
Net loss................................ $ (314) $ (17,049) $ (17,363)
========= ========== =========
Net loss per share, basic and diluted... $ (0.12) $ (3.99) $ (4.61)
========= ========== =========
Shares used in per share calculation --
basic and diluted...................... 2,521,485 4,275,090 3,763,399
========= ========== =========
Pro forma net loss per share --
basic and diluted...................... $ (1.11)
==========
Shares used in pro forma net loss per
share --
basic and diluted...................... 15,356,918
==========
</TABLE>
<TABLE>
<CAPTION>
As of December
31,
--------------
1998 1999
------ -------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents....................................... $1,117 $48,349
Working capital................................................. 902 47,238
Total assets.................................................... 1,239 53,029
Long-term debt.................................................. -- 79
Total liabilities............................................... 241 2,137
Total stockholders' equity...................................... 998 50,892
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of our operations and should be read together
with our financial statements and related notes included elsewhere in this
prospectus. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of factors
including, but not limited to, those set forth under "Risk Factors" and
elsewhere in this prospectus.
We were incorporated in August 1998, and we initiated testing of our service,
Noosh.com, in July 1999. We officially launched Noosh.com on October 1, 1999.
Since inception, our operating activities were related primarily to the design
and development of our Noosh.com service, building our corporate
infrastructure, establishing relationships with print buyers and vendors and
raising capital. During this time, we have grown our organization by hiring
personnel in key areas, particularly sales and marketing and research and
development. From inception through December 31, 1999, we accumulated net
losses of $17.4 million.
Through December 31, 1999, we did not generate any revenues. We intend to
generate revenues by charging print vendors a transaction fee based on the size
of the print order and the aggregate volume of orders processed by the
particular user. Some large print vendors will receive discounts based on
aggregate volume and other services they provide. In addition, print buyers
generally will pay a monthly fee for using our service. As of December 31,
1999, over 80 print buyers and print vendors successfully had processed over
350 print orders using our service. These print orders had an aggregate value
to the print buyers and print vendors of $3.36 million, with an average order
size in excess of $8,000. These print orders were processed by companies using
our service for evaluation purposes, and we received no revenues from them.
As we seek to expand our business, we intend to continue to commit
significant resources to sales and marketing and research and development
activities. We expect that we will incur losses and generate negative cash flow
from operations for the foreseeable future. Our ability to achieve
profitability depends upon our ability to increase our sales substantially. In
view of the rapidly changing nature of our business and our limited operating
history, we believe that period-to-period comparisons of our operating results,
including our operating expenses, are not necessarily meaningful and should not
be relied upon as an indication of our future performance.
In December 1999, we entered into agreements with two print vendors under
which they will be able to process their print orders using our service. In
connection with these agreements, we issued a warrant to one print vendor to
purchase 270,000 shares of common stock and a warrant to the other print vendor
to purchase 225,000 shares of common stock. 140,000 shares of common stock are
issuable immediately upon the exercise of a portion of one of the warrants at
an exercise price of $7.45, and 75,000 shares of common stock are issuable
immediately upon the exercise of a portion of the other warrant at an exercise
price of $11.00. The remaining portions of the warrants are exercisable when
the print vendors meet stated volume targets for business conducted over our
service at exercise prices ranging from $7.45 per share to the fair market
value of our common stock on the date the volume targets are met. Using the
Black-Scholes option pricing model and assuming a term of three years and
expected volatility of 60%, the fair value of the shares that are immediately
exercisable under the warrants approximated $1,058,000. Accordingly, we
recorded a charge of $1,058,000 for the quarter ended December 31, 1999. The
remaining shares under the warrants will be valued and a charge will be taken
in a similar manner when it becomes probable that the volume targets will be
met.
In January 2000, we entered into an agreement with a print buyer under which
the print buyer will be able to process its print orders using our service. In
connection with that agreement, we
19
<PAGE>
issued to the print buyer a warrant to purchase 50,000 shares of common stock.
All of the shares are exercisable at an exercise price of $11.00 per share when
the print buyer meets a stated volume target for business conducted over our
service.
In January 2000, we entered into an agreement with R.R. Donnelley to co-
market and make our Noosh.com service available to R.R. Donnelley customers. In
connection with the agreement, R.R. Donnelley purchased 1,272,727 shares of
series D preferred stock for a total of $14.0 million. In addition, we issued
two warrants to R.R. Donnelley to purchase an aggregate of 2,780,159 shares of
common stock at an exercise price of $11.00 per share. A total of 961,309
shares of common stock are issuable immediately upon the exercise of a portion
of the warrants. The remaining portions of the warrants are exercisable when
R.R. Donnelley or, in the case of one of the warrants, a specific business unit
of R.R. Donnelley, meets stated volume targets for business conducted over our
service at an exercise price of $11.00 per share. Using the Black-Scholes
option pricing model and assuming a term of two years and expected volatility
of 60%, the fair value of the shares that are immediately exercisable under the
warrants approximated $3,180,813. Accordingly, we will record a charge of
$3,180,813 for the quarter ending March 31, 2000 in connection with these
warrants. The remaining shares under the warrants will be valued and a charge
will be taken in a similar manner when it becomes probable that the volume
targets will be met.
Options granted to our employees from our inception through December 31, 1999
have been granted at exercise prices which, based on the assumed initial public
offering price, are below the deemed fair market value for financial reporting
purposes. As of December 31, 1999, we had recorded aggregate deferred stock
compensation for these options of $15.8 million. The deferred stock
compensation is being amortized over the vesting periods of the stock options.
We recognized no deferred stock compensation expense during the period ended
December 31, 1998 and $2.4 million for the year ending December 31, 1999.
Future amortization based on options granted through December 31, 1999 is
anticipated to be approximately:
<TABLE>
<CAPTION>
Year Ending December 31, Amount(s)
------------------------ ----------
<S> <C>
2000......................................................... $8,152,000
2001......................................................... 3,372,000
2002......................................................... 1,534,000
2003......................................................... 350,000
</TABLE>
In addition to these charges, we expect to record an additional $10.8 million
of deferred stock compensation for similar options granted from January 1, 2000
to January 15, 2000.
Results of Operations for the Period Ended December 31, 1998 and Year Ended
December 31, 1999
Operating Expenses
We categorize our operating expenses into research and development, sales and
marketing, general and administrative, value of warrants granted in connection
with marketing agreements and amortization of deferred stock compensation.
Research and Development. Research and development expenses consist of
personnel and other expenses associated with developing and enhancing software
in support of our Noosh.com service. Research and development expenses
increased from $111,000 for the period ended December 31, 1998 to $3.1 million
for the year ended December 31, 1999. These expenses in 1998 were comprised
primarily of salaries for an initial development team. In 1999, these expenses
consisted principally of staffing and associated costs related to the design
and development and maintenance of our Noosh.com service, and content and
design expenses. We believe that our success is dependent in large part on
continued enhancement of our Noosh.com service. Accordingly, we expect research
and development expenses to increase in future periods.
20
<PAGE>
Sales and Marketing. Sales and marketing expenses consist primarily of
participation in trade shows, advertisements, personnel and related costs for
our marketing staff and customer support groups. Sales and marketing expenses
increased from $96,000 for the period ended December 31, 1998 to $9.4 million
for the year ended December 31, 1999. These increases primarily resulted from
expenses related to increases in sales and marketing personnel and
participation in industry trade shows for a full fiscal year. We intend to
increase our sales and marketing expenses to develop relationships with print
buyers, print vendors and providers of related services and build brand
recognition.
General and Administrative. General and administrative expenses consist
primarily of salaries to employees and fees for professional services. General
and administrative expenses increased from $107,000 for the period ended
December 31, 1998 to $1.8 million for the year ended December 31, 1999
primarily as a result of operations for the full fiscal year and the addition
of finance and administrative personnel as well as expenses related to
increased professional service fees. We expect general and administrative
expenses to increase in future periods to the extent we continue to expand
operations and bear the increased expenses associated with being a public
company.
Value of Warrants Granted in Connection with Marketing Agreements. For the
year ended December 31, 1999, we recognized costs totaling $1,058,000 related
to the valuation of the portion of warrants immediately exercisable upon
issuance to two print vendors.
Amortization of Deferred Stock Compensation. We recorded aggregate deferred
stock compensation of $15.8 million in connection with some of the stock
options we granted through December 31, 1999. We expensed $2.4 million of this
deferred stock compensation in the year ended December 31, 1999, related to
these stock options. The deferred compensation amounts are being amortized over
the vesting period of the stock options, generally four years.
Interest Income, Net
Interest income, net has been derived primarily from earnings on cash
investments. We had no interest income, net for the period ended December 31,
1998 and $648,000 for the year ended December 31, 1999, which resulted from
higher average cash balances for a full fiscal year in 1999. We expect our
interest income to increase in the short term as a result of our investing the
proceeds from our sale of series D preferred stock and this offering.
Income Taxes
We incurred operating losses and accordingly did not record a provision for
income taxes for any of the periods presented. On December 31, 1999, for
federal and state income tax purposes, we had net operating loss carryforwards
of $13.1 million and $150,000. These net operating losses will expire in the
years 2005 through 2019 if not utilized. Future changes in our share ownership,
as defined in the Tax Reform Act of 1986 and similar state provisions, may
restrict the utilization of carryforwards.
Liquidity and Capital Resources
Since our inception in August 1998, we have funded our operations primarily
through the sale of $79.6 million of equity securities. As of December 31,
1999, we had cash and cash equivalents of $48.3 million. In addition, in
January 2000, we raised $15.6 million from the sale of equity securities.
Net cash used in operating activities was $123,000 for the period ended
December 31, 1998 and $12.0 million for the year ended December 31, 1999. Net
cash used in operating activities for the period ended December 31, 1998
primarily resulted from operating losses of $314,000 incurred
21
<PAGE>
during the period. Net cash used in operating activities for the year ended
December 31, 1999 primarily resulted from operating losses of $17.0 million,
partially offset by $3.4 million of amortization of deferred stock compensation
and the value of warrants granted in connection with marketing agreements.
Net cash used in investing activities was $72,000 for the period ended
December 31, 1998, and $3.7 million for the year ended December 31, 1999. The
cash used in investing activities in both periods was related principally to
purchases of computer equipment and, to a lesser extent, software and office
furniture to support expansion of our operations.
Net cash provided by financing activities was $1.3 million for the period
ended December 31, 1998, and $62.9 million for the year ended December 31,
1999. Cash provided by financing activities was primarily from proceeds of the
sale of our preferred stock.
As of December 31,1999, we had operating lease obligations of $1.7 million
for 2000, $606,000 for 2001 and $102,000 for 2002.
We believe that the net proceeds from this offering, together with our cash
and cash equivalents, will be sufficient to meet our anticipated cash needs for
working capital, operating expenses and capital expenditures for at least the
next twelve months. After twelve months, we may need additional capital.
However, we may need to raise additional funds sooner to fund additional
expansion, develop new or enhanced services, respond to competitive pressures
or make acquisitions. We cannot be certain that additional financing will be
available to us on favorable terms, if at all. If adequate funds are not
available on acceptable terms, our business will be harmed.
Year 2000 Readiness Disclosure
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish dates before and after January 1, 2000. This could result in system
failures or miscalculations causing disruption of operations for any company
using computer programs or hardware. As a result, many companies' computer
systems may need to be upgraded or replaced in order to avoid year 2000 issues.
The majority of software and hardware we use to manage our business has been
purchased or developed by us within the last 24 months. While this does not
completely protect us against year 2000 exposure, we believe our exposure is
limited because the technology we use to manage our business is not based upon
legacy hardware and software systems.
To date, we have not experienced any material interruptions in our operations
related to the year 2000 issue. We have not incurred material costs with
respect to our year 2000 remediation efforts and do not expect that future
costs will be material. However, if we, or third-party providers of hardware,
software and communications services fail to remedy any future year 2000
issues, the result could be lost revenues, increased operating expenses, the
loss of users and other business interruptions, any of which could harm our
business. The failure to adequately address year 2000 compliance issues in the
delivery of products and services to our users could result in claims against
us of misrepresentation or breach of contract and related litigation, any of
which could be costly and time consuming to defend.
We have not developed and do not plan to develop any specific contingency
plans for year 2000 issues. Our worst case scenario for year 2000 problems
would be our inability to operate our Noosh.com service.
22
<PAGE>
Quantitative and Qualitative Disclosures About Market Risk
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk of loss. Some of the securities that we
may invest in may be subject to market risk. This means that a change in
prevailing interest rates may cause the market value of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing rate and the prevailing interest rate
later rises, the market value of our investment will probably decline. To
minimize this risk in the future, we intend to maintain our portfolio of cash
equivalents and short-term investments in a variety of securities, including
commercial paper, money market funds, government and non-government debt
securities. In general, money market funds are not subject to market risk
because the interest paid on such funds fluctuates with the prevailing interest
rate. As of December 31, 1999, we did not have any hedging instruments.
We operate solely in the United States and all expenses to date have been
made in United States dollars. Accordingly, we have not had any exposure to
foreign currency rate fluctuations.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards, requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 is effective for fiscal years
beginning after June 30, 2000. Because we do not currently hold any derivative
instruments and do not engage in hedging activities, we do not believe that the
adoption of SFAS No. 133 will have a material impact on our financial position
or results of operations.
23
<PAGE>
BUSINESS
Overview
We are a leading provider of business-to-business e-commerce solutions for
the printing industry. We have developed and operate Noosh.com, an Internet-
based communication and collaboration service for managing the design,
procurement and production of print orders. Our service is designed to address
the complex, multi-step process of completing a print order. It leverages the
benefits of the Internet to enable print buyers, print vendors and other
providers of related services to communicate and collaborate efficiently
throughout the life cycle of a print order. Our service is primarily targeted
at companies with large print-buying requirements and their print vendors.
Print vendors who use our service generally will pay us a transaction fee based
on the size and volume of the print order, and print buyers who use our service
generally will pay us a monthly fee. A number of major corporations have
entered into user agreements with us and have deployed our Noosh.com service,
including Bank of America and Wells Fargo. In addition, to promote the
acceptance of our service by large print-buying companies, we have entered into
strategic agreements with leading vendors in the print industry. To date, these
vendors include Consolidated Graphics, R.R. Donnelley and Wallace Computer
Services.
Industry Background
Growth of Business-to-Business Commerce on the Internet
The Internet has emerged as one of the fastest growing communications mediums
in history and is fundamentally reshaping the way businesses interact with
other businesses. The Internet enables businesses to integrate complex business
processes, exchange information easily with multiple partners and provide
buyers and sellers with a consistent means of executing transactions. As a
result, companies of all sizes are adopting Internet strategies to conduct
business. According to Forrester Research, business-to-business e-commerce is
expected to grow from $43 billion in 1998 to $1.3 trillion in 2003.
The widespread adoption of business-to-business e-commerce is driving the
demand for industry-specific solutions that offer scaleable and standardized
online business environments. These e-commerce solutions provide businesses
with opportunities to reduce the costs of accessing information and to expand
their ability to conduct transactions with multiple parties. Business-to-
business e-commerce solutions are being targeted at and are most likely to be
accepted by industries characterized by a large number of buyers, sellers and
intermediaries, a high degree of fragmentation, significant dependence on
information exchange, high transaction volumes and broad user adoption of the
Internet.
The U.S. Printing Industry
The U.S. printing industry is very large, with numerous print buyers, print
vendors and other providers of related services, interacting with one another
in the process of managing the design, procurement and production of printed
business materials. Total sales in the U.S. printing industry were $149 billion
in 1998, according to Printing Industries of America, an industry trade
association. Total worldwide sales in the printing industry were $365 billion
in 1999 according to TrendWatch, an independent market research firm. The
printing industry includes the following product categories:
. Basic business printing, which includes simple, standardized products such
as business cards, stationery and business forms;
. Promotional printing, which consists of customized products such as
brochures, direct mail and catalogs;
. Bill-of-material printing, which consists of customized packaging, labels
and other shipping materials;
24
<PAGE>
. Publications, which includes newspapers, magazines and books; and
. Specialty printing, such as T-shirts, calendars and souvenirs.
The traditional process of designing, procuring and producing a print order
can require extensive collaboration by multiple parties and can be highly
inefficient. CAP Ventures, Inc., an independent print research firm, estimates
that for every $1 paid by a print buyer to a print vendor, there are $5 to $8
of additional costs associated predominantly with late fees, reworks, obsolete
materials and shipping. These expenses result from the traditional labor-
intensive process of managing a print order, as well as delays from and
miscommunications among the many people from multiple organizations who must
collaborate through the various steps required to complete a print order. Key
processes that require the coordination of multiple parties include job design
and specification, submitting requests for estimates, vendor selection, job
revision, production, warehousing, shipment and payment.
The U.S. printing industry is highly fragmented, with an estimated 51,000
printing businesses, 60,000 related creative concerns such as advertising
agencies, graphic design firms, publishers and corporate design groups, 12,000
print brokers and thousands of print-buying organizations. Contributing to this
fragmentation is the capital-intensive nature of print production, which causes
print vendors to specialize in specific print products based on the type of
equipment they own. Therefore, print vendors generally offer a limited
selection of customizable products.
This high degree of industry fragmentation and specialization generally leads
print buyers, particularly large enterprises with a broad range of printing
needs, to establish relationships with multiple print vendors. According to CAP
Ventures, a large print buying company spends between 6% and 15% of its annual
revenues to design, develop, procure, produce, distribute and store printed and
electronic documents and business communications programs. Each individual
print order typically involves the collaboration of multiple parties across
such varied organizations as the print buyer, print vendor, advertising agency,
independent designer, prepress specialist, bindery specialist, direct mailer
and print broker. Further, most large print buyers lack standardized
procurement, print management and tracking tools, hindering the development of
their spending and operating controls. According to CAP Ventures, over 80% of
print buyers manage the print process inefficiently, resulting in up to a 40%
waste of investment in annual print spending.
Limitations of Existing Print Management Processes
The typical process of producing a customized print product involves multiple
interactions among many people within numerous organizations, or a "many-to-
many" workflow process. For example, a large print buyer may engage advertising
and creative agencies to design, specify and buy print on its behalf.
Alternatively, print buyers may coordinate these processes in-house or rely on
a print broker to act as a sales middleman or project manager. Once a print
order is completed, direct mail and fulfillment companies often coordinate the
receipt, packaging and mailing of print products from several printers
simultaneously. As a result of this complicated production chain, we believe
that a print order which costs several thousand to several hundred thousand
dollars may require the collaboration of 10 to 30 people across three to seven
organizations.
25
<PAGE>
Lacking a centralized system for coordinating these many-to-many workflow
processes, the production of customized print products traditionally has been
characterized by significant inefficiencies, including:
Print Buyer
. Numerous communications across multiple mediums, including telephone,
facsimile, email, voicemail and paper;
. Cumbersome, error-prone procurement cycle;
. Labor-intensive print vendor selection process;
. Inconsistent pricing from numerous print vendors;
. Difficulty managing, coordinating and accounting for numerous print orders
across multiple organizations and from numerous print vendors;
. Unreliable storage and delivery of content files; and
. Obsolete inventory, accounting for a significant percentage of annual print
spending.
Print Vendor
. High customer acquisition and retention costs;
. Costly sales order administration and customer service;
. Difficulty managing, coordinating and accounting for numerous print orders
across multiple organizations;
. Manual reconciliation of internal job specifications, changes, file and
production instructions;
. Rework resulting from poorly documented specifications and other errors; and
. Inefficient equipment utilization.
In addition, agencies and brokers who serve as intermediaries between print
buyers, print vendors and other providers of related services face many of
these same inefficiencies.
The most common method today for coordinating the procurement and management
of customized print orders remains a combination of telephone, facsimile and
paper. Using these "one-to-one" communication tools, print buyers and vendors
conduct the multiple steps required to manage the print order, including
design, proofing, rework and delivery, on an ad hoc basis. More recently, some
print buyers and vendors have adopted software solutions designed to automate
different elements of the design, procurement and production processes. While
these proprietary software solutions improve on some of the inefficiencies of
traditional paper and phone-based methods, they too are largely inadequate
because they are based on one-to-one processes, while corporate print orders
generally require many-to-many communications. More specifically, one-to-one
methods are inadequate because:
. the production of a customized print product requires extensive interaction
and collaboration across many organizations and among numerous parties;
. the creative process of producing a customized print product is dynamic and
highly iterative, requiring all parties to have input throughout the
process; and
. full automation of any single print buyer/print vendor solution can require
a substantial investment in proprietary software and system integration that
often cannot be leveraged across multiple print buyer/print vendor
relationships.
Collectively, these shortcomings make one-to-one solutions difficult to scale
and thus limit their widespread adoption by the printing industry. We believe
that print buyers, print vendors and the numerous providers of related services
involved in the production of a print order desire a standardized,
collaborative environment where they can easily manage the entire print order
life
26
<PAGE>
cycle. We believe that these needs can be addressed with a comprehensive,
Internet-based communication and collaboration service for the management of
the design, procurement and production of print.
The NOOSH Solution
We have developed and operate Noosh.com, an Internet-based communication and
collaboration service for managing the design, procurement and production of
print orders. Our Noosh.com service is designed specifically to address the
complex needs of the printing industry and offers sophisticated functionality.
Key elements of our service include:
. providing a central location where all current information about a print
order is readily accessible through an Internet browser;
. enabling collaboration among all parties involved at each step of the print
order life cycle in a secure and scalable Internet environment; and
. enabling parties to build project specific working groups consisting of
participants from multiple organizations.
We believe that the principal benefits to print buyers, print brokers and
advertising agencies using our Noosh.com service are:
Increased Productivity. We provide online, real-time access to information
regarding the status of their print order, enabling more efficient job
management throughout the print supply chain. Our service is particularly
helpful to users who manage multiple jobs from several print vendors
simultaneously.
Reduced Print Purchasing Costs. Our service streamlines the print purchasing
process, allowing print buyers to reduce procurement costs and benefit from
better vendor management.
Shortened Job Lead Times. Noosh.com empowers print buyers with the ability to
design, procure and produce print orders more efficiently by enabling quick and
convenient collaboration between the multiple parties involved in the print
supply chain.
Better Tracking and Communication. Our service maintains a detailed history
of changes to job specifications and tracks print budgets and usage. Our
service also allows users to send messages and assign tasks to one another
within a standard communication environment.
We believe that our service also offers significant benefits to print
vendors, related suppliers, print brokers and advertising agencies, including:
Enhanced Customer Relationships. Noosh.com helps print vendors to serve their
customers better by allowing for improved responsiveness and higher quality
customer service relative to traditional methods of managing print.
Reduced Costs. Our service centralizes information, allowing print vendors to
reduce paperwork and improve accuracy, thereby limiting costly reworks and
document distributions.
Higher Sales Productivity. We offer print vendors the opportunity to access
new customers and markets through our service. Because our service streamlines
the procurement process, print vendors are able to reduce their selling and
marketing costs while extending their reach.
27
<PAGE>
Minimal Initial Investment. Because Noosh.com is an entirely Internet-based
service and does not require the purchase of any software, print buyers and
print vendors are able to establish an Internet presence easily and quickly
with little or no initial investment.
Our Strategy
To grow our business and customer base and increase usage of our service, we
intend to:
Exploit Our First-Mover Advantage. We believe that our position as the first
company to offer a completely Internet-based service for managing the design,
procurement and production of print orders provides us with a first-mover
advantage. As of December 31, 1999, over 80 print buyers and print vendors have
used our service to process print orders for evaluation purposes. To increase
the number of print buyers, print vendors and other related parties using our
service, we intend to build on the existing print relationships of our current
users with other companies in the print supply chain. Our direct sales force,
comprised of 50 professionals as of December 31, 1999, will continue to target
large print buyers and print vendors.
Build Brand Recognition. We intend to develop the most well-known and trusted
brand as the leading Internet-based service for managing the design,
procurement and production of print orders. We intend to pursue an aggressive
brand development strategy through targeted advertising and promotions, press
coverage and participation in trade association and industry events.
Additionally, we will also rely on our co-marketing relationships with large
print vendors in order to build our brand recognition.
Develop Strategic Relationships with Leading Industry Participants. We intend
to develop strategic relationships to increase our customer base, broaden our
service offerings and enhance our technology platform. Specifically, we are
seeking co-marketing relationships with large print vendors and opportunities
with leading corporate procurement system providers and equipment
manufacturers. We have already entered into these agreements with Consolidated
Graphics, R.R. Donnelley and Wallace Computer Services under which they would
co-market our service to their customers. By aggressively pursuing strategic
relationships, we believe we can help strengthen our value proposition for both
print buyers and vendors and generate increased usage of our Noosh.com service.
Maintain Technology Leadership. We intend to maintain our technology
leadership by continuously improving the functionality of our services to meet
the evolving needs of our current users and our future customers. For example,
we intend to develop business relationships and product interfaces with
enterprise resource planning and business-to-business e-commerce software
vendors to ensure widespread compatibility of our services. Additionally, we
plan on developing links with the information systems of print vendors and
graphic file transfer and management services to improve production workflow,
reduce data entry at the print vendors' sites and provide complementary
services for print vendors.
Foster Our Commitment to Customer Service. We focus on serving the interests
of our users because we believe a loyal base of users will afford us a
significant competitive advantage. Throughout each phase of the design and
implementation of our service, we maintain an active and consistent dialogue
with our users. At every stage of our design process, we seek user feedback to
develop new versions of and add enhancements to our system to better serve the
needs of our users. We also intend to enhance our customer service capabilities
by expanding our customer support and account management teams and improving
our online training tools.
Pursue Additional Revenue Opportunities. We intend to pursue additional
revenue opportunities by expanding our business into other print-related
markets, such as creative design
28
<PAGE>
process management and file and data storage. We also plan to expand
internationally into other markets that we believe would benefit from our
service. Further, we see applications for our technology in other non print-
related markets. Additionally, we intend to pursue selective acquisitions of,
or investments in, complementary products, services and businesses.
Products and Services
We provide a comprehensive, business-to-business, Internet-based
communication and collaboration service for managing the design, procurement
and production of print orders. Our service uses our patent-pending
LiveJobs(TM) technology to enable print buyers, print vendors and other
providers of related services involved in the print production and management
process to communicate and collaborate with each other regarding any print
order. After receiving a password-protected Noosh.com account, our service
allows each user to manage deadlines and client commitments and relationships
as well as to view detailed job and contact information through a user-friendly
interface.
Print buyers can easily create job specifications, submit the specifications
to print vendors for bids, award the print order to the chosen print vendor,
post the resulting print order online and collaborate with necessary parties
throughout the design, procurement and production stages of the print order.
Print vendors have access to the print buyer's specifications after they have
been asked to quote on a print order through Noosh.com. Print vendors may
submit quotes and subsequently manage print orders through our collaboration
and messaging capabilities. As the print order progresses, print buyers and
print vendors may notify each other of status changes, pose specification
questions, revise schedules, and collaborate on other aspects of the print
order in real time so that problems are resolved expeditiously.
Any print buyer or print vendor may use the service if they have a browser
and an Internet connection. Other than the browser, there is no special
software required to use Noosh.com.
With our service, we create a standardized environment which addresses the
printing industry's communications and procurement needs by:
. providing a central location where all current information about a print
order, including specifications, job status, estimates, change orders and
shipping instructions, is located;
. enabling collaboration among print buyers, print vendors and other providers
of related services involved in the print production and management process;
. enabling parties to build a team on a project and print order basis
consisting of participants from multiple organizations;
. assigning roles and privileges to individual team members, designating their
status and ability to view or make changes to a print order; and
. providing secure and selective access on print orders.
Our service enables print buyers, print vendors and other providers of
related services to communicate and collaborate efficiently throughout the life
cycle of a print order. The key features of our service are:
Estimating, Quoting and Specifications Management. Print jobs can be created
and submitted by buyers, and quoted online by print vendors, locally or
anywhere in the world. The buyer decides which and how many print vendors can
bid on a job. Job specifications and order revisions are managed consistently,
enabling buyers and print vendors to share common order description formats.
Order Management. Noosh.com provides online ordering, confirmation and order
status from design through delivery. This enables collaborative management and
tracking of orders by print
29
<PAGE>
buyers, print vendors, graphic designers and direct mail and fulfillment
companies. Online records of complete order history and revisions give everyone
involved in the order a comprehensive, relevant, up-to-the-minute status.
Management Reporting. Noosh.com provides print buyers with access to a range
of detailed performance reports, including purchasing, client history and print
vendor activity. Noosh.com also provides print vendors with a variety of
detailed reports, including account history and sales performance.
Content Delivery and File Management. Noosh.com allows for text and graphic
file transfers, real-time proofing and job file archiving, which are key
features needed to develop an integrated and full-service online environment
for creating and producing complex print orders.
Integration with Other Systems. We have published application programming
interfaces to facilitate the integration of Noosh.com with enterprise software
and other Internet services employed by our users.
Industry Reference. Noosh.com provides profiles of print vendors registered
with our service for review by print buyers and advertising agencies. Our
service also contains reference information about the printing industry for all
visitors, regardless of whether they have an account with us.
Users
We primarily target large print buyers with significant print buying
requirements together with their printers. In addition, we also target print
brokers who serve large print buyers, printers and advertising agencies.
Since we initiated testing of our Noosh.com service in July 1999 through
December 31, 1999, over 80 print buyers and printers have used our service for
evaluation purposes to process print orders, for which we received no revenues.
As of January 25, 2000, the following is a list of print buyers, printers and
other providers of related services who have entered into agreements to pay us
for the use of our service if they decide to use our service:
<TABLE>
<S> <C>
Printers, Pre-Press Vendors
Print Buyers and Print Brokers
Aetna Services, Inc. Bayshore Press
Bank of America Corp. Commercial Printing Co.
Cran Barry, Inc. CRT Color Printing Co.
E*TRADE Group, Inc. Eastern Rainbow Inc.
Levi Strauss & Co. Gamma One, Inc.
Merrill Lynch Asset Management Graphic Finishers of America
Miller Freeman, Inc. Hart Graphics, Inc.
The Timberland Company Imperial Company
Wells Fargo & Company Iridio Digital Printing
LAgraphico.com
Printers with Co-Marketing Agreements Multiple Images Printing Inc.
Consolidated Graphics, Inc. and New Leaf Press
their 63 affiliated companies Newport Printing Systems
R.R. Donnelley & Sons Company Nova Graphics, Ltd.
Wallace Computer Services, Inc. Printing Express, Inc.
Prodigy Press, Inc.
Rhodes Productions
RW Nielsen Associates
Santa Cruz Web Integration and Design
Spencer & Worth, Ltd.
Waller Press
Wicklander Printing Corporation
Wintry Press
</TABLE>
30
<PAGE>
The following are case studies of two users which have adopted our Noosh.com
service:
Bank of America. Bank of America is one of the largest banking institutions
in the United States, providing its customers with a wide array of banking and
other financial services. Bank of America estimates that it spends between $50
million and $70 million annually on its print and print-related needs with 30
to 50 printers. Bank of America was looking for a way to increase the
productivity of its new marketing and communications departments, generate
savings by reducing its number of print vendors and provide an internal,
nationwide communications service for managing the design, procurement and
production of its print needs. We worked with Bank of America's San Francisco
and Charlotte offices to analyze their current print procurement and production
process. We have since then developed a specific application for their
invoicing and procurement process and a front-end tracking system. As a result
of deploying our service in both offices, Bank of America believes that it has
been able to reduce the time required for it to obtain estimates from print
vendors and that it has experienced an increase in the number of bids it
receives for print orders. In addition, Bank of America believes that our
service enables its marketing department to make more revisions, more
frequently, to print projects, track the costs of print projects and budget
spending in the future for similar projects. Through December 31, 1999, Bank of
America processed over 115 orders with 11 print vendors using Noosh.com. It is
currently in the process of deploying Noosh.com on a nationwide basis.
Aetna Services. Aetna Services is one of the largest healthcare insurers in
the United States. Aetna estimates that it buys over $120 million worth of
printed business materials annually from numerous print vendors. Aetna was
looking for a way to manage its multiple print vendors, quick production cycles
and complex print-buying requirements. In addition, Aetna needed a way to
identify trends in their buying practices and develop a community among their
in-house print buyers to improve print order tracking and scheduling. With
Noosh.com, Aetna expects to increase the productivity of its print buyers and
shorten print order turn-around time. Specifically, our service provided a
central location for Aetna's print buyers to collaborate on print orders and
track the status of numerous orders across an assortment of product lines. In
addition, with Noosh.com Aetna believes it has been able to significantly
reduce the time it takes to specify and order reprint work. Further, Aetna
believes that Noosh.com's scheduling and messaging capabilities will
dramatically expedite its print procurement process that, prior to Noosh.com,
had been manual and paper-intensive. As a result of deploying our service,
Aetna believes it will be able to significantly reduce the time required to
obtain estimates on its print orders. Aetna anticipates that our service will
also result in significant cost savings. For example, since deploying our
service, Aetna has found that it is easier to receive multiple bids on print
orders, thereby providing it with access to more competitive pricing. Further,
Aetna believes that the centralized tracking features of our service have given
them the ability to spot trends in their print buying that may result in cost
savings in the future. Through December 31, 1999, Aetna has processed over 37
orders with 12 print vendors using Noosh.com.
Sales, Marketing and Customer Service
We sell our service in the United States primarily through our direct sales
organization. As of December 31, 1999, our direct sales force consisted of 50
sales professionals located in twelve offices throughout the United States. We
believe that we have hired top sales professionals from leading printing,
graphic arts and enterprise software companies. Our sales force targets
executive level decision makers in large print-buying organizations across a
broad range of industries. We believe that these executives are also
influential in promoting the adoption of our service among print vendors. We
intend to expand our sales force into additional major markets across the
country in order to broaden our customer base.
Our marketing programs are designed to increase brand awareness, educate our
target market about our services and generate new sales opportunities. As of
December 31, 1999, our marketing
31
<PAGE>
team consisted of 27 marketing professionals. We have engaged in marketing
activities that include trade shows, seminars, press relations, direct
mailings, Web site marketing, trade association relations and industry analyst
relations. We also have co-marketing agreements with large print vendors.
Our customer service organization assists users in planning, learning and
implementing our Noosh.com service. As of December 31, 1999, we employed nine
professionals in our customer service organization. We have a technical support
team available to users by telephone, over the Internet or by electronic mail
in order to resolve their customer support requests. In addition, we offer
training to users of our Noosh.com service through live classes.
Our ability to expand our business will depend in part on recruiting and
training additional direct sales, marketing and customer support personnel,
including additional personnel in new geographic markets as we expand.
Competition for qualified sales, marketing and customer support personnel is
intense. We may not be able to expand our direct sales or marketing force
successfully, which would limit our ability to expand our customer base. We may
also not be able to hire highly trained customer support personnel, which would
make it difficult for us to meet customer demands. Any difficulties we may have
in expanding our sales, marketing or customer support organizations will have a
negative impact on our ability to attract new customers and retain existing
users.
Strategic Relationships
We are actively seeking to develop strategic relationships with large print
vendors in which they would co-market our service to their customers. These
relationships are intended to help us rapidly gain adoption of our service. For
example, we have entered into strategic agreements with R.R. Donnelley,
Consolidated Graphics and Wallace Computer Services.
In January 2000, we entered into a co-development and co-marketing agreement
with R.R. Donnelley, a leading North American commercial printer and
information services company, to develop a co-branded Web site utilizing the
Noosh.com service for R.R. Donnelley's customers, particularly in the catalog,
magazine and book publishing markets. In the fiscal year ended December 31,
1998, R.R. Donnelley reported that revenues from these markets accounted for
over one-half of its consolidated net sales of $5.0 billion. Under the
agreements, we and R.R. Donnelley committed to actively promote and market the
Noosh.com service to R.R. Donnelley's customers. In connection with the
agreements, R.R. Donnelley purchased approximately $14.0 million of our
series D preferred stock. We issued R.R. Donnelley warrants to purchase our
common stock. A portion of each warrant is exercisable only when R.R. Donnelley
meets stated volume targets for business conducted over our service. R.R.
Donnelley also agreed to pay to us a transaction fee based on the aggregate
volume of print orders processed by them. R.R. Donnelley is not committed to
any volume targets.
We have also entered into agreements with corporate procurement system
providers such as Commerce One, Inc. and a memorandum of understanding with
Ariba Inc. to co-market and integrate the Noosh.com service with their online
business-to-business services, thus providing our users with a more complete
purchasing solution.
We rely on these types of relationships to help generate increased usage of
Noosh.com and strengthen our value proposition to our users. As a result, we
expect to continue to devote engineering and marketing resources to develop
these strategic relationships. However, we cannot be certain that we will be
able to enter into additional strategic relationships.
NOOSH Technology and System Architecture
Our Noosh.com service is a secure, reliable and scalable Internet-based
application that allows us to support our users worldwide from a single
location. It resides on our fault-tolerant servers
32
<PAGE>
colocated at AboveNet's San Jose, California facility. Our users access
Noosh.com using standard Internet browsers, which eliminates the need to
install our software at the customer site and facilitates the rapid deployment
of product enhancements.
Our principal technical assets are our internally developed software
applications that comprise Noosh.com. Noosh.com is built on a multi-layer
system architecture, centered around our LiveJobs technology. Our distributed,
highly modular architecture is designed to run on a variety of hardware
platforms and will allow us to add capacity as transaction volumes increase.
Several of our application layers can be redundantly configured, which, when
combined with our distributed architecture, enables us to provide our service
on an ongoing basis, even in the event of a partial systems failure.
Communications Layer. The communications layer connects our service with our
customers' desktop computers. The ability to integrate these diverse systems
has enabled us to create a collaborative online environment supporting a wide
range of users. The NOOSH firewall filters the incoming data stream and
provides a first line of site security. Our communications architecture is
based on standard industry technologies and protocols.
Interface and Presentation Layer. The interface and presentation layer
provides the "look and feel" of Noosh.com. Based upon user requests and access
rights, this layer retrieves information from the lower layers of the system
and transforms it into presentable content, which is delivered to the desktop
by the communications layer.
LiveJobs Technology. Our LiveJobs technology delivers the business logic
necessary to allow the user to access, manage and communicate information about
each print order. Each print order is modeled in our application as a sequence
of user-determined workflow steps. In order to facilitate communication between
users, we have developed event notification and messaging capabilities that
assist our users in completing each workflow step. This notification subsystem
also enables communication with customers' third-party print management tools.
Enterprise Services Layer. The enterprise services layer facilitates
information exchange with our data repository. Our databases are implemented
using industry-leading database software from Oracle and run on standard server
hardware.
We control access to our service through login, authentication and
authorization mechanisms and user role definitions, allowing the automated
enforcement of access privileges. Our LiveJobs technology ensures that users
only see the information to which they are permitted access based on their role
in a job or project and their group manager's authorization.
Intellectual Property
We rely on a combination of copyright, trademark and trade secret laws and
restrictions on disclosure to protect our intellectual property rights. We also
enter into confidentiality agreements with our employees and consultants and
other third parties and control access to software, documentation and other
proprietary information. Currently we have four U.S. patents pending relating
to our Noosh.com service. We do not have any issued patents. We have also filed
for federal trademark registration for "NOOSH" and the "NOOSH" logo in the
United States, Canada, Japan and Europe and for "LiveJobs" in the United
States. However, we cannot be certain that the steps we have taken to protect
our intellectual property rights will be adequate or that third parties will
not infringe or misappropriate our proprietary rights. We also cannot be sure
that competitors will not independently develop technologies that are
substantially equivalent or superior to the proprietary technologies employed
in our Internet-based services. If we fail to protect our proprietary rights
adequately, our competitors could offer similar services, potentially harming
our competitive position and decreasing our revenues in the United States and
other jurisdictions.
33
<PAGE>
In addition, in recent years, there has been significant litigation in the
United States involving patents and other intellectual property rights,
including among companies in the Internet industry. We cannot be certain that
our business activities will not infringe on the proprietary rights of others,
or that other parties will not assert infringement claims against us. Any claim
of infringement of proprietary rights of others, even if ultimately decided in
our favor, could result in substantial costs and diversion of resources. If a
claim is asserted that we infringed the intellectual property of a third party,
we may be required to seek licenses to that technology. We cannot be sure that
licenses to third-party technology will be available to us at a reasonable
cost, or at all. If we were unable to obtain a license on reasonable terms, we
could be forced to cease using the third-party technology.
Competition
We primarily encounter competition with respect to different aspects of our
service from traditional methods of designing and managing print orders and
from companies that offer business-to-business Internet-based procurement
systems or proprietary management software. In addition, existing print vendors
may develop competing Internet-based communication and collaboration services
for the management of print orders. Because there are relatively low barriers
to entry in the market for Internet-based print management services, we expect
additional competition from other established and emerging companies as the
market continues to develop and expand.
We believe that the principal competitive factors affecting our market
include adoption by a significant number of print buyers and print vendors,
product quality and performance, customer service, core technology, product
features and value of solution. Although we believe that our solution currently
competes favorably with respect to these factors, our market is relatively new
and is evolving rapidly. We may not be able to maintain our competitive
position against current and potential competitors, especially those with
significantly greater financial, marketing, service, support, technical and
other resources.
Some of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources and greater name recognition than we have. Many of our competitors
have well-established relationships with our current users and potential
customers and have extensive knowledge of our industry. Print buyers may be
unwilling to adopt an Internet-based system for managing the production of
their printed business materials. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to increase the ability of their products to
address customer needs. For example, other Internet-based print management
services may establish relationships with business-to-business procurement
system providers. Accordingly, it is possible that new competitors or alliances
among competitors may emerge and rapidly achieve customer acceptance.
Employees
As of December 31, 1999, we had 147 full-time employees. Of these employees,
we have 97 in sales and marketing, 35 in research and development and 15 in
general and administrative services and operations. None of our employees is
represented by a labor union, and we consider our labor relations to be good.
Facilities
We are headquartered in Palo Alto, California, where we lease approximately
23,000 square feet pursuant to a term lease that expires on December 31, 2000
and 9,000 square feet pursuant to a term lease that expires on December 31,
2001. These facilities are used for executive office space, including sales and
marketing, finance and administration, research and design and customer
34
<PAGE>
support. We also lease an aggregate of approximately 16,000 square feet in
Santa Monica and Irvine, California; Atlanta, Georgia; Chicago, Illinois;
Needham, Massachusetts; New York, New York; and Portland, Oregon. These
facilities are used for our sales activities. The term lease for our facilities
in Needham, Massachusetts expires on October 21, 2002 and the term lease for
our facilities in New York, New York expires on November 15, 2000. The other
facilities are leased on a month-to-month basis. We believe that we will need
to obtain additional space for our headquarters and additional sales offices in
the near future and that this additional space can be obtained on commercially
reasonable terms.
Legal Proceedings
From time to time, we may be involved in various lawsuits and legal
proceedings which arise in the ordinary course of business. Currently, we are
not a party to any material litigation or arbitration proceedings.
35
<PAGE>
MANAGEMENT
Executive Officers, Directors and Certain Key Employees
The following table sets forth information regarding our executive officers,
directors and certain key employees as of January 25, 2000:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- ----------
<S> <C> <C>
Ofer Ben-Shachar........ 39 President, Chief Executive Officer and Chairman of the Board
Kevin Akeroyd........... 31 Vice President of Sales
David Hannebrink........ 49 Vice President of Marketing and Business Development
Raymond Martinelli...... 41 Vice President of Human Resources
Timothy Moore........... 43 Vice President of Strategic Alliances, General Counsel and Secretary
Hagi Schwartz........... 38 Vice President of Finance and Chief Financial Officer
Robert Shaw............. 37 Senior Vice President of Sales
Larry Slotnick.......... 48 Vice President of Engineering
Mathew Spolin........... 28 Chief Technology Officer
Steven Baloff........... 44 Director
Kathy Levinson.......... 44 Director
Arthur Patterson........ 56 Director
</TABLE>
Ofer Ben-Shachar founded NOOSH and has served as our President, Chief
Executive Officer and Chairman of the Board since August 1998. From December
1994 until February 1998, Mr. Ben-Shachar was the founder, Chairman and Chief
Technical Officer of NetDynamics, Inc., an Internet-based technology company
that was acquired by Sun Microsystems Inc. in summer 1998. Prior to
NetDynamics, Mr. Ben-Shachar founded Software Xcellence, a software consulting
company, and served as president until December 1994. From June 1987 to October
1990, Mr. Ben-Shachar served as a senior software engineer for Teknekron
Software Systems, now Tibco Software Inc. Mr. Ben-Shachar holds a B.S. degree,
cum laude, in Math and Computer Science from Hebrew University in Jerusalem and
an M.S. in Computer Science from Washington State University.
Kevin Akeroyd has served as our Vice President of Sales since August 1999.
From July 1990 to August 1999, Mr. Akeroyd worked at R.R. Donnelley & Sons
Company, a provider of printing and integrated services, in a variety of
positions, including National Sales Vice President for their PreMedia division.
Mr. Akeroyd holds a B.A. degree in Business Administration from the University
of Washington.
David Hannebrink has served as our Vice President of Marketing and Business
Development since January 1999. From May 1997 to December 1998, he was a
consultant providing general management and marketing services to small and
mid-sized companies. In November 1982 he founded Covalent Systems Corporation,
a supplier of enterprise software and data collection systems for the printing
and electronic publishing industries. Mr. Hannebrink was with Covalent, and
with Logic Associates, Inc. after it acquired Covalent, until April 1997. He
served in several senior executive positions at Covalent, including service as
President and Chief Executive Officer of Covalent from March 1991 to April
1995. Most recently, he served as Vice President Sales and Marketing of Logic.
Mr. Hannebrink holds a B.S. degree in Mechanical Engineering from Cornell
University, an S.M. degree in Mechanical Engineering from the Massachusetts
Institute of Technology and an M.B.A. degree from the Leavey School of Business
at Santa Clara University.
Raymond Martinelli has served as our Vice President of Human Resources since
September 1999. From July 1995 to September 1999, Mr. Martinelli was Vice
President of Human Resources for Computer Curriculum Corporation, a provider of
educational software and services for K-12 schools. From August 1988 to July
1995, Mr. Martinelli was Divisional Human Resources Manager at Apple
36
<PAGE>
Computer, Inc. Mr. Martinelli holds a B.A. degree in Organizational
Communications from California State University, Sacramento and an M.A. degree
in Organizational Development from Golden Gate University.
Timothy Moore has served as our Vice President of Strategic Alliances and
General Counsel since January 2000. Mr. Moore has also served as our Secretary
since inception. From October 1997 to January 2000, Mr. Moore was a partner in
the law firm of Cooley Godward LLP, where his practice focused on the
representation of emerging technology companies. Prior to joining Cooley
Godward, Mr. Moore served for two years as Vice President, Strategic
Investments and General Counsel of Verity, Inc. From 1986 to 1996, Mr. Moore
practiced law at Gray Cary Ware & Freidenrich, where he was elected partner in
1991 and was a member of the compensation committee. Mr. Moore holds a J.D.
degree from Stanford Law School and a B.A. degree in Economics, with
distinction, from Stanford University.
Hagi Schwartz has served as our Vice President of Finance and Chief Financial
Officer since October 1999. From January 1996 to October 1999, Mr. Schwartz
served as Chief Financial Officer and Vice President of Finance of Check Point
Software Technologies Ltd., a worldwide leader in securing the Internet. From
April 1991 to December 1995, Mr. Schwartz served as the acting Chief Financial
Officer and Controller of Mercury Interactive Corporation, a software testing
company. Mr. Schwartz holds a B.A. degree in Accounting and Economics from Bar
Ilan University, Israel.
Robert Shaw has served as our Senior Vice President of Sales since January
2000. From July 1985 to January 2000, Mr. Shaw worked at R.R. Donnelley & Sons
Company, a provider of printing and integrated services, in a variety of
capacities including Senior Vice President of Sales and Marketing for the
Merchandise Media Business and Senior Vice President of Business-to-Business.
Mr. Shaw holds a B.A. degree in Business Administration and a B.S. degree in
Economics from Geneva College in Western Pennsylvania.
Lawrence Slotnick has served as our Vice President of Engineering since April
1999. From April 1997 to April 1999, he served as Vice President of Internet
and Enterprise Products at Apple Computer, Inc. where he was responsible for
charting Apple's strategic course for networking, collaboration and
communications products. From August 1995 to April 1997 he served as Vice
President of Engineering for the Global Business Systems division of Octel
Communications Corp. From March 1991 to June 1995, Mr. Slotnick served as Vice
President of Product Development in Apple's Claris subsidiary. Mr. Slotnick
holds B.S. and M.S. degrees in Computer Science from the University of
California, Berkeley.
Mathew Spolin has served as our Chief Technology Officer since January 1999.
Prior to joining us, Mr. Spolin was professional services and product manager
at Pangea Systems, Inc., a Java Fund startup specializing in development and
maintenance of large enterprise systems for pharmaceutical research. From March
1993 to April 1997, he was the senior bioinformatics architect for Human Genome
Sciences, Inc., a genomics and pharmaceutical company. Mr. Spolin holds a B.S.
in Computer Information Systems from The American University in Washington D.C.
Steven Baloff has served as a member of our board of directors since April
1999. Since February 1996, Mr. Baloff has worked for Advanced Technology
Ventures, a venture capital firm, and currently serves as a General Partner.
Prior to joining Advanced Technology Ventures, Mr. Baloff was Chief Executive
Officer and founder of Worldview, a co-creator of Travelocity. Mr. Baloff has
also held a variety of executive positions with Covalent Systems. Mr. Baloff
serves on the boards of directors of several privately held companies. Mr.
Baloff holds an A.B. degree in Economics from Harvard University and an M.B.A.
degree from Stanford University.
37
<PAGE>
Kathy Levinson has served as a member of our board of directors since
November 1999. Since January 1999, Ms. Levinson has served as President and
Chief Operating Officer of E*TRADE Group, Inc., a global provider of electronic
personal financial services. Since January 1996, Ms. Levinson served as
President and Chief Operating Officer of E*TRADE Securities, Inc., a wholly
owned subsidiary of E*TRADE Group, Inc. From 1980 to 1994, Ms. Levinson worked
at Charles Schwab & Co., Inc., a securities brokerage firm, in a variety of
senior executive positions. Ms. Levinson holds a B.A. degree in Economics from
Stanford University.
Arthur Patterson has served as a member of our board of directors since April
1999. He is currently General Partner at Accel Partners, a venture capital firm
which he co-founded in 1983. He is currently on the board of directors of
Actuate Corp., a software company, Weblink Wireless Inc., a wireless managing
company, and Portal Software Inc., a customer management and billing software
company, as well as several privately held Internet services companies. Mr.
Patterson holds A.B. and M.B.A. degrees from Harvard University.
Board Composition
We currently have four directors. Upon the closing of this offering, the
terms of office of the board of directors will be divided into three classes.
As a result, a portion of our board of directors will be elected each year. The
division of the three classes, the initial directors and their respective
election dates are as follows:
. the class I directors will be Ofer Ben-Shachar and Arthur Patterson, and
their term will expire at the annual meeting of stockholders to be held in
2001;
. the class II director will be Steven Baloff, and his term will expire at the
annual meeting of stockholders to be held in 2002; and
. the class III director will be Kathy Levinson, and her term will expire at
the annual meeting of stockholders to be held in 2003.
At each annual meeting of stockholders after the initial classification, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. In addition, our amended and restated certificate of
incorporation provides that the authorized number of directors may be changed
only by resolution of the board of directors. Any additional directorships
resulting from an increase in the number of directors will be distributed among
the three classes so that, as nearly as possible, each class will consist of
one-third of the directors. This classification of the board of directors may
have the effect of delaying or preventing changes in control or management of
NOOSH.
Board Committees
. Audit Committee. Our audit committee reviews our internal accounting
procedures and consults with, and reviews the services provided by, our
independent auditors. Current members of our audit committee are Steven
Baloff, Kathy Levinson and Arthur Patterson.
. Compensation Committee. Our compensation committee reviews and recommends to
the board of directors the compensation and benefits of all our officers and
reviews general policy relating to compensation and benefits of our
employees. The compensation committee also administers the issuance of stock
options and other awards under our stock plans. Current members of the
compensation committee are Steven Baloff and Arthur Patterson.
38
<PAGE>
Compensation Committee Interlocks and Insider Participation
Neither member of the compensation committee has at any time been an officer
or employee of NOOSH. 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 interlocking relationship existed
in the past.
Director Compensation
We do not provide cash compensation to members of our board of directors for
their services as members of the board or for attendance at committee meetings.
Members of the board of directors are reimbursed for some expenses in
connection with attendance at board and committee meetings. Under our 1998
equity incentive plan and our 2000 equity incentive plan, non-employee
directors are eligible to receive stock option grants at the discretion of our
board of directors or other administrator of the plan. In May 1999, Arthur
Patterson, one of our non-employee directors, received an option to purchase
300,000 shares of common stock at an exercise price of $0.1375 per share. In
November 1999, Kathy Levinson, one of our non-employee directors, received an
option to purchase 100,000 shares of common stock at an exercise price of $1.50
per share. In January 2000, Steven Baloff, one of our non-employee directors,
received an option to purchase 25,000 shares of common stock at $2.50 per
share. These options vest over a three year period in equal monthly increments.
In January 1999, we adopted our 2000 non-employee directors' stock option
plan to provide for the automatic grant of options to purchase shares of our
common stock to our directors who are not employees of NOOSH or any of our
affiliates. Any non-employee director elected after the effective date of this
offering will automatically receive an option to purchase 25,000 shares of
common stock when elected to the board of directors. Starting at the annual
stockholder meeting in 2001, all non-employee directors will receive an annual
option to purchase 10,000 shares of common stock. See "--Stock Plans--2000 Non-
Employee Directors' Stock Option Plan" for a more detailed explanation of the
terms of these stock options.
39
<PAGE>
Executive Compensation
The following table sets forth information concerning the compensation
received for services rendered to us by our Chief Executive Officer and our
four other most highly compensated executive officers in 1999 who earned, or
would have earned on an annualized basis, more than $100,000 during the fiscal
year ended December 31, 1999.
Summary Annual Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual (Option
Compensation Awards)
---------------- ------------
Number of
Securities
Underlying
Name and Principal Position Salary Bonus Options
--------------------------- -------- ------- ------------
<S> <C> <C> <C>
Ofer Ben-Shachar................................. $163,333 -- --
President, Chief Executive Officer
and Chairman of the Board
Kevin Akeroyd(1)................................. 56,248 $25,004 100,000
Vice President of Sales
David Hannebrink(2).............................. 143,750 60,000 416,000
Vice President of Marketing
and Business Development
Hagi Schwartz(3)................................. 32,290 65,000 300,000
Vice President of Finance
and Chief Financial Officer
Lawrence Slotnick(4)............................. 107,116 15,000 450,000
Vice President of Engineering
</TABLE>
- --------
(1) Mr. Akeroyd joined NOOSH in August 1999. On an annualized basis, Mr.
Akeroyd's base salary would have been $150,000. Mr. Akeroyd is guaranteed a
minimum monthly commission of $6,250 until January 1, 2001. Until January
1, 2001, Mr. Akeroyd is also eligible to receive an additional monthly
commission of $6,250 for achieving sales commission goals.
(2) Mr. Hannebrink joined NOOSH in January 1999. On an annualized basis, Mr.
Hannebrink's base salary would have been $150,000. Mr. Hannebrink is also
eligible to receive a bonus of $30,000 for each fiscal year upon
achievement of quarterly performance milestones.
(3) Mr. Schwartz joined NOOSH in October 1999. On an annualized basis, Mr.
Schwartz's base salary would have been $154,992.
(4) Mr. Slotnick joined NOOSH in April 1999. On an annualized basis, Mr.
Slotnick's base salary would have been $160,008. Mr. Slotnick is also
eligible to receive a bonus of $30,000 for each fiscal year upon
achievement of quarterly performance milestones.
40
<PAGE>
Option Grants
The following table sets forth information regarding stock options granted,
if any, to our Chief Executive Officer and our four other most highly
compensated executive officers during the fiscal year ended December 31, 1999.
The exercise price for each option was equal to the fair market value of our
common stock on the date of grant as determined by our board of directors.
Percentage of total options as set forth below was calculated based on an
aggregate of 5,294,990 shares of common stock granted under the 1998 equity
incentive plan in fiscal 1999. The potential realizable value as set forth
below was calculated based on the ten-year term of the option and assumed rates
of stock appreciation of 5% and 10%, compounded annually from the date the
options were granted to their expiration date based on the fair market value of
the common stock on the date of grant and an assumed initial public offering
price of $ per share.
Option Grants During Fiscal 1999
<TABLE>
<CAPTION>
Potential
Realizable
Value At
Assumed
Annual Rates
Percentage of Stock
of Total Price
Number of Options Appreciation
Securities Granted Exercise for Option
Underlying during Price Term
Options Fiscal Per Expiration -------------
Name Granted 1999 Share Date 5% 10%
---- ---------- ---------- -------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Ofer Ben-Shachar........ -- -- -- -- -- --
Kevin Akeroyd........... 100,000 1.9% $ 0.50 8/18/09
David Hannebrink........ 416,000 7.9% 0.0325 1/24/09
Hagi Schwartz........... 300,000 5.7% 1.00 10/7/09
Lawrence Slotnick....... 400,000 8.5% 0.1375 6/7/09
50,000 1.00 10/7/09
</TABLE>
The options listed in the table above are subject to vesting. The option
shares vest over a four-year period, with 25% of the option shares vesting
after one year and 2.08% vesting monthly thereafter. See "Stock Plans" for a
description of the material terms of these options.
41
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides summary information concerning the shares of
common stock represented by outstanding stock options held by our Chief
Executive Officer and our four other most highly compensated executive officers
as of December 31, 1999. Options granted to purchase shares of our common stock
under our 1998 equity incentive plan are immediately exercisable by certain
optionees at the discretion of the board, but are subject to a right of
repurchase pursuant to the vesting schedule of each specific grant. The
repurchase option generally lapses over a four year period, with 25% lapsing
after the first year and 2.08% lapsing monthly thereafter. In the event that an
employee ceases to provide service to us or our affiliates, we have the right
to repurchase any of that employee's unvested shares of common stock at the
original option price. Amounts shown in the value realized column were
calculated based on the difference between the option exercise price and the
fair market value of the common stock on the date of exercise, without taking
into account any taxes that may be payable in connection with the transaction,
multiplied by the number of shares of common stock underlying the option.
Exercise prices ranged from $0.0325 to $1.00. We have calculated the value of
unexercised in-the-money options based on the assumed initial public offering
price of $ per share of common stock without taking into account any
taxes that may be payable in connection with the transaction, multiplied by the
number of shares underlying the option, less the aggregate exercise price
payable for these shares.
<TABLE>
<CAPTION>
Number of
Securities
Underlying
Unexercised
Options at Value of Unexercised
December 31, In-the-Money Options at
Shares 1999 December 31, 1999
Acquired on Value --------------- -------------------------
Name Exercise Realized Vested Unvested Exercisable Unexercisable
---- ----------- -------- ------ -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ofer Ben-Shachar........ -- -- -- -- -- --
Kevin Akeroyd........... -- -- -- 100,000 $ --
David Hannebrink........ 416,000(1) $0.00 -- -- -- --
Hagi Schwartz........... 300,000(2) 0.00 -- -- -- --
Lawrence Slotnick....... -- -- -- 450,000 $ --
</TABLE>
- --------
(1) As of December 31, 1999, 416,000 shares held by Mr. Hannebrink were
unvested and subject to repurchase by us.
(2) As of December 31, 1999, 300,000 shares held by Mr. Schwartz were unvested
and subject to repurchase by us.
Employment Agreements
At the time of commencement of employment, our employees generally sign offer
letters specifying the basic terms and conditions of employment. In October
1999, we entered into an employment offer letter with Hagi Schwartz, our Vice
President of Finance and Chief Financial Officer. Under his employment offer
letter, we granted Mr. Schwartz an option to purchase 300,000 shares of common
stock at an exercise price of $1.00 per share. This option will vest 25% on the
first anniversary of his date of hire with the remainder vesting monthly over
the following three years. In the event Mr. Schwartz voluntarily terminates his
employment or is involuntarily terminated without cause, he is entitled to six
months continued salary and benefits and our repurchase right with respect to
his option shares continues to lapse over the six-month period.
In January 2000, we entered into an employment offer letter with Timothy
Moore, our Vice President of Strategic Alliances, General Counsel and
Secretary. Under his employment offer letter, we granted Mr. Moore an option to
purchase 285,000 shares of common stock at an exercise price of $2.25 per
share. This option will vest 25% on the first anniversary of his date of hire
with the
42
<PAGE>
remainder vesting monthly over the following three years. In the event Mr.
Moore is terminated without cause, he is entitled to six months continued
salary, benefits and vesting of stock options. In addition, in the event Mr.
Moore is terminated without cause before the first anniversary of his date of
hire, he is entitled to vesting for each month of employment.
In January 2000, we entered into an employment offer letter with Robert Shaw,
our Senior Vice President of Sales. Under his employment offer letter, we
granted Mr. Shaw an option to purchase 270,000 shares of common stock at an
exercise price of $2.50 per share. This option will vest 25% on the first
anniversary of his date of hire with the remainder vesting monthly over the
following three years. In the event Mr. Shaw is terminated without cause he is
entitled to twelve months continued salary and benefits. In addition, in the
event Mr. Shaw is terminated without cause before the first anniversary of his
date of hire, 25% of his option shares would become immediately vested.
Stock Plans
2000 Equity Incentive Plan
Our board of directors adopted our 2000 plan in January 2000, and our
stockholders approved the 2000 plan in 2000. The 2000 plan will be
effective on the effective date of this offering. At that time, no further
option grants will be made under our 1998 plan described in more detail below.
Share Reserve. A total of 6,000,000 shares of our common stock have been
reserved for issuance under the 2000 plan. On the date of each annual
stockholders' meeting, beginning with the annual stockholders' meeting in 2001,
the share reserve will increase by the least of the following:
. 4.5% of our total outstanding common stock;
. 2,000,000 shares of our common stock; or
. a lesser amount as determined by our board of directors.
When a stock award expires or is terminated before it is exercised, the shares
not acquired pursuant to the stock awards shall again become available for
issuance under the 2000 plan.
Eligibility. The 2000 plan permits the grant of options to employees,
directors and consultants. Options may be either incentive stock options, or
ISOs, within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, or nonstatutory stock options, or NSOs. In addition, the 2000 plan
permits the grant of stock bonuses and rights to purchase restricted stock.
The 2000 plan is administered by our board of directors. Our board of
directors may delegate its authority to administer the 2000 plan to a committee
of two or more board members appointed by the board of directors. The
administrator has the authority to select the eligible persons to whom award
grants are to be made, to designate the number of shares to be covered by each
award, to determine whether an option is to be an ISO or NSO, to establish
vesting schedules, to specify the exercise price of options and the type of
consideration to be paid upon exercise and to specify other terms of awards.
In general, the term of the stock options granted under the 2000 plan may not
exceed ten years. An optionholder may not transfer a stock option other than by
will or the law of descent or distribution. The exercise price for an ISO
cannot be less than 100% of the fair market value of our common stock on the
date of grant. The exercise price for NSOs cannot be less than 85% of the fair
market value of our common stock on the date of grant. In the event the
optionholder is a 10% stockholder, then the exercise price per share of an ISO
cannot be less than 110% of the fair market value of our common stock on the
date of grant.
43
<PAGE>
Unless the terms of an optionholder's stock option agreement provide for
earlier termination, in the event an optionholder's service relationship with
us ceases due to death, the optionholder's beneficiary may exercise any vested
options up to 18 months after the date the service relationship ends. In the
event an optionholder's service relationship with us ceases due to disability,
the optionholder may exercise any vested option up to twelve months after the
date the service relationship ends. If an optionholder's relationship with us
ceases for any reason other than disability or death, the optionholder may,
unless the terms of the stock option agreement provide for earlier termination,
exercise any vested options up to three months from the date the service
relationship ends.
ISOs may be granted only to our employees. The aggregate fair market value,
determined at the time of grant, of shares of our common stock with respect to
which ISOs are exercisable for the first time by an optionholder during any
calendar year under all of our stock plans may not exceed $100,000. No ISO may
be granted to any person who at the time of the grant owns or is deemed to own
stock possessing more than 10% of the total combined voting power of us or any
of our affiliates unless the term of the ISO award does not exceed five years
from the date of grant.
Effect on Options of a Change in Control. In the event of a change in control
in the beneficial ownership of NOOSH, all outstanding stock awards under the
2000 plan either will be assumed, continued or substituted for by any surviving
entity. If the surviving entity determines not to assume, continue or
substitute for these awards, the vesting provisions of such stock awards will
be accelerated and all outstanding awards will be immediately exercisable.
Awards not exercised prior to the effective date of the change of control shall
terminate and cease to be outstanding. In certain change in control
circumstances the vesting provisions of the outstanding stock awards will be
accelerated automatically. Furthermore, if a holder of a stock award is
terminated due to a constructive termination or involuntarily terminated
without cause within one month before or 13 months after a change in control,
the vesting of that holder's stock awards will be accelerated.
Other provisions. The terms of any stock bonuses or restricted stock purchase
awards granted under the 2000 plan will be determined by the administrator. The
administrator may award stock bonuses in consideration of past services without
a purchase payment. The purchase price of restricted stock under any restricted
stock purchase agreement will not be less than 85% of the fair market value of
our common stock on the date of grant. Shares sold or awarded under the 2000
plan may be subject to repurchase by us.
Our board of directors may amend or modify the 2000 plan at any time.
However, no amendment or modification shall adversely affect the rights and
obligations with respect to options or unvested awards unless the participant
consents to such an amendment or modification. In addition, the approval of our
stockholders is required for our board of directors to:
. increase the maximum number of shares issuable under the 2000 equity
incentive plan (except for permissible adjustments in the event of certain
changes in the company's capitalization);
. materially modify the eligibility requirements for participation; or
. materially increase the benefits accruing to participants.
1998 Equity Incentive Plan
Our board of directors adopted and our stockholders approved our 1998 equity
incentive plan in November 1998. The 1998 plan was amended in April 1999 and in
December 1999, and our stockholders approved both amendments. An aggregate of
8,000,000 shares of common stock currently are authorized for issuance under
the 1998 plan. Upon the effective date of this offering, no further option
grants will be made under the 1998 plan. The options granted under the 1998
plan have substantially the same terms as will be in effect for grants made
under the 2000 plan. With
44
<PAGE>
respect to change in control provisions, all outstanding options under the 1998
plan either will be assumed or substituted by any surviving entity. If the
surviving entity determines not to assume or substitute such awards, the
vesting schedule of all outstanding awards shall accelerate and all outstanding
awards will be immediately exercisable. Awards not exercised prior to the
effective date of the change in control shall terminate and cease to be
outstanding on the effective date of a change in control.
As of January 25, 2000, options to purchase a total of 3,025,428 shares of
common stock had been exercised, none of which had been repurchased and
2,705,344 of which were subject to repurchase; options to purchase a total of
4,038,907 shares of common stock with a weighted average price of $0.98 per
share were outstanding; and 817,198 shares remained available for future
issuance under the 1998 plan. As of January 24, 2000, the board had not granted
any stock bonuses or stock appreciation rights under the 1998 plan.
2000 Employee Stock Purchase Plan
Our board of directors adopted the 2000 employee stock purchase plan in
January 2000, and our stockholders approved the 2000 stock purchase plan in
2000.
Share Reserve. A total of 600,000 shares of common stock have been authorized
for issuance under the 2000 purchase plan. On the date of each annual
stockholders' meeting, beginning with the annual stockholders' meeting in 2001,
the share reserve will increase by the least of the following:
. 1.5% of our total outstanding common stock;
. 600,000 shares of our common stock; or
. a lesser amount as determined by the board of directors.
The 2000 purchase plan is intended to qualify as an employee stock purchase
plan within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended. Under the 2000 purchase plan, eligible employees will be able to
purchase common stock at a discount price in periodic offerings. The 2000
purchase plan will commence on the effective date of this offering.
Eligibility. All employees are eligible to participate in the 2000 purchase
plan so long as they are employed by us, or a subsidiary designated by the
board of directors, for at least 20 hours per week and are customarily employed
by us, or a subsidiary designated by the board of directors, for at least five
months per calendar year. Any employee who is a 5% stockholder is not eligible
to participate in the 2000 purchase plan.
Under the 2000 purchase plan, employees who participate in an offering
generally may have up to 15% of their earnings for the period of that offering
withheld. The amount withheld is used on each purchase date of the offering
period to purchase shares of common stock. The price paid for common stock on
the purchase dates will equal the lower of 85% of the fair market value of the
common stock on the first day of the offering period or 85% of the fair market
value of the common stock on the purchase date. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment.
Effect of a Change in Control. Upon a change in control of the beneficial
ownership of us, our board of directors has discretion to provide that each
right to purchase common stock will be assumed or an equivalent right
substituted by the successor entity or the board of directors may provide for
all sums collected by payroll deductions to be applied to purchase stock
immediately prior to the effective date of the change in control transaction.
45
<PAGE>
Other Provisions. Our board of directors has the authority to amend or
terminate the 2000 purchase plan; provided, however, that no amendment or
termination of the 2000 purchase plan may adversely affect any outstanding
rights to purchase common stock. Amendments generally will be submitted for
stockholder approval only to the extent required by law.
2000 Non-Employee Directors' Stock Option Plan
Our board of directors adopted the 2000 non-employee directors' stock option
plan in January 2000, and our stockholders approved the 2000 non-employee
directors' stock option plan in 2000. The directors' plan will be effective
on the effective date of this offering.
Share Reserve. A total of 350,000 shares of our common stock have been
reserved for issuance under the 2000 directors' plan. When a stock option
expires or is terminated before it is exercised, the shares not acquired
pursuant to the stock option shall again become available for issuance under
the 2000 directors' plan.
Eligibility and Option Terms. The directors' plan permits the grant of NSOs
to non-employee directors. The 2000 directors' plan is administered by our
board of directors. However, the grant of stock options is automatic.
On the effective date of this offering, each non-employee director will
automatically be granted an option to purchase 25,000 shares of common stock,
unless that director has previously been granted an option. Any individual who
becomes a non-employee director after this offering will automatically receive
this initial grant upon being elected to the board of directors. On each annual
stockholders' meeting, beginning with the annual stockholders' meeting in 2001,
any person who is then a non-employee director will automatically be granted an
option to purchase 10,000 shares of common stock.
In general, the stock options granted under the directors' plan may not
exceed ten years. An optionholder may not transfer a stock option other than by
will or the law of descent or distribution. The exercise price for nonstatutory
stock options will be 100% of the fair market value of the common stock on the
date of grant.
Unless the terms of an optionholder's stock option agreement provide for
earlier termination, in the event an optionholder's service relationship with
us ceases due to death, the optionholder's beneficiary may exercise any vested
options up to 18 months after the date such service relationship ends. In the
event an optionholder's service relationship with us ceases due to disability,
the optionholder may exercise any vested option up to twelve months after the
cessation of service. If an optionholder's relationship with us ceases for any
reason other than disability or death, the optionholder may, unless the terms
of the stock option agreement provide for earlier termination, exercise any
vested options up to three months from the date the service relationship ends.
Effect on Options of a Change in Control. In the event of certain changes in
control in the beneficial ownership of us, the vesting provisions of all
outstanding stock options under the directors' plan will be accelerated and the
stock options will be terminated upon the change of control if not previously
exercised.
Other Provisions. Our board of directors may amend or modify the directors'
plan at any time. However, no such amendment or modification shall adversely
affect the rights and obligations with respect to options unless the
participant consents to such an amendment or modification.
46
<PAGE>
401(k) Plan
We sponsor a 401(k) plan, a defined contribution plan intended to qualify
under Section 401(a) of the Internal Revenue Code of 1986, as amended. All
employees are eligible to participate. Participants may make pre-tax
contributions to the 401(k) plan of up to 25% of their eligible earnings,
subject to a statutorily prescribed annual limit ($10,500 in 2000). Under the
401(k) plan, each employee is fully vested in his or her deferred salary
contributions. Employee contributions are held and invested by the 401(k)
plan's trustee.
Each participant's contributions, and the corresponding investment earnings,
are generally not taxable to the participants until withdrawn. Individual
participants may direct the trustee to invest their accounts in authorized
investment alternatives.
Limitation of Liability of Directors and Indemnification Matters
Our amended and restated certificate of incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for:
. any breach of their duty of loyalty to the corporation or its stockholders;
. acts or omissions not in good faith or which 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.
This limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our amended and restated certificate of incorporation and bylaws provide that
we will indemnify our directors and officers, and may indemnify our other
employees and agents, to the fullest extent permitted by law. We believe that
indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions in that capacity and
certain other capacities, including serving as a director of another
corporation at the request of our board, regardless of whether the bylaws would
permit indemnification.
We have entered into agreements to indemnify our directors and executive
officers in addition to indemnification provided for in our certificate of
incorporation and our bylaws. These agreements, among other things, provide for
indemnification of our directors and executive officers for expenses specified
in the agreements, including attorneys' fees, judgments, fines and settlement
amounts incurred by any of these persons in any action or proceeding arising
out of these persons' services as a director or officer for us, any of our
subsidiaries or any other entity to which the person provides services at our
request. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and officers.
At present, we are not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent in which
indemnification would be required or permitted.
47
<PAGE>
Change of Control Arrangements
In August 1998 and September 1998, we entered into founder stock purchase
agreements with Ofer Ben-Shachar, our President, Chief Executive Officer and
Chairman of the Board. Under the terms of the agreements, as amended in April
1999, approximately 33% of his shares were immediately vested with
approximately 1.85% of his shares vesting monthly thereafter. Upon involuntary
termination prior to a change of control of us, approximately 11% of his shares
would become immediately vested. Upon involuntary termination following a
change of control of us, 100% of his remaining unvested shares would become
immediately vested.
In October 1999, we entered into an employment offer letter with Hagi
Schwartz, our Vice President of Finance and Chief Financial Officer, and in
January 2000, we entered into an employment offer letter with Timothy Moore,
our Vice President of Strategic Alliances, General Counsel and Secretary. Under
the terms of their employment offer letters, Mr. Schwartz and Mr. Moore are
entitled to full acceleration of the unvested portion of their option shares in
the event of a change of control.
According to the terms of the stock option grants to three of our directors,
Steven Baloff, Kathy Levinson and Arthur Patterson, vesting of their option
shares will immediately accelerate upon a change of control transaction.
For more information about the change of control provisions under our stock
plans, See "--Stock Plans."
RELATED PARTY TRANSACTIONS
The following executive officers, directors or holders of more than five
percent of our voting securities purchased securities in the amounts as of the
date shown below. For more detail on shares held by these purchasers see
"Principal Stockholders." Upon closing of this offering, all shares of our
outstanding Series A and Series B preferred stock will be automatically
converted into common stock on a two for one basis, and all outstanding shares
of our Series C and Series D preferred stock will be automatically converted
into common stock on a one for one basis. All preferred share amounts are
listed on an as-converted basis.
<TABLE>
<CAPTION>
Shares of Preferred Stock
--------------------------------------- Warrants for
Common Stock Series A Series B Series C Series D Common Stock
----------------- --------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ofer Ben-Shachar................ 8,000,000 2,999,998 160,000 100,671 45,455 --
Kevin Akeroyd................... 100,000 -- -- -- -- --
David Hannebrink................ 436,706 -- -- -- -- --
Raymond Martinelli.............. 75,000 -- -- -- -- --
Timothy Moore................... 285,000 -- -- -- -- --
Hagi Schwartz................... 300,000 -- 14,546 -- -- --
Robert Shaw..................... 270,000 -- -- -- -- --
Larry Slotnick.................. 400,000 -- -- -- -- --
Mathew Spolin................... 216,720 -- -- -- -- --
Steven Baloff................... 25,000 -- -- -- -- --
Kathy Levinson.................. 100,000 -- -- -- -- --
Accel Internet Fund II L.P.(1).. -- -- 605,090 139,597 -- --
Accel Investors '98 L.P.(1)..... -- -- 401,456 92,617 -- --
Accel Keiretsu VI L.P.(1)....... -- -- 75,636 17,450 -- --
Accel VI L.P.(1)................ -- -- 4,736,000 1,092,618 -- --
Advanced Technology Ventures V,
L.P.(2)........................ -- -- 2,106,582 560,913 -- --
ATV Entrepreneurs V, L.P.(2).... -- -- 75,236 20,033 -- --
MeriTech Capital Affiliates L.P.
............................... -- -- -- 32,215 -- --
MeriTech Capital Partners L.P.
............................... -- -- -- 1,981,208 -- --
R. R. Donnelley & Sons Company.. -- -- -- -- 1,272,727 2,780,159
Price Per Share................. $0.00125 to $2.50 $ 0.65 $ 2.75 $ 7.45 $ 11.00 $ 11.00
Date(s) of Purchase............. 8/98 to 1/00 11/98 4/99 11/99 1/00 1/00
</TABLE>
- -------
(1) Arthur Patterson, one of our directors, is a general partner of Accel
Partners.
(2) Steven Baloff, one of our directors, is a general partner of Advanced
Technology Ventures.
48
<PAGE>
We have entered into the following agreements with our executive officers,
directors and holders of more than five percent of our voting securities.
Co-Marketing Agreement. In January 2000, we entered into a co-development and
co-marketing agreement with R.R. Donnelley, a beneficial holder of greater than
5% of our common stock. Under the agreement, we and R.R. Donnelley are
committed to actively promote and market the Noosh.com service to R.R.
Donnelley's customers, particularly in the catalong, magazine and book
publishing markets. R.R. Donnelley also agreed to pay us a transaction fee
based on the aggregate volume of print orders processed by them. R.R. Donnelley
is not committed to any volume targets.
Amended and Restated Investor Rights Agreement. We and the preferred
stockholders described above have entered into an agreement, under which these
and other preferred stockholders will have registration rights with respect to
their shares of common stock following this offering. See "Description of
Capital Stock--Registration Rights" for a further description of the terms of
this agreement.
Indebtedness of Management. From April 1999 to January 2000, we made loans to
the following officers:
<TABLE>
<CAPTION>
Name Amount Due Date
- ---- -------- ----------------
<S> <C> <C>
David Hannebrink...................................... $ 13,520 April 15, 2000
Hagi Schwartz......................................... 300,000 October 8, 2002
David Hannebrink...................................... 100,000 November 1, 2000
Kevin Akeroyd......................................... 49,900 January 3, 2001
Raymond Martinelli.................................... 59,925 January 3, 2001
Timothy Moore......................................... 641,250 January 3, 2005
Steven Baloff......................................... 61,475 January 15, 2001
David Hannebrink...................................... 100,000 January 15, 2001
Robert Shaw........................................... 674,730 January 15, 2001
</TABLE>
Each loan was made under a promissory note secured by a pledge of early
exercised shares. The notes bear interest at 6% per year.
Stock Options. Stock option grants to our executive officers and directors
are described in this prospectus under the captions "Management--Director
Compensation" and "--Executive Compensation."
Management Rights. In November 1999, we entered into a management rights
letter agreement with MeriTech Capital, a holder of greater than 5% of our
common stock. Under the terms of the letter agreement, MeriTech is entitled to
consult with and advise us on significant business issues and to attend all
board meetings in a non-voting observer capacity.
Executive Employment Agreements. In October 1999, we entered into an
employment offer letter with Hagi Schwartz, our Vice President of Finance and
Chief Financial Officer. In January 2000, we entered into employment offer
letters with Robert Shaw, our Senior Vice President of Sales, and Timothy
Moore, our Vice President of Strategic Alliances and General Counsel.
See "Management--Employment Agreements."
Indemnification Agreements. We intend to enter into indemnification
agreements with our directors and executive officers for the indemnification of
these persons to the full extent permitted by law. We also intend to execute
these agreements with our future directors and officers.
49
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our outstanding common stock as of January 25, 2000,
and as adjusted to reflect the sale of our common stock by this prospectus, by:
. our Chief Executive Officer and each of our four other most highly
compensated executive officers;
. each director;
. each stockholder who is known by us to own beneficially 5% or more of our
common stock; and
. all directors and executive officers as a group.
Percentage of ownership in the following table is calculated based on
32,275,626 shares of common stock outstanding as of January 25, 2000 and
shares of common stock outstanding after completion of this
offering.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of January 25, 2000 are
deemed outstanding. Those shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of each other person. Except as
indicated in the footnotes to the table, the persons named in the table have
sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them, subject to community property laws where
applicable. Unless otherwise indicated, the address of each of the individuals
named above is: 3401 Hillview Avenue, Palo Alto, CA 94304.
<TABLE>
<CAPTION>
Beneficial Ownership
---------------------------------------------------------------
Number of
Options or Shares
warrants NOOSH may
Exercisable Repurchase
Within Within Percent
60 Days of 60 Days of -----------------
Name and Address of Number of January 25, January Before After
Beneficial Owner Shares(1) 2000 25, 2000(2) Total Offering Offering
- ------------------- ---------- ----------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ofer Ben-Shachar(3)..... 5,972,825 -- 1,333,299 7,306,124 22.6%
Kevin Akeroyd........... -- -- 100,000 100,000 * *
David Hannebrink........ 20,706 121,333 294,667 436,706 1.4 *
Hagi Schwartz........... 14,546 -- 300,000 314,546 * *
Lawrence Slotnick....... -- -- 400,000 400,000 1.2 *
Steven Baloff(4)........ 3,077,400 -- 18,056 3,095,456 9.6
Arthur Patterson(5)..... 7,160,464 83,333 -- 7,243,797 22.4
Kathy Levinson(6)....... 89,988 -- 88,889 178,877 * *
Accel Partners(5)....... 7,160,464 -- -- 7,160,464 22.2
Advanced Technology
Ventures(4)............ 3,070,456 -- -- 3,070,456 9.5
MeriTech Capital(7)..... 2,013,423 -- -- 2,013,423 6.2
R.R. Donnelley & Sons
Company................ 1,272,727 961,309 -- 2,219,036 6.7
All directors and
executive officers as a
group (12 persons)(8).. 16,412,684 204,666 3,304,876 19,922,226 61.3%
</TABLE>
50
<PAGE>
- --------
* Less than 1% of the outstanding shares of common stock.
(1) Excludes shares of common stock subject to a right of repurchase within 60
days of January 25, 2000.
(2) The unvested portion of the shares of common stock is subject to a right of
repurchase, at the original option price, in the event the holder ceases to
provide services to Noosh and its affiliates or upon a change of control of
NOOSH. The option exercise price ranges from $0.0325 to $2.50.
(3) Does not include 3,983,500 shares held by the Ben-Shachar Family Generation
Skipping Trust. Mr. Ben-Shachar is not a trustee of the trust and disclaims
beneficial ownership of the shares.
(4) Includes 2,975,187 shares held by Advanced Technology Ventures V, L.P., and
95,269 shares held by ATV Entrepreneurs V, L.P. Advanced Technology
Ventures is located at 485 Ramona Street, Suite 200, Palo Alto, CA 94301.
Mr. Baloff is a general partner of Advanced Technology Ventures and
disclaims beneficial ownership of these shares except to the extent of his
proportionate partnership interest in these shares.
(5) Includes 744,687 shares held by Accel Internet Fund II L.P., 494,073 shares
held by Accel Investors '98 L.P., 93,086 shares held by Accel Keiretsu VI
L.P. and 5,828,618 shares held by Accel VI L.P. Accel Partners are located
at 428 University Avenue, Palo Alto, CA 94303. Mr. Patterson is a general
partner of Accel Partners and disclaims beneficial ownership of these
shares except to the extent of his proportionate partnership interest in
these shares.
(6) Includes 78,877 shares held by Internet Experience, L.P. Internet
Experience is located at 4500 Bohannan Drive, Menlo Park, CA 94025. Ms.
Levinson is a general partner and a limited partner of Internet Experience
and disclaims beneficial ownership of these shares except to the extent of
her proportionate partnership interest in these shares.
(7) Includes, 32,215 shares held by MeriTech Capital Affiliates L.P. and
1,981,208 shares held by MeriTech Capital Partners L.P. MeriTech Capital is
located at 428 University Avenue, Palo Alto, CA 94303.
(8) Total number of shares includes 10,309,797 shares of common stock held by
entities affiliated with directors and executive officers. See footnotes 4
through 6 above.
51
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, our authorized capital stock will consist
of 75,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of
undesignated preferred stock, $0.001 par value. The following description of
our capital stock does not purport to be complete and is subject to, and
qualified in its entirety by, our amended and restated certificate of
incorporation and bylaws, which we have included as exhibits to the
registration statement of which this prospectus forms a part.
Common Stock
As of January 25, 2000, there were 32,275,626 shares of common stock and
preferred stock outstanding, held of record by 81 stockholders. These amounts
assume the conversion of all outstanding shares of preferred stock into common
stock, which is to occur upon the closing of this offering. In addition, as of
January 25, 2000, there were 4,038,907 shares of common stock subject to
outstanding options. Upon completion of this offering, there will be
shares of common stock outstanding, assuming no additional exercise of
outstanding stock options.
Each share of common stock entitles its holder to one vote on all matters to
be voted upon by stockholders. Subject to preferences that may apply to any
outstanding preferred stock, holders of common stock may receive ratably any
dividends that the board of directors may declare out of funds legally
available for that purpose. In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to share ratably in all
assets remaining after payment of liabilities and any liquidation preference of
preferred stock that may be outstanding. The common stock has no preemptive
rights, conversion rights or other subscription rights or redemption or sinking
fund provisions. All outstanding shares of common stock are fully paid and non-
assessable, and the shares of common stock that we will issue upon completion
of this offering will be fully paid and non-assessable.
Preferred Stock
According to our amended and restated certificate of incorporation, our board
of directors will have the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock in one or more
series. Our board shall designate the rights, preferences, privileges and
restrictions of the preferred stock, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preference, sinking
fund terms and number of shares constituting any series or the designation of
any series. The issuance of preferred stock could have the effect of
restricting dividends on the common stock, diluting the voting power of the
common stock, impairing the liquidation rights of the common stock or delaying
or preventing a change in control without further action by the stockholders.
We have no present plans to issue any shares of preferred stock after the
completion of this offering.
Warrants
As of January 25, 2000, we had outstanding the following warrants to
strategic partners:
. A warrant to purchase 270,000 shares of common stock. A portion of the
warrant for a total of 140,000 shares is immediately exercisable. Of these
140,000 shares, the right to purchase 35,000 shares will terminate upon the
closing of this offering. The remaining portion of the warrant becomes
exercisable in increments upon the holder meeting stated volume targets. The
exercise price for 210,000 shares under the warrant is $7.45 per share. The
exercise price of the remaining 60,000 shares will be the fair market value
on each date the applicable stated volume target is met. This warrant
expires in December 2002.
. A warrant to purchase 225,000 shares of common stock. A total of 75,000
shares is immediately exercisable. The remaining portion of the warrant
becomes exercisable in increments upon the
52
<PAGE>
holder meeting stated volume targets. The exercise price for 150,000 shares
under the warrant is $11.00 per share. The exercise price of the remaining
75,000 shares will be the fair market value at the end of the calendar
quarter that the stated volume target is met. This warrant expires in
December 2002.
. Two warrants to purchase a total of 2,780,159 shares of common stock at an
exercise price of $11.00 per share. A portion of the warrants for a total
of 961,309 shares of common stock is immediately exercisable. The remaining
portion of the warrants becomes exercisable in increments upon the holder
meeting stated volume targets. These warrants expire in January 2002.
. A warrant to purchase 50,000 shares of common stock at an exercise price of
$11.00. The entire warrant becomes exercisable upon the holder meeting
stated volume requirements. This warrant expires in January 2003.
Each of the warrants will also expire upon a merger or sale of all of our
assets. Each of the warrants contains provisions for the adjustment of the
exercise prices and the aggregate number of shares that may be issued upon
exercise of the warrants in the event of a stock split, stock dividend,
reorganization, reclassification or consolidation. In addition, each warrant
allows for cashless exercise.
Registration Rights
The holders of 29,000,745 shares of the common stock that will be
outstanding after this offering are entitled to require us to register the
sales of their shares under the Securities Act, under the terms of an
agreement between us and the holders of these securities. Subject to
limitations specified in the agreement, these registration rights include the
following:
. two demand registration rights that holders may exercise no sooner than 180
days after our initial public offering, which require us to register the
sale of a holder's shares, subject to the discretion of our board of
directors to delay the registration;
. an unlimited number of piggyback registration rights that require us to
register sales of a holder's shares when we undertake a public offering,
subject to the discretion of the managing underwriter of the offering to
decrease the amount that holders may register; and
. an unlimited number of rights to require us to register sales of shares on
Form S-3, a short form of registration statement permitted to be used by
some companies, which holders may exercise if they request registration of
the sale of more than $750,000 of common stock following the time we first
qualify for the use of this form of registration with the Securities and
Exchange Commission.
We will bear all registration expenses if these registration rights are
exercised, other than underwriting discounts and commissions. These
registration rights terminate as to a holder's shares when that holder may
sell those shares under Rule 144(k) of the Securities Act, which for most
parties means two years after the acquisition of the shares from us.
Anti-Takeover Provisions
Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law, which
regulates acquisitions of some Delaware corporations. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a business
combination with an interested stockholder for a period of three years
following the date the person becomes an interested stockholder, unless:
. our board of directors approved the business combination or the transaction
in which the person became an interested stockholder prior to the date the
person attained this status;
53
<PAGE>
. upon consummation of the transaction that resulted in the person becoming an
interested stockholder, the person owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction commenced, excluding
shares owned by persons who are directors and also officers; or
. on or subsequent to the date the person became an interested stockholder,
our board of directors approved the business combination and the
stockholders other than the interested stockholder authorized the
transaction at an annual or special meeting of stockholders.
Section 203 defines a "business combination" to include:
. any merger or consolidation involving the corporation and the interested
stockholder;
. any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
. in general, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder;
or
. the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an "interested stockholder" as any person
who, together with the person's affiliates and associates, owns, or within
three years prior to the determination of interested stockholder status did
own, 15% or more of a corporation's voting stock.
Certificate of Incorporation and Bylaw Provisions
Our amended and restated certificate of incorporation and bylaws, to be
effective upon the closing of this offering, divide our board into three
classes as nearly equal in size as possible, with each class serving a three-
year term. The terms are staggered, so that one-third of the board is to be
elected each year. The classification of our board could have the effect of
making it more difficult than otherwise for a third party to acquire control of
us, because it would typically take more than a year for our stockholders to
elect a majority of our board. In addition, our amended and restated
certificate of incorporation and bylaws will provide that any action required
or permitted to be taken by our stockholders at an annual or special meeting
may be taken only if it is properly brought before the meeting, and may not be
taken by written consent in lieu of a meeting. The bylaws will also provide
that special meetings of the stockholders may be called only by our board of
directors, our Chairman of the Board or our Chief Executive Officer. Under our
bylaws, stockholders wishing to propose business to be brought before a meeting
of stockholders will be required to comply with various advance notice
requirements. Finally, our amended and restated certificate of incorporation
and bylaws will not permit stockholders to take any action without a meeting.
Transfer Agent And Registrar
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company. The transfer agent's address is 40 Wall Street, 46th
Floor, New York, New York, 10005.
54
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock. Future
sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices. Sales of substantial amounts of our
common stock in the public market after any restrictions on sale lapse could
adversely affect the prevailing market price of the common stock and impair our
ability to raise equity capital in the future.
Upon completion of the offering, we will have outstanding shares
of common stock, outstanding options to purchase 4,038,907 shares of common
stock and outstanding warrants to purchase 3,290,159 shares of common stock,
assuming no additional option or warrant grants or exercises after January 25,
2000. We expect that the shares sold in this offering, plus any
shares issued upon exercise of the underwriters' over-allotment option, will be
freely tradable without restriction under the Securities Act, unless purchased
by our "affiliates" as that term is defined in Rule 144 under the Securities
Act. In general, affiliates include officers, directors and 10% or greater
stockholders.
The remaining 32,275,626 shares outstanding and 7,329,066 shares subject to
outstanding options and warrants are "restricted securities" within the meaning
of Rule 144. Restricted securities may be sold in the public market only if the
sale is registered or if it qualifies for an exemption from registration, such
as under Rule 144, 144(k) or 701 promulgated under the Securities Act, which
are summarized below. Sales of restricted securities in the public market, or
the availability of such shares for sale, could adversely affect the market
price of the common stock.
As a result of contractual restrictions described below and the provisions of
Rules 144, 144(k) and 701, the restricted shares will be available for sale in
the public market as follows:
. Beginning 180 days after the effective date, 19,870,033 shares will be
eligible for sale pursuant to Rule 144, Rule 144(k) and Rule 701.
. Beginning in November 2000, the remaining 12,405,593 shares will be eligible
for sale under Rule 144, Rule 144(k) or Rule 701 once they have been held
for the required period of time.
Additionally, of the 4,038,907 shares that may be issued upon the exercise of
outstanding options as of January 25, 2000, approximately 606,796 shares will
be vested and eligible for sale beginning 180 days after the effective date. As
of January 25, 2000, warrants for 1,141,309 shares of common stock were
exercisable and warrants for an additional 2,148,850 shares of common stock may
become exercisable in the future based on the holders meeting stated volume
targets for business conducted over our service. If exercised, the earliest
that these shares will be eligible for sale under Rule 144 is December 2000.
Lock-Up Agreements
Our directors, officers, employees and other stockholders, who together hold
all of our securities, have entered into lock-up agreements in connection with
this offering or are locked up under agreements with us. These lock-up
agreements generally provide that these holders will not offer, sell, contract
to sell, grant any option to purchase or otherwise dispose of our common stock
or any securities exercisable for or convertible into our common stock owned by
them for a period of 180 days after the date of this prospectus without the
prior written consent of Goldman, Sachs & Co. Notwithstanding possible earlier
eligibility for sale under the provisions of Rules 144, 144(k) and 701, shares
subject to lock-up agreements may not be sold until these agreements expire or
are waived by Goldman, Sachs & Co.
55
<PAGE>
Rule 144
In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any three-
month period a number of shares that does not exceed the greater of:
. one percent of the number of shares of common stock then outstanding, which
will equal approximately shares immediately after this offering;
and
. the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to manner
of sale, notice and the availability of current public information about us.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, may sell these
shares without complying with the manner of sale, public information, volume
limitation or notice requirements of Rule 144.
Rule 701
Rule 701, as currently in effect, permits our employees, officers, directors
or consultants who purchased shares pursuant to a written compensatory plan or
contract to resell such shares in reliance upon Rule 144, but without
compliance with certain restrictions. Rule 701 provides that affiliates may
sell their Rule 701 shares under Rule 144 90 days after effectiveness without
complying with the holding period requirement and that non-affiliates may sell
such shares in reliance on Rule 144 90 days after effectiveness without
complying with the holding period, public information, volume limitation or
notice requirements of Rule 144.
Registration Rights
On the date 180 days after the completion of this offering, the holders of
29,000,745 shares of our common stock will have rights to require us to
register their shares under the Securities Act. Upon the effectiveness of a
registration statement covering these shares, the shares would become freely
tradable.
Stock Options
We intend to file a registration statement under the Securities Act after the
effective date of this offering to register shares to be issued pursuant to our
employee benefit plans. As a result, any options or rights exercised under the
1998 equity incentive plan, the 2000 equity incentive plan, the 2000 employee
stock purchase plan and the 2000 non-employee directors' stock option plan will
also be freely tradable in the public market. However, shares held by
affiliates will still be subject to the volume limitation, manner of sale,
notice and public information requirements of Rule 144, unless otherwise
resalable under Rule 701. As of January 24, 2000, options to purchase 4,038,907
shares of common stock were outstanding, of which options to purchase 399,666
shares were vested and exercisable. In addition, as of that date we had
reserved 817,198 shares for possible future issuance under our 1998 equity
incentive plan, and an aggregate of 6,950,000 shares for possible future
issuance under our 2000 equity incentive plan, 2000 employee stock purchase
plan and 2000 non-employee directors' stock option plan.
56
<PAGE>
UNDERWRITING
NOOSH and the underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to certain
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., FleetBoston
Robertson Stephens Inc., Banc of America Securities LLC, PaineWebber
Incorporated and E*OFFERING Corp. are the representatives of the underwriters.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Goldman, Sachs & Co. ..............................................
FleetBoston Robertson Stephens Inc. ...............................
Banc of America Securities LLC.....................................
PaineWebber Incorporated...........................................
E*OFFERING Corp. ..................................................
-----
Total............................................................
=====
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from NOOSH to cover such sales. They may exercise that option for 30
days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in the same proportion as set forth in the table
above.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by NOOSH. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
Paid by NOOSH
<TABLE>
<CAPTION>
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per Share.................................................. $ $
Total...................................................... $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per share from
the initial public offering price. If all the shares are not sold at the
initial public offering price, the representatives may change the offering
price and the other selling terms.
NOOSH and its directors, officers, employees and other stockholders have
agreed with the underwriters, except under limited circumstances, not to offer,
sell, contract to sell, grant any option to purchase or otherwise dispose of
our common stock or any securities exercisable for or convertible into our
common stock owned by them for a period of 180 days after the date of this
prospectus without the prior written consent of Goldman, Sachs & Co. See
"Shares Eligible for Future Sale" for a discussion of transfer restrictions.
57
<PAGE>
Prior to this offering, there has been no public market for the common stock.
The initial public offering price for the common stock has been negotiated
among NOOSH and the representatives of the underwriters. Among the factors
considered in determining the initial public offering price of the shares, in
addition to prevailing market conditions, were NOOSH's historical performance,
estimates of NOOSH's business potential and earnings prospects, an assessment
of Noosh's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.
NOOSH has applied to have its common stock listed for quotation on the Nasdaq
National Market under the symbol "NOOS."
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.
The underwriters may also impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of such underwriter in stabilizing or short-sale covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on The Nasdaq
National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed five
percent of the total number of shares offered.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock offered hereby for certain
individuals designated by NOOSH who have expressed an interest in purchasing
such shares of common stock in the offering. The number of shares available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares not so purchased will be offered by
the underwriters to the general public on the same basis as other shares
offered hereby.
NOOSH estimates that the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $1,200,000.
NOOSH has agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
VALIDITY OF COMMON STOCK
The validity of the common stock offered hereby will be passed upon for NOOSH
by Cooley Godward LLP, Palo Alto, California. Legal matters relating to this
offering will be passed upon for the underwriters by Sullivan & Cromwell, Los
Angeles, California. As of the date of this prospectus, Cooley Godward LLP,
together with certain investment funds affiliated with the firm, own an
aggregate of 120,834 shares of our common stock through investment
partnerships.
58
<PAGE>
EXPERTS
The financial statements as of December 31, 1998 and 1999 included in this
prospectus have been audited by PricewaterhouseCoopers LLP, independent
accountants, as stated in their report appearing herein, and have been so
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered in this offering. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedule thereto. For further information with respect to us and the common
stock offered in this offering, we refer you to the registration statement and
to the attached exhibits and schedules. Statements made in this prospectus
concerning the contents of any document referred to in this prospectus are not
necessarily complete. With respect to each such document filed as an exhibit to
the registration statement, we refer you to the exhibit for a more complete
description of the matter involved.
The reports and other information we file with the SEC can be inspected and
copied at the public reference facilities that the SEC maintains at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and Suite 140, Citicorp Center, 50 West Madison Street, Chicago, Illinois
60661. Copies of these materials can be obtained at prescribed rates from the
Public Reference Section of the SEC at the principal offices of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549. You may obtain information
regarding the operation of the public reference room by calling 1(800) SEC-
0330. The SEC also maintains a web site (http://www.sec.gov) that makes
available the reports and other information we have filed with the SEC.
59
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2
Balance Sheets as of December 31, 1998 and 1999.......................... F-3
Statements of Operations for the period from inception to December 31,
1998, Year ended December 31, 1999, and the period from inception to
December 31, 1999....................................................... F-4
Statements of Stockholders' Equity for the period from inception to
December 31, 1999....................................................... F-5
Statements of Cash Flows for the period from inception to December 31,
1998, Year ended December 31, 1999, and the period from inception to
December 31, 1999....................................................... F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
NOOSH, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, changes in stockholders' equity and cash flow present fairly, in
all material respects, the financial position of NOOSH, Inc. at December 31,
1998 and 1999 and the results of its operations and cash flows for the period
from August 3, 1998 (date of inception) to December 31, 1998 and the year ended
December 31, 1999, 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.
PricewaterhouseCoopers LLP
San Jose, California
January 21, 2000
F-2
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
Pro Forma at
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $1,117 $ 48,349 $63,949
Prepaid expenses and other current
assets............................... 26 947
------ --------
Total current assets................ 1,143 49,296
Property and equipment, net............. 69 3,339
Other assets............................ 27 394
------ --------
Total assets........................ $1,239 $ 53,029
====== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 109 $ 634
Accrued liabilities................... 132 1,424
------ --------
Total current liabilities........... 241 2,058
Long-term debt.......................... -- 79
------ --------
Total liabilities................... 241 2,137
------ --------
Commitments (Note 5)
Stockholders' equity:
Convertible Preferred Stock: $0.001
par value;
Series A, Authorized: 2,023,077
shares
Issued and outstanding: 2,023,077
shares at December 31, 1998 and
December 31, 1999.................... 2 2 $ --
Series B, Authorized: 4,363,637 shares
Issued and outstanding: 4,363,637
shares at December 31, 1999.......... -- 4 --
Series C, Authorized: 7,648,286 shares
Issued and outstanding: 6,809,135
shares at December 31, 1999.......... -- 7 --
Common Stock: $0.001 par value;
Authorized: 45,000,000 shares
Issued and outstanding: 9,414,673
shares............................... 8 9 30
Additional paid-in capital............ 1,431 81,955 97,547
Deferred stock compensation........... (129) (13,408) (13,408)
Notes receivable from common
stockholders......................... -- (314) (314)
Deficit accumulated during the
development stage.................... (314) (17,363) (17,363)
------ -------- --------
Total Stockholders' equity.......... 998 50,892 $ 66,492
------ -------- ========
Total liabilities and
Stockholders' equity............. $1,239 $ 53,029
====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Period from Period from
August 3, August 3,
1998 (date 1998 (date
of of
inception) inception)
to Year Ended to
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Costs and expenses:
Research and development.............. $ 111 $ 3,053 $ 3,164
Sales and marketing................... 96 9,412 9,508
General and administrative............ 107 1,795 1,902
Value of warrants granted in
connection with marketing
agreements........................... -- 1,058 1,058
Amortization of deferred stock
compensation......................... -- 2,379 2,379
---------- ---------- ----------
Total operating expenses............ 314 17,697 18,011
---------- ---------- ----------
Interest income, net.................... -- (648) (648)
---------- ---------- ----------
Net loss................................ $ (314) $ (17,049) $ (17,363)
========== ========== ==========
Net loss per share--basic and diluted... $ (0.12) $ (3.99) $ (4.61)
========== ========== ==========
Shares used in per share calculation--
basic and diluted...................... 2,521,485 4,275,090 3,763,399
========== ========== ==========
Pro forma net loss per share--basic and
diluted................................ $ (1.11)
==========
Shares used in pro forma net loss per
share--basic and diluted............... 15,356,918
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
Deficit
Convertible Notes Accumulated
Preferred Shares Common Stock Additional Receivable Deferred During the Total
----------------- ---------------- Paid-In from Common Stock Development Stockholders'
Shares Amount Shares Amount Capital Shareholders Compensation Stage Equity
---------- ------ --------- ------ ---------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock to founders in
August 1998 at
$0.00125 per share,
net.................. -- $-- 8,040,000 $ 8 $ 1 $ -- $ -- $ -- $ 9
Issuance of Series A
Convertible Preferred
Stock at $0.65 per
share in November
1998, net of issuance
costs................ 2,023,077 2 -- -- 1,301 -- -- -- 1,303
Deferred stock
compensation......... -- -- -- -- 129 -- (129) -- --
Net loss............. -- -- -- -- -- -- -- (314) (314)
---------- --- --------- --- ------- ----- -------- -------- --------
Balances at December
31, 1998............. 2,023,077 2 8,040,000 8 1,431 -- (129) (314) 998
Issuance of common
stock................ -- -- 1,200,220 1 497 (314) -- -- 184
Issuance of common
stock in connection
with services
rendered............. -- -- 174,453 -- 700 -- -- -- 700
Issuance of Series B
Convertible Preferred
Stock at $2.75 per
share in April 1999,
net of issuance
costs................ 4,363,637 4 -- -- 11,955 -- -- -- 11,959
Issuance of Series C
Convertible Preferred
Stock at $7.45 per
share in November
1999, net of issuance
costs................ 6,809,135 7 -- -- 50,656 -- -- -- 50,663
Value of warrants
granted in connection
with marketing
agreements........... -- -- -- -- 1,058 -- -- -- 1,058
Deferred stock
compensation......... -- -- -- -- 15,658 -- (15,658) -- --
Amortization of
deferred stock
compensation......... -- -- -- -- -- -- 2,379 -- 2,379
Net loss............. -- -- -- -- -- -- -- (17,049) (17,049)
---------- --- --------- --- ------- ----- -------- -------- --------
Balances at December
31, 1999............. 13,195,849 $13 9,414,673 $ 9 $81,955 $(314) $(13,408) $(17,363) $ 50,892
========== === ========= === ======= ===== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from August Period from
3, 1998 August 3, 1998
(date of inception) Year Ended (date of inception)
to December 31, December 31, to December 31,
1998 1999 1999
------------------- ------------ -------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss................ $ (314) $(17,049) $(17,363)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization.......... 3 455 458
Value of warrants
granted in connection
with marketing
agreements............ -- 1,058 1,058
Amortization of
deferred stock
compensation.......... -- 2,379 2,379
Issuance of common
stock in connection
with services
rendered.............. -- 667 667
Changes in assets and
liabilities:
Prepaid expenses and
other current
assets............... (26) (921) (947)
Accounts payable...... 109 525 634
Accrued liabilities... 132 1,292 1,424
Other long-term
assets............... (27) (367) (394)
------ -------- --------
Net cash used in
operating
activities.......... (123) (11,961) (12,084)
------ -------- --------
Cash flows from investing
activities:
Purchase of property and
equipment.............. (72) (3,725) (3,797)
------ -------- --------
Net cash used in
investing
activities.......... (72) (3,725) (3,797)
------ -------- --------
Cash flows from financing
activities:
Proceeds from issuance
of Convertible
Preferred Stock net.... 1,303 62,622 63,925
Proceeds from issuance
of Common Stock, net... 9 184 193
Proceeds from issuance
of Common Stock in
connection with
services rendered...... -- 33 33
Proceeds from long-term
debt................... -- 79 79
------ -------- --------
Net cash provided by
financing
activities.......... 1,312 62,918 64,230
------ -------- --------
Net increase in cash and
cash equivalents........ 1,117 47,232 48,349
Cash and cash equivalents
at beginning of period.. -- 1,117 --
------ -------- --------
Cash and cash equivalents
at end of period........ $1,117 $ 48,349 $ 48,349
====== ======== ========
Noncash activity:
Deferred stock
compensation........... $ 129 $ 15,658 $ 15,787
====== ======== ========
Issuance of Common Stock
for notes receivable
from shareholder....... $ -- $ 314 $ 314
====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES:
NOOSH, Inc. (the "Company") was incorporated in the state of California and
commenced operations on August 3, 1998. NOOSH is a provider of business-to-
business e-commerce solutions for the printing industry. The Company has
developed and operates Noosh.com, an Internet-based communication and
collaboration service for managing the design, procurement and production of
print orders. The service leverages the benefits of the Internet to enable
print buyers, print vendors and other providers of related services to
communicate and collaborate efficiently through the complex, multi-step process
of completing a print order. The Company is in the development stage and since
inception has devoted substantially all of its efforts to developing its
service and raising capital.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents and are stated at
amounts that approximate fair value, based on quoted market prices. Cash
equivalents consist primarily of deposits in money market funds.
Concentration of credit risk
The Company's cash and cash equivalents are maintained at a major U.S.
financial institution. Deposits in this institution may exceed the amount of
insurance provided on such deposits.
Fair value of financial instruments
The carrying amounts of the Company's financial instruments, including cash
and cash equivalents, accounts payable and accrued liabilities approximate fair
value due to their short maturities.
Property and equipment
Property and equipment are stated at cost and are depreciated on a straight-
line basis over their estimated useful lives of three to five years. Leasehold
improvements are amortized over the lesser of the useful life of the asset or
the period of the lease. Maintenance and repairs are charged to operations as
incurred.
Research and development
Research and development costs are charged to operations as incurred.
F-7
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,"
requires that certain software development costs be capitalized after
technological feasibility has been established. The Company defines
technological feasibility as the establishment of a working model. Costs
incurred subsequent to such point have been insignificant and have been
expensed.
Income taxes
The Company accounts for income taxes under the liability method whereby
deferred tax asset or liability account balances are calculated at the balance
sheet date using current tax laws and rates in effect for the year in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
Advertising
The Company expenses advertising costs as they are incurred. Advertising
expense for the period from August 3, 1998 to December 31, 1998 and the year
ended December 31, 1999 was $0 and $272,000.
Accounting for stock compensation
The Company's stock-based compensation plan are accounted for in accordance
with Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for
Stock Issued to Employees" and complies with the disclosure provisions of
Statement of Financial Accounting Standards 123 ("SFAS No. 123"), "Accounting
for Stock-Based Compensation." Under APB No. 25, compensation expense is based
on the difference, if any, on the date of the grant, between the estimated fair
value of the Company's stock and the exercise price of options to purchase that
stock.
Comprehensive income
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 requires that
all items recognized under accounting standards as components of comprehensive
income be reported in an annual financial statement that is displayed with the
same prominence as other annual financial statements. The Company has no
comprehensive income component other than net loss.
Net loss per share
Basic net loss per share is computed by dividing net loss available to common
stockholders by the weighted average number of vested common shares outstanding
for the period. Diluted net loss per share is computed giving effect to all
dilutive potential common stock, including options, non vested common stock,
preferred stock and common stock warrants. Options, non vested common stock,
preferred stock and common stock warrants were not included in the computation
of diluted net loss per share in the periods reported because the effect would
be antidilutive.
F-8
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Antidilutive securities not included in net loss per share calculation for
the periods:
<TABLE>
<CAPTION>
Period from Period from
August 3, August 3,
1998 1998 (date
(date of of
inception) inception)
to Year Ended to
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Non vested common stock............... 4,814,804 4,109,338 4,109,338
Common stock options.................. 496,720 4,521,490 4,521,490
Convertible Preferred Stock........... 2,023,077 13,195,849 13,195,849
Common stock warrants................. -- 215,000 215,000
--------- ---------- ----------
7,334,601 22,041,677 22,041,677
========= ========== ==========
</TABLE>
Pro forma net loss per share (unaudited)
Pro forma net loss per share for the year ended December 31, 1999 and the
period from August 3, 1998 to December 31, 1998 is computed using the weighted
average number of common stock outstanding, including the pro forma effects of
the automatic conversion of the Company's Series A, Series B and Series C
convertible preferred stock into shares of the Company's common stock as
contemplated upon the closing of the Company's initial public offering
(see Note 8--Subsequent Events) as if such conversion occurred on January 1,
1999, or at the date of original issuance, if later. Pro forma common
equivalent shares, composed of unvested restricted common stock and incremental
common shares issuable upon the exercise of stock options, are not included in
pro forma diluted net loss per share because they would be anti-dilutive.
Pro forma (unaudited)
Upon the closing of the Company's initial public offering, it is contemplated
that the outstanding shares of Series A, Series B, Series C and Series D
convertible preferred stock will convert into 21,000,745 shares of common stock
(see Note 8--Subsequent Events). The pro forma column reflects the receipt of
net proceeds of $15.6 million upon the issuance and sale of 1,418,182 shares of
Series D preferred stock and the effect of the conversion of Series A, Series
B, Series C and Series D into common stock.
Recent accounting pronouncement
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities and will be adopted
in the year 2000. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. The Company does not expect the adoption of SFAS 133 to have a
material impact on its financial statements.
F-9
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 2--PROPERTY AND EQUIPMENT:
Property and equipment comprise (in thousands):
<TABLE>
<CAPTION>
December
31,
------------
1998 1999
---- ------
<S> <C> <C>
Computer equipment................................................ $31 $3,024
Communication equipment........................................... 11 63
Leasehold improvements............................................ -- 69
Furniture and fixtures............................................ 30 641
--- ------
72 3,797
Less: Accumulated depreciation and amortization................... (3) (458)
--- ------
$69 $3,339
=== ======
</TABLE>
NOTE 3--INCOME TAXES:
Deferred tax assets and liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------
1998 1999
----- ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................... $ 24 $5,231
Accrued employee benefits...................................... 14 52
Start-up costs................................................. 95 --
Other.......................................................... 5 (35)
----- ------
Total deferred tax assets.................................... 138 5,248
Valuation allowance.............................................. (138) (5,248)
----- ------
$ 0 $ --
===== ======
</TABLE>
At December 31, 1998 and 1999, the Company had approximately $150,000 and
$13,132,000 of California and federal net operating loss carryforwards which
expire between 2005 to 2019, if not utilized beforehand. Under the Tax Reform
Act of 1986, the amounts of and benefits from net operating loss carryforwards
may be impaired or limited in certain circumstances. Events which cause
limitations in the amount of net operating losses that the Company may utilize
in any one year include, but are not limited to, a cumulative ownership change
of more than 50%, as defined, in any three year period.
Due to uncertainty of realizing the benefits of the deferred tax assets, the
Company has provided a valuation allowance against the net deferred tax assets.
F-10
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The difference between the Company's effective income tax rate and the
federal statutory rate is as follows (in thousands):
<TABLE>
<CAPTION>
Period from Period from
August 13, August 13,
1998 (date of 1998 (date of
inception) to Year Ended inception) to
December 31, December 31, December 31,
1998 1999 1999
------------- ------------ -------------
<S> <C> <C> <C>
Statutory tax benefit................ $(110) $(5,967) $(6,077)
Permanent differences--non-deductible
expenses............................ -- (1,464) (1,464)
State taxes, net of federal tax
benefit............................. (18) (995) (1,013)
Change in valuation allowance........ 138 5,110 5,248
Other................................ (10) 388 378
----- ------- -------
Net tax provision.................... $ -- $ -- $ --
</TABLE>
NOTE 4--COMMITMENTS:
Operating lease
The Company leases its facilities under non-cancelable operating lease
agreements expiring through October 2002. Under the terms of the lease, the
Company is responsible for paying common area expenses, as incurred by the
lessor. Future minimum lease payments under the non-cancelable lease as of
December 31, 1999 were as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
2000............................................................ $1,679
2001............................................................ 606
2002............................................................ 102
------
Total......................................................... $2,387
======
</TABLE>
Rent expense under the operating lease totaled $19,000 and $616,000 for the
period ending December 31, 1998 and the year ended December 31, 1999.
NOTE 5--STOCKHOLDERS' EQUITY:
Convertible Preferred Stock
The convertible preferred stock at December 31, 1999 comprises:
<TABLE>
<CAPTION>
Number of
Number of Shares Liquidation
Shares Issued and Value
Authorized Outstanding Per Share
---------- ----------- -----------
<S> <C> <C> <C>
Series A..................................... 2,023,077 2,023,077 $0.65
Series B..................................... 4,363,637 4,363,637 $2.75
Series C..................................... 7,648,286 6,809,135 $7.45
---------- ----------
14,035,000 13,195,849
========== ==========
</TABLE>
F-11
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The rights, preferences and privileges with respect to the Preferred Stock
are as follows:
Dividends
Holders of Series A, Series B and Series C Preferred Stock, in preference to
the holders of Common Stock of the Corporation, shall be entitled to receive,
when and as declared by the Board of Directors, but only out of funds that are
legally available therefor, cash dividends at the rate of eight percent (8%) of
the "Original Issue Price" per annum on each outstanding share of Series A,
Series B and Series C Preferred Stock (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares). Such dividends shall be payable only when, as and if declared by the
Board of Directors and shall be non-cumulative. No dividends have been declared
as of December 31, 1999.
Liquidation preference
Upon any liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary, before any distribution or payment shall be made to
the holders of any Common Stock, the holders of Series A, Series B and Series C
Preferred Stock shall be entitled to receive an amount per share equal to the
Original Issue Price of $0.65, $2.75 and $7.45 plus all declared and unpaid
dividends. In the event funds are insufficient to make a complete distribution
to holders of Preferred Stock as described above, the remaining assets will be
distributed to the holders of Common Stock ratably among such holders of Common
Stock.
Voting rights
The holders of Preferred Stock have one vote for each share of Common Stock
into which such Preferred Stock may be converted.
Conversion
Each share of Preferred Stock is convertible at any time into shares of
Common Stock at the option of the holder, subject to adjustment for dilution.
Such conversion is automatic upon the earlier of the date specified by vote,
written consent or agreement of a majority of the holders of such series then
outstanding or immediately upon the closing date of a public offering of the
Company's Common Stock for which the aggregate net proceeds exceed $10,000,000.
The conversion ratio as of December 31, 1998 and 1999 is 2:1 for Series A and B
Preferred Stock after giving retroactive effect to the stock split effected in
1999. The conversion ratios as of December 31, 1999 is 1:1 for Series C
Preferred Stock. The conversion ratio of Series A, B and C Preferred Stock may
be adjusted under circumstances described in the Company's Restated Articles of
Incorporation.
Common Stock
The Company is authorized to issue 45,000,000 shares of Common Stock as of
December 31, 1999. A portion of the outstanding shares of common stock are
subject to repurchase by the Company over a four year period. As of December
31, 1998 and 1999, there were 4,814,804 and 4,109,338 shares of nonvested stock
issued pursuant to exercises of options which were subject to repurchase by the
Company.
F-12
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Incentive stock plan
In November 1998, the Company adopted the 1998 Stock Option Plan (the "Plan")
under which the Company may grant stock options for Common Stock to employees,
consultants and outside investors. The Board of Directors has the authority to
determine to whom options will be granted, the number of shares, the term and
exercise price (which cannot be less than fair market value at date of grant
for incentive stock options). If an employee owns stock representing more than
10% of the outstanding shares, the price of each share shall be at least 110%
of fair market value, as determined by the Board of Directors. Options granted
generally vest over four years. The Company has reserved 8,000,000 shares of
Common Stock for issuance under the Plan.
A summary of activity under the Plan is as follows:
<TABLE>
<CAPTION>
Number of Weighted
Number of Shares Average
Shares Issued and Exercise Aggregate
Authorized Outstanding Price Price
---------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Shares reserved.................. 1,980,000 -- -- $ --
Options granted.................. (496,720) 496,720 $0.0325 16,143
---------- ---------- ------- ----------
Balances, December 31, 1998...... 1,483,280 496,720 $0.0325 16,143
Shares reserved.................. 6,020,000 -- --
Options granted.................. (5,294,990) 5,294,990 $0.6278 3,324,195
Options exercised................ (1,200,220) $0.4149 (497,971)
Options cancelled................ 70,000 (70,000) $0.0325 (2,275)
---------- ---------- ------- ----------
Balances, December 31, 1999...... 2,278,290 4,521,490 $0.6281 $2,840,092
</TABLE>
For financial reporting purposes, the Company has determined that the
estimated value of common stock determined in anticipation of this offering was
in excess of the exercise price, which was considered to be the fair market
value as of the date of grant for 496,720 options issued in 1998 and 5,294,990
options issued in the year ended December 31, 1999. In connection with the
grants of such options, the Company has recorded deferred compensation of
$129,000 in the period from August 3, 1998 to December 31, 1998 and $15,658,000
during the year ended December 31, 1999. Deferred stock compensation will be
amortized over the vesting period which is generally 48 months from the date of
grant; $2,379,000 was expensed in the year ended December 31, 1999. Future
amortization based on options granted through December 31, 1999 is expected to
be $8,152,000, $3,372,000, $1,534,000 and $350,000 in the years 2000, 2001,
2002 and 2003.
F-13
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options
------------------------------------------- Currently
Exercisable
Weighted Average Weighted -----------
Number Remaining Average Number
Range of Exercise Price Outstanding Contractual Life Exercise Price Outstanding
- ----------------------- ----------- ---------------- -------------- -----------
<S> <C> <C> <C> <C>
$ 0.0325................ 837,500 9.13 $0.0325 51,041
$ 0.1375................ 1,477,980 9.44 $0.1375 66,666
$ 0.5000................ 258,000 9.63 $0.5000 --
$ 0.8000................ 447,750 9.71 $0.8000 --
$ 1.0000................ 625,850 9.77 $1.0000 --
$1.250 - $1.750......... 555,960 9.87 $1.4728 2,500
$2.000 - $2.250......... 318,450 9.98 $2.1288 6,250
--------- -------
4,521,490 126,457
========= =======
</TABLE>
Fair value disclosures
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation." Had compensation cost for the plan been determined based on the
fair value at grant date for all awards consistent with the provisions of SFAS
No. 123, the impact on the Company's financial statements would be as follows:
<TABLE>
<CAPTION>
Period from
August 13, Period from
1998 (date August 13,
of 1998 (date
inception) of
to Year Ended inception)
December 31, December 31, to December
1998 1999 31, 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net loss:
As reported......................... $(314,000) $(17,049,000) $(17,363,000)
Pro forma........................... $(314,000) $(17,124,000) $(17,438,000)
Basic and diluted net loss per share:
As reported......................... $ (0.12) $ (3.99) $ (4.61)
Pro forma........................... $ (0.12) $ (4.01) $ (4.63)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following weighted average assumptions:
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Risk-free interest rate....................................... 4.38% 5.35%
Expected life 4 years 4 years
Expected dividends............................................ $ -- $ --
</TABLE>
The weighted average per share fair value of common stock options granted
during 1998 and 1999 was $0.02 and $3.07.
Options granted to consultants are valued using the Black-Scholes method and
this value is charged against income over the vesting period of the options.
F-14
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Warrants
In connection with long-term marketing agreements entered into in December
1999, the Company has issued warrants to purchase up to an aggregate of 495,000
shares of common stock, of which warrants to purchase 140,000 shares of common
stock at an exercise price of $7.45 and warrants to purchase 75,000 shares at
an exercise price of $11.00 were immediately exercisable. The remaining
warrants will be exercisable in the future based on the holder meeting stated
volume targets for business conducted over the Noosh.com service at exercise
prices ranging from $7.45 per share to the fair market value of the common
stock at the date the volume targets are met.
The Company valued the warrants which were immediately exercisable using the
Black-Scholes method with the following assumptions: dividend yield at 0%;
expected warrant term of 3 years; risk free interest rate of 6.29% and expected
volatility of 60%. The fair value of $1,058,000 was expensed at the date of
grant. The remaining warrants will be valued and charged to expense when it is
probable that the performance targets will be met.
NOTE 6--UNAUDITED PRO FORMA LOSS PER SHARE AND PRO FORMA SHAREHOLDERS' EQUITY:
Pro forma basic net loss per share has been computed as described in Note 1
and also gives effect to common equivalent stock from preferred shares that
will convert upon the closing of the Company's initial public offering (using
the as-if-converted-method).
A reconciliation of the numerator and denominator used in the calculation of
pro forma basic and diluted net loss per share follow:
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
Pro forma net loss per share, basic and diluted:
Net loss....................................................... $(17,049,000)
Shares used in computing net loss per share, basic and
diluted....................................................... 4,275,090
Adjustment to reflect the effect of the assumed conversion of
convertible preferred stock................................... (11,081,828)
------------
Shares used in computing pro forma net loss per share, basic
and diluted................................................... 15,356,918
Pro forma net loss per share, basic and diluted................ $ (1.11)
</TABLE>
If the offering contemplated by this Prospectus is consummated as
contemplated, all of the convertible preferred stock outstanding as of the
closing date will be converted into an aggregate of approximately 19,582,563
shares of common stock based on the shares of convertible preferred stock
outstanding at December 31, 1999. Unaudited pro forma shareholders' equity at
December 31, 1999, as adjusted for the conversion of preferred stock, is
disclosed on the balance sheet.
NOTE 7--401(k) SAVINGS PLAN:
The Company established a 401(k) Savings Plan (the "Plan") that covers
substantially all employees. Under the Plan, employees are permitted to
contribute a portion of gross compensation not to exceed standard limitations
provided by the Internal Revenue Service. The Company maintains the right to
match employee contributions, but for the period from August 3, 1998 (date of
F-15
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
inception) to December 31, 1998, for the year ended December 31, 1999 and for
the period from August 3, 1998 (date of inception) to December 31, 1999, no
Company matching contributions were made.
NOTE 8--SUBSEQUENT EVENTS:
Initial public offering
In January 2000, the Company's Board of Directors authorized the Company to
file a registration statement with the Securities and Exchange Commission for
the purpose of an initial public offering of the Company's common stock. Upon
the completion of this offering, if the requirements set forth in its
Certificate of Incorporation are met, the Company's preferred stock will be
converted into common stock.
Reincorporation
In January 2000, the Company's Board of Directors approved reincorporation of
the Company in Delaware. The reincorporation is subject to stockholder
approval.
Warrants
In connection with a long-term marketing agreement entered into in January
2000, the Company has issued warrants to purchase up to an aggregate of
2,780,159 shares of common stock at an exercise price of $11.00 per share, of
which warrants to purchase 961,309 shares were immediately exercisable and the
remaining warrants will be exercisable in the future based on the holder
meeting stated volume targets for business conducted over the Noosh.com
service.
In connection with a print buyer user agreement entered into in January 2000,
the Company has issued a warrant to purchase up to 50,000 shares of common
stock at an exercise price of $11.00 per share, all shares of which will be
exercisable in the future based on the holder meeting a stated volume target
for business conducted over the Noosh.com service.
Amended and Restated Certificate of Incorporation
In January 2000, the Company amended and restated its Certificate of
Incorporation to increase the authorized number of shares of preferred stock to
15,200,000 shares, of which 6,809,135 were designated as Series C and 2,000,000
as Series D.
Series D Preferred Financing
In January 2000, the Company completed the closing of the Series D preferred
stock financing. The Company raised $15.6 million and issued 1,418,182 shares
of Series D preferred stock.
Employee Stock Purchase Plan
In January 2000, the Company's Board of Directors adopted the 2000 Employee
Stock Purchase Plan under which eligible employees will be able to purchase
common stock at a discount price in periodic offerings. The purchase plan will
commence on the effective date of the offering.
A total of 600,000 shares of common stock have been authorized for issuance
under the 2000 purchase plan.
F-16
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Non-Employee Directors' Stock Option Plan
In January 2000, the Company's Board of Directors adopted the 2000 Non-
Employee Directors' Stock Option Plan under which non-employee directors will
automatically be granted options to purchase shares of common stock on the
effective date of the offering and on each annual stockholders' meeting,
beginning with the annual stockholders meeting in 2001.
A total of 350,000 shares of common stock have been authorized for issuance
under the 2000 Non-Employee Directors' Stock Option Plan.
2000 Equity Incentive Plan
In January 2000, the Company's Board of Directors adopted the 2000 Equity
Incentive Plan under which 6,000,000 shares of common stock have been reserved
for issuance of options to employees, directors and consultants.
The 2000 Equity Incentive Plan will be effective on the effective date of the
offering at which time no further option grants will be made under the 1998
Equity Incentive Plan.
F-17
<PAGE>
[Description of Inside Back Cover Graphic: Graphic depicts the Noosh logo.
Graphic also contains the phrase: "the new dimension in managing print."
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Note Regarding Forward-Looking Statements................................ 14
Use of Proceeds.......................................................... 15
Dividend Policy.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Financial Data.................................................. 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations .......................................................... 19
Business................................................................. 24
Management............................................................... 36
Related Party Transactions............................................... 48
Principal Stockholders................................................... 50
Description of Capital Stock ............................................ 52
Shares Eligible for Future Sale.......................................... 55
Underwriting............................................................. 57
Validity of Common Stock................................................. 58
Experts.................................................................. 59
Additional Information................................................... 59
Index to Financial Statements............................................ F-1
</TABLE>
--------------
Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when
acting as an underwriter and with respect to an unsold allotment or
subscription.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
NOOSH, Inc.
Common Stock
--------------
[NOOSH Logo]
[NOOSH, INC. LOGO APPEARS HERE]
--------------
Goldman, Sachs & Co.
Robertson Stephens
Banc of America Securities LLC
PaineWebber Incorporated
E*OFFERING
Representatives of the Underwriters
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by us in connection with the sale of the
common stock being registered. All the amounts shown are estimates except for
the registration fee, the NASD filing fee and the Nasdaq National Market
application fee.
<TABLE>
<S> <C>
Registration fee................................................. $ 15,312
NASD filing fee.................................................. 6,300
Nasdaq National Market application fee........................... 95,000
Blue sky qualification fee and expenses.......................... 20,000
Printing and engraving expenses.................................. 250,000
Legal fees and expenses.......................................... 500,000
Accounting fees and expenses..................................... 250,000
Transfer agent and registrar fees................................ 15,000
Miscellaneous.................................................... 48,388
----------
Total............................................................ $1,200,000
==========
</TABLE>
Item 14. Indemnification of Officers and Directors.
As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director of ours will be personally liable to
us or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability for:
. any breach of duty of loyalty to us or to our stockholders;
. acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law;
. unlawful payment of dividends or unlawful stock repurchases or redemptions;
or
. any transaction from which the director derived an improper personal
benefit.
Our amended and restated certificate of incorporation further provides that
we must indemnify our directors and officers and may indemnify our other
employees and agents to the fullest extent permitted by Delaware law. We
believe that indemnification under our amended and restated certificate of
incorporation covers negligence and gross negligence on the part of
indemnified parties.
We intend to enter into indemnification agreements with each of our
directors and executive officers. These agreements, among other things,
require us to indemnify each director and executive officer for some expenses
including attorneys' fees, judgments, fines and settlement amounts incurred by
any of these persons in any action or proceeding, including any action by or
in the right of NOOSH, arising out of these persons' services as our director
or executive officer, any subsidiary of ours or any other company or
enterprise to which the person provides services at our request.
The underwriting agreement will provide for indemnification by the
underwriters of NOOSH, our directors, our officers who sign the registration
statement, and our controlling persons for some liabilities, including
liabilities arising under the securities act.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities.
Since inception, we have sold and issued the following unregistered
securities:
(1) From August 15, 1998 to January 25, 2000, we have granted stock
options to purchase 7,137,435 shares of the our common stock to employees,
consultants and directors pursuant to our 1998 equity incentive plan. Of
these stock options, 73,100 shares have been cancelled without being
exercised, 3,025,428 shares have been exercised, 0 have been repurchased
and 4,038,907 shares remain outstanding.
(2) In August 1998, we issued an aggregate of 40,000 shares of common
stock to one purchaser at $0.00125 per share for an aggregate purchase
price of $50.
(3) In August 1998, we issued an aggregate of 4,000,000 shares of common
stock to Ofer Ben-Shachar at $0.00125 per share for an aggregate purchase
price of $5,000.
(4) In September 1998, we issued an aggregate of 4,000,000 shares of
common stock to Ofer Ben-Shachar at $0.00125 per share for an aggregate
purchase price of $5,000.
(5) In November 1998, we issued an aggregate of 2,023,077 shares of
Series A preferred stock to twelve purchasers at $0.65 per share for an
aggregate purchase price of $1,315,000. Shares of Series A preferred stock
are convertible into shares of common stock at the rate of two shares of
common stock for each share of Series A preferred stock owned.
(6) In January 1999 through March 1999, we issued an aggregate of 76,986
shares of common stock to four consultants at $0.325 per share for an
aggregate purchase price of $2,502.
(7) In April 1999, we issued an aggregate of 4,363,637 shares of Series B
preferred stock to twenty-two purchasers at $2.75 per share for an
aggregate purchase price of $12,000,002. Shares of Series B preferred stock
are convertible into shares of common stock at the rate of two shares of
common stock for each share of Series B preferred stock owned.
(8) On September 15, 1999, we issued an aggregate of 13,216 shares of
common stock to six consultants at $0.80 per share for an aggregate
purchase price of $10,573.
(9) On October 8, 1999, we issued an aggregate of 11,609 shares of common
stock to eight consultants at $1.00 per share for an aggregate purchase
price of $11,609.
(10) On October 15, 1999, we issued an aggregate of 19,000 shares of
common stock to one employee as consideration with an aggregate fair market
value of $19,000 under a technology transfer agreement.
(11) On November 1, 1999, we issued an aggregate of 5,727 shares of
common stock to two consultants at $1.25 per share for an aggregate
purchase price of $7,159.
(12) In November 1999, we issued an aggregate of 6,809,135 shares of
Series C preferred stock to thirty-nine purchasers at $7.45 per share for
an aggregate purchase price of $50,728,056. Shares of Series C preferred
stock are convertible into shares of common stock at the rate of one share
of common stock for each share of Series C preferred stock owned.
(13) On November 15, 1999, we issued an aggregate of 33,865 shares of
common stock to four consultants at $1.50 per share for an aggregate
purchase price of $50,798.
(14) On November 30, 1999, we issued an aggregate of 847 shares of common
stock to three consultants at $1.75 per share for an aggregate purchase
price of $1,482.
(15) On December 30, 1999, we issued two warrants to two purchasers to
purchase an aggregate of 495,000 shares of common stock. A portion of the
first warrant, for a total of 140,000 shares, became immediately
exercisable upon issuance at an exercise price of $7.45. A portion of the
second warrant, for a total of 75,000 shares, became immediately
exercisable upon
II-2
<PAGE>
issuance at an exercise price of $11.00. The remaining portions of the
warrants are exercisable when the print vendors meet stated volume targets
for business conducted over our service at exercise prices ranging from
$7.45 per share to the fair market value of our common stock on the date
the volume targets are met.
(16) On December 31, 1999, we issued an aggregate of 13,203 shares of
common stock to seven consultants for an aggregate purchase price of
$29,707.
(17) On January 14, 2000, we issued one warrant to one purchaser to
purchase an aggregate of 50,000 shares of common stock at an exercise price
of $11.00 per share.
(18) On January 25, 2000 we issued 1,418,182 shares of Series D preferred
stock to three purchasers at $11.00 per share for a total of $15,600,002.
Shares of Series D preferred stock are convertible into shares of common
stock at the rate of one share of common stock for each share of Series D
preferred stock owned. In addition, we issued two warrants to purchase an
aggregate of 2,780,159 shares of common stock at an exercise price of
$11.00 per share. A total of 961,309 shares of common stock are immediately
exercisable under the warrants. The remaining shares under the warrants are
exercisable when the holder meets stated volume targets for business
conducted over our service.
With respect to the grant of stock options described in paragraph (1), an
exemption from registration was unnecessary in that none of the transactions
involved a "sale" of securities as this term is used in Section 2(3) of the
Securities Act. The sale and issuance of securities and the exercise of
options described in paragraphs (1), (6), (8), (9), (11), (13), (14) and (15)
above were deemed to be exempt from registration under the Securities Act by
virtue of Rule 701 promulgated thereunder in that they were offered and sold
either pursuant to a written compensatory benefit plan or pursuant to a
written contract relating to compensation, as provided in Rule 701. The sale
and issuance of securities described in paragraphs (2), (3), (4), (5), (7),
(10), (12), (16), (17) and (18) above were deemed to be exempt from
registration under the Securities Act by virtue of Rule 4(2) or Regulation D
promulgated thereunder.
Appropriate legends are affixed to the stock certificates issued in the
aforementioned transactions. Similar legends were imposed in connection with
any subsequent sales of any of these securities. All recipients either
received adequate information about NOOSH or had access, through employment or
other relationships, to such information.
II-3
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Registrant, as currently in effect.
3.2 Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed upon the closing of the offering made pursuant
to this Registration Statement.
3.3 Bylaws of the Registrant as currently in effect.
4.1* Specimen Common Stock Certificate.
4.2 Amended and Restated Investor Rights Agreement dated January 25, 2000
between Registrant and holders of the Registrant's Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock.
4.3* Warrant for the Purchase of 225,000 shares of Common Stock issued to
Consolidated Graphics, Inc. dated December 30, 1999.
4.4* Warrant for the Purchase of 270,000 shares of Common Stock issued to
Wallace Computer Services, Inc. dated December 30, 1999.
4.5* Warrant for the Purchase of 2,430,159 shares of Common Stock issued to
R.R. Donnelley & Sons Company dated January 25, 2000.
4.6* Warrant for the Purchase of 350,000 shares of Common Stock issued to
R.R. Donnelley & Sons Company dated January 25, 2000.
5.1* Opinion of Cooley Godward LLP.
10.1 Form of Indemnity Agreement.
10.2 1998 Equity Incentive Plan and related documents.
10.3 2000 Equity Incentive Plan and related documents.
10.4 2000 Employee Stock Purchase Plan.
10.5 2000 Non-Employee Directors Stock Option Plan and related documents.
10.6 Lease Agreement, dated April 1, 1999, between Registrant and Syntex
(U.S.A.) Inc.
10.7 Sublease Agreement, dated November 1, 1999, between the Registrant and
Xerox Corporation.
10.8 Promissory Note, dated April 15, 1999, between Registrant and David
Hannebrink.
10.9 Promissory Note, dated October 8, 1999, between Registrant and Hagi
Schwartz.
10.10 Promissory Note, dated November 1, 1999, between Registrant and David
Hannebrink.
10.11* Promissory Note, dated January 3, 2000, between Registrant and Kevin
Akeroyd.
10.12* Promissory Note, dated January 3, 2000, between Registrant and Ray
Martinelli.
10.13* Promissory Note, dated January 3, 2000, between Registrant and Timothy
Moore.
10.14* Promissory Note, dated January 15, 2000, between Registrant and Steven
Baloff.
10.15* Promissory Note, dated January 15, 2000, between Registrant and David
Hannebrink.
10.16* Promissory Note, dated January 15, 2000 between Registrant and Robert
Shaw.
10.17*+ Co-Development and Marketing Agreement, dated as of January 25, 2000,
between the Registrant and R.R. Donnelley & Sons Company.
23.1 Consent of Independent Accountants.
23.2* Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney. Reference is made to the signature page.
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment has been requested for a portion of this exhibit.
(b) Financial Statement Schedules.
Schedules are omitted because they are not applicable, or because the
information is included in the Financial Statements or the Notes thereto.
II-4
<PAGE>
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of this prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) That for purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 15
of this Registration Statement or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission this
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against these liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by a director, officer, or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether the indemnification by it is against
public policy as expressed in the Securities Act of 1933, and will be
governed by the final adjudication of this issue.
(4) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in the denomination and registered in
the names required by the Underwriters to permit prompt delivery to each
purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of Santa Clara, State of
California, on the 25th day of January, 2000.
NOOSH, Inc.
/s/ Ofer Ben-Shachar
By: _________________________________
Ofer Ben-Shachar
President, Chief Executive
Officer and Chairman
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Ofer
Ben-Shachar and Hagi Schwartz his or her true and lawful attorney-in-fact and
agent, each acting alone, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments
and registration statements filed pursuant to Rule 462) to the Registration
Statement on Form S-1, and to any registration statement filed under
Securities and Exchange Commission Rule 462, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his or
her substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Ofer Ben-Shachar President, Chief Executive January 25, 2000
______________________________________ Officer and Chairman of
Ofer Ben-Shachar the Board of Directors
(principal executive
officer)
/s/ Hagi Schwartz Vice President and Chief January 25, 2000
______________________________________ Financial Officer
Hagi Schwartz (principal financial and
accounting officer)
/s/ Steven Baloff Director January 25, 2000
______________________________________
Steven Baloff
/s/ Arthur Patterson Director January 25, 2000
______________________________________
Arthur Patterson
/s/ Kathy Levinson Director January 25, 2000
______________________________________
Kathy Levinson
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Registrant, as currently in effect.
3.2 Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed upon the closing of the offering made pursuant
to this Registration Statement.
3.3 Bylaws of the Registrant as currently in effect.
4.1* Specimen Common Stock Certificate.
4.2 Amended and Restated Investor Rights Agreement dated January 25, 2000
between Registrant and holders of the Registrant's Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock.
4.3* Warrant for the Purchase of 225,000 shares of Common Stock issued to
Consolidated Graphics, Inc. dated December 30, 1999.
4.4* Warrant for the Purchase of 270,000 shares of Common Stock issued to
Wallace Computer Services, Inc. dated December 30, 1999.
4.5* Warrant for the Purchase of 2,430,159 shares of Common Stock issued to
R.R. Donnelley & Sons Company dated January 25, 2000.
4.6* Warrant for the Purchase of 350,000 shares of Common Stock issued to
R.R. Donnelley & Sons Company dated January 25, 2000.
5.1* Opinion of Cooley Godward LLP.
10.1 Form of Indemnity Agreement.
10.2 1998 Equity Incentive Plan and related documents.
10.3 2000 Equity Incentive Plan and related documents.
10.4 2000 Employee Stock Purchase Plan.
10.5 2000 Non-Employee Directors Stock Option Plan and related documents.
10.6 Lease Agreement, dated April 1, 1999, between Registrant and Syntex
(U.S.A.) Inc.
10.7 Sublease Agreement, dated November 1, 1999, between the Registrant and
Xerox Corporation.
10.8 Promissory Note, dated April 15, 1999, between Registrant and David
Hannebrink.
10.9 Promissory Note, dated October 8, 1999, between Registrant and Hagi
Schwartz.
10.10 Promissory Note, dated November 1, 1999, between Registrant and David
Hannebrink.
10.11* Promissory Note, dated January 3, 2000, between Registrant and Kevin
Akeroyd.
10.12* Promissory Note, dated January 3, 2000, between Registrant and Ray
Martinelli.
10.13* Promissory Note, dated January 3, 2000, between Registrant and Timothy
Moore.
10.14* Promissory Note, dated January 15, 2000, between Registrant and Steven
Baloff.
10.15* Promissory Note, dated January 15, 2000, between Registrant and David
Hannebrink.
10.16* Promissory Note, dated January 15, 2000 between Registrant and Robert
Shaw.
10.17*+ Co-Development and Marketing Agreement, dated as of January 25, 2000,
between the Registrant and R.R. Donnelley & Sons Company.
23.1 Consent of Independent Accountants.
23.2* Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney. Reference is made to the signature page.
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment has been requested for a portion of this exhibit.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION OF
NOOSH MERGER CORPORATION
The undersigned, a natural person (the "Sole Incorporator"), for the
purpose of organizing a corporation to conduct the business and promote the
purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware hereby certifies that:
I.
The name of this corporation is NOOSH Merger Corporation.
II.
The address of the registered office of the corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, and the name of the registered agent of the corporation in
the State of Delaware at such address is the CT Corporation System.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock."
B. The total number of shares which the Corporation is authorized to issue
is sixty million two hundred thousand (60,200,000) shares, forty five million
(45,000,000) shares of which shall be Common Stock (the "Common Stock") and
fifteen million two hundred thousand (15,200,000) shares of which shall be
Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have a par
value of one tenth of one cent ($0.001) per share, and the Common Stock shall
have a par value of one tenth of one cent ($0.001) per share.
C. Two million twenty three thousand seventy seven (2,023,077) of the
authorized shares of Preferred Stock are hereby designated "Series A Preferred
Stock" (the "Series A Preferred"). Four million three hundred sixty three
thousand six hundred thirty seven (4,363,637) of the authorized shares of
Preferred Stock are hereby designated "Series B Preferred Stock" (the "Series B
Preferred"). Six million eight hundred nine thousand one hundred thirty-five
(6,809,135) of the authorized shares of Preferred Stock are hereby designated
"Series C Preferred Stock" (the "Series C Preferred"). Two million (2,000,000)
of the authorized shares of Preferred Stock are hereby designated "Series D
Preferred Stock" (the "Series D Preferred").
1.
<PAGE>
D. The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred (together, the "Series Preferred") are as follows:
1. Dividend Rights.
a. Holders of Series Preferred, in preference to the holders of
any other stock of the Corporation ("Junior Stock"), shall be entitled to
receive on a pro rata basis, when and as declared by the Board of Directors, but
only out of funds that are legally available therefor, cash dividends at the
rate of eight percent (8%) of the "Original Issue Price" per annum on each
outstanding share of Series Preferred (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares). The Original Issue Price of the Series A Preferred shall be Sixty-Five
Cents ($0.65) (the "Series A Original Issue Price"). The Original Issue Price of
the Series B Preferred shall be Two Dollars and Seventy-Five Cents ($2.75) (the
"Series B Original Issue Price"). The Original Issue Price of the Series C
Preferred shall be Seven Dollars and Forty-Five Cents ($7.45) (the "Series C
Original Issue Price"). The Original Issue Price of the Series D Preferred shall
be Eleven Dollars ($11.00) (the "Series D Original Issue Price"). Such dividends
shall be payable only when, as and if declared by the Board of Directors and
shall be non-cumulative.
b. So long as any shares of Series Preferred shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Corporation be purchased, redeemed,
or otherwise acquired for value by the Corporation (except for acquisitions of
Common Stock by the Corporation pursuant to agreements which permit the
Corporation to repurchase such shares upon termination of services to the
Corporation or in exercise of the Corporation's right of first refusal upon a
proposed transfer) until all dividends (set forth in Section 1a above) on the
Series Preferred shall have been paid or declared and set apart. In the event
dividends are paid on any share of Common Stock, an additional dividend shall be
paid with respect to all outstanding shares of Series Preferred in an amount
equal per share (on an as-if-converted to Common Stock basis) to the amount paid
or set aside for each share of Common Stock. The provisions of this Section 1b
shall not, however, apply to (i) a dividend payable in Common Stock, or (ii) the
acquisition of shares of any Junior Stock in exchange for shares of any other
Junior Stock.
2. Voting Rights.
a. General Rights. Except as otherwise provided herein or as
required by law, the Series Preferred shall be voted equally with the shares of
the Common Stock of the Corporation and not as a separate class, at any annual
or special meeting of stockholders of the Corporation, and may act by written
consent in the same manner as the Common Stock, in either case upon the
following basis: each holder of shares of Series Preferred shall be entitled to
such number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder's aggregate number of shares of Series Preferred
are convertible (pursuant to Section 5 hereof) immediately after the close of
business on the record date fixed for such meeting or the effective date of such
written consent.
2.
<PAGE>
b. Separate Vote of Series Preferred. For so long as at least
seven million (7,000,000) shares of Series Preferred (subject to adjustment for
any stock split, reverse stock split or other similar event affecting the Series
Preferred) remain outstanding, in addition to any other vote or consent required
herein or by law, the vote or written consent of the holders of at least
seventy-five percent of the outstanding Series Preferred (voting on an as-if-
converted basis as a single class) shall be necessary for effecting or
validating the following actions:
(i) Any amendment, alteration, or repeal of any provision
of the Certificate of Incorporation or the Bylaws of the Corporation (including
any filing of a Certificate of Determination) that affects adversely the voting
powers, preferences, or other special rights or privileges, qualifications,
limitations, or restrictions of any series of the Series Preferred;
(ii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Corporation ranking senior
to or on parity with any series of the Series Preferred in rights of redemption,
liquidation preference, voting or dividends or any increase in the authorized or
designated number of any such new class or series;
(iii) Any redemption, repurchase, payment of dividends or
other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the Corporation pursuant to agreements which permit the
Corporation to repurchase such shares upon termination of services to the
Corporation or in exercise of the Corporation's right of first refusal upon a
proposed transfer);
(iv) Any action that results in the payment or declaration
of a dividend on any shares of Common Stock;
(v) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3c);
(vi) Any increase or decrease in the authorized number of
shares of the Series A Preferred, Series B Preferred, Series C Preferred or
Series D Preferred; or
(vii) Any issuance of shares of Series D Preferred, whether
directly or indirectly, that would result in more than 1,500,000 shares of
Series D Preferred being outstanding unless such issuance of shares occurs in
connection with (a) a merger, consolidation, acquisition or similar business
combination approved by the Board of Directors, (b) any equipment leasing
arrangement, or debt financing from a bank or similar financial institution
approved by the Board of Directors, or (c) any strategic transactions involving
the Corporation and other entities, including joint ventures, manufacturing,
marketing or distribution arrangements, and technology transfer or development
arrangements approved by the Board of Directors.
c. Separate Vote of Series C Preferred. For so long as at least
three million five hundred thousand (3,500,000) shares of Series C Preferred
(subject to adjustment for any stock split, reverse stock split or other similar
event affecting the Series C Preferred) remain outstanding, in addition to any
other vote or consent required herein or by law, the vote or
3.
<PAGE>
written consent of the holders of at least a majority of the outstanding Series
C Preferred shall be necessary for effecting or validating the following
actions:
(i) Any amendment, alteration, or repeal of any provision
of the Certificate of Incorporation or the Bylaws of the Corporation (including
any filing of a Certificate of Determination) that alters or changes the voting
powers, preferences, or other special rights or privileges, qualifications,
limitations, or restrictions of the Series C Preferred;
(ii) Any increase or decrease in the authorized number of
shares of the Series C Preferred; or
(iii) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3c) in
which the value of the proceeds received by the Series C Preferred is an amount
per share of Series C Preferred less than the product obtained by multiplying
two by the Series C Original Issue Price (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares).
d. Election of Board of Directors. For so long as at least
three million (3,000,000) shares of Series A Preferred and Series B Preferred
remain outstanding (subject to adjustment for any stock split, reverse stock
split or similar event affecting the Series Preferred), (i) the holders of
Series A Preferred, voting as a separate class, shall be entitled to elect one
(1) member of the Company's Board of Directors at each meeting or pursuant to
each consent of the Company's stockholders for the election of directors, and to
remove from office such director and to fill any vacancy caused by the
resignation, death or removal of such director; (ii) the holders of Series B
Preferred, voting as a separate class, shall be entitled to elect one (1) member
of the Company's Board of Directors at each meeting or pursuant to each consent
of the Company's stockholders for the election of directors, and to remove from
office such director and to fill any vacancy caused by the resignation, death or
removal of such director; (iii) the holders of Common Stock, voting as a
separate class, shall be entitled to elect one (1) member of the Board of
Directors at each meeting or pursuant to each consent of the Company's
stockholders for the election of directors, and to remove from office such
director and to fill any vacancy caused by the resignation, death or removal of
such director; and (iv) the holders of Common Stock and Series Preferred, voting
together as a single class on an as-if-converted basis, shall be entitled to
elect all remaining members of the Board of Directors at each meeting or
pursuant to each consent of the Company's stockholders for the election of
directors, and to remove from office such directors and to fill any vacancy
caused by the resignation, death or removal of such directors.
3. Liquidation Rights.
a. Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of any Junior Stock, (i) the holders of
Series A Preferred shall be entitled to be paid out of the assets of the
Corporation an amount per share of Series A Preferred equal to the Series A
Original Issue Price plus all declared and unpaid dividends on such shares of
Series A Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like
4.
<PAGE>
with respect to such shares) for each share of Series A Preferred held by them,
(ii) the holders of Series B Preferred shall be entitled to be paid out of the
assets of the Corporation an amount per share of Series B Preferred equal to the
Series B Original Issue Price plus all declared and unpaid dividends on such
shares of Series B Preferred (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares) for each
share of Series B Preferred held by them, (iii) the holders of Series C
Preferred shall be entitled to be paid out of the assets of the Corporation an
amount per share of Series C Preferred equal to the Series C Original Issue
Price plus all declared and unpaid dividends on such shares of Series C
Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) for each share of
Series C Preferred held by them and (iv) the holders of Series D Preferred shall
be entitled to be paid out of the assets of the Corporation an amount per share
of Series D Preferred equal to the Series D Original Issue Price plus all
declared and unpaid dividends on such shares of Series D Preferred (as adjusted
for any stock dividends, combinations, splits, recapitalizations and the like
with respect to such shares) for each share of Series D Preferred held by them.
b. After the payment of the full liquidation preference of the
Series Preferred as set forth in Section 3a above, the assets of the Corporation
legally available for distribution, if any, shall be distributed ratably to the
holders of the Common Stock.
c. The following events shall be considered a liquidation under
this Section:
(i) any consolidation or merger of the Corporation with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Corporation immediately prior
to such consolidation, merger or reorganization, as a result of their ownership
of the Corporation's securities own less than 50% of the surviving corporation's
voting power immediately after such consolidation, merger or reorganization (an
"Acquisition"); or
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Corporation (an "Asset Transfer").
d. If, upon any liquidation, distribution, or winding up, the
assets of the Corporation shall be insufficient to make payment in full to all
holders of Series Preferred of the liquidation preference set forth in Section
3a, then such assets shall be distributed among the holders of Series Preferred
at the time outstanding, ratably in proportion to the full amounts to which they
would otherwise be respectively entitled.
4. Redemption.
The Series Preferred shall not be redeemable by the Corporation.
5.
<PAGE>
5. Conversion Rights.
The holders of the Series Preferred shall have the following rights
with respect to the conversion of the Series Preferred into shares of Common
Stock (the "Conversion Rights"):
a. Optional Conversion. Subject to and in compliance with the
provisions of this Section 5, any shares of Series Preferred may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series Preferred shall be entitled upon conversion shall be the product obtained
by multiplying the "Series A Preferred Conversion Rate", "Series B Preferred
Conversion Rate", "Series C Preferred Conversion Rate", or "Series D Preferred
Conversion Rate", as applicable, then in effect (determined as provided in
Section 5b) by the number of shares of Series A Preferred, Series B Preferred,
Series C Preferred or Series D Preferred, as applicable, being converted.
b. Series Preferred Conversion Rate. The conversion rate in
effect at any time for conversion of each of the Series A Preferred (the "Series
A Preferred Conversion Rate"), the Series B Preferred (the "Series B Preferred
Conversion Rate"), the Series C Preferred (the "Series C Preferred Conversion
Rate"), and the Series D Preferred (the "Series D Preferred Conversion Rate")
shall be the quotient obtained by dividing the Series A Original Issue Price,
the Series B Original Issue Price, the Series C Original Issue Price, and Series
D Original Issue Price of the Series A Preferred, the Series B Preferred, the
Series C Preferred and Series D Preferred, respectively, by the "Series A
Preferred Conversion Price", the "Series B Preferred Conversion Price," the
"Series C Preferred Conversion Price" and the "Series D Preferred Conversion
Price," respectively, calculated as provided in Section 5c.
c. Series Preferred Conversion Price. As of the date of filing
of this Certificate of Incorporation (the "Filing Date"), the conversion price
for the Series A Preferred shall be $0.325 (the "Series A Preferred Conversion
Price"), the conversion price for the Series B Preferred shall be $1.375 (the
"Series B Preferred Conversion Price"), the conversion price for the Series C
Preferred shall be the Series C Original Issue Price (the "Series C Preferred
Conversion Price") and the conversion price for the Series D Preferred shall be
the Series D Original Issue Price (the "Series D Preferred Conversion Price").
Such Series A Preferred Conversion Price, Series B Preferred Conversion Price,
Series C Preferred Conversion Price and Series D Preferred Conversion Price
shall be adjusted from time to time in accordance with this Section 5. All
references to the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price or Series D Preferred
Conversion Price herein shall mean the Series A Preferred Conversion Price,
Series B Preferred Conversion Price, Series C Preferred Conversion Price or
Series D Preferred Conversion Price, respectively, as so adjusted after the
Filing Date.
d. Mechanics of Conversion. Each holder of Series Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
5 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or any transfer agent for the Series Preferred,
and shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of
Series Preferred being converted. Thereupon, the Corporation shall promptly
issue and
6.
<PAGE>
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Series Preferred being converted.
Such conversion shall be deemed to have been made at the close of business on
the date of such surrender of the certificates representing the shares of Series
Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.
e. Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Filing Date effect
a subdivision of the outstanding Common Stock without a corresponding
subdivision of the Series A Preferred, Series B Preferred, Series C Preferred
and Series D Preferred, the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price, the Series C Preferred Conversion Price and Series D
Preferred Conversion Price in effect immediately before that subdivision shall
be proportionately decreased. Conversely, if the Corporation shall at any time
or from time to time after the Filing Date combine the outstanding shares of
Common Stock into a smaller number of shares without a corresponding combination
of the Series A Preferred, the Series B Preferred, the Series C Preferred, and
Series D Preferred, the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price, the Series C Preferred Conversion Price and Series D
Preferred Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 5e shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
f. Adjustment for Common Stock Dividends and Distributions. If
the Corporation at any time or from time to time after the Filing Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, in each such event the Series A Preferred Conversion Price, Series B
Preferred Conversion Price, Series C Preferred Conversion Price and Series D
Preferred Conversion Price that is then in effect shall be decreased as of the
time of such issuance or, in the event such record date is fixed, as of the
close of business on such record date, by multiplying the Series A Preferred
Conversion Price, Series B Preferred Conversion Price, Series C Preferred
Conversion Price and Series D Preferred Conversion Price then in effect by a
fraction (i) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (ii) the denominator of which is
the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in payment of such dividend
or distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price and Series D Preferred
Conversion Price shall be recomputed accordingly as of the close of business on
such record date and thereafter the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price, the Series C Preferred Conversion Price and
Series D
7.
<PAGE>
Preferred Conversion Price shall be adjusted pursuant to this Section 5f to
reflect the actual payment of such dividend or distribution.
g. Adjustments for Other Dividends and Distributions. If the
Corporation at any time or from time to time after the Filing Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Series Preferred shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Corporation which
they would have received had their Series Preferred been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 5 with
respect to the rights of the holders of the Series Preferred or with respect to
such other securities by their terms.
h. Adjustment for Reclassification, Exchange and Substitution.
If at any time or from time to time after the Filing Date, the Common Stock
issuable upon the conversion of the Series Preferred is changed into the same or
a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3c or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 5), in any such event each holder
of Series Preferred shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
i. Reorganizations, Mergers, Consolidations or Sales of Assets.
If at any time or from time to time after the Filing Date, there is a capital
reorganization of the Common Stock (other than an Acquisition or Asset Transfer
as defined in Section 3c or a recapitalization, subdivision, combination,
reclassification, exchange or substitution of shares provided for elsewhere in
this Section 5), as a part of such capital reorganization, provision shall be
made so that the holders of the Series Preferred shall thereafter be entitled to
receive upon conversion of the Series Preferred the number of shares of stock or
other securities or property of the Corporation to which a holder of the number
of shares of Common Stock deliverable upon conversion would have been entitled
on such capital reorganization, subject to adjustment in respect of such stock
or securities by the terms thereof. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 5 with
respect to the rights of the holders of Series Preferred after the capital
reorganization to the end that the provisions of this Section 5 (including
adjustment of each Series Preferred Conversion Price then in effect and the
number of shares issuable upon conversion of the Series Preferred) shall be
applicable after that event and be as nearly equivalent as practicable.
8.
<PAGE>
j. Sale of Shares Below Series Preferred Conversion Price.
(i) If at any time or from time to time after the Filing
Date, the Company issues or sells, or is deemed by the express provisions of
this subsection 5j to have issued or sold, Additional Shares of Common Stock (as
defined in subsection 5j(iv) below), other than as a dividend or other
distribution on any class of stock as provided in Section 5f above, and other
than a subdivision or combination of shares of Common Stock as provided in
Section 5e above, for an Effective Price (as defined in subsection 5j(iv) below)
less than the then effective Series A Preferred Conversion Price, Series B
Preferred Conversion Price, Series C Preferred Conversion Price or Series D
Preferred Conversion Price, then and in each such case the then existing Series
A Preferred Conversion Price, Series B Preferred Conversion Price, Series C
Preferred Conversion Price or Series D Preferred Conversion Price, as the case
may be, shall be reduced, as of the opening of business on the date of such
issue or sale, to a price determined by multiplying the Series A Preferred
Conversion Price, Series B Preferred Conversion Price, Series C Preferred
Conversion Price or Series D Preferred Conversion Price, as applicable, by a
fraction (i) the numerator of which shall be (A) the number of shares of Common
Stock deemed outstanding (as defined below) immediately prior to such issue or
sale, plus (B) the number of shares of Common Stock which the aggregate
consideration received (as defined in subsection 5j(ii) by the Company for the
total number of Additional Shares of Common Stock so issued would purchase at
such Series A Preferred Conversion Price, Series B Preferred Conversion Price,
Series C Preferred Conversion Price or Series D Preferred Conversion Price, as
the case may be, and (ii) the denominator of which shall be the number of shares
of Common Stock deemed outstanding (as defined below) immediately prior to such
issue or sale plus the total number of Additional Shares of Common Stock so
issued. For the purposes of the preceding sentence, the number of shares of
Common Stock deemed to be outstanding as of a given date shall be the sum of (A)
the number of shares of Common Stock actually outstanding, (B) the number of
shares of Common Stock into which the then outstanding shares of Series
Preferred could be converted if fully converted as of the time of such issuance,
and (C) the number of shares of Common Stock which could be obtained through the
exercise or conversion of all other rights, options and convertible securities
outstanding as of the time of such issuance.
(ii) For the purpose of making any adjustment required
under this Section 5j, the consideration received by the Company for any issue
or sale of securities shall (A) to the extent it consists of cash, be computed
as the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale but without deduction of
any expenses payable by the Company, (B) to the extent it consists of property
other than cash, be computed as the fair value of that property as determined in
good faith by the Board of Directors, and (C) if Additional Shares of Common
Stock, Convertible Securities (as defined in subsection 5j(iii)) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined in
good faith by the Board of Directors to be allocable to such Additional Shares
of Common Stock, Convertible Securities or rights or options.
9.
<PAGE>
(iii) For the purpose of the adjustment required under this
Section 5j, if the Company issues or sells (i) stock or other securities
convertible into, Additional Shares of Common Stock (such convertible stock or
securities being herein referred to as "Convertible Securities") or (ii) rights
or options for the purchase of Additional Shares of Common Stock or Convertible
Securities and if the Effective Price of such Additional Shares of Common Stock
is less than the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price or Series D Preferred
Conversion Price, as the case may be, in each case the Company shall be deemed
to have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional Shares of Common Stock
issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance of
such rights or options or Convertible Securities, plus, in the case of such
rights or options, the minimum amounts of consideration, if any, payable to the
Company upon the exercise of such rights or options, plus, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Company (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion thereof; provided that if in
the case of Convertible Securities the minimum amounts of such consideration
cannot be ascertained, but are a function of antidilution or similar protective
clauses, the Company shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is reduced; provided
further that if the minimum amount of consideration payable to the Company upon
the exercise or conversion of such rights, options or Convertible Securities is
subsequently increased, the Effective Price shall be again recalculated using
the increased minimum amount of consideration payable to the Company upon the
exercise or conversion of such rights, options or Convertible Securities. No
further adjustment of the Series A Preferred Conversion Price, Series B
Preferred Conversion Price, Series C Preferred Conversion Price or Series D
Preferred Conversion Price, as adjusted upon the issuance of such rights,
options or Convertible Securities, shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exercise of any such rights
or options or the conversion of any such Convertible Securities. If any such
rights or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the Series A
Preferred Conversion Price, Series B Preferred Conversion Price, Series C
Preferred Conversion Price or Series D Preferred Conversion Price as adjusted
upon the issuance of such rights, options or Convertible Securities shall be
readjusted to the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price or Series D Preferred
Conversion Price, as the case may be, which would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of conversion
of such Convertible Securities, and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by the
Company for the granting of all such rights or options, whether or not
exercised, plus the consideration received for issuing or selling the
10.
<PAGE>
Convertible Securities actually converted, plus the consideration, if any,
actually received by the Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) on the conversion of such
Convertible Securities, provided that such readjustment shall not apply to prior
conversions of Series A Preferred, Series B Preferred, Series C Preferred or
Series D Preferred.
(iv) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant to
this Section 5j, whether or not subsequently reacquired or retired by the
Company other than (A) shares of Common Stock issued or issuable upon conversion
of the Series Preferred; (B) shares of Common Stock and/or options, warrants or
other Common Stock purchase rights, and the Common Stock issued or issuable
pursuant to such options, warrants or other rights (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like) after the
Filing Date to employees, officers or directors of, or consultants or advisors
to the Company or any subsidiary pursuant to stock purchase or stock option
plans or other arrangements that are approved by the Board of Directors; (C)
shares of Common Stock issued or issuable pursuant to the exercise of options,
warrants or convertible securities outstanding as of the Filing Date, (D) shares
of Common Stock and/or options, warrants or other Common Stock purchase rights,
and the Common Stock issued or issuable pursuant to such options, warrants or
other rights issued for consideration other than cash pursuant to a merger,
consolidation, acquisition or similar business combination approved by the Board
of Directors, (E) shares of Common Stock issued or issuable pursuant to any
equipment leasing arrangement, or debt financing from a bank or similar
financial institution approved by the Board of Directors, and (F) shares of
Common Stock issued or issuable in connection with strategic transactions
involving the Corporation and other entities, including joint ventures,
manufacturing, marketing or distribution arrangements, and technology transfer
or development arrangements approved by the Board of Directors. References to
Common Stock in the subsections of this clause (iv) above shall mean all shares
of Common Stock issued by the Company or deemed to be issued pursuant to this
Section 5j. The "Effective Price" of Additional Shares of Common Stock shall
mean the quotient determined by dividing the total number of Additional Shares
of Common Stock issued or sold, or deemed to have been issued or sold by the
Company under this Section 5j, into the aggregate consideration received, or
deemed to have been received by the Company for such issue under this Section
5j, for such Additional Shares of Common Stock.
k. Certificate of Adjustment. In each case of an adjustment or
readjustment of the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price or Series D Preferred
Conversion Price for the number of shares of Common Stock or other securities
issuable upon conversion of the Series A Preferred, Series B Preferred, Series C
Preferred or Series D Preferred, if the Series A Preferred, Series B Preferred,
Series C Preferred or Series D Preferred is then convertible pursuant to this
Section 5, the Corporation, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred at the
holder's address as shown in the Corporation's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (i) the
consideration received or deemed to be received by the
11.
<PAGE>
Corporation for any Additional Shares of Common Stock issued or sold or deemed
to have been issued or sold, (ii) the Series A Preferred Conversion Price,
Series B Preferred Conversion Price, Series C Preferred Conversion Price or
Series D Preferred Conversion Price at the time in effect, (iii) the number of
Additional Shares of Common Stock and (iv) the type and amount, if any, of other
property which at the time would be received upon conversion of the Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred.
l. Notices of Record Date. Upon (i) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any Acquisition (as defined in Section
3c) or other capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation with or into any other corporation, or any
Asset Transfer (as defined in Section 3c), or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Series Preferred at least twenty (20) days prior to the
record date specified therein a notice specifying (A) the date on which any such
record is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (B) the date on which any such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up.
m. Automatic Conversion.
(i) Each share of Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred shall automatically be converted into
shares of Common Stock, based on the then-effective Series A Preferred
Conversion Price, Series B Preferred Conversion Price, Series C Preferred
Conversion Price or Series D Preferred Conversion Price, as the case may be, (a)
at any time upon the affirmative vote of the holders of at least seventy-five
percent of the outstanding shares of the Series Preferred (voting on an as-if-
converted basis as a single class), or (b) immediately upon the closing of a
firmly underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Corporation in which (A) the per
share price is at least $11.00 (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like), and (B) the gross cash
proceeds to the Corporation (before underwriting discounts, commissions and
fees) are at least $20,000,000. Upon such automatic conversion, any declared and
unpaid dividends shall be paid in accordance with the provisions of Section 5d.
(ii) Upon the occurrence of the event specified in
subsection (i) above, the outstanding shares of Series Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent; provided, however, that the Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock
12.
<PAGE>
issuable upon such conversion unless the certificates evidencing such shares of
Series Preferred are either delivered to the Corporation or its transfer agent
as provided below, or the holder notifies the Corporation or its transfer agent
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. Upon the occurrence of
such automatic conversion of the Series Preferred, the holders of Series
Preferred shall surrender the certificates representing such shares at the
office of the Corporation or any transfer agent for the Series Preferred.
Thereupon, there shall be issued and delivered to such holder promptly at such
office and in its name as shown on such surrendered certificate or certificates,
a certificate or certificates for the number of shares of Common Stock into
which the shares of Series Preferred surrendered were convertible on the date on
which such automatic conversion occurred, and any declared and unpaid dividends
shall be paid in accordance with the provisions of Section 5d.
n. Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
o. Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Series Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series Preferred, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
p. Notices. Any notice required by the provisions of this
Section 5 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Corporation.
q. Payment of Taxes. The Corporation will pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of Series Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue
13.
<PAGE>
and delivery of shares of Common Stock in a name other than that in which the
shares of Series Preferred so converted were registered.
r. No Dilution or Impairment. Without the consent of the
holders of the then outstanding Series Preferred, as required under Section 2b,
the Corporation shall not amend its Certificate of Incorporation or participate
in any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or take any other voluntary action, for the purpose
of avoiding or seeking to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Corporation, but shall at all
times in good faith assist in carrying out all such action as may be reasonably
necessary or appropriate in order to protect the conversion rights of the
holders of the Series Preferred against dilution or other impairment.
6. No Reissuance of Series Preferred. No share or shares of Series
Preferred acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued; and in addition, the Certificate of
Incorporation shall be appropriately amended to effect the corresponding
reduction in the Corporation's authorized stock.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. Management. The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of Directors. The number
of directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
B. Board of Directors.
1. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "1993
Act"), covering the offer and sale of Common Stock to the public (the "Initial
Public Offering"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the Initial Public Offering, the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be
14.
<PAGE>
elected for a full term of three years to succeed the directors of the class
whose terms expire at such annual meeting. During such time or times that the
corporation is subject to Section 2115(b) of the California General Corporation
Law ("CGCL"), this Section A.2.a of this Article V shall become effective and be
applicable only when the corporation is a "listed" corporation within the
meaning of Section 301.5 of the CGCL.
2. In the event that the corporation is unable to have a
classified board under applicable law, Section 301.5 of the CGCL, Section A. 2.
a. of this Article V shall not apply and all directors shall be elected at each
annual meeting of stockholders to hold office until the next annual meeting.
3. No stockholder entitled to vote at an election for
directors may cumulate votes to which such stockholder is entitled, unless, at
the time of such election, the corporation (i) is subject to Section 2115(b) of
the CGCL and (ii) is not or ceases to be a "listed" corporation under Section
301.5 of the CGCL. During this time, every stockholder entitled to vote at an
election for directors may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit. No stockholder,
however, shall be entitled to so cumulate such stockholder's votes unless (i)
the names of such candidate or candidates have been placed in nomination prior
to the voting and (ii) the stockholder has given notice at the meeting, prior to
the voting, of such stockholder's intention to cumulate such stockholder's
votes. If any stockholder has given proper notice to cumulate votes, all
stockholders may cumulate their votes for any candidates who have been properly
placed in nomination. Under cumulative voting, the candidates receiving the
highest number of votes, up to the number of directors to be elected, are
elected.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
C. Removal of Directors
1. During such time or times that the corporation is subject
to Section 2115(b) of the CGCL, the Board of Directors or any individual
director may be removed from office at any time without cause by the affirmative
vote of the holders of at least a majority of the outstanding shares entitled to
vote on such removal; provided, however, that unless the entire Board is
removed, no individual director may be removed when the votes cast against such
director's removal, or not consenting in writing to such removal, would be
sufficient to elect that director if voted cumulatively at an election which the
same total number of votes were cast (or, if such action is taken by written
consent, all shares entitled to vote were voted) and the entire number of
directors authorized at the time of such director's most recent election were
then being elected.
15.
<PAGE>
2. At any time or times that the corporation is not subject to
Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section A. 3. a. above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.
D. Vacancies.
1. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
2. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
3. At any time or times that the corporation is subject to
Section 2115(b) of the CGCL, if, after the filling of any vacancy by the
directors then in office who have been elected by stockholders shall constitute
less than a majority of the directors then in office, then
a. Any holder or holders of an aggregate of five percent
(5%) or more of the total number of shares at the time outstanding having the
right to vote for those directors may call a special meeting of stockholders; or
b. The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
E. Bylaw Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
F. Ballots. The directors of the corporation need not be elected by
written ballot unless the Bylaws so provide.
16.
<PAGE>
G. Action By Stockholders. No action shall be taken by the
stockholders of the corporation except at an annual or special meeting of
stockholders called in accordance with the Bylaws or by written consent of
stockholders in accordance with the Bylaws prior to the closing of the Initial
Public Offering and following the closing of the Initial Public Offering no
action shall be taken by the stockholders by written consent.
H. Advance Notice. Advance notice of stockholder nominations for the
election of directors and of business to be brought by stockholders before any
meeting of the stockholders of the corporation shall be given in the manner
provided in the Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. This corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the CGCL) for breach of duty to the
corporation and its stockholders through bylaw provisions or through agreements
with the agents, or through shareholder resolutions, or otherwise, in excess of
the indemnification otherwise permitted by Section 317 of the CGCL, subject, at
any time or times the corporation is subject to Section 2115(b) to the limits on
such excess indemnification set forth in Section 204 of the CGCL.
C. Any repeal or modification of this Article VI shall be
prospective and shall not affect the rights under this Article VI in effect at
the time of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, except as provided in paragraph
B. of this Article VII, and all rights conferred upon the stockholders herein
are granted subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
17.
<PAGE>
VIII.
The name and the mailing address of the Sole Incorporator is as follows:
Katie McGirr
Cooley Godward LLP
Five Palo Alto Square
Palo Alto, CA 94306
In Witness Whereof, this Certificate has been subscribed this ___ day of
__________, 2000 by the undersigned who affirms that the statements made herein
are true and correct.
____________________________________________
Katie McGirr
Sole Incorporator
18.
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NOOSH, INC.
Ofer Ben-Shachar and Timothy J. Moore hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of NOOSH Merger Corporation, a Delaware corporation.
TWO: The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
I.
The name of this corporation is NOOSH, Inc.
II.
The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, and the
name of the registered agent of the corporation in the State of Delaware at such
address is the Corporation Service Company.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. Classes of Stock. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
eighty million (80,000,000) shares. Seventy five million (75,000,000) shares
shall be Common Stock, each having a par value of one-tenth of one cent
($0.001). Five million (5,000,000) shares shall be Preferred Stock, each having
a par value of one-tenth of one cent ($0.001).
B. Rights, Preferences and Restrictions of Preferred Stock. The
Preferred Stock may be issued from time to time in one or more series. The Board
of Directors is hereby authorized, by filing a certificate (a "Preferred Stock
Designation") pursuant to the Delaware General Corporation Law ("DGCL"), to fix
or alter from time to time the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such
<PAGE>
decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. Management. The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of Directors. The number
of directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
B. Board of Directors.
1. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "1993 Act"),
covering the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the Initial Public Offering, the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
During such time or times that the corporation is subject to Section 2115(b) of
the California General Corporation Law ("CGCL"), this Section A.2.a of this
Article V shall become effective and be applicable only when the corporation is
a "listed" corporation within the meaning of Section 301.5 of the CGCL.
2. In the event that the corporation is unable to have a classified
board under applicable law, Section 301.5 of the CGCL, Section A. 2. a. of this
Article V shall not apply and all directors shall be elected at each annual
meeting of stockholders to hold office until the next annual meeting.
3. No stockholder entitled to vote at an election for directors may
cumulate votes to which such stockholder is entitled, unless, at the time of
such election, the corporation (i) is subject to Section 2115(b) of the CGCL and
(ii) is not or ceases to be a "listed" corporation under Section 301.5 of the
CGCL. During this time, every stockholder entitled to vote at an election for
directors may cumulate such stockholder's votes and give one candidate a number
of
2.
<PAGE>
votes equal to the number of directors to be elected multiplied by the number of
votes to which such stockholder's shares are otherwise entitled, or distribute
the stockholder's votes on the same principle among as many candidates as such
stockholder thinks fit. No stockholder, however, shall be entitled to so
cumulate such stockholder's votes unless (i) the names of such candidate or
candidates have been placed in nomination prior to the voting and (ii) the
stockholder has given notice at the meeting, prior to the voting, of such
stockholder's intention to cumulate such stockholder's votes. If any stockholder
has given proper notice to cumulate votes, all stockholders may cumulate their
votes for any candidates who have been properly placed in nomination. Under
cumulative voting, the candidates receiving the highest number of votes, up to
the number of directors to be elected, are elected.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
C. Removal of Directors
1. During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
2. At any time or times that the corporation is not subject to
Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section A. 3. a. above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.
D. Vacancies.
1. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
3.
<PAGE>
2. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
3. At any time or times that the corporation is subject to Section
2115(b) of the CGCL, if, after the filling of any vacancy by the directors then
in office who have been elected by stockholders shall constitute less than a
majority of the directors then in office, then
a. Any holder or holders of an aggregate of five percent (5%)
or more of the total number of shares at the time outstanding having the right
to vote for those directors may call a special meeting of stockholders; or
b. The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
E. Bylaw Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
F. Ballots. The directors of the corporation need not be elected by
written ballot unless the Bylaws so provide.
G. Action By Stockholders. No action shall be taken by the stockholders
of the corporation except at an annual or special meeting of stockholders called
in accordance with the Bylaws or by written consent of stockholders in
accordance with the Bylaws prior to the closing of the Initial Public Offering
and following the closing of the Initial Public Offering no action shall be
taken by the stockholders by written consent.
H. Advance Notice. Advance notice of stockholder nominations for the
election of directors and of business to be brought by stockholders before any
meeting of the stockholders of the corporation shall be given in the manner
provided in the Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. This corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the CGCL) for breach of duty to the corporation
and its shareholders through
4.
<PAGE>
bylaw provisions or through agreements with the agents, or through shareholder
resolutions, or otherwise, in excess of the indemnification otherwise permitted
by Section 317 of the CGCL, subject, at any time or times the corporation is
subject to Section 2115(b) to the limits on such excess indemnification set
forth in Section 204 of the CGCL.
C. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
THREE: This Amended and Restated Certificate of Incorporation has been
duly approved by the Board of Directors of this Corporation.
FOUR: This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with the provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware by the Board of Directors and
the stockholders of the Corporation. The total number of outstanding shares
entitled to vote or act by written consent was ______________ shares of Common
Stock, 2,023,077 shares of Series A Preferred Stock, 4,363,637 shares of Series
B Preferred Stock, 6,809,135 shares of Series C Preferred Stock and
_____________ shares of Series D Preferred Stock.
5.
<PAGE>
In Witness Whereof, NOOSH Merger Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by the President and the
Secretary in Palo Alto, California this ____ day of ____________, 2000.
NOOSH Merger Corporation
By:_______________________________
President
Ofer Ben-Shachar
Attest:
By:___________________________
Secretary
Timothy J. Moore
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
NOOSH MERGER CORPORATION
(A DELAWARE CORPORATION)
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I OFFICES................................................. 1
Section 1. Registered Office..................................... 1
Section 2. Other Offices......................................... 1
ARTICLE II CORPORATE SEAL.......................................... 1
Section 3. Corporate Seal........................................ 1
ARTICLE III STOCKHOLDERS' MEETINGS.................................. 1
Section 4. Place Of Meetings..................................... 1
Section 5. Annual Meetings....................................... 1
Section 6. Special Meetings...................................... 4
Section 7. Notice Of Meetings.................................... 5
Section 8. Quorum................................................ 5
Section 9. Adjournment And Notice Of Adjourned Meetings.......... 5
Section 10. Voting Rights......................................... 6
Section 11. Joint Owners Of Stock................................. 6
Section 12. List Of Stockholders.................................. 6
Section 13. Action Without Meeting................................ 6
Section 14. Organization.......................................... 7
ARTICLE IV DIRECTORS............................................... 8
Section 15. Number And Term Of Office............................. 8
Section 16. Powers................................................ 8
Section 17. Classes of Directors.................................. 8
Section 18. Vacancies............................................. 9
Section 19. Resignation........................................... 10
Section 20. Removal............................................... 10
Section 21. Meetings.............................................. 10
Section 22. Quorum And Voting..................................... 11
Section 23. Action Without Meeting................................ 12
Section 24. Fees And Compensation................................. 12
Section 25. Committees............................................ 12
Section 26. Organization.......................................... 13
</TABLE>
i.
<PAGE>
Table of Contents
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE V OFFICERS................................................ 13
Section 27. Officers Designated................................... 13
Section 28. Tenure And Duties Of Officers......................... 14
Section 29. Delegation Of Authority............................... 15
Section 30. Resignations.......................................... 15
Section 31. Removal............................................... 15
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF
SECURITIES OWNED BY THE CORPORATION..................... 15
Section 32. Execution Of Corporate Instruments.................... 15
Section 33. Voting Of Securities Owned By The Corporation......... 16
ARTICLE VII SHARES OF STOCK......................................... 16
Section 34. Form And Execution Of Certificates.................... 16
Section 35. Lost Certificates..................................... 17
Section 36. Transfers............................................. 17
Section 37. Fixing Record Dates................................... 17
Section 38. Registered Stockholders............................... 18
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION..................... 18
Section 39. Execution Of Other Securities......................... 18
ARTICLE IX DIVIDENDS............................................... 19
Section 40. Declaration Of Dividends.............................. 19
Section 41. Dividend Reserve...................................... 19
ARTICLE X FISCAL YEAR............................................. 19
Section 42. Fiscal Year........................................... 19
ARTICLE XI INDEMNIFICATION......................................... 20
Section 43. Indemnification Of Directors, Executive Officers,
Other Officers, Employees And Other Agents............ 20
ARTICLE XII NOTICES................................................. 23
Section 44. Notices............................................... 23
ARTICLE XIII AMENDMENTS.............................................. 24
Section 45. Amendments............................................ 24
ARTICLE XIV LOANS TO OFFICERS....................................... 24
</TABLE>
ii.
<PAGE>
Table of Contents
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 46. Loans To Officers....................................... 24
</TABLE>
iii.
<PAGE>
BYLAWS
OF
NOOSH MERGER CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle.
(Del. Code Ann., tit. 8, (S) 131)
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require. (Del. Code Ann., tit.
8, (S) 122(8))
ARTICLE II
CORPORATE SEAL
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise. (Del. Code Ann., tit. 8, (S)
122(3))
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. Place Of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof. (Del. Code Ann., tit. 8, (S) 211(a))
Section 5. Annual Meetings.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. Nominations of persons for election
to the Board of Directors of the corporation and the proposal
1.
<PAGE>
of business to be considered by the stockholders may be made at an annual
meeting of stockholders: (i) pursuant to the corporation's notice of meeting of
stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by
any stockholder of the corporation who was a stockholder of record at the time
of giving of notice provided for in the following paragraph, who is entitled to
vote at the meeting and who complied with the notice procedures set forth in
Section 5. (Del. Code Ann., tit. 8, (S) 211(b)).
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90/th/) day nor earlier than the close of business on
the one hundred twentieth (120/th/) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120/th/) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90/th/) day prior to such annual meeting
or the tenth (10/th/) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder
2.
<PAGE>
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such stockholder, as
they appear on the corporation's books, and of such beneficial owner, (ii) the
class and number of shares of the corporation which are owned beneficially and
of record by such stockholder and such beneficial owner, and (iii) whether
either such stockholder or beneficial owner intends to deliver a proxy statement
and form of proxy to holders of, in the case of the proposal, at least the
percentage of the corporation's voting shares required under applicable law to
carry the proposal or, in the case of a nomination or nominations, a sufficient
number of holders of the corporation's voting shares to elect such nominee or
nominees (an affirmative statement of such intent, a "Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section 5(b)
of these Bylaws to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the corporation at least one
hundred (100) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 5 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the tenth (10/th/) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
3.
<PAGE>
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption). At any time or times that the corporation is subject to
Section 2115(b) of the California General Corporation Law ("CGCL"), stockholders
holding five percent (5%) or more of the outstanding shares shall have the right
to call a special meeting of stockholders only as set forth in Section 18(c)
herein.
(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120/th/) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90/th/) day prior to such meeting or the tenth (10/th/)
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
4.
<PAGE>
Section 7. Notice Of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given. (Del. Code Ann., tit. 8, (S)(S) 222, 229)
Section 8. Quorum. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series. (Del. Code Ann., tit. 8, (S) 216)
Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. (Del. Code Ann., tit. 8,
(S) 222(c))
5.
<PAGE>
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents (but only prior to the Initial
Public Offering) shall have the right to do so either in person or by an agent
or agents authorized by a proxy granted in accordance with Delaware law. An
agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period. (Del. Code Ann., tit. 8, (S)(S) 211(e), 212(b))
Section 11. Joint Owners Of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a majority
or even-split for the purpose of subsection (c) shall be a majority or even-
split in interest. (Del. Code Ann., tit. 8, (S) 217(b))
Section 12. List Of Stockholders. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present. (Del. Code Ann., tit. 8, (S) 219(a))
Section 13. Action Without Meeting.
(a) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action
6.
<PAGE>
referred to therein unless, within sixty (60) days of the earliest dated consent
delivered to the corporation in the manner herein required, written consents
signed by a sufficient number of stockholders to take action are delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested. (Del. Code Ann., tit.
8, (S) 228)
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing and who, if the action had been
taken at a meeting, would have been entitled to notice of the meeting if the
record date for such meeting had been the date that written consents signed by a
sufficient number of stockholders to take action were delivered to the
corporation as provided in Section 228 (c) of the DGCL. If the action which is
consented to is such as would have required the filing of a certificate under
any section of the DGCL if such action had been voted on by stockholders at a
meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written consent has been given in accordance with Section 228
of the DGCL.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
7.
<PAGE>
ARTICLE IV
DIRECTORS
Section 15. Number And Term Of Office. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws. (Del. Code Ann., tit. 8, (S)(S) 141(b),
211(b), (c))
Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
(Del. Code Ann., tit. 8, (S) 141(a))
Section 17. Classes of Directors.
(a) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the Initial Public Offering, the directors shall be divided into
three classes designated as Class I, Class II and Class III, respectively.
Directors shall be assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors. At the first annual meeting of
stockholders following the closing of the Initial Public Offering, the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of three years. At the second annual meeting of
stockholders following the Initial Public Offering, the term of office of the
Class II directors shall expire and Class II directors shall be elected for a
full term of three years. At the third annual meeting of stockholders following
the Initial Public Offering, the term of office of the Class III directors shall
expire and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting. During such time or times that the corporation is
subject to Section 2115(b) of the CGCL, this Section 17(a) shall become
effective and apply only when the corporation is a "listed" corporation within
the meaning of Section 301.5 of the CGCL.
(b) In the event that the corporation is unable to have a
classified Board of Directors under applicable law, Section 17(a) of these
Bylaws shall not apply and all directors shall be elected at each annual meeting
of stockholders to hold office until the next annual meeting.
(c) No stockholder entitled to vote at an election for directors
may cumulate votes to which such stockholder is entitled, unless, at the time of
the election, the corporation (i) is subject to (S)2115(b) of the CGCL and (ii)
is not or ceases to be a "listed" corporation under Section 301.5 of the CGCL.
During this time, every stockholder entitled to vote at an election for
directors may cumulate such stockholder's votes and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which such stockholder's shares are otherwise entitled, or
distribute the stockholder's votes on the same principle among as many
candidates as such stockholder thinks fit. No stockholder, however,
8.
<PAGE>
shall be entitled to so cumulate such stockholder's votes unless (i) the names
of such candidate or candidates have been placed in nomination prior to the
voting and (ii) the stockholder has given notice at the meeting, prior to the
voting, of such stockholder's intention to cumulate such stockholder's votes. If
any stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest number
of votes, up to the number of directors to be elected, are elected.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Section 18. Vacancies.
(a) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Section 18 in the case of the
death, removal or resignation of any director. (Del. Code Ann., tit. 8, (S)
223(a), (b))
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL. (Del. Code Ann., tit. 8, (S) 223(c)).
(c) At any time or times that the corporation is subject to Section
2115(b) of the CGCL, if, after the filling of any vacancy, the directors then in
office who have been elected by stockholders shall constitute less than a
majority of the directors then in office, then
(1) Any holder or holders of an aggregate of five percent
(5%) or more of the total number of shares at the time outstanding having the
right to vote for those directors may call a special meeting of stockholders; or
(2) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held
9.
<PAGE>
to elect the entire board, all in accordance with Section 305(c) of the CGCL.
The term of office of any director shall terminate upon that election of a
successor. (CGCL (S) 305(c).
Section 19. Resignation. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified. (Del. Code Ann., tit. 8, (S)(S) 141(b), 223(d))
Section 20. Removal.
(a) During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
(b) Following any date on which the corporation is no longer
subject to Section 2115(b) of the CGCL and subject to any limitations imposed by
law, Section 20(a) above shall no longer apply and removal shall be as provided
in Section 141(k) of the DGCL.
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors. (Del. Code Ann., tit. 8, (S) 141(g))
(c) Special Meetings. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place
10.
<PAGE>
within or without the State of Delaware whenever called by the Chairman of the
Board, the President or any two of the directors (Del. Code Ann., tit. 8, (S)
141(g))
(d) Telephone Meetings. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting. (Del. Code
Ann., tit. 8, (S) 141(I))
(e) Notice of Meetings. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. (Del. Code Ann., tit. 8, (S) 229)
(f) Waiver of Notice. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting. (Del. Code Ann., tit. 8, (S) 229)
Section 22. Quorum And Voting.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting. (Del. Code Ann., tit. 8, (S) 141(b))
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws. (Del. Code Ann., tit. 8,
(S) 141(b))
Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all
11.
<PAGE>
members of the Board of Directors or committee, as the case may be, consent
thereto in writing, and such writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee. (Del. Code Ann., tit. 8, (S)
141(f))
Section 24. Fees And Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor. (Del. Code
Ann., tit. 8, (S) 141(h))
Section 25. Committees.
(a) Executive Committee. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation. (Del. Code Ann., tit. 8, (S) 141(c))
(b) Other Committees. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws. (Del. Code Ann., tit. 8, (S) 141(c))
(c) Term. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member
12.
<PAGE>
of the Board of Directors to act at the meeting in the place of any such absent
or disqualified member. (Del. Code Ann., tit. 8, (S)141(c))
(d) Meetings. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee. (Del. Code Ann., tit. 8,
(S)(S) 141(c), 229)
Section 26. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President (if a director), or if the President is absent, the most
senior Vice President (if a director), or, in the absence of any such person, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the
officers of the corporation shall be fixed by or in the manner designated by the
Board of Directors. (Del. Code Ann., tit. 8, (S)(S) 122(5), 142(a), (b))
13.
<PAGE>
Section 28. Tenure And Duties Of Officers.
(a) General. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors. (Del. Code Ann., tit. 8, (S) 141(b), (e))
(b) Duties of Chairman of the Board of Directors. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28. (Del. Code Ann., tit. 8, (S) 142(a))
(c) Duties of President. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time. (Del. Code Ann., tit.
8, (S) 142(a))
(d) Duties of Vice Presidents. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time. (Del. Code Ann., tit. 8, (S)
142(a))
(e) Duties of Secretary. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time. (Del. Code Ann., tit. 8, (S) 142(a))
14.
<PAGE>
(f) Duties of Chief Financial Officer. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time. (Del. Code Ann., tit. 8, (S) 142(a))
Section 29. Delegation Of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer. (Del. Code Ann., tit. 8, (S) 142(b))
Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
Section 32. Execution Of Corporate Instruments. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation. (Del. Code
Ann., tit. 8, (S)(S) 103(a), 142(a), 158)
15.
<PAGE>
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount. (Del. Code
Ann., tit. 8, (S)(S) 103(a), 142(a), 158).
Section 33. Voting Of Securities Owned By The Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President. (Del. Code Ann., tit. 8, (S) 123)
ARTICLE VII
SHARES OF STOCK
Section 34. Form And Execution Of Certificates. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical. (Del. Code Ann., tit. 8, (S) 158)
16.
<PAGE>
Section 35. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed. (Del. Code Ann., tit. 8, (S) 167)
Section 36. Transfers.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares. (Del. Code Ann., tit.
8, (S) 201, tit. 6, (S) 8- 401(1))
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the DGCL. (Del. Code Ann., tit. 8, (S) 160 (a))
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received,
17.
<PAGE>
adopt a resolution fixing the record date. If no record date has been fixed by
the Board of Directors within ten (10) days of the date on which such a request
is received, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by applicable law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. (Del. Code Ann., tit. 8, (S) 213)
Section 38. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
(Del. Code Ann., tit. 8, (S)(S) 213(a), 219)
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 39. Execution Of Other Securities. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate
18.
<PAGE>
security shall be issued, the signatures of the persons signing and attesting
the corporate seal on such bond, debenture or other corporate security may be
the imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
Section 40. Declaration Of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law. (Del. Code Ann., tit. 8,
(S)(S) 170, 173)
Section 41. Dividend Reserve. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created. (Del.
Code Ann., tit. 8, (S) 171)
ARTICLE X
FISCAL YEAR
Section 42. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents.
(a) Directors And Officers. The corporation shall indemnify its
directors and officers to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
officers; and, provided, further, that the corporation
19.
<PAGE>
shall not be required to indemnify any director or officer in connection with
any proceeding (or part thereof) initiated by such person unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the corporation, (iii) such
indemnification is provided by the corporation, in its sole discretion, pursuant
to the powers vested in the corporation under the DGCL or any other applicable
law or (iv) such indemnification is required to be made under subsection (d).
(b) Employees and Other Agents. The corporation shall have power to
indemnify its employees and other agents as set forth in the DGCL or any other
applicable law. The Board of Directors shall have the power to delegate the
determination of whether indemnification shall be given to any such person to
such officers or other persons as the Board of Directors shall determine.
(c) Expenses. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or executive officer of another corporation, partnership, joint
venture, trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
director or officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Section 43 or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an officer of the corporation (except by reason of the fact that such officer is
or was a director of the corporation in which event this paragraph shall not
apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the director or officer. Any right to indemnification or advances granted by
this Section 43 to a director or officer shall be enforceable by or on behalf of
the person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make
20.
<PAGE>
it permissible under the DGCL or any other applicable law for the corporation to
indemnify the claimant for the amount claimed. In connection with any claim by
an officer of the corporation (except in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such officer is or was a director of the corporation) for advances, the
corporation shall be entitled to raise a defense as to any such action clear and
convincing evidence that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the DGCL or any other applicable law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct.
(e) Non-Exclusivity of Rights. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any applicable statute, provision of the Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law, or by any
other applicable law.
(f) Survival of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the DGCL or any
other applicable law, the corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 43.
(h) Amendments. Any repeal or modification of this Section 43 shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Section 43 that shall
not have been invalidated, or by any other applicable law. If this Section 43
shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
officer to the full extent under any other applicable law.
21.
<PAGE>
(j) Certain Definitions. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Section 43 with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 43.
ARTICLE XII
NOTICES
Section 44. Notices.
(a) Notice To Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and
22.
<PAGE>
duly deposited in the United States mail, postage prepaid, and addressed to his
last known post office address as shown by the stock record of the corporation
or its transfer agent. (Del. Code Ann., tit. 8, (S) 222)
(b) Notice To Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) Affidavit Of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained. (Del. Code Ann., tit. 8, (S) 222)
(d) Time Notices Deemed Given. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) Methods of Notice. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure To Receive Notice. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) Notice To Person With Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the DGCL,
the certificate shall state, if such is the fact and if notice is required, that
notice was given to all persons entitled to receive notice except such persons
with whom communication is unlawful.
(h) Notice To Person With Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of
23.
<PAGE>
the corporation, to any stockholder to whom (i) notice of two consecutive annual
meetings, and all notices of meetings or of the taking of action by written
consent without a meeting to such person during the period between such two
consecutive annual meetings, or (ii) all, and at least two, payments (if sent by
first class mail) of dividends or interest on securities during a twelve-month
period, have been mailed addressed to such person at his address as shown on the
records of the corporation and have been returned undeliverable, the giving of
such notice to such person shall not be required. Any action or meeting which
shall be taken or held without notice to such person shall have the same force
and effect as if such notice had been duly given. If any such person shall
deliver to the corporation a written notice setting forth his then current
address, the requirement that notice be given to such person shall be
reinstated. In the event that the action taken by the corporation is such as to
require the filing of a certificate under any provision of the DGCL, the
certificate need not state that notice was not given to persons to whom notice
was not required to be given pursuant to this paragraph. (Del. Code Ann, tit. 8,
(S) 230)
ARTICLE XIII
AMENDMENTS
Section 45. Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
Section 46. Loans To Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of the corporation. Nothing in these Bylaws shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute. (Del. Code Ann., tit. 8, (S)143)
24.
<PAGE>
EXHIBIT 4.2
NOOSH, INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
January 24, 2000
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
Page
<C> <S> <C>
Section 1. General.......................................................... 2
1.1 Definitions...................................................... 2
Section 2. Registration; Restrictions On Transfer........................... 3
2.1 Restrictions on Transfer......................................... 3
2.2 Demand Registration.............................................. 4
2.3 Piggyback Registrations.......................................... 6
2.4 Form S-3 Registration............................................ 7
2.5 Expenses of Registration......................................... 8
2.6 Obligations of the Company....................................... 8
2.7 Termination of Registration Rights............................... 9
2.8 Delay of Registration; Furnishing Information.................... 9
2.9 Indemnification.................................................. 10
2.10 Assignment of Registration Rights................................ 12
2.11 Amendment of Registration Rights................................. 12
2.12 Limitation on Subsequent Registration Rights..................... 12
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information... 12
2.14 Rule 144 Reporting............................................... 13
Section 3. Covenants Of The Company.......................................... 14
3.1 Basic Financial Information and Reporting......................... 14
3.2 Inspection Rights................................................ 14
3.3 Confidentiality of Records....................................... 15
3.4 Reservation of Common Stock...................................... 15
3.5 Employee Proprietary Information and Inventions Agreement........ 15
3.6 Key Man Insurance................................................ 15
3.7 Stock Vesting.................................................... 15
3.8 Observer Rights.................................................. 15
3.9 Qualified Small Business Stock................................... 16
3.10 Termination of Covenants......................................... 16
Section 4. Rights Of First Refusal......................................... 16
4.1 Subsequent Offerings............................................. 16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
Page
<C> <S> <C>
4.2 Exercise of Rights............................................... 17
4.3 Issuance of Equity Securities to Other Persons................... 17
4.4 Termination and Waiver of Rights of First Refusal................ 17
4.5 Transfer of Rights of First Refusal.............................. 17
4.6 Excluded Securities.............................................. 17
Section 5. Miscellaneous.................................................... 18
5.1 Governing Law.................................................... 18
5.2 Survival......................................................... 18
5.3 Successors and Assigns........................................... 19
5.4 Entire Agreement................................................. 19
5.5 Severability..................................................... 19
5.6 Amendment and Waiver............................................. 19
5.7 Delays or Omissions.............................................. 19
5.8 Notices.......................................................... 20
5.9 Attorneys' Fees.................................................. 20
5.10 Titles and Subtitles............................................. 20
5.11 Prior Agreement.................................................. 20
5.12 Aggregation of Stock............................................. 20
5.13 Counterparts..................................................... 20
</TABLE>
ii
<PAGE>
NOOSH, INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement") is
entered into as of the 24th day of January, 2000, by and among NOOSH, Inc., a
California corporation (the "Company"), the holders of the Company's Series A
Preferred Stock (the "Series A Stock"), the holders of the Company's Series B
Preferred Stock (the "Series B Stock"), the holders of the Company's Series C
Preferred Stock (the "Series C Stock"), and the purchasers of the Company's
Series D Preferred Stock ("Series D Stock") set forth on Exhibit A of that
certain Series D Preferred Stock Purchase Agreement of even date herewith (the
"Purchase Agreement"). The purchasers of the Series D Stock shall be referred
to hereinafter as the "Purchasers" and each individually as a "Purchaser", and
the holders of the Series A Stock (the "Series A Holders"), the holders of the
Series B Stock (the "Series B Holders"), the holders of the Series C Stock (the
"Series C Holders"), and the Purchasers shall be referred to hereinafter
together as the "Investors" and each individually as an "Investor."
RECITALS
WHEREAS, the Company proposes to sell and issue up to one million five
hundred thousand (1,500,000) shares of its Series D Stock to the Purchasers
pursuant to the Purchase Agreement;
WHEREAS, the Company, the Series A Holders, the Series B Holders, and the
Series C Holders previously entered into that certain Amended and Restated
Investor Rights Agreement, dated as of November 3, 1999 (the "Prior Agreement");
WHEREAS, as a condition of entering into the Purchase Agreement, the
Investors have requested that the Company, the Series A Holders, the Series B
Holders, and the Series C Holders agree to amend and restate the Prior Agreement
to extend to them registration rights, information rights and other rights as
set forth below; and
WHEREAs, pursuant to Section 5.6 of the Prior Agreement, at least seventy-
five (75%) of the holders of Registrable Securities (as defined therein) has
agreed to amend and restate the Prior Agreement and supersede said Prior
Agreement in its entirety with this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree that the Prior Agreement shall be
amended and restated to read in its entirety as follows:
1
<PAGE>
Section 1. General
1.1 Definitions. As used in this Agreement the following terms shall have
the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means (a) Common Stock of the Company issued
or issuable upon conversion of the Shares; (b) any Common Stock issued to Ofer
Ben-Shachar, including Common Stock transferred by Ofer Ben-Shachar to the Ben-
Shachar Family Generation Skipping Trust, dated November 6, 1998, on or before
the date of this Agreement (the "Founder Shares"); (c) Common Stock of the
Company issuable upon the exercise of warrants issued to R.R. Donnelley and Sons
Company ("RRD") as of the date hereof; and (d) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such above-described securities.
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person to the public either pursuant to a registration
statement or Rule 144 or sold in a private transaction in which the transferor's
rights under Section 2 of this Agreement are not assigned.
"Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements of a
single special counsel for the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
2
<PAGE>
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean the Company's Series A Stock issued pursuant to
the Company's Series A Preferred Stock Purchase Agreement, dated November 20,
1998, and held by the Investors listed on Exhibit A thereto and their permitted
assigns, the Company's Series B Stock issued pursuant to the Series B Preferred
Stock Purchase Agreement, dated April 26, 1999, and held by the Investors listed
on Exhibit A thereto and their permitted assigns, the Company's Series C Stock
issued pursuant to the Series C Preferred Stock Purchase Agreement, dated
November 3, 1999, and held by the Investors listed on Exhibit A thereto and
their permitted assigns, and the Company's Series D Stock issued pursuant to the
Purchase Agreement and held by the Investors listed on Exhibit A thereto and
their permitted assigns.
Section 2. Registration; Restrictions On Transfer
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or the shares of Common Stock issuable upon conversion of
the Shares ("Conversion Shares") unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by the
terms of this Agreement if such disposition occurs prior to the Initial
Offering, (B) such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (C) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act. It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
shareholders in accordance with their interest in the corporation, (C) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (D) to the Holder's family member
or trust for the benefit of an individual Holder; provided that in each case the
transferee will be subject to the terms of this Agreement to the same extent as
if he were an original Holder hereunder.
3
<PAGE>
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of thirty percent (30%) or more
of the Registrable Securities (other than the Founder Shares) then outstanding
(the "Initiating Holders") that the Company file a registration statement under
the Securities Act covering the registration of Registrable Securities having an
anticipated aggregate offering price of at least $15,000,000, then the Company
shall, within thirty (30) days of receipt thereof, give written notice of such
request to all Holders, and subject to the limitations of this Section 2.2, use
its best efforts to effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter
4
<PAGE>
or underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Sectio n 2.2:
(i) prior to the earlier of April 26, 2004, or one hundred eighty
(180) days following the effective date of the registration statement pertaining
to the Initial Offering;
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective;
(iii) during the period starting with the date of filing of, and
ending on the date one hundred eighty (180) days following the effective date of
the registration statement pertaining to the Initial Offering; provided that the
Company makes reasonable good faith efforts to cause such registration statement
to become effective;
(iv) if within thirty (30) days of receipt of a written request
from the Initiating Holders pursuant to Section 2.2(a), the Company gives notice
to the Holders of the Company's intention to make its Initial Offering within
ninety (90) days;
(v) if the Company shall furnish to the Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board or the Chief Executive Officer stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be effected at such time, in which event the Company shall have the right to
defer such filing for a period of not more than ninety (90) days after receipt
of the request of the Initiating Holders; provided that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period; or
(vi) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 2.4 below.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act)
5
<PAGE>
and will afford each such Holder an opportunity to include in such registration
statement all or part of such Registrable Securities held by such Holder. Each
Holder desiring to include in any such registration statement all or any part of
the Registrable Securities held by it shall, within fifteen (15) days after the
above-described notice from the Company, so notify the Company in writing. Such
notice shall state the intended method of disposition of the Registrable
Securities by such Holder. If a Holder decides not to include all of its
Registrable Securities in any registration statement thereafter filed by the
Company, such Holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
(a) Underwriting. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders' on a pro rata
basis based on the total number of Registrable Securities held by the Holders
(provided, that, only 2,000,000 of the Founder's Shares (as adjusted for splits,
combinations, and the like) shall be included as Registrable Securities for the
purposes of this allocation); third, to the Holders of the portion of the
Founders Shares not considered for the purposes of the previous allocation; and,
fourth, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall (i) reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting
or (ii) reduce the amount of securities of the selling Holders included in the
registration below twenty-five percent (25%) of the total amount of securities
included in such registration, unless such offering is the Initial Offering and
such registration does not include shares of any other selling shareholders, in
which event any or all of the Registrable Securities of the Holders may be
excluded in accordance with the immediately preceding sentence. In no event will
shares of any other selling shareholder be included in such registration which
would reduce the number of shares which may be included by Holders without the
written consent of Holders of not less than seventy five percent (75%) of the
Registrable Securities proposed to be sold in the offering. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired partners and
shareholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefits of any of the
foregoing person shall be deemed to be a single "Holder", and any pro rata
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.
6
<PAGE>
(b) Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of at least twenty percent (20%) of the Registrable Securities
then outstanding a written request or requests that the Company effect a
registration on Form S-3 (or any successor to Form S-3) or any similar short-
form registration statement and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than seven hundred fifty thousand dollars
($750,000), or
(iii) if within thirty (30) days of receipt of a written request
from Initiating Holders pursuant to Section 2.2(a), the Company gives notice to
the Holders of the Company's intention to make a firm commitment underwritten
public offering of its Common Stock within ninety (90) days;
(iv) if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4; provided, that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period, or
7
<PAGE>
(v) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Holders pursuant to this Section 2.4, or
(vi) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively. All such Registration
Expenses incurred in connection with registrations requested pursuant to this
Section 2.4 shall be paid by the Company.
2.5 Expenses of Registration. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration,
qualification, or compliance under Section 2.3 or 2.4 herein shall be borne by
the Company. All Selling Expenses incurred in connection with any registrations,
qualifications, or compliances hereunder, shall be borne by the holders of the
securities so registered pro rata on the basis of the number of shares so
registered. The Company shall not, however, be required to pay for expenses of
any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of
which has been subsequently withdrawn by the Initiating Holders or the Holders
under Section 2.4 unless (a) the withdrawal is based upon material adverse
information concerning the Company of which the Initiating Holders or the
Holders under Section 2.4 were not aware at the time of such request or (b) the
Holders of a majority of Registrable Securities agree to forfeit their right to
one requested registration pursuant to Section 2.2 or 2.4, in which event such
right shall be forfeited by all the Holders. If the Holders are required to pay
the Registration Expenses, such expenses shall be borne by the holders of
securities (including Registrable Securities) requesting such registration in
proportion to the number of shares for which registration was requested. If the
Company is required to pay the Registration Expenses of a withdrawn offering
pursuant to clause (a) above, then the Holders shall not forfeit their rights
pursuant to Section 2.2 or 2.4 to a demand registration.
2.6 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use all reasonable efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to ninety (90) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto. The
Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
8
<PAGE>
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect three
(3) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if and when all Registrable Securities
held by and issuable to such Holder (and its affiliates, partners, former
partners, members and former members) may be sold under Rule 144 during any
ninety (90) day period.
2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
their Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
9
<PAGE>
2.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the partners, officers and directors of each Holder, any
underwriter (as defined in the Securities Act) for such Holder and each person,
if any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
10
<PAGE>
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Holder hereunder exceed
the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof
11
<PAGE>
the giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation.
2.10 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (a) is a
subsidiary, parent, general partner, limited partner, retired partner, member or
retired member of a Holder, (b) is a Holder's family member or trust for the
benefit of an individual Holder, or (c) acquires at least fifty thousand
(50,000) shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (i) the transferor shall, within ten (10) days
after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned and (ii) such transferee shall agree
to be subject to all restrictions set forth in this Agreement.
2.11 Amendment of Registration Rights. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least seventy-five percent
(75%) of the Registrable Securities then outstanding. Any amendment or waiver
effected in accordance with this Section 2.11 shall be binding upon each Holder
and the Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 Limitation on Subsequent Registration Rights. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of at least seventy-five percent (75%) of the Registrable Securities
then outstanding, enter into any agreement with any holder or prospective holder
of any securities of the Company that would grant such holder registration
rights senior to those granted to the Holders hereunder.
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information. Each
Holder hereby agrees that such Holder shall not sell or otherwise transfer or
dispose of any Common Stock (or other securities) of the Company held by such
Holder (other than those included in the registration) for a period specified by
the representative of the underwriters of Common Stock (or other securities) of
the Company not to exceed one hundred eighty (180) days following the effective
date of a registration statement of the Company filed under the Securities Act;
provided that (a) the obligations described in this Section 2.13 shall apply
only to the Company's Initial Offering; (b) all officers and directors of the
Company and holders of at least one percent (1%) of the Company's securities
enter into similar agreements; (c) such agreements shall not apply to securities
purchased by the Holder in the public market or in a registered offering; and
(d) any discretionary waiver or termination of the restrictions contained in
such agreement (or any similar lock up provision to which the Company is a
party) for the benefit of any officer, director, or holder of at least one
percent (1%) of the Company's securities shall apply to all the Holders on a
pro-rata basis (according to the total number of Registrable Securities owned by
each Holder).
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or
12
<PAGE>
the representative of the underwriters of Common Stock (or other securities) of
the Company, each Holder shall provide, within ten (10) days of such request,
such information as may be reasonably required by the Company or such
representative in connection with the completion of any public offering of the
Company's securities pursuant to a registration statement filed under the
Securities Act. The obligations described in this Section 2.13 shall not apply
to a registration relating solely to employee benefit plans on Form S-1 or Form
S-8 or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose stop-
transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one-
hundred eighty (180) day period.
2.14 Rule 144 Reporting. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
Section 3. Covenants Of The Company
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, the Company will
furnish each Investor owning not less than 1,000,000 shares of Registrable
Securities (other than Founder Shares and as adjusted for stock splits and
combinations) (a "Major Investor") a balance sheet of the Company, as at the end
of such fiscal year, and a statement of income and a statement of cash flows of
the Company, for such year, all prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the
13
<PAGE>
figures for the previous fiscal year, all in reasonable
detail. Such financial statements shall be accompanied by a report and opinion
thereon by independent public accountants of national standing selected by the
Company's Board of Directors.
(c) The Company will furnish each Major Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a balance sheet of the Company as of the end of each such
quarterly period, and a statement of income and a statement of cash flows of the
Company for such period and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and year-end audit adjustments
may not have been made.
(d) The Company will furnish each Major Investor (i) at least thirty
(30) days prior to the beginning of each fiscal year an annual budget and
operating plans for such fiscal year (and as soon as available, any subsequent
revisions thereto); and (ii) as soon as practicable after the end of each month,
and in any event within twenty (20) days thereafter, a balance sheet of the
Company as of the end of each such month, and a statement of income and a
statement of cash flows of the Company for such month and for the current fiscal
year to date, including a comparison to plan figures for such period, prepared
in accordance with generally accepted accounting principles consistently
applied, with the exception that no notes need be attached to such statements
and year-end audit adjustments may not have been made.
3.2 Inspection Rights. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 Confidentiality of Records. Each Investor agrees to use, and to use its
best efforts to insure that its authorized representatives use, the same degree
of care as such Investor uses to protect its own confidential information to
keep confidential any information furnished to it which the Company identifies
as being confidential or proprietary (so long as such information is not in the
public domain), except that such Investor may disclose such proprietary or
confidential information to any partner, subsidiary or parent of such Investor
for the purpose of evaluating its investment in the Company as long as such
partner, subsidiary or parent is advised of and bound by the confidentiality
provisions of this Section 3.3. RRD further covenants that it will use all
information obtained pursuant to this Agreement only for the purpose of
evaluating its investment in the Company and not in connection with its business
activities.
3.4 Reservation of Common Stock. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
14
<PAGE>
3.5 Employee Proprietary Information and Inventions Agreement. The Company
shall require all employees and consultants to execute and deliver an Employee
Proprietary Information and Inventions Agreement in the form provided to Gray
Cary Ware & Freidenrich LLP.
3.6 Key Man Insurance. The Company will use its best efforts to maintain in
full force and effect term life insurance in the amount of one million
($1,000,000) dollars on each of the lives of Ofer Ben-Shachar and David
Hannebrink, naming the Company as beneficiary.
3.7 Stock Vesting . Unless otherwise approved by the Board of Directors,
all stock options and other stock equivalents issued after the date of this
Agreement to employees, directors, consultants, and other service providers
shall be subject to vesting as follows: twenty five percent (25%) of such stock
shall vest at the end of the first year following the date of such person's
services commencement date with the Company and seventy five percent (75%) of
such stock shall vest no more rapidly than monthly over the next three years.
With respect to any shares of stock purchased by any such person, the Company's
repurchase option shall provide that upon such person's termination of
employment or service with the Company, with or without cause, the Company or
its assignee (to the extent permissible under applicable securities laws and
other laws) shall have the option to purchase at cost any unvested shares of
stock held by such person.
3.8 Observer Rights . Each of MeriTech Capital Partners, Bowman Capital
Management, Technology Crossover Ventures, (so long as the Series C Preferred
does not have a separate representative on the Company's Board of Directors) and
RRD, for so long as each is a Major Investor, shall be entitled to have a
representative reasonably acceptable to the Company attend all meetings of its
Board of Directors in a non-voting observer capacity and, in this respect, the
Company shall provide such representative copies of all notices, minutes,
consents and other material that it provides to its directors at the same time
that such notices, minutes, consents and other materials are provided to its
directors; provided, however, that the Company reserves the right to exclude
such representative from access to any material or meeting or portion thereof if
the Company believes that such exclusion is reasonably necessary to preserve the
attorney-client privilege, to protect highly confidential proprietary
information or for other similar reasons.
3.9 Qualified Small Business Stock . In the event that the Company proposes
to act or engage in a transaction that would be reasonably expected to result in
the termination or impairment of the status of the Series A Stock or Series B
Stock (or the Common Stock issuable upon conversion thereof) as "qualified small
business stock" as set forth in Section1202(c) of the Internal Revenue Code of
1986, as amended (the "Code"), the Company shall use reasonable efforts to
notify the Major Investors who are Major Investors as of the date hereof and
consult in good faith to attempt to devise, if commercially practicable, a
mutually agreeable and reasonable alternative transaction structure that would
preserve such status. In addition, the Company shall use reasonable efforts to
submit to the Major Investors and with the Internal Revenue Service any reports
that may be required under Section 1202(d)(1)(C) of the Code and any related
Treasury Regulations. In addition, within twenty (20) days after any Major
Investor has delivered to the Company a written request therefor, the Company
shall deliver to such Major Investor a written statement informing the Major
Investor whether to the Company's knowledge
15
<PAGE>
such Major Investor's interest in the Company should constitute "qualified small
business stock" as defined in Section 1202(c) of the Code. The Company's
obligation to furnish a written statement pursuant to this Section 3.9 shall
continue notwithstanding the fact that a class of the Company's stock may be
traded on an established securities market. The Company's obligations under this
Section 3.9 shall continue irrespective of the number of shares any such Major
Investor may hold subsequent to the date of this Agreement.
3.10 Termination of Covenants. All covenants, except Section 3.9, of the
Company contained in Section 3 of this Agreement shall expire and terminate as
to each Investor upon the earlier of (i) the effective date of the registration
statement pertaining to the Initial Offering or (ii) upon (a) the acquisition of
all or substantially all of the assets of the Company or (b) an acquisition of
the Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction (a "Change in Control").
Section 4. Rights Of First Refusal
4.1 Subsequent Offerings. Each Major Investor shall have a right of first
refusal to purchase its pro rata share of all Equity Securities, as defined
below, that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Equity Securities excluded by Section
4.6 hereof. Each Major Investor's pro rata share is equal to the ratio of (a)
the number of shares of the Company's Common Stock (including all shares of
Common Stock issued or issuable upon conversion of the Shares) which such Major
Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Major Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Major Investor shall have
fifteen (15) days from the giving of such notice to agree to purchase its pro
rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Major Investor who would cause the Company to
be in violation of applicable federal securities laws by virtue of such offer or
sale.
4.3 Issuance of Equity Securities to Other Persons. If not all of the Major
Investors elect to purchase their pro rata share of the Equity Securities, then
the Company shall
16
<PAGE>
promptly notify in writing the Major Investors who do so elect and shall offer
such Major Investors the right to acquire such unsubscribed shares on a pro rata
basis. The Major Investors shall have five (5) days after receipt of such notice
to notify the Company of its election to purchase all or a portion thereof of
the unsubscribed shares. If the Major Investors fail to exercise in full the
rights of first refusal, the Company shall have ninety (90) days thereafter to
sell the Equity Securities in respect of which the Major Investor's rights were
not exercised, at a price and upon general terms and conditions materially no
more favorable to the purchasers thereof than specified in the Company's notice
to the Major Investors pursuant to Section 4.2 hereof. If the Company has not
sold such Equity Securities within ninety (90) days of the notice provided
pursuant to Section 4.2, the Company shall not thereafter issue or sell any
Equity Securities, without first offering such securities to the Major Investors
in the manner provided above.
4.4 Termination and Waiver of Rights of First Refusal. The rights of first
refusal established by this Section 4 shall not apply to, and shall terminate
upon the earlier of (i) immediately upon the closing of a firmly underwritten
public offering pursuant to an effective registration statement under the
Securities Act covering the offer and sale of Common Stock for the account of
the Company in which the per share price is at least $11.00 (as adjusted for
stock splits, combinations, and the like) and the gross cash proceeds to the
Company (before underwriting discounts, commissions and fees) are at least
$20,000,000 (a "Qualifying IPO") or (ii) a Change in Control. The rights of
first refusal established by this Section 4 may be amended, or any provision
waived with the written consent of Major Investors with rights under this
Section 4 holding at least seventy-five percent (75%) of the Registrable
Securities held by all such Major Investors, or as permitted by Section 5.6.
4.5 Transfer of Rights of First Refusal. The rights of first refusal of
each Major Investor having rights under this Section 4 may be transferred to the
same parties, subject to the same restrictions as any transfer of registration
rights pursuant to Section 2.10.
4.6 Excluded Securities. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary, pursuant to stock purchase or stock
option plans or agreements or other arrangements that are approved by the Board
of Directors;
(b) stock issued pursuant to any rights or agreements outstanding as of
the date of this Agreement, options and warrants outstanding as of the date of
this Agreement; and stock issued pursuant to any such rights or agreements
granted after the date of this Agreement; provided that the rights of first
refusal established by this Section 4 applied with respect to the initial sale
or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
approved by the Board of Directors;
17
<PAGE>
(d) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the Shares;
(f) any Equity Securities issued pursuant to any equipment leasing
arrangement, or debt financing from a bank or similar financial institution
approved by the Board of Directors;
(g) any Equity Securities that are issued by the Company pursuant to a
registration statement filed under the Securities Act in connection with a
Qualifying IPO;
(h) shares of the Company's Common Stock or Preferred Stock issued in
connection with strategic transactions involving the Company and other entities,
including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, have been
approved by the Company's Board of Directors; and
(i) shares of Series D Stock (including shares of Common Stock issuable
upon conversion of such Series D Stock) issued or issuable pursuant to the
Purchase Agreement.
Section 5. Miscellaneous
5.1 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.
5.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.
5.4 Entire Agreement. This Agreement, the Exhibits and Schedules hereto, the
Purchase Agreement and the other documents delivered pursuant thereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and no
18
<PAGE>
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
5.5 Severability. In case any provision of the Agreement shall be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
5.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least seventy-five percent (75%) of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least seventy-five percent (75%)
of the Registrable Securities.
(c) Notwithstanding the foregoing, this Agreement may be amended with
only the written consent of the Company to include additional purchasers of
Shares as "Investors," "Holders" and parties hereto.
5.7 Delays or Omissions. It is agreed that no delay or omission to exercise
any right, power, or remedy accruing to any Holder, upon any breach, default or
noncompliance of the Company under this Agreement shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent, or approval of any kind or character on any Holder's
part of any breach, default or noncompliance under the Agreement or any waiver
on such Holder's part of any provisions or conditions of this Agreement must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, by law, or otherwise
afforded to Holders, shall be cumulative and not alternative.
5.8 Notices. All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given: (a) upon personal delivery to the party
to be notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient; if not, then on the next business day,
(c) five (5) days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
5.9 Attorneys' Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
19
<PAGE>
5.10 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 Prior Agreement. The Prior Agreement is hereby superseded in its
entirety and shall be of no further force or effect.
5.12 Aggregation of Stock. All Shares held or acquired by affiliated
entities or person shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
5.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
20
<PAGE>
In Witness Whereof, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Company:
NOOSH, Inc.
By: /s/ Ofer Ben-Shachar
-------------------------------------------
Ofer Ben-Shachar
President and Chief Executive Officer
<PAGE>
EXHIBIT 10.1
INDEMNITY AGREEMENT
This Agreement is made and entered into this _____ day of ________________,
2000 by and between NOOSH, Inc., a Delaware corporation (the "Corporation"), and
__________ ("Agent").
Recitals
Whereas, Agent performs a valuable service to the Corporation in his
capacity as _______ of the Corporation;
Whereas, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
Whereas, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
Whereas, in order to induce Agent to continue to serve as _________ of the
Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
Now, Therefore, in consideration of Agent's continued service as ________
after the date hereof, the parties hereto agree as follows:
Agreement
1. Services to the Corporation. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
__________ of the Corporation or as a director, officer or other fiduciary of
an affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such
position (subject to any contractual obligation that Agent may have assumed
apart from this Agreement) and that the Corporation or any affiliate shall
have no obligation under this Agreement to continue Agent in any such
position.
2. Indemnity of Agent. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
1
<PAGE>
3. Additional Indemnity. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further
agrees to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation,
or is or was serving or at any time serves at the request of the Corporation
as a director, officer, employee or other agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise;
and
(b) otherwise to the fullest extent as may be provided to Agent by
the Corporation under the non-exclusivity provisions of the Code and the
Bylaws.
4. Limitations on Additional Indemnity. No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent solely for an accounting
of profits made from the purchase or sale by Agent of securities of the
Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;
(b) on account of Agent's conduct that is established by a final
judgment as knowingly fraudulent or deliberately dishonest or that constituted
willful misconduct;
(c) on account of Agent's conduct that is established by a final
judgment as constituting a breach of Agent's duty of loyalty to the
Corporation or resulting in any personal profit or advantage to which Agent
was not legally entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity
clause, bylaw or agreement, except in respect of any excess beyond payment
under such insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both
the Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof) initiated
by Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the
2
<PAGE>
proceeding was authorized by the Board of Directors of the Corporation, (iii)
such indemnification is provided by the Corporation, in its sole discretion,
pursuant to the powers vested in the Corporation under the Code, or (iv) the
proceeding is initiated pursuant to Section 9 hereof.
5. Continuation of Indemnity. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise) and shall continue thereafter so
long as Agent shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving
in the capacity referred to herein.
6. Partial Indemnification. Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and
amounts paid in settlement and any other amounts that Agent becomes legally
obligated to pay in connection with any action, suit or proceeding referred to
in Section 3 hereof even if not entitled hereunder to indemnification for the
total amount thereof, and the Corporation shall indemnify Agent for the
portion thereof to which Agent is entitled.
7. Notification and Defense of Claim. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against
the Corporation under this Agreement, notify the Corporation of the
commencement thereof; but the omission so to notify the Corporation will not
relieve it from any liability which it may have to Agent otherwise than under
this Agreement. With respect to any such action, suit or proceeding as to
which Agent notifies the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent
of its election to assume the defense thereof, the Corporation will not be
liable to Agent under this Agreement for any legal or other expenses
subsequently incurred by Agent in connection with the defense thereof except
for reasonable costs of investigation or otherwise as provided below. Agent
shall have the right to employ separate counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice
from the Corporation of its assumption of the defense thereof shall be at the
expense of Agent unless (i) the employment of counsel by Agent has been
authorized by the Corporation, (ii) Agent shall have reasonably concluded, and
so notified the Corporation, that there is an actual conflict of interest
between the Corporation and Agent in the conduct of the defense of such action
or (iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of
Agent's separate counsel shall be at the
3
<PAGE>
expense of the Corporation. The Corporation shall not be entitled to assume
the defense of any action, suit or proceeding brought by or on behalf of the
Corporation or as to which Agent shall have made the conclusion provided for
in clause (ii) above; and
(c) the Corporation shall not be liable to indemnify Agent under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably
withheld. The Corporation shall be permitted to settle any action except that
it shall not settle any action or claim in any manner which would impose any
penalty or limitation on Agent without Agent's written consent, which may be
given or withheld in Agent's sole discretion.
8. Expenses. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all
expenses incurred by Agent in connection with such proceeding upon receipt of
an undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. Enforcement. Any right to indemnification or advances granted by
this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim
is made within ninety (90) days of request therefor. Agent, in such
enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting his claim. It shall be a defense to any
action for which a claim for indemnification is made under Section 3 hereof
(other than an action brought to enforce a claim for expenses pursuant to
Section 8 hereof, provided that the required undertaking has been tendered to
the Corporation) that Agent is not entitled to indemnification because of the
limitations set forth in Section 4 hereof. Neither the failure of the
Corporation (including its Board of Directors or its stockholders) to have
made a determination prior to the commencement of such enforcement action that
indemnification of Agent is proper in the circumstances, nor an actual
determination by the Corporation (including its Board of Directors or its
stockholders) that such indemnification is improper shall be a defense to the
action or create a presumption that Agent is not entitled to indemnification
under this Agreement or otherwise.
10. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
the Corporation effectively to bring suit to enforce such rights.
11. Non-Exclusivity of Rights. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office.
4
<PAGE>
12. Survival of Rights.
(a) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of
the Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to
the benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. Separability. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity
or unenforceability shall not affect the validity or enforceability of the
other provisions hereof. Furthermore, if this Agreement shall be invalidated
in its entirety on any ground, then the Corporation shall nevertheless
indemnify Agent to the fullest extent provided by the Bylaws, the Code or any
other applicable law.
14. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed
by both parties hereto.
16. Identical Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the
existence of this Agreement.
17. Headings. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction hereof.
18. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with
postage prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
5
<PAGE>
(b) If to the Corporation, to:
NOOSH, Inc.
3401 Hillview Avenue
Palo Alto, CA 94304
or to such other address as may have been furnished to Agent by the Corporation.
In Witness Whereof, the parties hereto have executed this Agreement on and
as of the day and year first above written.
NOOSH, INC.
By:
----------------------------------------
Ofer Ben-Shachar
President and Chief Executive Officer
Agent
By:
----------------------------------------
Name:
--------------------------------------
Address:
-----------------------------------
6
<PAGE>
EXHIBIT 10.2
NOOSH, INC.
1998 Equity Incentive Plan
Adopted November 12, 1998, as Amended April 15, 1999
Approved By Shareholders November 13, 1998, and Amendment Approved
April 15,1999
Termination Date: November 12, 2008
1. Purposes.
(a) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) Available Stock Awards. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) General Purpose. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c).
(e) "Common Stock" means the common stock of the Company.
(f) "Company" means NOOSH, Inc., a California corporation.
(g) "Consultant" means any person, including an advisor, (i) engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors of the Company who are not compensated
1.
<PAGE>
by the Company for their services as Directors or Directors of the Company who
are merely paid a director's fee by the Company for their services as Directors.
(h) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(i) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(j) "Director" means a member of the Board of Directors of the Company.
(k) "Disability" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(n) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
2.
<PAGE>
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(iii) Prior to the Listing Date, the value of the Common Stock shall
be determined in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations.
(o) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(q) "Non-Employee Director" means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(r) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(s) "Officer" means (i) before the Listing Date, any person designated by
the Company as an officer and (ii) on and after the Listing Date, a person who
is an officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.
(t) "Option" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(u) "Option Agreement" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
3.
<PAGE>
(w) "Outside Director" means a Director of the Company who either (i) is
not a current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(x) "Participant" means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Stock
Award.
(y) "Plan" means this NOOSH, Inc. 1998 Equity Incentive Plan.
(z) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(aa) "Securities Act" means the Securities Act of 1933, as amended.
(bb) "Stock Award" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(cc) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(dd) "Ten Percent Shareholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.
4.
<PAGE>
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(ii) Committee Composition when Common Stock is Publicly Traded. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more Non-
Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (i) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (1) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (2) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (ii)
delegate to a committee of one or more members of the Board who are not Non-
Employee Directors the authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Exchange Act.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate three million (3,000,000) shares
of Common Stock.
(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full
5.
<PAGE>
(or vested in the case of Restricted Stock), the stock not acquired under such
Stock Award shall revert to and again become available for issuance under the
Plan. If any Common Stock acquired pursuant to the exercise of an Option shall
for any reason be repurchased by the Company under an unvested share repurchase
option provided under the Plan, the stock repurchased by the Company under such
repurchase option shall not revert to and again become available for issuance
under the Plan.
(c) Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
(d) Share Reserve Limitation. Prior to the Listing Date, at no time shall
the total number of shares issuable upon exercise of all outstanding Options and
the total number of shares provided for under any stock bonus or similar plan of
the Company exceed the applicable percentage as calculated in accordance with
the conditions and exclusions of Section 260.140.45 of Title 10 of the
California Code of Regulations, based on the shares of the Company which are
outstanding at the time the calculation is made.
5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.
(b) Ten Percent Shareholders. No Ten Percent Shareholder shall be eligible
for the grant of an Incentive Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
the Common Stock at the date of grant and the Option is not exercisable after
the expiration of five (5) years from the date of grant.
Prior to the Listing Date, no Ten Percent Shareholder shall be
eligible for the grant of a Nonstatutory Stock Option unless the exercise price
of such Option is at least one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant.
Prior to the Listing Date, no Ten Percent Shareholder shall be
eligible for a restricted stock award unless the purchase price of the
restricted stock is at least one hundred percent (100%) of the Fair Market Value
of the Common Stock at the date of grant.
(c) Section 162(m) Limitation. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no employee shall be eligible to
be granted Options covering more than five hundred thousand (500,000) shares of
the Common Stock during any calendar year. This subsection 5(c) shall not apply
prior to the Listing Date and, following the Listing Date, this subsection 5(c)
shall not apply until (i) the earliest of: (1) the first material modification
of the Plan (including any increase in the number of shares reserved for
issuance under the Plan in accordance with Section 4); (2) the issuance of all
of the shares of Common Stock reserved for issuance under the Plan; (3) the
expiration of the Plan; or (4) the first meeting of shareholders at which
Directors of the Company are to be elected that occurs after the close of the
third calendar year following the calendar year in which occurred the first
registration of an
6.
<PAGE>
equity security under Section 12 of the Exchange Act; or (ii) such other date
required by Section 162(m) of the Code and the rules and regulations promulgated
thereunder.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Shareholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Shareholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the stock subject to the Option on the date the Option
is granted. Notwithstanding the foregoing, an Incentive Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) Exercise Price of a Nonstatutory Stock Option. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option granted on or after the Listing Date shall be not
less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, a Nonstatutory Stock Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
(d) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by (1) delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or (3) in any
other form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
7.
<PAGE>
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option granted prior to the Listing Date shall not be transferable except by
will or by the laws of descent and distribution and shall be exercisable during
the lifetime of the Optionholder only by the Optionholder. A Nonstatutory Stock
Option granted on or after the Listing Date shall be transferable to the extent
provided in the Option Agreement. If the Nonstatutory Stock Option does not
provide for transferability, then the Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing provisions of this subsection 6(f), the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(h) Minimum Vesting Prior to the Listing Date. Notwithstanding the
foregoing subsection 6(g), Options granted prior to the Listing Date shall
provide for vesting of the total number of shares at a rate of at least twenty
percent (20%) per year over five (5) years from the date the Option was granted,
subject to reasonable conditions such as continued employment. However, in the
case of such Options granted to Officers, Directors or Consultants, the Option
may become fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Company; for
example, the vesting provision of the Option may provide for vesting of less
than twenty percent (20%) per year of the total number of shares subject to the
Option.
(i) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the
8.
<PAGE>
date three (3) months following the termination of the Optionholder's Continuous
Service (or such longer or shorter period specified in the Option Agreement,
which, for Options granted prior to the Listing Date, shall not be less than
thirty (30) days, unless such termination is for cause), or (ii) the expiration
of the term of the Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate.
(j) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.
(k) Disability of Optionholder. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement, which, for Options granted prior to the Listing Date, shall
not be less than six (6) months) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(l) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death pursuant to subsection 6(e) or 6(f), but only within
the period ending on the earlier of (1) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the Option
Agreement, which, for Options granted prior to the Listing Date, shall not be
less than six (6) months) or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.
(m) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option.
Subject to the "Repurchase Limitation" in subsection 10(h), any unvested
9.
<PAGE>
shares so purchased may be subject to an unvested share repurchase option in
favor of the Company or to any other restriction the Board determines to be
appropriate.
(n) Right of Repurchase. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares acquired by the Optionholder pursuant to the exercise of the
Option.
(o) Right of First Refusal. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares exercised pursuant to the
Option. Except as expressly provided in this subsection 6(o), such right of
first refusal shall otherwise comply with any applicable provisions of the
Bylaws of the Company.
(p) Re-Load Options. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares equal to the
number of shares surrendered as part or all of the exercise price of such
Option; (ii) have an expiration date which is the same as the expiration date of
the Option the exercise of which gave rise to such Re-Load Option; and (iii)
have an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option
shall be subject to the same exercise price and term provisions heretofore
described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares under subsection 4(a) and
the "Section 162(m) Limitation" on the grants of Options under subsection 5(c)
and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.
7. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and
10.
<PAGE>
conditions of separate stock bonus agreements need not be identical, but each
stock bonus agreement shall include (through incorporation of provisions hereof
by reference in the agreement or otherwise) the substance of each of the
following provisions:
(i) Consideration. A stock bonus shall be awarded in consideration
for past services actually rendered to the Company for its benefit.
(ii) Vesting. Subject to the "Repurchase Limitation" in subsection
10(h), shares of Common Stock awarded under the stock bonus agreement may, but
need not, be subject to a share repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board.
(iii) Termination of Participant's Continuous Service. Subject to the
"Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.
(iv) Transferability. For a stock bonus award made before the Listing
Date, rights to acquire shares under the stock bonus agreement shall not be
transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Participant only by the Participant.
For a stock bonus award made on or after the Listing Date, rights to acquire
shares under the stock bonus agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the stock bonus
agreement, as the Board shall determine in its discretion, so long as stock
awarded under the stock bonus agreement remains subject to the terms of the
stock bonus agreement.
(b) Restricted Stock Awards. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) Purchase Price. Subject to the provisions of subsection 5(b)
regarding Ten Percent Shareholders, the purchase price under each restricted
stock purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. For restricted stock
awards made prior to the Listing Date, the purchase price shall not be less than
eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made or at the time the purchase is consummated. For restricted stock
awards made on or after the Listing Date, the purchase price shall not be less
than eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made or at the time the purchase is consummated.
11.
<PAGE>
(ii) Consideration. The purchase price of stock acquired pursuant to
the restricted stock purchase agreement shall be paid either: (i) in cash at the
time of purchase; (ii) at the discretion of the Board, according to a deferred
payment or other arrangement with the Participant; or (iii) in any other form of
legal consideration that may be acceptable to the Board in its discretion;
provided, however, that at any time that the Company is incorporated in
Delaware, then payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.
(iii) Vesting. Subject to the "Repurchase Limitation" in subsection
10(h), shares of Common Stock acquired under the restricted stock purchase
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
(iv) Termination of Participant's Continuous Service. Subject to the
"Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.
(v) Transferability. For a restricted stock award made before the
Listing Date, rights to acquire shares under the restricted stock purchase
agreement shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a restricted stock award made on or after the
Listing Date, rights to acquire shares under the restricted stock purchase
agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the restricted stock purchase agreement, as the
Board shall determine in its discretion, so long as stock awarded under the
restricted stock purchase agreement remains subject to the terms of the
restricted stock purchase agreement.
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.
12.
<PAGE>
9. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
10. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Shareholder Rights. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant or other holder of Stock Awards any right to continue to serve
the Company or an Affiliate in the capacity in effect at the time the Stock
Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or
without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.
(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements,
13.
<PAGE>
shall be inoperative if (iii) the issuance of the shares upon the exercise or
acquisition of stock under the Stock Award has been registered under a then
currently effective registration statement under the Securities Act or (iv) as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(f) Withholding Obligations. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common Stock
otherwise issuable to the participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
(g) Information Obligation. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.
(h) Repurchase Limitation. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price. To the extent
required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations, any repurchase option contained in a Stock Award
granted prior to the Listing Date to a person who is not an Officer, Director or
Consultant shall be upon the terms described below:
(i) Fair Market Value. If the repurchase option gives the Company the
right to repurchase the shares upon termination of employment at not less than
the Fair Market Value of the shares to be purchased on the date of termination
of Continuous Service, then (i) the right to repurchase shall be exercised for
cash or cancellation of purchase money indebtedness for the shares within ninety
(90) days of termination of Continuous Service (or in the case of shares issued
upon exercise of Stock Awards after such date of termination, within ninety (90)
days after the date of the exercise) or such longer period as may be agreed to
by the Company and the Participant (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code regarding "qualified small
business stock") and (ii) the right terminates when the shares become publicly
traded.
(ii) Original Purchase Price. If the repurchase option gives the
Company the right to repurchase the shares upon termination of Continuous
Service at the original purchase price, then (i) the right to repurchase at the
original purchase price shall lapse at the rate of at
14.
<PAGE>
least twenty percent (20%) of the shares per year over five (5) years from the
date the Stock Award is granted (without respect to the date the Stock Award was
exercised or became exercisable) and (ii) the right to repurchase shall be
exercised for cash or cancellation of purchase money indebtedness for the shares
within ninety (90) days of termination of Continuous Service (or in the case of
shares issued upon exercise of Options after such date of termination, within
ninety (90) days after the date of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock").
(i) Cancellation and Re-Grant of Options.
(i) Authority to Reprice. The Board shall have the authority to
effect, at any time and from time to time, (i) the repricing of any outstanding
Options under the Plan and/or (ii) with the consent of any adversely affected
holders of Options, the cancellation of any outstanding Options under the Plan
and the grant in substitution therefor of new Options under the Plan covering
the same or different numbers of shares of Common Stock. The exercise price per
share shall be not less than that specified under the Plan for newly granted
Stock Awards. Notwithstanding the foregoing, the Board may grant an Option with
an exercise price lower than that set forth above if such Option is granted as
part of a transaction to which Section 424(a) of the Code applies.
(ii) Effect of Repricing under Section 162(m) of the Code. Shares
subject to an Option which is amended or canceled in order to set a lower
exercise price per share shall continue to be counted against the maximum award
of Options permitted to be granted pursuant to subsection 5(c). The repricing of
an Option under this subsection 10(i) resulting in a reduction of the exercise
price shall be deemed to be a cancellation of the original Option and the grant
of a substitute Option; in the event of such repricing, both the original and
the substituted Options shall be counted against the maximum awards of Options
permitted to be granted pursuant to subsection 5(c). The provisions of this
subsection 10(i)(b) shall be applicable only to the extent required by Section
162(m) of the Code.
11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Stock Award, without the receipt of consideration
by the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the maximum number of securities subject to award to any
person pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price per
share of stock subject to such outstanding Stock Awards. The Board, the
determination of which shall be final, binding and conclusive, shall make such
adjustments. (The conversion of any convertible securities of the Company shall
not be treated as a transaction "without receipt of consideration" by the
Company.)
15.
<PAGE>
(b) Change in Control--Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, then such Stock Awards shall be
terminated if not exercised (if applicable) prior to such event.
(c) Change in Control--Asset Sale, Merger, Consolidation or Reverse
Merger. In the event of (i) a sale of substantially all of the assets of the
Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation or (iii) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise, then any surviving
corporation or acquiring corporation shall assume any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the shareholders in the transaction
described in this subsection 11(c) for those outstanding under the Plan. In the
event any surviving corporation or acquiring corporation refuses to assume such
Stock Awards or to substitute similar stock awards for those outstanding under
the Plan, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall terminate if not exercised
(if applicable) prior to such event.
12. Amendment of the Plan and Stock Awards.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent shareholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) Shareholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for shareholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
16.
<PAGE>
(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the shareholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
14. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the shareholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
17.
<PAGE>
EXHIBIT 10.2
NOOSH, INC.
1998 EQUITY INCENTIVE PLAN
Stock Option Agreement
(Incentive and Nonstatutory Stock Options)
Pursuant to the Stock Option Grant Notice ("Grant Notice") and this Stock
Option Agreement, NOOSH, Inc. (the "Company") has granted you an option under
its 1998 Equity Incentive Plan (the "Plan") to purchase the number of shares of
the Company's Common Stock indicated in the Grant Notice at the exercise price
indicated in the Grant Notice. Defined terms not explicitly defined in this
Stock Option Agreement but defined in the Plan shall have the same definitions
as in the Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein, your option will
vest as provided in the Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.
2. Number of Shares and Exercise Price. The number of shares subject to
your option and your exercise price per share referenced in the Grant Notice may
be adjusted from time to time for Capitalization Adjustments, as provided in the
Plan.
3. Exercise. You option may be exercised only with respect to shares that
have vested in accordance with Section 8.
4. Method of Payment. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of the
exercise price in cash or by check or in any other manner permitted by the Grant
----------------------
Notice, which may include one or more of the following:
- ------
(a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board which,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock that either have been held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or were not acquired, directly or indirectly from the Company, that are
owned free and clear of any liens, claims, encumbrances or security interests,
and that are valued at Fair Market Value on the date of exercise. "Delivery" for
these
<PAGE>
purposes, in the sole discretion of the Company at the time your option is
exercised, shall include delivery to the Company of your attestation of
ownership of such shares of Common Stock in a form approved by the Company.
Notwithstanding the foregoing, your option may not be exercised by tender to the
Company of Common Stock to the extent such tender would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption
of the Company's stock.
5. Whole Shares. Your option may only be exercised for whole shares.
6. Securities Law Compliance. Notwithstanding anything to the contrary
contained herein, your option may not be exercised unless the shares issuable
upon exercise of your option are then registered under the Securities Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act. The exercise of your option must also comply with other
applicable laws and regulations governing the option, and the option may not be
exercised if the Company determines that the exercise would not be in material
compliance with such laws and regulations.
7. Term. The term of your option commences on the Date of Grant and
expires upon the earliest of the following:
(a) immediately upon the termination of your Continuous Service for
Cause;
(b) three (3) months after the termination of your Continuous Service
for any reason other than Cause, Disability or death, provided that if during
any part of such three- (3-) month period the option is not exercisable solely
because of the condition set forth in paragraph 6, the option shall not expire
until the earlier of the Expiration Date or until it shall have been exercisable
for an aggregate period of three (3) months after the termination of your
Continuous Service;
(c) twelve (12) months after the termination of your Continuous
Service due to Disability;
(d) eighteen (18) months after your death if you die either during
your Continuous Service or within three (3) months after your Continuous Service
terminates for reason other than Cause;
(e) the Expiration Date indicated in the Grant Notice; or
(f) the tenth (10th) anniversary of the Date of Grant.
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of the option and
ending on the day three (3) months before the date of the option's exercise, you
must be an employee of the Company or an Affiliate, except in the event of your
death or your Disability. The Company has provided for extended
<PAGE>
exercisability of your option under certain circumstances for your benefit, but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you provide services to the Company or an Affiliate as a
Consultant or Director or if you exercise your option more than three (3) months
after the date your employment with the Company or an Affiliate terminates.
8. Terms of Exercise.
(a) You may exercise the vested portion of your option during its
term by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax withholding
obligation of the Company arising by reason of (1) the exercise of your option,
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise, or (3) the disposition of shares acquired upon
such exercise.
(c) If your option is an incentive stock option, by exercising your
option you agree that you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of your option that occurs within two (2) years after the
date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.
(d) By exercising your option you agree that the Company (or a
representative of the underwriters) may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act, require that you not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any shares of
Common Stock or other securities of the Company held by you, for a period of
time specified by the underwriter(s) (not to exceed one hundred eighty (180)
days) following the effective date of the registration statement of the Company
filed under the Securities Act. You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) which are consistent with the foregoing or which are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to your Common Stock
until the end of such period.
9. Transferability. Your option is not transferable, except by will or by
the laws of descent and distribution, and is exercisable during your life only
by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
<PAGE>
10. Right of First Refusal/Right of Repurchase. Vested shares that are
received upon exercise of your option are subject to any right of first refusal
that may be described in the Company's bylaws in effect at such time the Company
elects to exercise its right. The Company's right of first refusal shall expire
on the date of the first registration of an equity security of the Company under
Section 12 of the Exchange Act. In addition, to the extent provided in the
Company's bylaws as amended from time to time, the Company shall have the right
to repurchase all or any part of the shares received pursuant to the exercise of
your option.
11. Option not a Service Contract. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or
an Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
12. Withholding Obligations.
(a) At the time your option is exercised, in whole or in part, or at
any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.
(b) Upon your request and subject to approval by the Company, in its
sole discretion, and compliance with any applicable conditions or restrictions
of law, the Company may withhold from fully vested shares of Common Stock
otherwise issuable to you upon the exercise of your option a number of whole
shares having a Fair Market Value, determined by the Company as of the date of
exercise, not in excess of the minimum amount of tax required to be withheld by
law. If the date of determination of any tax withholding obligation is deferred
to a date later than the date of exercise of your option, share withholding
pursuant to the preceding sentence shall not be permitted unless you make a
proper and timely election under Section 83(b) of the Code, covering the
aggregate number of shares of Common Stock acquired upon such exercise with
respect to which such determination is otherwise deferred, to accelerate the
determination of such tax withholding obligation to the date of exercise of your
option. Notwithstanding the filing of such election, shares shall be withheld
solely from fully vested shares of Common Stock determined as of the date of
exercise of your option that are otherwise issuable to you upon such exercise.
Any adverse consequences to you arising in connection with such share
withholding procedure shall be your sole responsibility.
(c) Your option is not exercisable unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no
<PAGE>
obligation to issue a certificate for such shares or release such shares from
any escrow provided for herein.
13. Notices. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the last address
you provided to the Company.
14. Governing Plan Document. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option, and
is further subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.
<PAGE>
EXHIBIT 10.3
Noosh, Inc.
2000 Equity Incentive Plan
Adopted January 13, 2000
Approved By Shareholders _______________, 2000
Termination Date: January 12, 2010
1. Purposes.
(a) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) Available Stock Awards. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) General Purpose. The Company, by means of the Plan, seeks to retain the
services of the group of persons eligible to receive Stock Awards, to secure and
retain the services of new members of this group and to provide incentives for
such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. Definitions.
(a) "Accountants" means the independent public accountants of the Company.
(b) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means the occurrence of any of the following (and only the
following): (i) conviction of the terminated Participant of any felony
involving fraud or act of dishonesty against the Company or its Affiliates; (ii)
conduct by the terminated Participant which, based upon good faith and
reasonable factual investigation and determination of the Company (or, if the
terminated Participant is an Officer, of the Board), demonstrates gross
unfitness to serve; or (iii) intentional, material violation by the terminated
Participant of any statutory or fiduciary duty of the terminated Participant to
the Company or its Affiliates. In addition, if the terminated Participant is
not an Officer, Cause also shall include poor performance of the terminated
Participant's services for the Company or its Affiliates as determined by the
Company following (A) written notice to the Participant describing the nature of
such deficiency and (b) the
1
<PAGE>
Participant's failure to cure such deficiency within thirty (30) days following
receipt of the such written notice.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(g) "Common Stock" means the common stock of the Company.
(h) "Company" means Noosh, Inc., a Delaware corporation.
(i) "Constructive Termination" means the occurrence of any of the following
events or conditions: (i) (A) a change in the Participant's status, title,
position or responsibilities (including reporting responsibilities) which
represents an adverse change from the Participant's status, title, position or
responsibilities as in effect at any time within ninety (90) days preceding the
date of a Change in Control (as defined in subsection 11(f)) or at any time
thereafter; (B) the assignment to the Participant of any duties or
responsibilities which are inconsistent with the Participant's status, title,
position or responsibilities as in effect at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter; or (C) any
removal of the Participant from or failure to reappoint or reelect the
Participant to any of such offices or positions, except in connection with the
termination of the Participant's Continuous Service for Cause, as a result of
the Participant's Disability or death or by the Participant other than as a
result of Constructive Termination; (ii) a reduction in the Participant's annual
base compensation or any failure to pay the Participant any compensation or
benefits to which the Participant is entitled within five (5) days of the date
due; (iii) the Company's requiring the Participant to relocate to any place
outside a twenty-five (25) mile radius of the Participant's current work site,
except for reasonably required travel on the business of the Company or its
Affiliates which is not materially greater than such travel requirements prior
to the Change in Control; (iv) the failure by the Company to (A) continue in
effect (without reduction in benefit level and/or reward opportunities) any
material compensation or employee benefit plan in which the Participant was
participating at any time within ninety (90) days preceding the date of a Change
in Control or at any time thereafter, unless such plan is replaced with a plan
that provides substantially equivalent compensation or benefits to the
Participant, or (B) provide the Participant with compensation and benefits, in
the aggregate, at least equal (in terms of benefit levels and/or reward
opportunities) to those provided for under each other employee benefit plan,
program and practice in which the Participant was participating at any time
within ninety (90) days preceding the date of a Change in Control or at any time
thereafter; (v) any material breach by the Company of any provision of an
agreement between the Company and the Participant, whether pursuant to this Plan
or otherwise, other than a breach which is cured by the Company within fifteen
(15) days following notice by the Participant of such breach; or (vi) the
failure of the Company to obtain an agreement, satisfactory to the Participant,
from any successors and assigns to assume and agree to perform the obligations
created under this Plan.
(j) "Consultant" means any person, including an advisor, (i) engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for
2
<PAGE>
such services or (ii) who is a member of the Board of Directors of an Affiliate.
However, the term "Consultant" shall not include either Directors who are not
compensated by the Company for their services as Directors or Directors who are
merely paid a director's fee by the Company for their services as Directors.
(k) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(l) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(m) "Director" means a member of the Board of Directors of the Company.
(n) "Disability" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(o) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(q) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
3
<PAGE>
(r) "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.
(s) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(t) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(u) "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.
(v) "Option" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
(w) "Option Agreement" means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(x) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(y) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(z) "Participant" means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Stock
Award.
(aa) "Plan" means this Noosh, Inc. 2000 Equity Incentive Plan.
(bb) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
4
<PAGE>
(cc) "Securities Act" means the Securities Act of 1933, as amended.
(dd) "Stock Award" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(ee) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(ff) "Ten Percent Shareholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) Powers of Board. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how each Stock Award shall be
granted; what type or combination of types of Stock Award shall be granted; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive Common Stock
pursuant to a Stock Award; and the number of shares of Common Stock with respect
to which a Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the
5
<PAGE>
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
(ii) Committee Composition when Common Stock is Publicly Traded. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more Non-
Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not Non-
Employee Directors the authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Exchange Act.
(d) Effect of Board's Decision. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate six million
(6,000,000) shares of Common Stock, plus an annual increase on the date of each
annual stockholders' meeting, beginning with the annual stockholders' meeting in
2001, equal to the least of (1) four and one half percent (4.5 %) of the total
shares of the Company's Common Stock outstanding (on a fully diluted basis) as
of the date of annual stockholders' meeting; (2) two million (2,000,000) shares
of Common Stock; or (3) such smaller number of shares of Common Stock as
determined by the Board.
(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such Stock
Award shall revert to and again become available for issuance under the Plan.
(c) Source of Shares. The shares of Common Stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.
6
<PAGE>
5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.
(b) Ten Percent Shareholders. A Ten Percent Shareholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Common
Stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Section 162(m) Limitation. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than five hundred thousand
(500,000) shares of Common Stock during any calendar year.
(d) Consultants.
(i) A Consultant shall not be eligible for the grant of a Stock Award
if, at the time of grant, a Form S-8 Registration Statement under the Securities
Act ("Form S-8") is not available to register either the offer or the sale of
the Company's securities to such Consultant because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under
the Securities Act in order to comply with the requirements of the Securities
Act, if applicable, and (ii) that such grant complies with the securities laws
of all other relevant jurisdictions.
(ii) Form S-8 generally is available to consultants and advisors only
if (i) they are natural persons; (ii) they provide bona fide services to the
issuer, its parents, its majority-owned subsidiaries or majority-owned
subsidiaries of the issuer's parent; and (iii) the services are not in
connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
7
<PAGE>
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Shareholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Shareholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may
be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) Exercise Price of a Nonstatutory Stock Option. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the Common Stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(d) Consideration. The purchase price of Common Stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board. Unless otherwise
specifically provided in the Option, the purchase price of Common Stock acquired
pursuant to an Option that is paid by delivery to the Company of other Common
Stock acquired, directly or indirectly from the Company, shall be paid only by
shares of the Common Stock of the Company that have been held for more than six
(6) months (or such longer or shorter period of time required to avoid a charge
to earnings for financial accounting purposes). At any time that the Company is
incorporated in Delaware, payment of the Common Stock's "par value," as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form
8
<PAGE>
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option Agreement. If
the Nonstatutory Stock Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified in the Option Agreement, the Option
shall terminate.
(i) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(j) Disability of Optionholder. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement) or (ii) the expiration of the term of the Option as set
forth in the Option
9
<PAGE>
Agreement. If, after termination, the Optionholder does not exercise his or her
Option within the time specified herein, the Option shall terminate.
(k) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement) or (2) the expiration of the term of such Option as set
forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.
(l) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Any unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate. The Company will not exercise its repurchase
option until at least six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes) have
elapsed following exercise of the Option unless the Board otherwise specifically
provides in the Option.
(m) Re-Load Options.
(i) Without in any way limiting the authority of the Board to make or
not to make grants of Options hereunder, the Board shall have the authority (but
not an obligation) to include as part of any Option Agreement a provision
entitling the Optionholder to a further Option (a "Re-Load Option") in the event
the Optionholder exercises the Option evidenced by the Option Agreement, in
whole or in part, by surrendering other shares of Common Stock in accordance
with this Plan and the terms and conditions of the Option Agreement. Unless
otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).
(ii) Any such Re-Load Option shall (1) provide for a number of shares
of Common Stock equal to the number of shares of Common Stock surrendered as
part or all of the exercise price of such Option; (2) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
10
<PAGE>
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.
(iii) Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) Consideration. A stock bonus may be awarded in consideration for
past services actually rendered to the Company or an Affiliate for its benefit.
(ii) Vesting. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
(iii) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.
(iv) Transferability. Rights to acquire shares of Common Stock under
the stock bonus agreement shall be transferable by the Participant only upon
such terms and conditions as are set forth in the stock bonus agreement, as the
Board shall determine in its discretion, so long as Common Stock awarded under
the stock bonus agreement remains subject to the terms of the stock bonus
agreement.
(b) Restricted Stock Awards. Each restricted stock purchase agreement shall
be in such form and shall contain such terms and conditions as the Board shall
deem appropriate. The terms and conditions of the restricted stock purchase
agreements may change from time to time, and the terms and conditions of
separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
11
<PAGE>
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price shall
not be less than eighty-five percent (85%) of the Common Stock's Fair Market
Value on the date such award is made or at the time the purchase is consummated.
(ii) Consideration. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment.
(iii) Vesting. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.
(iv) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(v) Transferability. Rights to acquire shares of Common Stock under
the restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the
12
<PAGE>
Company shall be relieved from any liability for failure to issue and sell
Common Stock upon exercise of such Stock Awards unless and until such authority
is obtained.
9. Use of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Shareholder Rights. No Participant shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares of Common
Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for
13
<PAGE>
the Participant's own account and not with any present intention of selling or
otherwise distributing the Common Stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (1) the
issuance of the shares of Common Stock upon the exercise or acquisition of
Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common
Stock.
(f) Withholding Obligations. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of Common Stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.
11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the Common Stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of Common Stock subject to such outstanding Stock Awards.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)
(b) Change in Control--Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.
(c) Change in Control--Asset Sale, Merger, Consolidation or Reverse Merger.
In the event of (i) a sale, lease or other disposition of all or substantially
all of the assets of the Company, (ii) a consolidation or merger of the Company
with or into any other corporation or
14
<PAGE>
other entity or person, or any other corporate reorganization, in which the
shareholders of the Company immediately prior to such consolidation, merger or
reorganization, own less than 50% of the Company's outstanding voting power of
the surviving entity (or its parent) following the consolidation, merger or
reorganization or (iii) any transaction (or series of related transactions
involving a person or entity, or a group of affiliated persons or entities) in
which in excess of fifty percent (50%) of the Company's outstanding voting power
is transferred, then any surviving corporation or acquiring corporation shall
assume any Stock Awards outstanding under the Plan or shall substitute similar
stock awards (including an award to acquire the same consideration paid to the
shareholders in the transaction described in this subsection 11(c) for those
outstanding under the Plan. In the event any surviving corporation or acquiring
corporation refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then with respect to Stock Awards
held by Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated in full, and the Stock Awards shall
terminate if not exercised (if applicable) at or prior to such event. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event.
(d) Change in Control--Securities Acquisition. In the event of an
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or an Affiliate) of the beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of Directors and provided
that such acquisition is not a result of, and does not constitute a transaction
described in, subsection 11(c) hereof, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, the vesting of such
Stock Awards (and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full.
(e) Change in Control--Change in Incumbent Board. In the event that the
individuals who, as of the date of the adoption of this Plan, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least fifty
percent (50%) of the Board and provided that such change in the Incumbent Board
does not occur solely as a result of and/or following a transaction described in
subsection 11(c) hereof, then with respect to Stock Awards held by persons whose
Continuous Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full. If the election, or nomination for election, by the
Company's shareholders of any new Director was approved by a vote of at least
fifty percent (50%) of the Incumbent Board, such new Director shall be
considered as a member of the Incumbent Board.
(f) Special Acceleration Provisions. Notwithstanding any other provisions
of this Plan to the contrary, if (i) a Change in Control (as such term is
defined below) occurs and (ii) within one (1) month prior to the date of such
Change in Control or thirteen (13) months after the date of such Change in
Control the Continuous Service of a Participant terminates due to an
15
<PAGE>
involuntary termination (not including death or Disability) without Cause or due
to a Constructive Termination, then the vesting and exercisability of all Stock
Awards held by such Participant shall be accelerated in full or any
reacquisition or repurchase rights held by the Company with respect to a Stock
Award shall lapse in full, as appropriate; provided, however, that if such
potential acceleration of the vesting and exercisability of Stock Awards (or
lapse of reacquisition or repurchase rights held by the Company with respect to
Stock Awards) would cause a contemplated Change in Control transaction that
would otherwise be eligible to be accounted for as a "pooling-of-interests"
transaction to become ineligible for such accounting treatment under generally
accepted accounting principles as determined by the Accountants prior to the
Change of Control, such acceleration shall not occur.
For purposes of this subsection 11(f) only, Change in Control means: (i) a
dissolution or liquidation of the Company; (ii) a sale of all or substantially
all of the assets of the Company; or (iii) a merger or consolidation in which
the Company is not the surviving corporation and in which beneficial ownership
of securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of Directors has changed;
(iv) a reverse merger in which the Company is the surviving corporation but the
shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, and in which beneficial ownership of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of Directors has changed; (v) an
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or subsidiary of the Company or other entity controlled by the Company)
of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of Directors; or (vi) in the event that the individuals
who, as of the date of adoption of the Plan, are members of the Company's Board
(the "Incumbent Board"), cease for any reason to constitute at least fifty
percent (50%) of the Board. (If the election, or nomination for election by the
Company's stockholders, of any new Director is approved by a vote of at least
fifty percent (50%) of the Incumbent Board, such new Director shall be
considered to be a member of the Incumbent Board in the future.)
(g) Parachute Payments. In the event that the acceleration of the vesting
and exercisability of the Stock Awards and/or the lapse of reacquisition or
repurchase rights with respect to Stock Awards provided for in subsection 11(f)
and benefits otherwise payable to a Participant (i) constitute "parachute
payments" within the meaning of Section 280G of the Code, or any comparable
successor provisions, and (ii) but for this subsection would be subject to the
excise tax imposed by Section 4999 of the Code, or any comparable successor
provisions (the "Excise Tax"), then such Participant's benefits hereunder shall
be either
(i) provided to such Participant in full, or
16
<PAGE>
(ii) provided to such Participant as to such lesser extent which
would result in no portion of such benefits being subject to
the Excise Tax,
whichever of the foregoing amounts, when taking into account applicable federal,
state, local and foreign income and employment taxes, the Excise Tax, and any
other applicable taxes, results in the receipt by such Participant, on an after-
tax basis, of the greatest amount of benefits, notwithstanding that all or some
portion of such benefits may be taxable under the Excise Tax. Unless the
Company and such Participant otherwise agree in writing, any determination
required under this subsection shall be made in writing in good faith by the
Accountants. In the event of a reduction of benefits hereunder, the Participant
shall be given the choice of which benefits to reduce. For purposes of making
the calculations required by this subsection, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of the
Code, and other applicable legal authority. The Company and the Participant
shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
subsection. The Company shall bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this subsection.
If, notwithstanding any reduction described in this subsection, the
IRS determines that the Participant is liable for the Excise Tax as a result of
the receipt of the payment of benefits as described above, then the Participant
shall be obligated to pay back to the Company, within thirty (30) days after a
final IRS determination or in the event that the Participant challenges the
final IRS determination, a final judicial determination, a portion of the
payment equal to the "Repayment Amount." The Repayment Amount with respect to
the payment of benefits shall be the smallest such amount, if any, as shall be
required to be paid to the Company so that the Participant's net after-tax
proceeds with respect to any payment of benefits (after taking into account the
payment of the Excise Tax and all other applicable taxes imposed on such
payment) shall be maximized. The Repayment Amount with respect to the payment
of benefits shall be zero if a Repayment Amount of more than zero would not
result in the Participant's net after-tax proceeds with respect to the payment
of such benefits being maximized. If the Excise Tax is not eliminated pursuant
to this paragraph, the Participant shall pay the Excise Tax.
Notwithstanding any other provision of this subsection 11(g), if (i)
there is a reduction in the payment of benefits as described in this subsection,
(ii) the IRS later determines that the Participant is liable for the Excise Tax,
the payment of which would result in the maximization of the Participant's net
after-tax proceeds (calculated as if the Participant's benefits had not
previously been reduced), and (iii) the Participant pays the Excise Tax, then
the Company shall pay to the Participant those benefits which were reduced
pursuant to this subsection contemporaneously or as soon as administratively
possible after the Participant pays the Excise Tax so that the Participant's net
after-tax proceeds with respect to the payment of benefits is maximized.
17
<PAGE>
12. Amendment of the Plan and Stock Awards.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent shareholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) Shareholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for shareholder approval, including, but not limited
to, amendments to the Plan intended to satisfy the requirements of Section
162(m) of the Code and the regulations thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the shareholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
14. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been
18
<PAGE>
approved by the shareholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
15. Choice of Law.
The law of the State of California shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.
19
<PAGE>
EXHIBIT 10.3
Noosh, Inc.
2000 Equity Incentive Plan
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this Stock
Option Agreement, Noosh, Inc. (the "Company") has granted you an option under
its 2000 Equity Incentive Plan (the "Plan") to purchase the number of shares of
the Company's Common Stock indicated in your Grant Notice at the exercise price
indicated in your Grant Notice. Defined terms not explicitly defined in this
Stock Option Agreement but defined in the Plan shall have the same definitions
as in the Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein, your option will
vest as provided in your Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.
2. Number of Shares and Exercise Price. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. Exercise prior to Vesting ("Early Exercise"). If permitted in your
Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise" of
your option is permitted) and subject to the provisions of your option, you may
elect at any time that is both (i) during the period of your Continuous Service
and (ii) during the term of your option, to exercise all or part of your option,
including the nonvested portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover first
vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments that
have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company's form of Early
Exercise Stock Purchase Agreement;
(c) you shall enter into the Company's form of Early Exercise Stock
Purchase Agreement with a vesting schedule that will result in the same vesting
as if no early exercise had occurred; and
(d) if your option is an incentive stock option, then, as provided in
the Plan, to the extent that the aggregate Fair Market Value (determined at the
time of grant) of the shares of Common Stock with respect to which your option
plus all other incentive stock options you hold are exercisable for the first
time by you during any calendar year (under all plans of the
<PAGE>
Company and its Affiliates) exceeds one hundred thousand dollars ($100,000),
your option(s) or portions thereof that exceed such limit (according to the
order in which they were granted) shall be treated as nonstatutory stock
options.
4. Method of Payment. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of
the exercise price in cash or by check or in any other manner permitted by your
Grant Notice, which may include one or more of the following:
(a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.
(c) Pursuant to the following deferred payment alternative:
(i) Not less than one hundred percent (100%) of the aggregate
exercise price, plus accrued interest, shall be due four (4) years from date of
exercise or, at the Company's election, upon termination of your Continuous
Service.
(ii) Interest shall be compounded at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any portion of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
(iii) At any time that the Company is incorporated in Delaware,
payment of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall be made in cash and not by deferred payment.
(iv) In order to elect the deferred payment alternative, you
must, as a part of your written notice of exercise, give notice of the election
of this payment alternative and,
<PAGE>
in order to secure the payment of the deferred exercise price to the Company
hereunder, if the Company so requests, you must tender to the Company a
promissory note and a security agreement covering the purchased shares of Common
Stock, both in form and substance satisfactory to the Company, or such other or
additional documentation as the Company may request.
5. Whole Shares. You may exercise your option only for whole shares of
Common Stock.
6. Securities Law Compliance. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also
comply with other applicable laws and regulations governing your option, and you
may not exercise your option if the Company determines that such exercise would
not be in material compliance with such laws and regulations.
7. Term. You may not exercise your option before the commencement of its
term or after its term expires. The term of your option commences on the Date
of Grant and expires upon the earliest of the following:
(a) three (3) months after the termination of your Continuous Service
for any reason other than your Disability or death, provided that if during any
part of such three (3) month period your option is not exercisable solely
because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;
(b) twelve (12) months after the termination of your Continuous
Service due to your Disability;
(c) eighteen (18) months after your death if you die either during
your Continuous Service or within three (3) months after your Continuous Service
terminates;
(d) the Expiration Date indicated in your Grant Notice; or
(e) the day before the tenth (10th) anniversary of the Date of Grant.
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of your option
and ending on the day three (3) months before the date of your option's
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability. The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you continue to provide services to
<PAGE>
the Company or an Affiliate as a Consultant or Director after your employment
terminates or if you otherwise exercise your option more than three (3) months
after the date your employment terminates.
8. Exercise.
(a) You may exercise the vested portion of your option (and the
unvested portion of your option if your Grant Notice so permits) during its term
by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.
(c) If your option is an incentive stock option, by exercising your
option you agree that you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of your option that occurs within two (2) years after the
date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.
9. Transferability. Your option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
10. Right of Repurchase. To the extent provided in the Company's bylaws
as amended from time to time, the Company shall have the right to repurchase all
or any part of the shares of Common Stock you acquire pursuant to the exercise
of your option.
11. Option not a Service Contract. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or
an Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
<PAGE>
12. Withholding Obligations.
(a) At the time you exercise your option, in whole or in part, or at
any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.
(b) Upon your request and subject to approval by the Company, in its
sole discretion, and compliance with any applicable conditions or restrictions
of law, the Company may withhold from fully vested shares of Common Stock
otherwise issuable to you upon the exercise of your option a number of whole
shares of Common Stock having a Fair Market Value, determined by the Company as
of the date of exercise, not in excess of the minimum amount of tax required to
be withheld by law. If the date of determination of any tax withholding
obligation is deferred to a date later than the date of exercise of your option,
share withholding pursuant to the preceding sentence shall not be permitted
unless you make a proper and timely election under Section 83(b) of the Code,
covering the aggregate number of shares of Common Stock acquired upon such
exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of
Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein.
13. Notices. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
14. Governing Plan Document. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option, and
is further subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.
<PAGE>
EXHIBIT 10.4
Noosh, Inc.
2000 Employee Stock Purchase Plan
Adopted by Board of Directors January 13, 2000
Approved by Stockholders ___________, 2000
Effective Date: _______________, 2000
Termination Date: January 12,2020
1. Purpose.
(a) The purpose of the Plan is to provide a means by which Employees of the
Company and certain designated Affiliates may be given an opportunity to
purchase Shares of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of such
Employees, to secure and retain the services of new Employees and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
(c) The Company intends that the Rights to purchase Shares granted under
the Plan be considered options issued under an "employee stock purchase plan,"
as that term is defined in Section 423(b) of the Code.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(d) "Committee" means a committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(e) "Company" means Noosh, Inc., a Delaware corporation.
(f) "Director" means a member of the Board.
(g) "Eligible Employee" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering.
(h) "Employee" means any person, including Officers and Directors, employed
by the Company or an Affiliate of the Company. Neither service as a Director nor
payment of a director's fee shall be sufficient to constitute "employment" by
the Company or the Affiliate.
1.
<PAGE>
(i) "Employee Stock Purchase Plan" means a plan that grants rights intended
to be options issued under an "employee stock purchase plan," as that term is
defined in Section 423(b) of the Code.
(j) "Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.
(k) "Fair Market Value" means the value of a security, as determined in
good faith by the Board. Unless otherwise provided in the Offering, if the
security is listed on any established stock exchange or traded on the Nasdaq
National Market or the Nasdaq SmallCap Market, the Fair Market Value of the
security shall be the closing sales price (rounded up where necessary to the
nearest whole cent) for such security (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the relevant security of the Company) on the
trading day which is coincident with the relevant determination date, as
reported in The Wall Street Journal or such other source as the Board deems
reliable.
(l) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(m) "Offering" means the grant of Rights to purchase Shares under the Plan
to Eligible Employees.
(n) "Offering Date" means a date selected by the Board for an Offering to
commence.
(o) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(p) "Participant" means an Eligible Employee who holds an outstanding Right
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Right granted under the Plan.
2.
<PAGE>
(q) "Plan" means this 2000 Employee Stock Purchase Plan.
(r) "Purchase Date" means one or more dates established by the Board during
an Offering on which Rights granted under the Plan shall be exercised and
purchases of Shares carried out in accordance with such Offering.
(s) "Right" means an option to purchase Shares granted pursuant to the
Plan.
(t) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(u) "Securities Act" means the United States Securities Act of 1933, as
amended.
(v) "Share" means a share of the common stock of the Company.
3. Administration.
(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c). Whether
or not the Board has delegated administration, the Board shall have the final
power to determine all questions of policy and expediency that may arise in the
administration of the Plan.
(b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine when and how Rights to purchase Shares shall be
granted and the provisions of each Offering of such Rights (which need not be
identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and Rights granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(iv) To amend the Plan on the terms of an Offering authorized under
the Plan as provided in Section 14.
(v) Generally, to exercise such powers and to perform such acts as it
deems necessary or expedient to promote the best interests of the Company and
its Affiliates and to carry out the intent that the Plan be treated as an
Employee Stock Purchase Plan.
(c) The Board may delegate administration of the Plan to a Committee of the
Board composed of two (2) or more members, all of the members of which Committee
may be, in the discretion of the Board, Non-Employee Directors and/or Outside
Directors. If administration is
3.
<PAGE>
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee of one (1) or more Directors,
including Non-Employee Directors and/or Outside Directors, any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(d) All determinations, interpretations and constructions made by the Board
in good faith shall not be subject to review by any person and shall be final,
binding and conclusive on all persons.
4. Shares Subject to the Plan.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in securities, the Shares that may be sold pursuant to Rights granted
under the Plan shall not exceed in the aggregate six hundred thousand (600,000)
Shares, plus an annual increase on the date of each annual stockholders'
meeting, beginning with the annual stockholders' meeting in 2001, equal to the
least of (1) one and one half percent (1.5 %) of the total Shares outstanding
(on a fully diluted basis) as of the date of annual stockholders' meeting; (2)
six hundred thousand (600,000) Shares; or (3) such smaller number of Shares as
determined by the Board. If any Right granted under the Plan shall for any
reason terminate without having been exercised, the Shares not purchased under
such Right shall again become available for the Plan.
(b) The Shares subject to the Plan may be unissued Shares or Shares that
have been bought on the open market at prevailing market prices or otherwise.
5. Grant of Rights; Offering.
(a) The Board may from time to time grant or provide for the grant of
Rights to purchase Shares of the Company under the Plan to Eligible Employees in
an Offering on an Offering Date or Offering Dates selected by the Board. Each
Offering shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate, which shall comply with the requirements of
Section 423(b)(5) of the Code that all Employees granted Rights to purchase
Shares under the Plan shall have the same rights and privileges. The terms and
conditions of an Offering shall be incorporated by reference into the Plan and
treated as part of the Plan. The provisions of separate Offerings need not be
identical, but each Offering shall include (through incorporation of the
provisions of this Plan by reference in the document comprising the Offering or
otherwise) the period during which the Offering shall be effective, which period
shall not exceed twenty-seven (27) months beginning with the Offering Date, and
the substance of the provisions contained in Sections 6 through 9, inclusive.
(b) If a Participant has more than one Right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (i) each agreement or notice delivered by that Participant will be
deemed to apply to all of his or her Rights under the
4.
<PAGE>
Plan, and (ii) an earlier-granted Right (or a Right with a lower exercise price,
if two Rights have identical grant dates) will be exercised to the fullest
possible extent before a later-granted Right (or a Right with a higher exercise
price if two Rights have identical grant dates) will be exercised.
6. Eligibility.
(a) Rights may be granted only to Employees of the Company or, as the Board
may designate as provided in subsection 3(b), to Employees of an Affiliate.
Except as provided in subsection 6(b), an Employee shall not be eligible to be
granted Rights under the Plan unless, on the Offering Date, such Employee has
been in the employ of the Company or the Affiliate, as the case may be, for such
continuous period preceding such grant as the Board may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no Employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan unless, on the Offering Date, such Employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee will, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Right under that
Offering, which Right shall thereafter be deemed to be a part of that Offering.
Such Right shall have the same characteristics as any Rights originally granted
under that Offering, as described herein, except that:
(i) the date on which such Right is granted shall be the "Offering
Date" of such Right for all purposes, including determination of the exercise
price of such Right;
(ii) the period of the Offering with respect to such Right shall begin
on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she will not receive any Right under that Offering.
(c) No Employee shall be eligible for the grant of any Rights under the
Plan if, immediately after any such Rights are granted, such Employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subsection 6(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any Employee, and stock which such Employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such Employee.
(d) An Eligible Employee may be granted Rights under the Plan only if such
Rights, together with any other Rights granted under all Employee Stock Purchase
Plans of the Company
5.
<PAGE>
and any Affiliates, as specified by Section 423(b)(8) of the Code, do not permit
such Eligible Employee's rights to purchase Shares of the Company or any
Affiliate to accrue at a rate which exceeds twenty five thousand dollars
($25,000) of the fair market value of such Shares (determined at the time such
Rights are granted) for each calendar year in which such Rights are outstanding
at any time.
(e) The Board may provide in an Offering that Employees who are highly
compensated Employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
7. Rights; Purchase Price.
(a) On each Offering Date, each Eligible Employee, pursuant to an Offering
made under the Plan, shall be granted the Right to purchase up to the number of
Shares purchasable with a percentage designated by the Board or the Committee
not exceeding fifteen percent (15%) of such Employee's Earnings (as defined by
the Board in subparagraph 8(a)) during the period which begins on the Offering
Date (or such later date as the Board determines for a particular Offering) and
ends on the date stated in the Offering, which date shall be no later than the
end of the Offering. The Board shall establish one or more Purchase Dates
during an Offering on which Rights granted under the Plan shall be exercised and
purchases of Shares carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board may
specify a maximum amount of Shares that may be purchased by any Participant as
well as a maximum aggregate amount of Shares that may be purchased by all
Participants pursuant to such Offering. In addition, in connection with each
Offering that contains more than one Purchase Date, the Board may specify a
maximum aggregate amount of Shares which may be purchased by all Participants on
any given Purchase Date under the Offering. If the aggregate purchase of Shares
upon exercise of Rights granted under the Offering would exceed any such maximum
aggregate amount, the Board shall make a pro rata allocation of the Shares
available in as nearly a uniform manner as shall be practicable and as it shall
deem to be equitable.
(c) The purchase price of Shares acquired pursuant to Rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the Shares on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the Shares on the Purchase Date.
8. Participation; Withdrawal; Termination.
(a) An Eligible Employee may become a Participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll
6.
<PAGE>
deductions of up to the maximum percentage specified by the Board of such
Employee's Earnings during the Offering. "Earnings" is defined as an employee's
regular salary or wages (including amounts thereof elected to be deferred by the
employee, that would otherwise have been paid, under any arrangement established
by the Company that is intended to comply with Section 125, Section 401(k),
Section 402(e)(3), Section 402(h) or section 403(b) of the Code, and also
including any deferrals under a non-qualified deferred compensation plan or
arrangement established by the Company), and also, if determined by the Board or
the Committee and set forth in the terms of the Offering, may include any or all
of the following: (i) overtime pay, (ii) commissions, (iii) bonuses, incentive
pay, profit sharing and other remuneration paid directly to the employee, and/or
(iv) other items of remuneration not specifically excluded pursuant to the Plan.
Earnings shall not include the cost of employee benefits paid for by the Company
or an Affiliate, education or tuition reimbursements, imputed income arising
under any group insurance or benefit program, traveling expenses, business and
moving expense reimbursements, income received in connection with stock options,
contributions made by the Company or an Affiliate under any employee benefit
plan, and similar items of compensation, as determined by the Board or the
Committee. Notwithstanding the foregoing, the Board or Committee may modify the
definition of "Earnings" with respect to one or more Offerings as the Board or
Committee determines appropriate. The payroll deductions made for each
Participant shall be credited to a bookkeeping account for such Participant
under the Plan and either may be deposited with the general funds of the Company
or may be deposited in a separate account in the name of, and for the benefit
of, such Participant with a financial institution designated by the Company. To
the extent provided in the Offering, a Participant may reduce (including to
zero) or increase such payroll deductions. To the extent provided in the
Offering, a Participant may begin such payroll deductions after the beginning of
the Offering. A Participant may make additional payments into his or her account
only if specifically provided for in the Offering and only if the Participant
has not already had the maximum permitted amount withheld during the Offering.
(b) At any time during an Offering, a Participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board in the Offering. Upon such withdrawal from the
Offering by a Participant, the Company shall distribute to such Participant all
of his or her accumulated payroll deductions (reduced to the extent, if any,
such deductions have been used to acquire Shares for the Participant) under the
Offering, without interest unless otherwise specified in the Offering, and such
Participant's interest in that Offering shall be automatically terminated. A
Participant's withdrawal from an Offering will have no effect upon such
Participant's eligibility to participate in any other Offerings under the Plan
but such Participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating Employee's employment with the
Company or a designated Affiliate for any reason (subject to any post-employment
participation period required by law) or other lack of eligibility. The Company
shall distribute to such terminated Employee
7.
<PAGE>
all of his or her accumulated payroll deductions (reduced to the extent, if any,
such deductions have been used to acquire Shares for the terminated Employee)
under the Offering, without interest unless otherwise specified in the Offering.
If the accumulated payroll deductions have been deposited with the Company's
general funds, then the distribution shall be made from the general funds of the
Company, without interest. If the accumulated payroll deductions have been
deposited in a separate account with a financial institution as provided in
subsection 8(a), then the distribution shall be made from the separate account,
without interest unless otherwise specified in the Offering.
(d) Rights granted under the Plan shall not be transferable by a
Participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in Section 15 and, otherwise during his
or her lifetime, shall be exercisable only by the person to whom such Rights are
granted.
9. Exercise.
(a) On each Purchase Date specified therefor in the relevant Offering, each
Participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of Shares up to the maximum amount of Shares
permitted pursuant to the terms of the Plan and the applicable Offering, at the
purchase price specified in the Offering. No fractional Shares shall be issued
upon the exercise of Rights granted under the Plan unless specifically provided
for in the Offering. The amount, if any, of accumulated payroll deductions
remaining in each participant's account after the purchase of shares which is
less than the amount required to purchase one share of Common Stock on the final
Purchase Date of an Offering shall be held in each such participant's account
for the purchase of shares under the next Offering under the Plan, unless such
participant withdraws from such next Offering, as provided in subparagraph 8(b),
or is no longer eligible to be granted rights under the Plan, as provided in
paragraph 6, in which case such amount shall be distributed to the participant
after such final Purchase Date, without interest. The amount, if any, of
accumulated payroll deductions remaining in any participant's account after the
purchase of shares which is equal to the amount required to purchase one or more
whole shares of Common Stock on the final Purchase Date of an Offering shall be
distributed in full to the participant after such Purchase Date, without
interest.
(b) No Rights granted under the Plan may be exercised to any extent unless
the Shares to be issued upon such exercise under the Plan (including Rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act and the Plan is in material compliance with all applicable
state, foreign and other securities and other laws applicable to the Plan. If on
a Purchase Date in any Offering hereunder the Plan is not so registered or in
such compliance, no Rights granted under the Plan or any Offering shall be
exercised on such Purchase Date, and the Purchase Date shall be delayed until
the Plan is subject to such an effective registration statement and such
compliance, except that the Purchase Date shall not be delayed more than twelve
(12) months and the Purchase Date shall in no event be more than twenty-seven
(27) months from the Offering Date. If, on the Purchase Date of any Offering
hereunder, as delayed to the maximum extent permissible, the Plan is not
registered and
8.
<PAGE>
in such compliance, no Rights granted under the Plan or any Offering shall be
exercised and all payroll deductions accumulated during the Offering (reduced to
the extent, if any, such deductions have been used to acquire Shares) shall be
distributed to the Participants, without interest unless otherwise specified in
the Offering. If the accumulated payroll deductions have been deposited with the
Company's general funds, then the distribution shall be made from the general
funds of the Company, without interest. If the accumulated payroll deductions
have been deposited in a separate account with a financial institution as
provided in subsection 8(a), then the distribution shall be made from the
separate account, without interest unless otherwise specified in the Offering.
10. Covenants of the Company.
(a) During the terms of the Rights granted under the Plan, the Company
shall ensure that the amount of Shares required to satisfy such Rights are
available.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell Shares upon exercise of the
Rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Shares under the Plan, the Company shall be relieved from any liability for
failure to issue and sell Shares upon exercise of such Rights unless and until
such authority is obtained.
11. Use of Proceeds from Shares.
Proceeds from the sale of Shares pursuant to Rights granted under the Plan
shall constitute general funds of the Company.
12. Rights as a Stockholder.
A Participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, Shares subject to Rights granted under
the Plan unless and until the Participant's Shares acquired upon exercise of
Rights under the Plan are recorded in the books of the Company (or its transfer
agent).
13. Adjustments upon Changes in Securities.
(a) If any change is made in the Shares subject to the Plan, or subject to
any Right, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the type of security and
initial maximum number of Shares subject to the Plan pursuant to subsection
4(a), the additional Shares subject to the Plan and the overall maximum of
Shares pursuant to subsection 4(b), and the outstanding Rights will be
appropriately adjusted in the type of security, number of shares, and purchase
9.
<PAGE>
limits of such outstanding Rights. The Board shall make such adjustments, and
its determination shall be final, binding and conclusive. (The conversion of
any convertible securities of the Company shall not be treated as a transaction
that does not involve the receipt of consideration by the Company.)
(b) Effective as of the first Offering, in the event of a Change in
Control, then, as determined by the Board in its sole discretion (i) any
surviving or acquiring corporation may assume outstanding Rights or substitute
similar Rights for those under the Plan, (ii) such Rights may continue in full
force and effect, or (iii) the Participants' accumulated payroll deductions may
be used to purchase Shares immediately prior to the transaction described above
and the Participants' Rights under the ongoing Offering terminated. In the event
that no affirmative determination is made by the Board pursuant to the preceding
sentence, then alternative (iii) shall automatically apply.
(c) "Change in Control" means the happening of any of the following events:
(i) A dissolution or liquidation of the Company.
(ii) A sale, lease or other disposition of all or substantially all of
the assets of the Company.
(iii) A merger, reverse merger, consolidation or reorganization of the
Company with or into another corporation or other legal person, or any other
capital reorganization of the Company, including but not limited to a capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged.
14. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in securities and except as to minor amendments to benefit the administration of
the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Affiliate, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 423 of the Code, Rule 16b-3
under the Exchange Act and any Nasdaq or other securities exchange listing
requirements. Currently under the Code, stockholder approval within twelve (12)
months before or after the adoption of the amendment is required where the
amendment will:
(i) Increase the amount of Shares reserved for Rights under the Plan;
(ii) Modify the provisions as to eligibility for participation in the
Plan to the extent such modification requires stockholder approval in order for
the Plan to obtain employee stock purchase plan treatment under Section 423 of
the Code; or
10.
<PAGE>
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code.
(b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Employee Stock Purchase Plans
and/or to bring the Plan and/or Rights granted under it into compliance
therewith.
(c) Rights and obligations under any Rights granted before amendment of the
Plan shall not be impaired by any amendment of the Plan, except with the consent
of the person to whom such Rights were granted, or except as necessary to comply
with any laws or governmental regulations, or except as necessary to ensure that
the Plan and/or Rights granted under the Plan comply with the requirements of
Section 423 of the Code.
15. Designation of Beneficiary.
(a) A Participant may file a written designation of a beneficiary who is to
receive any Shares and/or cash, if any, from the Participant's account under the
Plan in the event of such Participant's death subsequent to the end of an
Offering but prior to delivery to the 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 during an Offering.
(b) The Participant may change such designation of beneficiary at any time
by written notice. In the event of the death of a Participant and in the absence
of a beneficiary validly designated under the Plan who is living at the time of
such Participant's death, the Company shall deliver such Shares and/or cash to
the executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its sole discretion, may deliver such Shares and/or cash to the
spouse or to any one or more dependents or relatives of the Participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
16. Termination or Suspension of the Plan.
(a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the Shares subject to the Plan's reserve, as increased and/or adjusted from time
to time, have been issued under the terms of the Plan or upon the twentieth
anniversary of the effective date of the Plan whichever is earlier. No Rights
may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any Rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
Rights were granted, or except as necessary
11.
<PAGE>
to comply with any laws or governmental regulation, or except as necessary to
ensure that the Plan and/or Rights granted under the Plan comply with the
requirements of Section 423 of the Code.
17. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Rights
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted by the Board, which date may be prior to the
effective date set by the Board.
12.
<PAGE>
EXHIBIT 10.5
Noosh, Inc.
2000 Non-Employee Directors' Stock Option Plan
Adopted by the Board of Directors January 13, 2000
Approved By Stockholders ________, 2000
Effective Date: Date of the Initial Public Offering
Termination Date: None
1. Purposes.
(a) Eligible Option Recipients. The persons eligible to receive Options
are the Non-Employee Directors of the Company.
(b) Available Options. The purpose of the Plan is to provide a means by
which Non-Employee Directors may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Nonstatutory
Stock Options.
(c) General Purpose. The Company, by means of the Plan, seeks to retain
the services of its Non-Employee Directors, to secure and retain the services of
new Non-Employee Directors and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "Annual Grant" means an Option granted annually to all Non-Employee
Directors who meet the specified criteria pursuant to subsection 6(b) of the
Plan.
(c) "Annual Meeting" means the annual meeting of the stockholders of the
Company.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Noosh, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the
1.
<PAGE>
term "Consultant" shall not include either Directors of the Company who are not
compensated by the Company for their services as Directors or Directors of the
Company who are merely paid a director's fee by the Company for their services
as Directors.
(i) "Continuous Service" means that the Optionholder's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Optionholder's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionholder renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Optionholder
renders such service, provided that there is no interruption or termination of
the Optionholder's Continuous Service. For example, a change in status from a
Non-Employee Director of the Company to a Consultant of an Affiliate or an
Employee of the Company will not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
(j) "Director" means a member of the Board of Directors of the Company.
(k) "Disability" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(n) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(o) "Initial Grant" means an Option granted to a Non-Employee Director who
meets the specified criteria pursuant to subsection 6(a) of the Plan.
2.
<PAGE>
(p) "IPO Date" means the effective date of the initial public offering of
the Common Stock.
(q) "Non-Employee Director" means a Director who at the time of grant is
not an Employee.
(r) "Nonstatutory Stock Option" means an Option not intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(s) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(t) "Option" means a Nonstatutory Stock Option granted pursuant to the
Plan.
(u) "Option Agreement" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(w) "Plan" means this Noosh, Inc. 2000 Non-Employee Directors' Stock
Option Plan.
(x) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(y) "Securities Act" means the Securities Act of 1933, as amended.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan. The
Board may not delegate administration of the Plan to a committee.
(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine the provisions of each Option to the extent not
specified in the Plan.
(ii) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
(iii) To amend the Plan or an Option as provided in Section 12.
3.
<PAGE>
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Options shall not exceed in the aggregate three hundred fifty thousand (350,000)
shares of Common Stock.
(b) Reversion of Shares to the Share Reserve. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not acquired under such Option shall revert to and
again become available for issuance under the Plan.
(c) Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
5. Eligibility.
Nondiscretionary Options as set forth in section 6 shall be granted under
the Plan to all Non-Employee Directors. Notwithstanding the foregoing, no
Options shall be granted under the Plan to any Non-Employee Director who is a
representative of a stockholder or stockholders of the Company and who in such
capacity and/or by virtue of any agreement with or policy of such stockholder or
stockholders is unable to receive Options.
6. Non-Discretionary Grants.
(a) Initial Grants. Without any further action of the Board, each Non-
Employee Director shall be granted the following Options:
(i) On the IPO Date, each person who is then a Non-Employee Director
automatically shall be granted an Initial Grant to purchase twenty-five thousand
(25,000) shares of Common Stock on the terms and conditions set forth herein.
Notwithstanding the foregoing, any Non-Employee Director who received a stock
option grant from the Company prior to the IPO Date shall not be eligible for an
Initial Grant pursuant to this Section 6(a)(i).
(ii) After the IPO Date, each person who is elected or appointed for
the first time to be a Non-Employee Director automatically shall, upon the date
of his or her initial election or appointment to be a Non-Employee Director by
the Board or stockholders of the Company, be granted an Initial Grant to
purchase twenty-five thousand (25,000) shares of Common Stock on the terms and
conditions set forth herein.
(b) Annual Grants. Commencing with the Annual Meeting in 2001, each person
who is then a Non-Employee Director automatically shall be granted an Annual
Grant to
4.
<PAGE>
purchase ten thousand (10,000) shares of Common Stock on the terms and
conditions set forth herein.
7. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan. Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate. Each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Exercise Price. The exercise price of each Option shall be one hundred
percent (100%) of the Fair Market Value of the stock subject to the Option on
the date the Option is granted. Notwithstanding the foregoing, an Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option may be paid, to the extent permitted by applicable statutes and
regulations, in any combination of (i) cash or check or (ii) delivery to the
Company of other Common Stock.
(d) Transferability. An Option shall not be transferable except by will or
by the laws of descent and distribution and shall be exercisable during the
lifetime of the Optionholder only by the Optionholder. Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company, in
a form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionholder, shall thereafter be entitled to exercise the
Option.
(e) Vesting Generally. Options shall vest and become exercisable as
follows:
(i) Initial Grants shall provide for vesting of 1/3rd of the shares
12 months after the date of the grant and 1/36/th/ of the shares monthly
thereafter.
(ii) Annual Grants shall provide for vesting of 1/3rd of the shares 12
months after the date of the grant and 1/36/th/ of the shares monthly
thereafter.
(f) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service, or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after
5.
<PAGE>
termination, the Optionholder does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate.
(g) Extension of Termination Date. If the exercise of the Option following
the termination of the Optionholder's Continuous Service (other than upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 7(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(h) Disability of Optionholder. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination, the Optionholder does
not exercise his or her Option within the time specified herein, the Option
shall terminate.
(i) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the three-month period after the termination of the
Optionholder's Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise the
Option as of the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the Option upon the Optionholder's death, but only
within the period ending on the earlier of (1) the date eighteen (18) months
following the date of death or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the Options, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such Options.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Options and to issue and sell shares of Common Stock
upon exercise of the Options; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Option or
any stock issued or issuable pursuant to any such Option. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or
agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell stock upon exercise of such
Options unless and until such authority is obtained.
6.
<PAGE>
9. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
10. Miscellaneous.
(a) Stockholder Rights. No Optionholder shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such Optionholder has satisfied all requirements
for exercise of the Option pursuant to its terms.
(b) No Service Rights. Nothing in the Plan or any instrument executed or
Option granted pursuant thereto shall confer upon any Optionholder any right to
continue to serve the Company as a Non-Employee Director or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(c) Investment Assurances. The Company may require an Optionholder, as a
condition of exercising or acquiring stock under any Option, (i) to give written
assurances satisfactory to the Company as to the Optionholder's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company stating that the Optionholder is acquiring the stock subject to
the Option for the Optionholder's own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if
(iii) the issuance of the shares upon the exercise or acquisition of stock under
the Option has been registered under a then currently effective registration
statement under the Securities Act or (iv) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(d) Withholding Obligations. The Optionholder may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under an Option by any of the following means (in addition
to the Company's right to withhold from any compensation paid to the
Optionholder by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares from the shares of
the Common Stock otherwise issuable to the Optionholder as a result of the
exercise or acquisition
7.
<PAGE>
of stock under the Option; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Option, without the receipt of consideration by
the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject both to the Plan pursuant to
subsection 4(a) and to the nondiscretionary Options specified in Section 5, and
the outstanding Options will be appropriately adjusted in the class(es) and
number of securities and price per share of stock subject to such outstanding
Options. The Board shall make such adjustments, and its determination shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a transaction "without receipt of
consideration" by the Company.)
(b) Change in Control--Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, then all outstanding Options shall
terminate immediately prior to such event.
(c) Change in Control--Asset Sale, Merger, Consolidation or Reverse
Merger. In the event of (i) a sale of all or substantially all of the assets of
the Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation or (iii) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise, then the vesting of all
outstanding Options under the Plan shall be accelerated in full, and the Options
shall terminate if not exercised at or prior to such event.
(d) Change in Control--Securities Acquisition. In the event of an
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or an Affiliate) of the beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of Directors, then the
vesting of all outstanding Options under the Plan shall be accelerated in full,
and the Options shall terminate if not exercised at or prior to such event.
(e) Change in Control--Change in Incumbent Board. In the event that the
individuals who, as of the date of the adoption of this Plan, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least fifty
percent (50%) of the Board, then the vesting of all outstanding Options under
the Plan shall be accelerated in full. If the
8.
<PAGE>
election, or nomination for election, by the Company's stockholders of any new
Director was approved by a vote of at least fifty percent (50%) of the Incumbent
Board, such new Director shall be considered as a member of the Incumbent Board.
12. Amendment of the Plan and Options.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval.
(c) No Impairment of Rights. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.
(d) Amendment of Options. The Board at any time, and from time to time,
may amend the terms of any one or more Options; provided, however, that the
rights under any Option shall not be impaired by any such amendment unless (i)
the Company requests the consent of the Optionholder and (ii) the Optionholder
consents in writing.
13. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time. No
Options may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Option granted while the Plan is in
effect except with the written consent of the Optionholder.
14. Effective Date of Plan.
The Plan shall become effective on the IPO Date, but no Option shall be
granted unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
15. Choice of Law.
All questions concerning the construction, validity and interpretation of
this Plan shall be governed by the law of the State of California, without
regard to such state's conflict of laws rules.
9.
<PAGE>
EXHIBIT 10.5
Noosh, Inc.
2000 Non-Employee Directors' Stock Option Plan
Stock Option Agreement
(Nonstatutory Stock Options)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this Stock
Option Agreement, Noosh, Inc. (the "Company") has granted you an option under
its 2000 Non-Employee Directors' Stock Option Plan (the "Plan") to purchase the
number of shares of the Company's Common Stock indicated in your Grant Notice at
the exercise price indicated in your Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein, your option will
vest as provided in your Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.
2. Number of Shares and Exercise Price. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. Method of Payment. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of the
exercise price in cash or by check or in any other manner permitted by your
-----------------
Grant Notice, which may include one or more of the following:
- ------------
(a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender
<PAGE>
would violate the provisions of any law, regulation or agreement restricting the
redemption of the Company's stock.
4. Whole Shares. You may exercise your option only for whole shares of
Common Stock.
5. Securities Law Compliance. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also comply
with other applicable laws and regulations governing your option, and you may
not exercise your option if the Company determines that such exercise would not
be in material compliance with such laws and regulations.
6. Term. The term of your option commences on the Date of Grant and
expires upon the earliest of the following:
(a) three (3) months after the termination of your Continuous Service
for any reason other than your Disability or death, provided that if during any
part of such three (3) month period your option is not exercisable solely
because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;
(b) twelve (12) months after the termination of your Continuous
Service due to your Disability;
(c) eighteen (18) months after your death if you die either during
your Continuous Service or within three (3) months after your Continuous Service
terminates;
(d) the Expiration Date indicated in your Grant Notice; or
(e) the tenth (10th) anniversary of the Date of Grant.
7. Exercise.
(a) You may exercise the vested portion of your option (and the
unvested portion of your option if your Grant Notice so permits) during its term
by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by
<PAGE>
reason of (1) the exercise of your option, (2) the lapse of any substantial risk
of forfeiture to which the shares of Common Stock are subject at the time of
exercise, or (3) the disposition of shares of Common Stock acquired upon such
exercise.
8. Transferability. Your option is not transferable, except by will or by
the laws of descent and distribution, and is exercisable during your life only
by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
9. Option not a Service Contract. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
10. Withholding Obligations.
(a) At the time you exercise your option, in whole or in part, or at
any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.
(b) Upon your request and subject to approval by the Company, in its
sole discretion, and compliance with any applicable conditions or restrictions
of law, the Company may withhold from fully vested shares of Common Stock
otherwise issuable to you upon the exercise of your option a number of whole
shares of Common Stock having a Fair Market Value, determined by the Company as
of the date of exercise, not in excess of the minimum amount of tax required to
be withheld by law. If the date of determination of any tax withholding
obligation is deferred to a date later than the date of exercise of your option,
share withholding pursuant to the preceding sentence shall not be permitted
unless you make a proper and timely election under Section 83(b) of the Code,
covering the aggregate number of shares of Common Stock acquired upon such
exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of
Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole responsibility.
<PAGE>
(c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein.
11. Notices. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
12. Governing Plan Document. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option, and
is further subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.
<PAGE>
EXHIBIT 10.6
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is dated as of the first day of April 1999
("Commencement Date") by and between Syntex (U.S.A.) Inc., a Delaware
corporation ("Landlord") and Noosh, Inc., a California corporation ("Tenant").
IN CONSIDERATION OF THE MUTUAL PROMISES CONTAINED HEREIN, THE PARTIES AGREE
AS FOLLOWS:
1. Premises
1.1. Description. Landlord leases to Tenant and Tenant leases from
Landlord, upon the terms and conditions herein set forth, those certain premises
("Premises") located at 3401 Hillview Avenue, Building B, Suite 100 & 101, Palo
Alto, County of Santa Clara, California, as illustrated in Exhibit A, attached
hereto, and approximately twenty three thousand and thirty (23,030) rentable
square feet comprising approximately 16.78% of a two story multi-tenant building
("Building"), as illustrated in Exhibit B, and subject to the terms and
conditions of the Ground Lease ("Master Lease"), Exhibit C, for the Site
("Site"), comprising approximately 105.513 acres, by and between the Board of
Trustees of the Leland Stanford Junior University ("Lessor") and Syntex (U.S.A.)
Inc. ("Lessee"), and comprised of two (2) lease agreements for parceled
properties illustrated in Exhibit D, and described as lease No. 1 and lease No.
2 as follows: Lease No. 1, dated January 1, 1963 for a 24.84 acre land parcel
for a fifty one (51) year term, and amended June 1, 1964, to add two (2) more
land parcels of 5.123 acres and 2.090 acres for the same term, and further
amended on April 1, 1965 to add an additional 5.433 acre parcel, and amended on
July 1, 1968 to provide a five and one half (5.5) year option for Lessee to
extend the term until June 30, 2019; and Lease No. 2, dated July 1, 1968, for
two (2) land parcels comprising 22.595 acres and 9.535 acres each, for an
initial term of fifty one (51) years and to expire June 30, 2019, and a third
land parcel of 35.909 acres, for a term of six (6) years and extended by
exercise of option for an additional period coterminous with the first two (2)
parcels.
1.2. Common Areas. During the Term hereof (which term is defined in
Section 2.1) Tenant shall have non-exclusive use of shared parking as shown on
the attached site-plan (Exhibit E) at a ratio of approximately three and three
tenths (3.3) spaces per one thousand (1,000) rentable square feet of space
leased at no additional cost or expense to Tenant. Designated outdoor areas
immediately south of the building may be used for recreational purposes in
common with Landlord and/or Landlord's Affiliates or tenants, or, if scheduled
in advance and under reasonable limitations as may be set forth by Landlord, to
support outdoor organized assembly events. No other external site common
building areas are included in the rentable square footage. An "Affiliate"
means any business entity that is controlled by, controlling, or under common
control with the relevant party (control shall mean the direct or indirect
beneficial ownership of more than fifty percent (50%) of the voting or income
interest in such business entity, or such other relationship that in fact
constitutes such actual control).
1.
<PAGE>
1.3. Telecommunications Room. Tenant reserves the right to have controlled
access to the central telecommunications room of the building located within the
adjoining suite on the ground level, for purposes of routing Tenant devices and
cable necessary as may be required to serve the Premises.
1.4. Common Lobby. Tenant shall share a designated common stair lobby at
the extreme north end of the Building and a rear exit stair vestibule, as
illustrated in Exhibit B with a second floor suite of the north wing. Tenant
shall have the right to, at Tenant's sole expense, install a reception desk and
counter in the designated common stair lobby. Tenant shall be required to
remove the reception desk at the termination of this Lease.
1.5. Measurement. The Premises are measured by Landlord's CADD file.
2. Term
2.1. Term. The term of this Lease ("Term") shall commence on the
Commencement Date, so long as the Lease is fully executed and delivered to the
Parties and shall end at the close of business on December 31, 2000, unless
sooner terminated pursuant to any provision hereof. The Commencement Date shall
be the later to occur of (I) April 1, 1999 or (ii) Landlord's delivery of
possession of the Premises. If Landlord has not delivered the Premises to Tenant
on or before May 1, 1999, 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.
2.2. Prior Access. If this Lease has been duly executed by Tenant and
Landlord, Tenant shall have access during the month preceding the Commencement
Date to the Premises, for purposes of data and equipment installation. Tenant
shall be liable for any damage to the Premises caused by Tenant, its agents,
contractors and/or employees during these periods of construction and
installation of data and equipment.
3. Rent
3.1. Basic Rent. Tenant shall pay to Landlord Basic Rent for the Premises
on a full service basis at the following rates:
Months Basic Rent /Month
- ------ -----------------
1-3 $45,000
4-21 $69,090
The first month's rent shall be due upon execution of this lease.
3.2. Tenant Operating Expense. Tenant shall manage and pay directly for
all third party services as Tenant Operating Expense with respect to service,
repair, or building system replacement as set forth in Paragraph 7.1.3. Tenant
shall immediately pay to Landlord all Landlord repairs of Tenant damage,
excepting normal wear and tear, casualty, and condemnation to building and
utility systems.
2.
<PAGE>
3.2.1 Payment of Utility Rate Increase and Tenant Excess Utility
Usage. Tenant shall pay to Landlord all Tenant charges for utility rate
increases as set forth in Paragraph 7.2.1, and Tenant's excess utility
consumption as set forth in Paragraph 7.2.2. Tenant shall pay such charges as
additional rent ("Additional Rent"), on the same terms and conditions as set
forth in Paragraph 3.3. Landlord shall assess to Tenant any such excess utility
---
charges at least twice during the Term, a) within one month following the end of
the first calendar year, and b) upon final Lease Expiration, unless the Tenant's
cumulative utility usage exceeds the Average Building Energy Allowance as set
forth in Paragraph 7.2.1, in which case, Landlord may assess to Tenant those
charges during the interim period, which will become due and payable by Tenant
at that time.
3.3. Payment of Rent. Rent shall be paid in lawful money of the United
States of America without deduction or offset, prior notice, abatement, or
demand, as set forth in Section 12.1, except as otherwise provided herein.
Tenant's obligation to pay Basic Rent shall commence on the Commencement Date
and Basic Rent shall be paid in advance of the Commencement Date and on the
first (1st) day of each succeeding calendar month until the end of the Term.
Basic Rent for any period during the Term which is for less than one (1) full
month shall be a pro-rata portion of the monthly Basic Rent payment. Tenant
acknowledges that late payment by Tenant to Landlord of Basic Rent or any other
payment due Landlord will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of such costs being extremely difficult and
impracticable to fix. Such costs include without limitation processing and
accounting charges and late charges (if any) that may be imposed on Landlord by
the terms of any encumbrance and note secured by any encumbrance covering the
Premises. Therefore, if any installment of Basic Rent or other payment due from
Tenant is not received by Landlord within six (6) business days following the
due date, Tenant shall pay to Landlord, in addition to the Rent due and in
addition to interest thereon as provided in Section 12.1, an additional sum of
five percent (5%) of the overdue amount as a late charge. The parties agree
that this late charge and interest represent a fair and reasonable estimate of
the costs that Landlord will incur by reason of late payment by Tenant.
Acceptance of any late charge shall not constitute a waiver of Tenant's default
with respect to the overdue amount, nor prevent Landlord from exercising any of
the other rights and remedies available to Landlord.
3.4. Security Deposit. Tenant shall pay at signing of Lease a refundable
security deposit of one month's Basic Rent ($69,090) in the form of cash. No
interest shall accrue on the Deposit. Should Tenant comply with all the terms,
covenants and conditions of this Lease and at the end of the Term leave the
Premises in the condition required by this Lease, then the Deposit or any
balance thereof, less the sums owing to Landlord, shall be returned to Tenant
within thirty (30) days after the termination of this Lease and vacancy of the
Premises by Tenant. Tenant shall not have the right to apply this Deposit or
any part thereof toward the payment of any Rent due hereunder. Landlord may at
its option maintain the Deposit separate and apart from, or commingle with,
Landlord's general funds.
3.
<PAGE>
3.5. Monetary Obligations as Rent. All monetary amounts payable by Tenant
to Landlord under this Lease including but not limited to Basic Rent, Security
Deposit and amounts paid by Landlord to cure Tenant's default(s), shall be
deemed "Rent" hereunder.
3.6. Guarantee. Mr. Ofer Ben-Shachar hereby personally guarantees Tenant's
rent obligations under the Lease for up to six-hundred ninety thousand and nine
hundred dollars ($690,900). Such guaranty shall be released upon acceptable
proof to Landlord that Tenant has successfully completed a third round of
financing not less than ten times such previous personal guarantee.
4. Use Of The Premises
4.1. Use Restrictions. The Premises shall be used exclusively for the
purpose of R&D software development, sales, computer labs, storage and
distribution, offices, marketing and other related legal uses in conformance
with allowable uses set forth in the Master Lease and zoning regulations and
ancillary uses including office space and supporting amenities. No
manufacturing or commercial assembly shall be performed on the Premises. Tenant
shall not use, or permit the Premises, or any part thereof, to be used, for any
purpose other than the purpose for which the Premises are hereby leased, and no
use shall be made or permitted to be made of the Premises, nor acts done, which
will increase the existing rate of insurance on the Premises or cause a
cancellation of any insurance policy covering the Premises, nor shall Tenant
sell or permit to be kept, used or sold, in or about the Premises, any article
which may be prohibited by the standard form of fire insurance policies. Tenant
shall be liable to Landlord for any increases in the existing rate of insurance,
or any other losses or damages incurred by the Landlord, as a result of Tenant's
failure to comply with the requirements of the preceding sentence. Tenant shall
not commit, or suffer to be committed, any waste upon the Premises, or any
public or private nuisance, or other act or thing which may injure, annoy, or
disturb the quiet enjoyment of any occupant of neighboring properties. Tenant
shall not place or knowingly cause to be placed: (i) any harmful materials in
the drainage system of the Premises, or (ii) any loads upon the floors, walls,
ceilings or roof which might endanger the structure nor overload any electrical,
mechanical, or other systems in excess of the design capacity. No waste
materials or refuse shall be dumped upon or permitted to remain in or on any
part of the Premises (inside or outside) except in regularly used trash
containers in conformity with applicable regulations. No materials or articles
of any nature shall be stored in or on or permitted to remain in or on or
outside any portion of the Premises. No loudspeaker or other device, system, or
apparatus which can be heard outside the Premises shall be used in or at the
Premises without the prior written consent of Landlord. Tenant covenants and
agrees that no diminution of light, air or view by any structure which may be
hereafter erected, whether or not by Landlord, or use of the Premises by any
other occupants or use of neighboring building or areas by others shall in any
way affect this Lease, entitle Tenant to any reduction of Rent hereunder, or
result in any liability of Landlord to Tenant.
4.2. Hazardous Materials. "Hazardous Materials" means any hazardous or
toxic
4.
<PAGE>
substance, material or waste, the storage, use, or disposition of which is or
becomes regulated by any local governmental authority, the State of California
or the United States government. "Hazardous Materials" includes, without
limitation, any material or hazardous waste under Section 255115, 25117 or
25122.7, or listed pursuant to Section 25140 of the California Health and Safety
code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a
"hazardous substance" under Section 25136 of the California Health and Safety
Code, Division 20, Chapter 6.8 (Carpenter-Preseley-Tanner Hazardous Substance
Account Act, (iii) defined as a "hazardous material," "hazardous substance," or
"hazardous waste" under Section 25501 of the California Health and Safety Code,
Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and
Inventory), (iv) defined as "hazardous substance" under Section 25281 of the
California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage
of Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) listed under
Article 9 or defined as hazardous or extremely hazardous pursuant to Article 11
of Title 22 of the California Administrative Code, Division 4, Chapter 20,
(viii) designated as a "hazardous substance" pursuant to Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. Section 1317), (ix) defined as
"hazardous waste" pursuant to Section 1004 of the Federal Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903), (x)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C. Section 9601 et
seq. (42 U.S.C. Section 9601) or (xi) listed or defined as "hazardous waste",
"hazardous substance", or other similar designation by any regulatory scheme or
the State of California or the United States Government. Tenant shall not cause
or permit any Hazardous Material to be brought upon, kept, stored, generated or
recycled in or about the Premises by Tenant, its agents, employees, contractors,
or invitees, excepting Tenant's right to store and use household cleaning
products in household quantities, provided such products are used, stored and
disposed of in accordance with all applicable codes. Subject to Tenant escort
and during normal business hours following 24 hour notice (except in case of
emergency), Tenant shall grant unrestricted access to Landlord's safety
inspection representative within the Premises to verify Tenant compliance.
4.3. Release of Hazardous Materials. If Tenant or Landlord knows or has
reason to believe that any release of Hazardous Material has resulted or will
result in the contamination of the Premises or the underlying or surrounding
property, whether by Tenant, Landlord or a third party, either party shall, as
soon as practicable, give written notice of that condition to the other party.
In such event, Landlord may cause tests to be performed, including wells to be
installed thereon, and may cause the surface water, ground water or soil to be
tested to detect the presence of Hazardous Materials by the use of such tests as
are then customarily used for such purposes. If Tenant so requests, Landlord
shall supply Tenant with copies of such test results, free of charge. The cost
of such tests or the installation, maintenance, repair and replacement of such
wells shall, in the first instance, be at the cost of Landlord. To the extent
the cause of the contamination can reasonably be attributed to both parties, the
costs referred to in this Article 4 shall be reallocated according to the
relative contribution to such contamination by each party. If it is determined
that Tenant caused such contamination, Tenant shall reimburse Landlord for the
costs paid by Landlord.
5.
<PAGE>
4.4. Indemnity by Tenant. Tenant shall defend, indemnify and hold harmless
Landlord and its Affiliates and their respective directors, officers,
shareholders, employees, successors, assigns and agents from and against any and
all causes of action, claims, judgment, damages, penalties, fines cost
(including those associated with any investigation, removal, clean-up,
government oversight and restoration work and materials required to return the
Premises and/or the underlying or surrounding property to its condition existing
prior to any contamination of the premises and/or the underlying or surrounding
property), liabilities and losses (including, without limitation, attorney's
fees, consultants fees, and expert fees arising out of, resulting from, or in
connection with the generation, use, storage, management, recycling, or disposal
of Hazardous Materials in or about the Premises by Tenant, its agents,
contractors, employees or invitees during the Term. If Tenant has a duty to
defend Landlord under this Section, Landlord may, at its election, participate
with Tenant in discussions and negotiations with other parties concerning the
matters affecting the Premises that activated such duty.
4.5. Indemnity by Landlord. Reciprocally, Landlord shall defend,
indemnify, hold harmless Tenant and its officers, directors, shareholders,
employees, successors, assigns and agents from and against any and all causes of
action, claims, judgment, damages, penalties, fines, costs (including those
associated with any investigation, removal, clean-up, government oversight and
restoration work and materials required to return the Premises and/or the
underlying or surrounding property to its condition existing prior to any
contamination of the premises and/or the underlying or surrounding property),
liability and losses (including, without limitation, attorney's fees, consultant
fees, and expert fees arising out of, resulting from, or in connection with (i)
any existing contamination in, on or under the Premises, Building or Site, or
(ii) the generation, use, storage, management, recycling, or disposal of
Hazardous Materials in or about the Premises, Building or Site by the Landlord,
its agents, contractors, employees or invitees prior to or during the Term. If
Landlord has a duty to defend Tenant under this Section, Tenant may, at its
election, participate with Landlord in discussions and negotiations with other
parties concerning the matters affecting the Premises that activated such duty.
4.6. Survival of Rights and Obligations. The termination of this Lease
shall not terminate the parties' rights and obligations under this Article 4 and
the parties expressly agree that the provisions contained herein shall survive
the termination of Tenant's leasehold estate. The provisions of this Article 4
are for the benefit of Landlord and Tenant and shall not be construed to be for
the benefit of any other person or occupant of the Premises.
4.7. Reciprocal Representation and Warranty Regarding Knowledge of Soil or
Groundwater Contamination. The parties represent and warrant to each other that
they have no knowledge of soil or groundwater contamination on or under Premises
at the time of execution hereof.
5. Taxes And Assessments
6.
<PAGE>
5.1. Tenant Responsibility. Tenant shall pay before delinquency any and all
taxes, assessments, license fees and public charges levied, assessed or imposed
upon or against Tenant's fixtures, equipment, furnishings, furniture, appliances
and personal property installed or located on or within the Premises. Tenant
shall cause said fixtures, equipment, furnishings, furniture, appliances and
personal property to be assessed and billed separately from the real property of
Landlord. If any of Tenant's said personal property shall be assessed with
Landlord's real property, Tenant shall pay to Landlord the taxes reasonably
attributable to Tenant within twenty (20) days after receipt of a written
statement from Landlord setting forth the taxes applicable to Tenant's property.
5.2. Real Property Taxes. All Real Property Taxes shall be paid by
Landlord. However, the portion of the Real Property Taxes that are assessed on
the parcels where improvements made by Tenant are located (which parcel numbers
are set out in Exhibit D) at the 3401 Hillview Avenue address, shall be billed
by Landlord to Tenant, and Tenant shall pay such portion of the Real Property
Taxes to Landlord as are reasonably and fairly allocable to Tenant's
improvements no later than thirty (30) days after receipt from Landlord of the
Real Property Tax bill from the taxing governmental authority. The term "Real
Property Taxes," as used herein, shall mean and include: (i) all taxes,
assessments, levies and other charges of any kind or nature whatsoever, general
and special, foreseen and unforeseen (including without limitation, all
installments of principal and interest required to pay any general or special
assessments for public improvements) now or hereafter imposed by any
governmental or quasi-governmental authority or special district having the
direct or indirect power to tax or levy assessments, which are levied or
assessed against, or with respect to the value, occupancy, or use of all or any
portion of the Premises (as now constructed or as may at any time hereafter be
constructed, altered, or otherwise changed by the Tenant) or Landlord's interest
therein; any improvements located within the Premises (regardless of ownership)
constructed by Tenant; the fixtures, equipment and other property of Landlord,
real or personal, that are an integral part of and located in the Premises; and
landscaping areas, walkways, parking areas, public utilities, or energy within
the Premises; and (ii) all costs and fees (including reasonable attorneys' fees)
incurred by Landlord or Tenant in reasonably contesting any Real Property Tax
attributable to the parcel(s) on which the Building is located and in
negotiating with public authorities as to any Real Property Tax attributable to
the parcel(s) on which the Building is located. Tenant shall not be obligated
to pay (a) any state, local, federal or corporate income tax measured by the
income of Landlord from all sources; (b) any franchise, succession or transfer
taxes; (c) interest on taxes or penalties resulting from Landlord's failure to
pay taxes in a timely manner; (d) any increases in taxes attributable to
additional improvements to the Building or parking areas unless such
improvements to the Building or parking areas are for Tenant's benefit; (e) any
increases in taxes attributable to the sale, transfer, exchange or other
disposition of Landlord's interest in the Building.
6. Indemnity And Insurance
7.
<PAGE>
6.1. Indemnity. Except as set forth in Article 4, of this Lease, Tenant
agrees to indemnify, defend (with counsel reasonably acceptable to Landlord) and
hold Landlord and its Affiliates and their respective directors, officers,
agents, employees, successors and assigns (the "Landlord Indemnitees") harmless
from and against any and all demands, claims, causes of action, judgments,
obligations or liabilities, and all reasonable expenses incurred in
investigating or resisting the same (including without limitation reasonable
attorneys' fees), on account of, relating to or arising out of, the condition
excepting pre-existing condition, use or occupancy of the Premises by Tenant,
its agents, contractors, employees or invitees. The foregoing indemnification
obligation shall not apply to the extent that such claim is (i) the result of,
or caused by Landlord's default of failure to fulfill Landlord's obligations
pursuant to this Lease, or (ii) caused by the active negligence or willful
misconduct of the Landlord or Landlord Indemnitees. This Lease is made on the
express condition that Landlord shall not be liable for, or suffer loss by
reason of, injury to person or damage to property, from whatever cause, in any
way connected with the condition, use or occupancy of the Premises specifically
including, without limitation, any liability for injury to persons or damage to
property of Tenant, its agents, officers, employees, successors, assigns and
invitees, and Tenant hereby expressly waives and releases the Landlord
Indemnitees from liability for same, except for such which arises from the
active negligence or willful misconduct of the Landlord or Landlord's
Indemnitees. Nothing contained in this Section 6.1 shall be deemed (i) to
obligate Tenant to indemnify and hold Landlord or Landlord's Indemnitees
harmless from defect in the design, workmanship or materials of the Building,
except for the design, workmanship or materials for which Tenant is responsible,
if any or (ii) be a waiver by Tenant of any claims or causes of action Tenant
may have against Landlord or Landlord's Indemnitees for liability caused by the
active negligence or willful misconduct of the Landlord or Landlord's
Indemnitees. Landlord shall indemnify and save Tenant harmless from and against
any material and reasonable loss, cost or expense incurred by Tenant as a result
of the sole negligence or willful misconduct of Landlord or Landlord's
Indemnitees; notwithstanding anything contained elsewhere herein in this Section
6.1, neither party shall be liable for any special, incidental, or consequential
damages hereunder.
6.2. Liability and Worker's Compensation Insurance. Tenant shall, at
Tenant's expense, obtain and keep in force during the Term a policy of Worker's
Compensation Insurance and a policy of comprehensive public liability insurance
insuring Tenant against any liability arising out of the condition, use or
occupancy of the Premises and all areas appurtenant thereto, including parking
areas. Such insurance shall be in an amount satisfactory to Landlord of not
less than $2,000,000 for bodily injury or death as a result of any one
occurrence, and $1,000,000 for damage to property as a result of any one
occurrence. The insurance shall be with companies authorized to do business in
the State of California and companies of Best's Rating Guide of A- IX or better
and approved by Landlord. Tenant shall deliver to Landlord prior to possession,
a certificate of insurance evidencing the existence of the policy required
hereunder, and such certificate shall certify that the policy (i) covers
Landlord as an additional insured; (ii) shall not be canceled or altered without
thirty (30) days prior written notice to Landlord; (iii) insures performance of
the indemnity set forth in Section 6.1; and (iv) the coverage is primary and any
coverage by Landlord is in excess thereto.
8.
<PAGE>
6.3. Landlord Self-Insurance. Landlord shall, at all times during the
Term, maintain in effect a program of public liability self insurance and risk
retention, protecting Landlord and Tenant and insuring against liability
(including bodily injury or property damage) arising on or about the Premises
with limits which are equal to Tenant's insurance obligations set forth above.
Such insurance costs - included in the Basic Rent described in Article 3.
6.4. Insurance of Personal Property, Fixtures and Equipment. Tenant shall
at all times during the Term, at its cost and expense, maintain in effect
policies of insurance covering its personal property, inventory, alterations,
fixtures and equipment located on the Premises providing protection against any
peril included within the classification "Fire and Extended Coverage," together
with insurance against sprinkler leakage, vandalism and malicious mischief. The
proceeds of such insurance, so long as this Lease remains in effect, shall be
used to repair or replace the alterations, fixtures and repair or replace such
alterations, fixtures and Premises-related equipment so insured, should Tenant
elect, in its sole discretion, repair or replace such alterations, fixtures and
equipment.
6.5. Property Insurance. Landlord shall obtain and keep in force during the
Term a policy or policies of insurance coverage including fire, extended
coverage, sprinkler leakage, vandalism and malicious mischief, for loss or
damage to the Premises, in the amount of the full replacement value thereof.
Such insurance costs are included in the Basic Rent described in Article 3.
Said insurance shall also include (i) reasonable amounts of coverage for
enforcement of any law or ordinance regulating reconstruction or replacement for
any reason whatsoever and (ii) an agreed valuation provision in lieu of any co-
insurance clause, waiver of subrogation and inflation guard protection.
6.6. Waiver of Subrogation. Landlord and Tenant hereby waive any right
that each may have against the other on account of any loss or damage or
occasion to Landlord or Tenant, their respective property, the Building or
Premises or their contents, arising from any risk covered by the insurance
required hereunder. The parties each on behalf of their respective insurance
entities insuring the property of either Landlord or Tenant against any such
loss, waive any right of subrogation that the parties or their respective
insurance companies or entity may have against the other party or the other
party's insurance company or entities. The Landlord and Tenant agree to obtain
such a subrogation waiver from their respective insurance carriers or entities
and deliver a copy to the other.
6.7. Allocation. Landlord shall fairly allocate Landlord's insurance costs
that are attributable and beneficial to Tenant or the Premises on a pro-rata
basis between Landlord and Tenant, and among Tenant and any other tenants.
7. Operation, Management, Services And Utilities
7.1. Operation and Management.
9.
<PAGE>
7.1.1 Grounds and Exterior Building Maintenance. All expenses of
operation, management and maintenance service and repair of a) site improvements
and grounds about the Premises, including landscape and irrigation, parking
areas and walks, site lighting, and b) all exterior building maintenance and
repairs, including exterior glass washing performed twice per year shall be at
Landlord's sole cost and expense and performed as part of the Base Rent except
where such repairs may be necessary due to damage or misuse by Tenant, excepting
normal wear and tear, or damage due to casualty or condemnation.
7.1.2 Interior Building Maintenance by Landlord. Landlord shall
operate, manage, and maintain all service and repairs for plumbing, general
lighting excluding Tenant's specialty fixtures, HVAC equipment and temperature
controls which are dedicated to Tenant equipment. Excluding any damage not
caused by normal wear and tear, casualty or condemnation which Landlord has
reasonably determined to be caused by Tenant or Tenant's guests, such Interior
Building Maintenance shall be at Landlord's sole cost and expense and performed
as part of the Base Rent.
7.1.3 Interior Building Maintenance by Tenant. Tenant shall operate,
manage, and maintain all service and repair to tenant improvements, including
all (a) Tenant damage of walls, floors, ceilings, fixtures, systems, and exposed
finishes; (b) Tenant specialty devices, (c) Tenant trade fixtures and equipment,
including data/telecommunications systems, cabling, and devices; (d) Landlord
approved interior modifications, alterations and/or changes; (e) interior plant
care; (f) custodial cleaning and interior window washing, (g) carpet cleaning to
be performed once during the Term and once at the end of the Term, (h) dedicated
air conditioning equipment, (i) security access equipment and devices, and
cameras if such have been installed by the Tenant and signal lines, (j) door
locks and hardware, (k) Tenant signs, (l) and Tenant furnishings and artwork.
Nothing contained herein shall be construed to require Landlord to install
improvements, except as set forth in Paragraph 9.1.
7.2 Utilities
7.2.1 Basic Utility Service & Usage. Landlord shall operate, manage,
service, repair or cause to be repaired, all utility distribution systems
including water, gas, power, sanitary sewer, storm drains, and designated trash
enclosures. Landlord shall bear the expense for Tenant's normal use of utilities
and utility systems as part of the Basic Rent, except where damage may be caused
by Tenant, excepting normal wear and tear, in which case such repairs shall be
performed by Landlord and borne by Tenant as Tenant Operating Expense, due and
payable as set forth under Paragraph 3.2.1.
Tenant's basic utility consumption associated with normal business hour usage
shall be borne by the Landlord as part of the Basic Rent. Such basic utility
consumption is defined as the average building energy allowance ("Average
Building Energy Allowance"), and is computed to be $.18/SF/Month over the Term,
-------------
on the basis of $.051 per KWHR, the utility rate charged by the
--------------
10.
<PAGE>
City of Palo Alto without mark-up. In the event that the City of Palo Alto
utility rate increases during the period of the Term, Landlord reserves the
right to assess such additional increase to Tenant. The Average Building Energy
Allowance is established from the building average utility usage derived from
the occupied building areas over the previous 12 month period prior to
Commencement.
7.2.2 Excess Utility Usage. Tenant shall use its best efforts to
conduct and manage its business operations within the Average Building Energy
Allowance set forth in 7.2.1, however, Tenant shall pay Landlord for all excess
utility consumption exceeding that amount. Such charges for Excess Utility Usage
will be assessed as set forth in Paragraph 3.2.1, or on a more frequent basis if
Tenant's Excess Utility Usage exceeds the Average Building Energy Allowance by
10% over any six month period. Landlord shall compute such Excess Utility Charge
on the basis of the amount of Tenant's total energy consumption in excess of the
Average Building Energy Allowance applied to the area of the Premises for that
cumulative period.
7.2.3 Utility Service Interruption. Landlord shall exercise best
efforts to maintain in a state of uninterrupted operation, the HVAC central
plant serving the Building and Building electrical utility service systems
during the Term, however, if continuous interruption caused by failure of the
Landlord operated systems (except tele-communications ) systems maintained by
Tenant) continues for more than ten days, Tenant shall have the right to abate
rent in proportion to the Tenant business interference as reasonably negotiated
in good faith between the parties and for such length of time as such
interruption materially interferes with Tenant's business operations. Landlord
reserves the right to make periodic (at least annual) central plant equipment
shut downs to perform scheduled preventative service maintenance, where Landlord
agrees to coordinate such maintenance in advance with Tenant, and Landlord shall
make all reasonable efforts to schedule such service on weekends, off-hours,
general holidays, or between Christmas and New Years (excepting emergency
events) to minimize disruption to Tenant's business. Landlord shall not be
liable for any interruption caused by utility system failure or other services
to the Premises during the Term, unless caused by Landlord's active negligence
or willful misconduct (or it's agents, contractors or employees), and only to
the extent of rent abatement for the period of interruption. If an electrical
utility service interruption occurs which: (i) was caused solely by Landlord;
and (ii) significantly limits Tenant's ability to conduct business operations;
and (iii) persists continuously for a period of forty five (45) days, then
Tenant shall have the right to terminate this Lease.
7.3 Security Access
7.3.1 Tenant Rekeying. Tenant shall rekey all interior and exterior
locks with new key cores and remove all such key cores at the end of the Lease.
Tenant may install at it's sole expense a dedicated card key system or similar
secured access system to the perimeter doors of Tenant's dedicated Premises.
Such system shall be removed at the end of the Lease.
7.3.2 Common Access Security. Tenant agrees to coordinate and share
master keys with
11.
<PAGE>
the upstairs tenant for access through the common lobby and common rear
vestibule. Tenant may install a card access device to the exterior common
entrance doors at Tenant's expense, so long as such access is agreed to be
shared with the tenant upstairs without restriction.
7.3.3 Landlord Emergency Access. Landlord maintains a master access
agreement with the City of Palo Alto Fire and Police Departments as part of a
site wide coordinated emergency access response program. Tenant shall provide
Landlord with master keys and/or security card for Landlord's Emergency access
to the Premises 24 hours a day, every day of the year. Landlord reserves the
right to make emergency access to the Premises to facilitate or verify occupant
evacuations during or as a result of fire, flood, earthquake, or similar life
threatening circumstances. Landlord reserves the right to make unscheduled entry
into the Premises for purposes of emergency maintenance repairs to building
systems or Tenant's specialty equipment as may be necessary to prevent property
damage or personal injury to others.
7.3.4 Landlord Maintenance Access. Landlord or Landlord's authorized
contractors or service agents shall rely on Tenant representatives to provide
access to the Premises during normal business hours, or during pre-scheduled
"after hours" with Tenant's permission in order to perform maintenance repairs
or service.
8. Acceptance Of The Premises And Covenant To Surrender
8.1. Commencement Condition. Landlord shall clean the Premises, patch and
paint all existing wall surfaces and otherwise deliver the Premises in a broom
clean condition. All building and lighting systems serving the Premises shall be
operational and in good condition and repair on the Commencement Date. Landlord
shall be solely responsible for any cost related to the installation of the
initial phone lines to the Premises, however, Landlord shall not warrant their
performance and Tenant shall have responsibility for all maintenance service and
repair thereafter throughout the Term.
8.2. Punch List. A walkthrough punch list ("Punch List") prepared by the
parties prior to Commencement Date will be used to identify any major items not
commensurate with a good beginning of occupancy status. Excepting the Punch
List, Tenant accepts the Premises as being in good order, condition and repair,
without representation or warranty by Landlord as to the condition of the
Premises or as to the use or occupancy which may be made thereof, except as
expressly contained herein.
8.3. Surrender Condition. Tenant agrees on the last day of the Term, or
on sooner termination of this Lease, to surrender the Premises, at Landlord's
election, either: (i) restored to their original condition, excepting normal
wear and tear and damage due to casualty or condemnation, in accordance with the
requirements set forth in this Agreement or (ii) together with all alterations,
additions and improvements which may have been made in, to, or on the
12.
<PAGE>
Premises by Landlord or Tenant (and which have been approved by Landlord to
remain on the Premises at the time of providing Landlord's consent), unto
Landlord in good order, condition and repair, excepting for events of casualty
or such wear and tear as would be normal for the period of Tenant's occupancy
and subject to minor punch list items, provided such punch list items are
resolved by Tenant within ten (10) days after written notice by Landlord to do
the same. Tenant further agrees that at the end of the Term or sooner
termination of this Lease, Tenant at its sole expense, shall:
8.3.1. remove or have removed all Hazardous Materials from the
Premises that are caused by Tenant's employees, agents, contractors and
invitees. If such Hazardous Materials are not removed, then Tenant shall
indemnify and hold Landlord harmless from and against the costs of removal and
disposal by Landlord and against all loss or liability resulting from the
presence of Hazardous Materials on the Premises; and
8.3.2. remove all its personal property and trade fixtures from the
Premises in a manner that is reasonable and acceptable to Landlord; and
8.3.3. Tenant shall restore, in a manner to the reasonable
satisfaction of Landlord unless otherwise agreed by the parties, all exposed
walls, ceilings, floor finishes, surfaces and utility and building systems where
such removal of personal property or trade fixtures may directly or indirectly
cause damage to the Premises. Notwithstanding anything to the contrary contained
herein, a) Tenant shall not be required to remove (I) any of the initial tenant
improvements constructed by or on behalf of Tenant, which have been approved by
Landlord, and ii) any alterations or additions for which Tenant has obtained
Landlord's consent unless Landlord has indicated, at the time of granting such
consent, that such removal will be required; and b) Tenant shall be entitled to
remove portions of improvements, additions, and alterations stipulated in
Paragraph 8.3.2, provided tenant repairs any damage caused by such removal.
8.4. Removal by Tenant. If Tenant's personal property or trade fixtures
are not removed, and the Premises are not restored to the condition at the
Commencement Date, excepting (i) ordinary wear and tear and (ii) events of
casualty, then Tenant shall indemnify and hold Landlord harmless from and
against the reasonable costs of removal and restoration incurred by Landlord as
a result thereof. If after ten (10) days following written notice from Landlord
all said property has not been removed, then it shall be deemed to be abandoned
by Tenant and title shall thereupon pass to Landlord without compensation to
Tenant, however, Landlord may elect to begin physical removal of said property
on the day following expiration as provided herein and use reasonable efforts to
safeguard said property and in such event, Landlord, its agents and contractors
shall not be liable to Tenant for any damage subjected to said personal property
as a result of removal, handling, or storage.
8.5. Removal by Landlord. Subject to Section 8.4, Landlord may, upon
termination of this Lease, remove, store and/or sell all moveable personal
property and trade fixtures so
13.
<PAGE>
abandoned by Tenant, at Tenant's sole cost, and repair any damage caused by such
removal at Tenant's sole cost. If the Premises are not surrendered at the end of
the Term or sooner termination of this Lease and Landlord does not exercise any
of its rights pursuant to Section 8.4 of this Lease, then Tenant shall indemnify
Landlord against loss or liability resulting from the delay by Tenant in so
surrendering the Premises, including without limitation, any claims made by any
succeeding occupant arising out of such delay, provided that such claims shall
total no more than two hundred thousand dollars ($200,000) per month of delay in
surrendering the Premises.
8.6. Acceptance by Landlord. No act or conduct of Landlord, whether
consisting of the acceptance of the keys to the demised Premises, or otherwise,
shall be deemed to be or constitute an acceptance of the surrender of the
demised Premises, or otherwise, by Tenant prior to the expiration of the Term
hereof, and such acceptance for the surrender by Tenant shall only flow from and
must be evidenced by a written acknowledgment of acceptance of surrender signed
by Landlord with a punch list attached which shall obligate Tenant to resolve
within ten (10) days after such written notice. After the expiration or earlier
termination of this Lease, Tenant shall execute, acknowledge and deliver to
Landlord, within fifteen (15) days after written demand from Landlord to Tenant,
any quitclaim deed or other document reasonably required by any reputable title
company, licensed to operate in the State of California, to remove the cloud or
encumbrance created by this Lease from the real property of which Tenant's
Premises are a part.
8.7. Tenant Surrender. Should Tenant fail to surrender the Premises as
required hereunder, Tenant shall reimburse Landlord for any and all reasonable
costs incurred by Landlord in connection with restoring the Premises less normal
wear and tear and damage due to casualty or condemnation to their original
condition and such reimbursement shall be due and owing at Landlord's election
on demand unless otherwise provided in herein.-
9. Repair And Maintenance
9.1. Landlord Obligations. Subject to the provisions of Article 14,
Landlord shall keep and maintain the roof, paving, structural elements,
landscaping, irrigation, and exterior walls of the building in good order and
repair and all common Building and Site areas. Landlord shall manage the
building utility systems unless dedicated to Tenant's exclusive use. Landlord
shall b e responsible for City-mandated ADA costs associated with the exterior
areas of the Premises. Notwithstanding anything other than Sections 10.1 and
8.1 in this Lease to the contrary, Landlord shall have no obligation to alter,
remodel, improve, decorate, the Premises or any part thereof, except Landlord
shall provide to Tenant a recarpeting allowance including new top set base up to
but not to exceed twenty-five dollars ($25.00) per square yard of floor area
currently carpeted, amounting to a total maximum of $55,100.
9.2. Tenant Obligations. Tenant shall be responsible for and shall
undertake the design and construction of any Tenant improvements, subject to
---
Landlord's consent. "Tenant
14.
<PAGE>
Improvements" means all work necessary to augment the base building and includes
finished ceilings, walls, floor surfaces, HVAC distribution, lighting,
electrical distribution, fire protections systems, cabling, security systems,
distributed and centralized conference areas, secretarial, reception area work
stations, satellite kitchens, and other areas necessary for the operation of an
internet service provider. Tenant shall, at its sole cost, keep and maintain the
interior of Premises, in a condition of proper cleanliness and good working
order. Tenant shall be responsible without limitation for repairs necessitated
by Tenant's negligence or failure to properly safeguard and maintain such areas.
Tenant shall be responsible for all City-mandated ADA costs associated with the
interior of the Premises that are triggered by Tenant's alterations or
improvements. Tenant shall have sole responsibility to manage and limit its
equipment and property placement within the structural design load limits of the
Premises according to the specific placement. Should Tenant fail to maintain the
Premises as required of Tenant in this Lease, forthwith upon written notice from
Landlord, Landlord, in addition to all other remedies available hereunder or by
law, and without waiving any alternative remedies, may make the same, and in
that event, Tenant shall reimburse Landlord for the actual and reasonable cost
of such maintenance or repairs, at Landlord's election on demand or on the next
date upon which Basic Rent is due.
9.3. Exclusions to Tenant Obligations. Tenant's obligation to repair shall
not extend to (1) damage and repairs as may be covered under Section 6 herein,
(2) damage caused by any defects in the design, construction or materials of the
Building including the Premises other than design, construction, or materials
that were Tenant's responsibility, (3) damage caused by the active negligence or
willful misconduct of Landlord, its employees, agents, invitees or licensees,
(4) repairs reimbursed pursuant to the definition of reimbursable Operating
Expenses, (5) damage due to fire, earthquake, acts of god, the elements, or
other casualty; and (6) damage to the interior of the Premises resulting from
causes outside the Premises. Tenant shall not be obligated to pay for capital
expenditures of the roof system, or the exterior cladding and glazing systems.
9.4. Compliance with Regulations. Tenant shall have sole responsibility
for compliance with all regulatory requirements governing the management and
timely reporting of the quality and quantity of discharges from all facility
utility systems from the Premises.
10. Alterations And Additions
10.1. Regulatory Modifications. Landlord shall be responsible for
performing all modifications required on the exterior of the Premises including
the exterior entrances and exits, by the City of Palo Alto pursuant to the
Americans with Disabilities Act and Title 24 as may be required as part of the
approved initial construction and bringing the Premises on the Commencement Date
into compliance with all applicable local, state and federal regulations and
codes as interpreted and required by the City of Palo Alto on Commencement Date.
Tenant shall be responsible for performing all modifications required by the
City of Palo Alto pursuant to the American Disabilities Act and Title 24 as may
be required for interior modifications, alterations or improvements, as approved
by Landlord.
15.
<PAGE>
10.2. Landlord Approval. Tenant shall not make, or suffer to be made, any
alterations, improvements or additions in, on, or about, or to the Premises or
any part thereof without the prior written approval of Landlord, which approval
shall not be unreasonably withheld or delayed. Subject to this Section 10.2,
Landlord conceptually approves Tenant's significant augmentation of the network
room and network cabling in the Premises. Tenant shall submit to Landlord two
sets of design drawings for Landlord's review and approval prior to start of
work. Landlord's consent shall be affixed or attached to one set of the drawings
and returned to the Tenant. Said Landlord consent is not required for the
physical attachment or utility hook-up of Tenant's personal property, fixtures,
or equipment on the Premises, however, Tenant shall restore damaged surfaces
following the removal of these items at the expiration of the Lease, nor is such
Landlord consent required for routine repairs to the Premises' utility systems
provided they do not compromise the performance of such systems and meet
established practices and code requirements. If Landlord consents to Tenant's
making any alterations, improvements, or additions, Tenant shall be responsible
for notifying Landlord at least (3) business days before work can begin for
Landlord to post notice of non- responsibility, which shall remain posted until
completion of the alterations, additions or improvements. If any alteration,
addition or change requested by Tenant and approved by Landlord results in a
requirement of any law, regulation, ordinance, order of any public agency,
Tenant, at its sole cost and expense, shall promptly make the same in accordance
with the provisions of this Article 10, except in the case of such an
alteration, et al being required in the absence of any Tenant alteration during
the Term, in which case Landlord shall be solely responsible for making the
required alteration. At the completion of an alteration or addition, Tenant
shall submit to Landlord's Palo Alto engineering department a complete record
"as-built" set of blue print drawings which accurately depict the new conditions
together with any concealed work.
10.3. Exterior. No exterior building modifications will be allowed to the
Premises except as may be required to keep building and lighting systems in good
condition and repair. All construction will be performed under a recorded notice
of Landlord non-responsibility and only by contractors that agree to Landlord
stipulated general construction conditions regarding site access and
mobilization, material storage and handling, dust and noise control, trash
disposal, minimum standards of safety, minimum building standard finishes, the
proper use, handling and disposal of hazardous materials, and general reputation
in the industry.
10.4. Restoration. If Tenant requests that any alterations, improvements
or additions be made, and Landlord in its reasonable judgment agrees to their
implementation, Tenant shall perform same at Tenant's sole cost and expense.
Landlord shall not require at the end of the Term the removal of improvements
approved by Landlord as of the Commencement Date. Tenant shall also reimburse
Landlord for the actual and reasonable costs of removing any other such
alterations, improvements or additions at the termination of this Lease, and
restoring the Premises to their original condition. Any alteration, addition or
improvements to the Premises (except movable furniture, security and sound
studio equipment, and trade fixtures not affixed to the Premises) shall become
the property of Landlord upon expiration or termination of this Lease.
Alterations and additions that are not to be deemed as trade fixtures shall
include
16.
<PAGE>
heating, lighting, electrical systems, air conditioning, partitioning,
electrical signs, laboratory casework, built-in laboratory equipment, carpeting,
or any other installation that has become an integral part of the Premises.
10.5. Restoration Exclusions. Tenant shall not be required to make (1)
any structural changes nor shall Landlord approve of Tenant's request for any
alterations, modifications, or improvements which may require any structural
changes, (2) any changes which constitute capital expenditures, (3) any
improvements or alterations which will remain as part of the Premises for the
benefit of Landlord upon termination of this Lease in order to comply with any
law, ordinance, rule or regulation or the recommendation of Landlord's fire
insurance rating organization unless the same is required by Tenant's particular
use of the Premises.
11. Events Of Default
The occurrence of any of one or more of the following events shall
constitute a default hereunder by Tenant:
11.1. Abandonment. The abandonment of the Premises by Tenant. Abandonment
shall be defined as any absence by Tenant from the Premises for twenty (20) or
more business days while in default of any of its obligations hereunder.
11.2. Payment Breach. The failure by Tenant to make any payment of Rent,
or other payment required to be made by Tenant hereunder, within three (3)
business days after written notice from Landlord.
11.3. Other Breach. The failure by Tenant to observe or perform any of
the express or implied covenants or provisions of this Lease to be observed or
performed by Tenant where such failure continues for a period of thirty (30)
days after written notice thereof from Landlord to Tenant; provided, however,
that any such notice shall be in lieu of, and not in addition to, any notice
required under California Code of Civil Procedure Section 1161; and provided
further, that if the nature of Tenant's default is such that more than thirty
(30) days are reasonably required for its cure, then Tenant shall not be deemed
to be in default if Tenant shall commence such cure within said thirty (30) day
period and thereafter diligently prosecute such cure to completion.
11.4. Assignment or Subletting. An assignment or subletting of this Lease
that is not permitted by Article 18.
12. Remedies For Default
12.1. Landlord Rights. If this Lease is breached by Tenant, Landlord has
the option of (i) removing all persons and property from the Premises and
repossessing the Premises, in which case any of Tenant's property which Landlord
removes from the Premises may be stored in a public warehouse or elsewhere at
the cost of, and for the account of Tenant, or (ii) allowing
17.
<PAGE>
Tenant to remain in full possession and control of the Premises. If Landlord
chooses to repossess the Premises, the Lease will automatically terminate in
accordance with the provisions of California Civil Code, Section 1951.2. If the
Lease is so terminated, Landlord may recover from Tenant: (1) the worth at the
time of award of the unpaid Rent which had been earned at the time of
termination, including interest at the prime rate of the Chase Manhattan Bank ,
New York plus 1% at the time of award; (2) the worth at the time of award of the
amount by which the unpaid Rent which would have been earned after termination
until the time of award exceeds the amount of such Rental loss that Tenant
proves could have been reasonably avoided, including interest at the maximum
rate an individual is permitted by law to charge; and (3) the worth at the time
of award of the amount by which the unpaid Rent for the balance of the Term
after the time of award exceeds the amount of such Rental loss that Tenant
proves could be reasonably avoided. "The worth at the time of the award", as
used in (1), (2) and (3) of this Article 12, is to be the amount equal to the
base amount multiplied by the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award.
12.2. Lease in Effect. If Landlord chooses not to repossess the Premises,
but allows Tenant to remain in full possession and control of the Premises, in
accordance with provisions of California Civil Code, Section 1951.4, Landlord
may treat the Lease as being in full force and effect subject to all reasonable
efforts to mitigate its damages, and may collect from Tenant all Rents as they
become due through the termination date of the Lease, as specified in the Lease.
For the purpose of this Article 12, the following do not constitute a
termination of Tenant's right to possession:
12.2.1. Reasonable acts of maintenance or preservation, or
reasonable efforts to relet the Premises; or
12.2.2. The appointment of a receiver on the initiative of Landlord
to protect its interest under this Lease.
12.3. Tenant Liability. Tenant shall be liable immediately to Landlord
for all reasonable costs Landlord incurs in reletting the Premises, including
without limitation, brokers' commissions attributable to the remainder of the
Term, removal of Tenant's trade fixtures and equipment and associated repairs,
and like costs. Reletting can be for a period shorter or longer than the
remainder of the Term. Tenant shall pay to Landlord the Rent due under this
Lease on the dates the Rent is due, less the Rent Landlord receives from this
Lease unless Landlord notifies Tenant that Landlord elects to terminate this
Lease. After Tenant's default and for as long as Landlord does not terminate
Tenant's right to possession of the Premises, if Tenant obtains Landlord's
consent, Tenant shall have the right to assign or sublet its interest in this
Lease, but Tenant shall not be released from liability.
12.4. Relet. If Landlord elects to relet the Premises as provided in this
Section, Rent that Landlord receives from reletting shall be applied to the
payment of:
12.4.1. First, any indebtedness from Tenant to Landlord other than
Rent due
18.
<PAGE>
from Tenant;
12.4.2. Second, all costs, including for maintenance, incurred by
Landlord in reletting;
12.4.3. Third, Rent due and unpaid under this Lease.
12.5. Proceeds. After deducting the payments referred to in this Article
12, any sum remaining from the Rent Landlord receives from reletting shall be
held by Landlord and applied in payment of future Rent as Rent becomes due under
this Lease. In no event shall Tenant be entitled to any excess Rent received by
Landlord as a result of a default hereunder. If, on the date Rent is due under
this Lease, the Rent received from reletting is less than Rent due on that date,
Tenant shall pay to Landlord, in addition to the remaining Rent due, all costs
including for maintenance, Landlord incurred in reletting that remain after
applying the Rent received from the reletting, as provided in this Article 12.
12.6. Cure. At any time after Tenant commits a default, Landlord can cure
the default at Tenant's sole reasonable cost. If Landlord at any time, by reason
of Tenant's default, pays any sum or does any act that requires the payment of
any sum, the sum paid by Landlord shall be due promptly from Tenant to Landlord
at the time the sum is paid, and if paid at a later date, bear interest at the
maximum rate set forth in Section 12.1 but in no event in excess of ten (10) per
cent per annum from the date the sum is paid by Landlord until Landlord is
reimbursed by Tenant. The sum, together with interest on it, shall be deemed to
be part of the Rent that is due and owing by Tenant to Landlord hereunder.
12.7. Interest. Any Rent not paid when due shall bear interest at the
rate set forth in Section 12.1 from the date due until paid, but in no event in
excess of ten (10) per cent per annum.
13. Destruction
13.1. Landlord Options. If the Premises are destroyed in whole or in part
from any cause, Landlord may, at its sole option:
13.1.1. Rebuild or restore the Premises to their condition prior to
the damage or destruction; or
13.1.2. Terminate the Lease, provided Landlord terminates all other
leases of the Building.
13.2. Notice. Landlord shall give Tenant notice in writing sixty (60)
days from the date of destruction of the Premises if such damage or destruction
is or is not capable of repair within one hundred twenty (120) days of the date
of notice, and of Landlord's election to either rebuild and restore the
Premises, or to terminate this Lease. If Landlord fails to provide said notice
within sixty (60) days following the date of destruction, or provides notice
that such repairs shall exceed one
19.
<PAGE>
hundred twenty (120) days from the date of notice, then Tenant shall have the
right to terminate this Lease. If Landlord gives Tenant written notice to
rebuild or restore the Premises within sixty (60) days of the date of
destruction, then Landlord agrees, at its expense, promptly to rebuild or
restore the Premises to its condition prior to the damage or destruction. If
Landlord does not complete the rebuilding or restoration within one hundred
twenty (120) days following the date of notice to rebuild (such period of time
to be extended a maximum of sixty (60) days for delays caused by any act or
omission to act of Tenant or its agents, employees, contractors, invitees, or
because of acts of God, acts of public agencies, labor disputes, strikes, fires,
freight embargoes, rainy or stormy weather, inability to obtain materials,
supplies or fuels, acts of contractors or subcontractors, or delay of the
contractors or subcontractors due to such causes or other contingencies beyond
the reasonable control of Landlord), then Tenant shall have the right to
terminate this Lease by giving fifteen (15) days prior written notice to
Landlord. All rent shall abate as of the date of destruction. Landlord's
obligation to rebuild or restore shall not include restoration of Tenant's trade
fixtures or equipment not comprising the Premises, merchandise, or any
improvements, alterations or additions made by Tenant to the Premises.
13.3. Civil Code. Unless this Lease is terminated pursuant to the
foregoing provisions, this Lease shall remain in full force and effect. Tenant
hereby expressly waives the provisions of Section 1932, Subdivision 2, and
Section 1933, Subdivision 4, of the California Civil Code.
13.4. Destruction. If the Premises are damaged or destroyed to the extent
of not less than thirty three and one third percent (33 1/3%) of the replacement
cost thereof, Landlord may elect to terminate this Lease, whether the Premises
be injured or not.
13.5. Damage At the End of Term. If there is a partial destruction of the
Premises and/or Building within the final six (6) months of the Term, either
Tenant or Landlord shall have the right to terminate this Lease by written
notice to the other within fifteen (15) days after the date of such damage or
destruction.
14. Condemnation
If any part of the Premises, not including any portions of the parking or Site
area which may be reasonably replaced by alternative parking within close
proximity on the Site, shall be taken for any public or quasi-public use, under
any statute or by right of eminent domain, or private purchase in lieu thereof,
either Landlord or Tenant may terminate this Lease upon and within fifteen (15)
days of the taking and the vesting of title in the condemnor or purchaser. If a
part or all of the Premises is taken, all compensation awarded upon such taking
shall go to Landlord, and Tenant shall have no claim thereto, except as set
forth in this Article 14. Tenant shall have the right to separately petition and
to claim and recover from the condemning authority, but not from Landlord, such
compensation as may be separately awarded or recoverable by Tenant in Tenant's
own right on account of any and all damage to Tenant's business, including
without limitation the loss of goodwill by reason of any appropriation, and for
or on account of any cost or loss to which Tenant might be put in removing and
relocating Tenant's merchandise, furniture,
20.
<PAGE>
moveable trade fixtures, and equipment and the value of Tenant's leasehold
interest in the Premises, tenant's improvements to the extent paid for by Tenant
any alterations, additions, improvements or replacements made by or at the
expense of the Tenant and any compensation by reason of the payment by Tenant of
Basic Rent in excess of the Basic Rent payable by Tenant in this Lease in order
to obtain alternate space. Each party waives the provisions of Code of Civil
Procedure, Section 1265130, allowing either party to petition the Superior Court
to terminate this Lease if there is a partial taking of the Premises. Nothing
herein contained shall be deemed or construed to prevent Tenant from interposing
and prosecuting in any condemnation proceedings a claim for the value of any
fixtures or improvements installed in or made to the Premises by the Tenant, or
for its costs of moving or loss of business by reason of such condemnation.
15. Free From Liens
Tenant shall (a) pay for all labor and services performed or materials used by
or furnished to Tenant, or any contractor employed by Tenant with respect to the
Premises, (b) indemnify, defend and hold Landlord and the Premises harmless and
free from any liens, claims, demands, encumbrances, or judgments created or
suffered by reason of any labor or services performed or materials used by or
furnished by Tenant or any contractor employed by Tenant with respect to the
Premises, (c) give notice to Landlord in writing five (5) days prior to
employing any laborer or contractor to perform services related, or receiving
materials for use upon the Premises, and (d) post, on behalf of Landlord, a
notice of non-responsibility in accordance with the statutory requirements of
California Civil Code, Section 3094, or any amendment thereof. If an improvement
bond with a public agency in connection with the above is required to be posted,
Tenant agrees to include Landlord as an additional obligee.
16. Compliance With Laws
Tenant shall at its own cost, comply with and observe all laws, regulations,
ordinances, statutes, and other requirements of all municipal, county, state and
federal authorities, as they now exist or may hereafter be enacted by
legislative bodies having jurisdiction thereof, relating to the use, condition
and occupancy of the Premises, subject to Section 10.4. Notwithstanding the
foregoing or anything to the contrary contained in this Lease, Tenant shall not
be responsible for capital expenditures related to (a) building structural
modifications or (b) American Disabilities Act (ADA) interior alterations,
excepting where Tenant employees may bring such action to cause said alterations
to be undertaken, in compliance with laws, codes, ordinances or governmental
directives not otherwise required elsewhere in this Lease.
17. Subordination
Tenant agrees that this Lease shall, at the option of Landlord, be subjected and
subordinated to any mortgage, deed of trust, or other instrument of security,
which has been or shall be placed on the Premises, and this subordination is
hereby made effective without any further act of Tenant or Landlord. Tenant
shall, at any time hereinafter, within fifteen (15) days, execute any
instruments, releases or other documents that may be reasonably required by a
mortgagee,
21.
<PAGE>
mortgagor, or trustor, or beneficiary under any deed of trust, for the purpose
of subjecting or subordinating this Lease to the lien of any such mortgage, deed
of trust, or other instrument of security, provided that Tenant shall continue
to have the rights covenanted and warranted to Tenant in Article 27. The
subordination of this Lease to any future mortgages, deeds of trust or other
security interests shall be subject to the following: (1) the holder of such
lease or security interest shall have first agreed in writing that so long as
Tenant is not is default, this Lease shall not be terminated by foreclosure or
sale and (2) such subordination shall not otherwise restrict or limit the rights
or increase the obligations of Tenant under this Lease. To the extent permitted
under the Master Lease., Tenant's obligation to attorn to such ground lessor or
mortgagee shall be conditioned on receipt of a reasonably satisfactory
nondisturbance agreement and upon assumption by such ground lessor or mortgagee
of Landlord's obligations under this Lease.
17.1. Encumbrance. Subject to the foregoing, if this Lease is or becomes
subordinate to any encumbrance now of record or encumbrance recorded after this
date affecting the Premises, then Tenant agrees to attorn to any purchaser at
any foreclosure sale, or to any grantee or transferee designated in any deed
given in lieu of foreclosure. In such event, Tenant shall execute, at Landlord's
or lender's request, such recognition and attornment agreement as lender and
Tenant, at its option, may reasonably agree upon.
18. Assignment And Subletting
18.1. Assignment or Subletting. Tenant shall not, without the prior
written consent of Landlord, which shall not be unreasonably withheld, except as
set forth below, delayed or conditioned, either voluntarily or by operation of
law, sell, encumber, pledge or otherwise transfer all or any part of Tenant's
leasehold estate hereunder or permit the Premises to be occupied by anyone other
than Tenant or Tenant's employees, or sublet the Premises or any portion
thereof, except to an Affiliate of Tenant which Affiliated sublessee or assignee
would not need Landlord's approval but would require the approval of Lessor. No
more than two entities shall occupy the Premises at any time, whether or not
such entity is Affiliated. The transfer, assignment or hypothecation of any
stock or interest in Tenant in the aggregate in excess of twenty five percent
(25%) shall be deemed an assignment within the meaning and provisions of this
Section, unless such transfer, assignment or hypothecation is between or among
Affiliates of Tenant. Notwithstanding the foregoing, a sale or transfer of the
capital stock of Tenant shall be deemed a Landlord permitted transfer if (a)
such sale or transfer occurs in connection with any bona fide financing or
capitalization for the benefit of Tenant and in the sole opinion of Landlord,
such transfer shall not create a conflict of business interest with respect to
Landlord's own business operations, or (b) Tenant becomes a publically traded
corporation. Except where otherwise provided in this Lease, Landlord shall have
no right to any sums or other economic consideration in connection from any
Landlord permitted transfer.
18.2. Profit on Sublease. All profit that Tenant shall realize in the
subletting of the Premises shall be paid to Landlord. "Profit" shall be computed
after subtracting therefrom any and all costs and expenses incurred by Tenant in
connection with such subleasing, including reasonable
22.
<PAGE>
improvement allowances, brokerage commissions and attorney's fees. Tenant shall
give Landlord a copy of any sublease and shall remit to Landlord by the first of
each calendar quarter any such profit due from such lease during the previous
quarter.
18.3. Notice to Landlord. If Tenant desires at any time to assign this
Lease or to sublet the Premises or any portion thereof, it shall first notify
Landlord of its desire to do so and shall submit in writing to Landlord (i) the
name of the proposed sublessee or assignee; (ii) the nature of the proposed
sublessee's or assignee's business to be carried on in the Premises; (iii) the
terms and provisions of the proposed sublease or assignment; and (iv) such
reasonable financial information (to be treated in a confidential manner by
Landlord) concerning the proposed assignee as Landlord may require. Landlord
shall reasonably approve or reject, subject to Section 18.1, any such assignment
or subletting by written notice to Tenant no later than fifteen (15) working
days after Landlord's receipt of the foregoing information. Landlord also has
the right, in its sole discretion, to retake the Premises if Tenant so requests
Landlord consent to an assignment or subletting.
18.4. Involuntary Assignment. No interest of Tenant in this Lease shall
be assignable by operation of law. Without limiting the foregoing, each of the
following acts shall be considered an involuntary assignment:
18.4.1. Transfer of this Lease by testacy or intestacy;
18.4.2. If Tenant is or becomes bankrupt or insolvent, makes an
assignment for the benefit of creditors, or institutes a proceeding under the
Bankruptcy Act in which Tenant is the bankrupt;
18.4.3. The appointment of a trustee or receiver to take possession
of substantially all of Tenant's assets located at the Premises or of Tenant's
interests in this Lease, where possession is not restored to Tenant within sixty
(60) days; or
18.4.4. The attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where seizure is not discharged within sixty (60) days.
An involuntary assignment shall constitute a default by Tenant and Landlord
shall have the right to elect to terminate this Lease, in which case this Lease
shall not be treated as an asset of Tenant.
18.5. Tenant to Reimburse for Expenses. Tenant agrees to reimburse
Landlord upon demand for Landlord's reasonable costs and reasonable attorney's
fees (without limitation) incurred in conjunction with the processing,
investigation and documentation of any involuntary assignment.
19. Insolvency Or Bankruptcy
Either (a) the appointment of a receiver to take possession of all or
substantially all of the assets of Tenant, or (b) a general assignment by Tenant
for the benefit of creditors, or (c) any action
23.
<PAGE>
taken or suffered by Tenant under any insolvency or bankruptcy act shall
constitute a breach of this Lease by Tenant. Upon the happening of any such
event, this Lease shall terminate ten (10) days after written notice of
termination from Landlord to Tenant. This section is to be applied consistent
with applicable state and federal law in effect at the time such event occurs.
20. Landlord Loan Or Sale
If Tenant shall require an estoppel certificate or similar document from
Landlord, Landlord's estoppel shall be in the same form as applicable to
Landlord, as Tenant must provide below. Tenant agrees, promptly following
written request by Landlord, to (a) execute and deliver to Landlord any
documents, including estoppel certificates presented to Tenant by Landlord, (i)
certifying that this Lease is unmodified and in full force and effect, (or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to which the
Rent and other charges are paid in advance, if any, (ii) acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder, and (iii) 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 any part thereof, or a purchase of
the Premises from Landlord, and (b) to deliver to Landlord "10-K" Annual Reports
if such exists, filed with the Securities and Exchange Commission for the
previous three (3) fiscal years. Tenant's failure to deliver an estoppel
certificate within twenty (20) days following such request shall constitute a
default under this Lease and shall be conclusive upon Tenant that this Lease is
in full force and effect and has not been modified except as may be represented
by Landlord, and that there are no uncured defaults in Landlord's performance.
Any such certificate shall contain language such that (1) all statements therein
are made to Tenant's best knowledge and (2) nothing therein shall be deemed to
be a waiver of any right or cause of action based on any fact of which Tenant
has no knowledge due to Landlord's concealment of or failure to disclose such
fact.
21. Attorney's Fees
If, for any reason, any suit be initiated to enforce any provision of this
Lease, the prevailing party shall be entitled to legal costs, expert witnesses
expenses and reasonable attorney's fees as fixed by the Court.
22. Notices
All notices to be given to Tenant may be given in writing, personally or by
depositing the same in the United States mail, postage prepaid, and addressed to
the Vice President of Finance of the Tenant at the address of the Premises for
Tenant with a copy to the Legal Department, unless a different address has been
given to the other in writing. Any notice, payment or document required or
permitted by this Lease to be given to Landlord shall be addressed to Landlord
at the address set forth below, or at such other address as either party may
have specified by notice
24.
<PAGE>
delivered in accordance herewith:
Attn: Director of Site Services Attn:
- ------------------------------- ----------------------------
Palo Alto Site Engineering Division ____________________________
Syntex (U.S.A.) Inc. ____________________________
3401 Hillview Avenue ____________________________
Palo Alto, California 94304-1397 ____________________________
with a copy to: with a copy to:
Attn: Legal Department Attn.:______________________
- ----------------------
Syntex (U.S.A.) Inc. ____________________________
3401 Hillview Avenue ____________________________
Palo Alto, CA 94304-1397 ____________________________
23. Waiver
The waiver by Landlord or Tenant of any breach of any term, covenant or
condition herein contained shall not be deemed to be a future waiver of such
term, covenant, or condition herein contained. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant, or condition of this Lease, other than the
failure of Tenant to pay the particular Rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
Rent.
24. Holding Over
Any holding over after the expiration of the Term and up to six months after
such expiration shall be construed to be a tenancy from month-to-month (which in
no event shall exceed a period of three (3) months) at a rental one and one and
one-half or one hundred and twenty five (125%) per cent of the Basic Rent as set
forth in Section 3.1. above, and shall otherwise be on the terms and conditions
herein specified, so far as applicable.
25. Sale Or Transfer Of Premises
If Landlord sells or transfers all or any portion of the Premises, Landlord, on
consummation of the sale or transfer, shall be released from any liability
thereafter accruing under this Lease but not such liability as accrued prior to
such sale, including without limitation with respect to Section 4.2 of this
Lease. If any deposit or prepaid Rent has been paid by Tenant, Landlord agrees
to transfer the deposit or prepaid Rent to Landlord's successor other than any
portion of the security deposit applied or retained to compensate Landlord for
any loss or damage that Landlord may have suffered as a result of Tenant's
default, and thereupon, Landlord shall be discharged from any further liability
in reference thereto.
26. Landlord's Right To Perform
Except as otherwise provided in this Lease, all terms, covenants and conditions
of this Lease to
25.
<PAGE>
be performed or observed by Tenant shall be performed or observed by Tenant at
Tenant's sole cost and expense and without any reduction of Rent. If Tenant
fails to pay any sum of money required to be paid by it hereunder or fails to
perform or observe any other term hereunder on its part to be performed or
observed beyond all applicable cure periods, Landlord may, at its option,
without waiving or releasing Tenant from any obligation of Tenant hereunder,
make any such payment or perform or observe any such other term or act on
Tenant's part to be performed or observed. All sums so paid by Landlord and all
reasonably necessary costs of such performance or observation by Landlord
together with interest thereon from the date incurred at the rate of ten (10%)
per cent per annum shall be paid by Tenant to Landlord, within fifteen (15) days
of receipt of written demand, in which event Landlord shall have the same rights
and remedies against Tenant as in the case of nonpayment of Rent hereunder.
27. Quiet Enjoyment By Tenant, Non-Disturbance And Landlord's Right Of Entry
27.1. Landlord's Covenant. Subject to Section 27.2, Landlord covenants
and warrants that upon Tenant's paying the Rent and observing and performing all
of the terms, covenants and conditions on Tenant's part to be observed and
performed under this Lease:
27.1.1. Tenant shall have, hold and enjoy the sole and exclusive
use and enjoyment of the Premises during the Term without interference by
Landlord and/or its representatives, and
27.1.2. If the Premises are encumbered during the Term, If Landlord
defaults under any encumbrance, the encumbrancer shall not have the contractual
right to evict Tenant or reject this Lease.
27.2. Landlord Entry. Landlord (and/or its representatives) shall have
the right, at all reasonable times upon 24 hours' notice, to enter the Premises
to post notices, inspect, repair, maintain, improve, or alter the Premises; and
to erect scaffolding and other necessary structures in or near the Premises, and
Tenant shall procure such access to the Premises for Landlord and its
representatives. Landlord and any purchaser, lessee, or encumbrancer may enter
the Premises, at all reasonable times with 24-hour notice, with respect to any
existing or prospective sale, lease or encumbrance. Landlord shall also have the
right to enter the Premises in those emergency situations which could involve
potential injury to persons or loss of or damage to property. All of the above
shall be without abatement of Rent and any such entry shall not be construed as
a forcible or unlawful entry, or a detainer, or an actual or constructive
eviction of Tenant from the Premises, except as otherwise agreed in this Lease.
28. Signs
No sign, placard, picture, advertisement, name or notice shall be permanently
inscribed, printed or affixed on or to any part of the outside of the Premises
or any exterior windows of the Premises or any interior windows or doors visible
from common areas of the Premises without
26.
<PAGE>
the prior written consent of Landlord which consent shall not be unreasonably
withheld or delayed and Landlord shall have the right to remove the same without
notice to and at the expense of Tenant. Tenant shall have the right to a quarter
panel of shared monument signage at the first Hillview Avenue entrance to the
Premises, south of Foothill Expressway, along with shared signage of a single
non-Landlord Affiliated cotenant for the Premises, bearing the names or logos of
Avid/Digidesign and one other tenant, subject to the approval of the Master
Lessor's designee (Stanford Lands Management Company) and the City of Palo Alto.
Under the same approval standards, Tenant shall also be allowed to have two
smaller directional signs on site and an entrance sign at the north side of the
building. Tenant is allowed to display a sign on or about front entrance to the
Premises, subject to all applicable approvals and at Landlord's option upon
expiration or other sooner termination of this Lease, Tenant shall at Tenant's
sole cost both remove such signs, repair all damage caused thereby and restore
the appearance of the Premises to its condition prior to the placement of said
sign. All approved signs (or lettering on outside doors) shall be done at the
expense of Tenant by a person qualified and reasonably approved of by Landlord.
Any signs shall be according to government and Stanford regulation.
29. Rules And Regulations
Such reasonable rules and regulations as may hereafter be adopted by Landlord
for the safety, care and cleanliness of the Premises and the preservation of
good order thereon, are hereby expressly made a part hereof, and Tenant agrees
to obey all such rules and regulations.
30. Miscellaneous
30.1. Time is of the Essence. Time is of the essence of this Lease, and
each and all of its provisions.
30.2. Assignment. The term "assign" shall include the term "transfer."
30.3. Severability. The invalidity or unenforceability of any provision
of this Lease shall not affect the validity or enforceability of the remainder
of this Lease.
30.4. Equal Participation. All parties hereto have equally participated
in the preparation of this Lease.
30.5. Headings. The headings and title to the paragraphs of this Lease
are not a part of this Lease and shall have no effect upon the construction or
interpretation of any part thereof.
30.6. No other Representations. Landlord has made no representation(s)
whatsoever to Tenant (express or implied) except as may be expressly stated in
writing in this Lease document.
30.7. Entire Agreement and Modification. This Lease document contains all
of the agreement and conditions made between the parties hereto, and may not be
modified orally or in
27.
<PAGE>
any other manner than by agreement in writing, signed by all of the parties
hereto or their respective successors in interest.
30.8. Non-exclusive Remedies. It is understood and agreed that the
remedies herein given to Landlord shall be cumulative, and the exercise of any
one remedy by Landlord shall not be to the exclusion of any other remedy.
30.9. Successors. The covenants and conditions herein contained shall,
subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of all the parties hereto; and
all of the parties hereto shall jointly and severally be liable hereunder.
30.10. Presumptions. This Lease has been negotiated by the parties hereto
and the language hereof shall not be construed for or against either party.
30.11. Covenants and Conditions. All provisions, whether covenants or
conditions, on the part of Landlord and Tenant shall be deemed to be both
covenants and conditions.
30.12. Governing Law. This Lease shall in all respects be governed by, and
construed and enforced in accordance with the laws of the State of California.
30.13. Additional Representations. Landlord represents and warrants the
following to Tenant as of the date of this Lease:
30.13.1. There are no actions, suits, claims or arbitrations
(including proceedings in eminent domain or purchase in lieu thereof) affecting
any or all of Landlord's interest in the Premises.
30.13.2. Landlord has not received notice from any governmental
agency pertaining to the violation of any material law, order or regulation
affecting Landlord's interest in the Premises, and Landlord has no knowledge
that Tenant has received such notice.
30.13.3. Landlord has no knowledge of (i) any leases, sublease,
licenses, occupancies or tenancies in effect related to the Premises except as
described herein, or (ii) any rights of first refusal or options to purchase its
interest therein or with respect to the Premises.
30.13.4. There exists no default or event which with notice or
passage of time or both would constitute a default under the Master Lease on the
part of the Lessor or Landlord, the Master Lease is in full force and effect and
is unmodified or amended except as set forth herein, Landlord has paid all rent
and other charges in amounts due under the Master Lease, and Landlord has no
knowledge of any claims or defenses by Lessor against Landlord.
30.14. Maintenance of Master Lease. Landlord agrees to maintain the Master
Lease in full force and effect during the Term (and any extended term) of this
Lease.
28.
<PAGE>
30.15. Second Right of First Refusal. Tenant shall have the second right
of first refusal (following Avid Technologies, Inc. right of first refusal) on
approximately 20,000 square feet on the second floor of the Premises,
conditioned upon Landlord's expansion needs. Rates on such additional property
will be at current market rates negotiated in good faith by the parties at the
time of exercise of the right.
31. Brokerage Commissions. Landlord shall pay all brokerage commissions
due on this Lease. Each party hereto represents and warrants that it has dealt
with no other broker in connection with this Sublease and the transactions
contemplated herein, except Cornish & Carey Commercial/ONCOR International.
29.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the
date first above written.
LANDLORD: TENANT:
SYNTEX (U.S.A.) INC. NOOSH, INC.
By: /s/ David R. Austin By: /s/ Ofer Ben-Shachar
_______________________________ _______________________________
Its: Vice President Its: President & CEO
______________________________ ______________________________
Date: 3/24/99 Date: 3/19/99
_____________________________ _____________________________
GUARANTOR:
OFER BEN-SHACHAR
By: /s/ Ofer Ben-Shachar
_______________________________
Its: ______________________________
Date: _____________________________
30.
<PAGE>
EXHIBIT 10.7
THE DOCUMENT COMPANY
XEROX
SUBLEASE
THIS SUBLEASE, dated for reference purposes the 1st first day of November,
1999 by and between XEROX CORPORATION, a New York corporation, having its
principal office at 800 Long Ridge Road, Stamford, Connecticut 06904
(hereinafter referred to as "Sublandlord") and Noosh,Inc, a California
Corporation, having its principal office at 3401 Hillview Avenue, Palo Alto,
California 94304(hereinafter referred to as "Subtenant"), as a sublease under a
certain Lease as described below.
WITNESSETH:
WHEREAS, the Board of Trustees of the Leland Stanford Junior University
("Stanford") and HTC VENTURE, a California General Partnership and predecessor
in interest to SPIEKER PROPERTIES (hereinafter referred to as "Landlord")
entered into a certain ground lease ("Ground Lease") pursuant to that certain
Extension, Amendment, Assignment, Assumption and Consent to Assignment of Lease
dated November 17, 1989, whereby Landlord leased from Stanford that certain
parcel of land located in Palo Alto, California, commonly known as 3400
Hillview Avenue.
WHEREAS, Landlord and Sublandlord entered into a lease dated the 1st day of
March, 1990, as amended by First Amendment to Lease dated October 23,1990, as
supplemented by Consent to Sublease dated October 26, 1990, Acknowledgment of
Lease Assignment, Estoppel, Subordination, Non-Disturbance and Attornment
Agreement dated December 19, 1990, Consent to First Amendment of Lease dated
December 20, 1990, and as further amended by Second Amendment to Lease dated
October 21,1991, Letter Agreement dated November 25, 1991, and Consent to Second
Amendment of Lease dated February 11, 1992 (said Lease, as so amended and
supplemented, hereinafter referred to as the "Master Lease"), whereby Landlord
leased to Sublandlord the Demised Premises, as described in the Master Lease, a
copy of which Master Lease is attached hereto as Exhibit A.
WHEREAS, Sublandlord desires to lease to Subtenant and Subtenant desires to
lease from Sublandlord a certain portion of the Demised Premises.
1.
<PAGE>
NOW THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration, each paid in hand to the other, the receipt and
sufficiency whereof is hereby acknowledged, Sublandlord and Subtenant do hereby
agree as follows:
1. DESCRIPTION OF BUILDING
-----------------------
Sublandlord leases to Subtenant and Subtenant hires from Sublandlord 8,942
rentable square feet, as shown on Exhibit B attached hereto (hereinafter
referred to as the "Subleased Premises"), located in the building known as
Building #3 located at 3400 Hillview Ave, in the City of Palo Alto, State of
California.
2. TERM
----
The term of the Sublease shall be for a period commencing on the later to
occur of: (i) Sublandlord's delivery of possession and (ii) January 1, 2000 (the
"Commencement Date") and ending on December 29, 2001.
Notwithstanding anything to the contrary contained herein, if Sublandlord
has not delivered the Subleased Premises substantially completed to Subtenant on
or before February 1, 2000, then Subtenant shall have the right thereafter to
cancel this Sublease, and upon such cancellation, Sublandlord shall return all
sums theretofore deposited by Subtenant with Sublandlord, and neither part shall
have any further liability to the other.
Subtenant shall have the right to enter the Subleased Premises prior to
January 1, 2000 to take reasonable preparatory measures for its occupancy of the
Subleased Premises, including, without limitation, the installation its trade
fixtures, furnishings, and telephone and computer equipment. Such entry shall
be subject to all of the terms and conditions of this Sublease, except that
Subtenant shall not be required to pay any Rent or Additional Rent on account
thereof, during this period Subtenant must be escorted by a Xerox employee.
3. RENT
----
Subtenant agrees to pay Sublandlord as rent ("Rent") hereunder the
following:
From January 1,2000 to December 31,2000 $40,239.00/month
From January 1,2001 to December 29,2001 $40,239.00/month
The monthly Rent is to be paid in advance on the first day of each month
during the Sublease term. If the Sublease commences or expires on a date other
than the first or last day of a month, the Rent for that month shall be
2.
<PAGE>
prorated. All payments shall be made to Xerox Corporation, Attention: XSERV
Lease Administration, 800 Long Ridge Road, Post Office Box 1600, Stamford, CT
06904, or to such other person or place as may be designated by Xerox
Corporation in writing.
Sublandlord and Subtenant acknowledge that the Rent specified herein does
not provide for charges in Common Area Maintenance, Real Estate Taxes and
Insurance, as defined in the Rider attached to said Master Lease and
incorporated herein by reference (the "Rider"), which may hereafter pertain to
the Subleased Premises or janitorial, building maintenance and repair,
landscaping, security, or electricity. Therefore Subtenant shall pay in addition
to the monthly installments of the annual Rent, as Additional Rent, its pro-rata
share of actual cost in Common Area Maintenance, Real Estate Taxes and Insurance
in the manner set forth in the Rider. Subtenant's pro-rata share ("Pro Rata
Share") shall equal 4.3%.
Expenses to the extent actually paid by Sublandlord for the Premises under
the Master Lease ( including the Subleased Premises) and not included as
Additional Expenses under the Master Lease:
a. normal and customary common area maintenance and repair
Notwithstanding the foregoing or anything to the contrary in this Sublease,
Subtenant shall not be required to pay any Addition Rent, or to perform any
obligation that is (i) fairly allocable to any period of time prior to the
Commencement Date or following the expiration or sooner termination of the
Sublease (for any reason other than Subtenant's default, (ii) fairly allocable
to any portion of the Master Premises other than the Subleased Premises, (iii)
payable as a result of a default by Sublandlord of any of its obligations under
the Master Lease, or as a result of the negligence or willful misconduct of
Sublandlord or any of its agents, employees or contractors, or (iv) are incurred
for the sole benefit of Sublandlord.
Subtenant acknowledges that the electricity for the Subleased Premises is
metered and shall pay the Sublandlord for their pro rata building share on a
monthly basis. See Exhibit E for a description of the services provided
hereunder.
Subtenant has agreed to pay $500.00 monthly rental for the furniture that
currently exists in the offices. An inventory list of the furniture is attached
to the sublease ( Exhibit F). After the term of the sublease, the furniture will
be returned to Xerox in same condition received, less normal wear and tear.
4. USE
---
3.
<PAGE>
The Subleased Premises may be used and occupied for research and
development, training, receiving, storing, prototype manufacturing and ancillary
office use including the use of computers and various other electronic equipment
needed for Subtenant's business. Sublandlord covenants, to the best of
Sublandlord's knowledge, that there are no zoning ordinances, provisions of the
underlying Ground Lease, or any other prohibitions restricting or limiting the
use of the Subleased Premises for the purpose herein specified.
Subtenant shall not use or occupy the Subleased Premises in violation of
the Ground Lease, the Master Lease or in violation of law, and shall, upon
written notice from Sublandlord, discontinue any use of the Subleased Premises
which is declared by any governmental authority having jurisdiction to be a
violation of law. Subtenant shall comply with any direction of any governmental
authority having jurisdiction, which shall by reason of the nature of
Subtenant's use or occupancy of the Subleased Premises impose any duty upon
Subtenant or Sublandlord with respect to the Subleased Premises, or with respect
to the use and occupancy thereof. Subtenant shall comply with all conditions of
approval for development permits issued for the Complex, including
implementation of a Transportation Demand Management ("TDM") program if required
by City ordinance.
Subtenant may, if Subtenant so elects, and for Subtenant's sole use,
install and operate within the Subleased Premises microwave ovens and install
and operate within the Subleased Premises vending machines to dispense hot and
cold beverages, ice cream, candy, and food; such machines shall be maintained in
a neat and sanitary condition and shall comply with all applicable laws and
ordinances.
Notwithstanding anything to the contrary in this Sublease, Subtenant shall
not be responsible for compliance with any laws, codes, ordinances or other
governmental directives where such compliance would is not related specifically
to Tenant's use and occupancy or the Subleased Premises or triggered by
Subtenant's alterations or improvements to the Subleased Premises.
5. INCORPORATED
------------
(a) Only the Paragraphs contained in the Master Lease which are delineated
in Paragraph 5 (c) hereof are hereby incorporated by reference herein with the
same effect as if fully set forth; provided that the term "Tenant" as defined
therein shall for the purpose of this Sublease be deemed to be "Subtenant" as
defined herein. The term "Demised Premises" shall be deemed to mean the
"Subleased Premises" and the term "Lease" as defined therein shall be deemed to
mean this Sublease. The term "Commencement Date" shall mean the Commencement
Date as defined herein.
4.
<PAGE>
(b) Sublandlord shall use reasonable efforts to cause Landlord to perform
as expeditiously as possible all the Landlord's obligations under the Master
Lease, provided that nothing contained in this Sublease shall be construed as
requiring Sublandlord to perform any obligation or discharge any duty which the
Landlord may be required to perform or discharge under the Master Lease.
(c) Except where in conflict with the other terms, conditions and
provisions of this Sublease which shall in such event govern and prevail, the
following Paragraphs of the Master Lease, to the extent provided below, are
hereby included and incorporated into this Sublease pursuant to Paragraph 5 (a)
above:
Entire Section 6: Except in the first two sentences of the second
paragraph the Sublandlord shall provide the maintenance
and repair services described in these two sentences at
the sole cost and expense of the Subtenant.
Subtenant's shall not be liable for any maintenance and
repair obligations of a capital nature except, and to
the extent, required due to Subtenant's negligence or
willful misconduct.
Entire Section 7: Except that the term Landlord shall refer to Sublandlord
and all Alterations made by Subtenant shall be subject
to Sublandlord's approval.
Except in the Seventh line of the first paragraph the
phrase "fifteen (15)" are deleted and replaced with the
phrase "twenty (20)."
Entire Section 9: Except in 9(a): The second sentence shall be changed to
reflect: Subtenant shall obtain service and pay for the
cost of such utilities for the Subleased Premises.
Except the last sentence of 9(b) shall be deleted.
9(c) is not deleted as stated in the Second Amendment
dated 10/21/91 and will remain in full force and effect.
Entire Section 10:
Entire Section 12:
Entire Section 15:
5.
<PAGE>
Entire Section 16: Except the last sentence of paragraph (a)
Except paragraph (c).
Entire Section 19:
Entire Section 20: Except the term "Landlord" shall refer to Sublandlord.
Entire Section 21: Except the term "Landlord" shall refer to Sublandlord.
Entire Section 22: Except the term "Landlord" shall refer to Sublandlord.
Entire Section 31: Except the term "Landlord" shall refer to both
Sublandord and Landlord.
Entire Section 34: Except subsections (a)(i) and (ii) and subsection (b).
Entire Section 36:
Entire Section 37:
Entire Section 38:
Entire Section 39:
Entire Section 40:
Entire Section 41:
Entire Section 42: Except this section shall apply to both Landlord and
Sublandlord.
Entire Section 43:
Entire Section 47: Except the term "Landlord" shall refer to Sublandlord
Section 47(b) is deleted (Refer to Paragraph 11 of this
Sublease).
Entire Rider dated Subject to Paragraph 3 above and except in paragraph (f)
March 1, 1990 the Sublandlord shall deliver to Subtenant the statement
setting forth the amounts of estimated Common Area
Maintenance for the then current year to the notice
address herein.
Any provisions of the Master Lease not expressly incorporated herein shall
not be incorporated and shall not be applicable to the Subtenant.
6.
<PAGE>
6. DAMAGE
(a) If at any time prior to expiration of this Sublease, the Subleased Premises
are wholly or partially damaged, destroyed or rendered inaccessible by a risk
fully covered (excluding deductibles) by insurance maintained by Landlord or for
Landlord's benefit, and the Subtenant is unable, in its sole but reasonable
discretion, to carry on its normal operations in all or a substantial portion of
the Subleased Premises, then, Subtenant shall give Sublandlord notice which
Sublandlord shall transmit to Landlord. Within the later of twenty (20) days
after Subtenant's notice or forty-five (45) days after the damage or
destruction, Sublandlord shall give Subtenant notice of Landlord's reasonable
determination that the Subleased Premises can or cannot be fully restored and
ready for occupancy within one (1) year from the date of damage or destruction,
without payment of overtime or other premiums.
(1) If Landlord determines that the Subleased Premises can be so restored
within one (1) year, (i) this sublease shall remain in full force, (ii) rent
shall be abated proportionally for such portion of the Subleased Premises as is
inaccessible or unusable, to the extent rent is abated under the Lease, and
(iii) Landlord shall proceed diligently to repair the damage or destruction,
including all Tenant improvements, using materials of at least the quality used
in the original construction of the Complex, Premises and Tenant Improvements
with a minimum of interference in Subtenant's normal operations. If, in
Sublandlord's sole but reasonable judgment, Landlord shall not have performed
any of the above obligations in strict compliance therewith, then Sublandlord
may, but shall not be required to, undertake such obligations at Landlord's
expense.
(2) If Landlord determines that the Subleased Premises cannot be so restored
within one (1) year, then Subtenant may, at its option, request Sublandlord to
exercise its rights to terminate the Lease with respect to the Subleased
Premises, which Sublandlord agrees to do.
(b) If any time prior to expiration or termination of this Sublease, the
Subleased Premises are wholly or partially damaged, destroyed or rendered
inaccessible by a risk not fully covered (excluding deductibles) by insurance
maintained by Landlord or for Landlord's benefit, and the Subtenant is unable,
in its sole but reasonable discretion, to carry on its normal operations in all
or a substantial portion of the Subleased Premises, then Subtenant shall give
Sublandlord notice which Sublandlord shall transmit to Landlord. Promptly
following receipt of notice from Landlord, Sublandlord shall give Subtenant
notice informing Subtenant whether Landlord intends to repair such damage or
destruction, and if so, whether such damage or destruction can be fully restored
and ready for occupancy within one (1) year from the date of damage or
destruction, without payment of overtime or other premiums.
7.
<PAGE>
(1) If Landlord elects to repair and such damage or destruction can be fully
restored within one (1) year, (i) this Sublease shall remain in full force, (ii)
rent shall be abated proportionally for such portion of the Subleased Premises
as is inaccessible or unusable to the extent rent is abated under the Lease,
(iii) Landlord shall proceed diligently to repair the damage or destruction,
including all Tenant improvements, using materials of at least the quality used
in the original construction of the Complex, Demised Premises and Tenant
Improvements with a minimum of interference in Subtenant's normal operations.
If, in Subtenant's sole but reasonable judgment, Landlord shall not have
performed any of the above obligations in strict compliance therewith, then
Sublandlord may, but shall not be required to, undertake such obligations at
Landlord's expense.
(2) If Landlord does not elect to repair or determines that the Subleased
Premises cannot be so restored within one (1) year, then Subtenant may, at its
option, request Sublandlord to exercise its right to terminate the Lease with
respect to the Subleased Premises, which Sublandlord agrees to do.
(c) If during the final twelve (12) months of the term of this Sublease (or any
extension term) the Subleased Premises are wholly or partially damaged,
destroyed or rendered inaccessible and the Subtenant is unable, in its sole
reasonable discretion, to carry on its normal operations in all or a substantial
portion of the Subleased Premises, Subtenant may, at its option, request
Sublandlord to exercise its right to terminate the Lease with respect to the
Subleased Premises.
7. CONDEMNATION
------------
(a) If all or substantially all of the Subleased Premises shall be condemned
for public use or voluntarily transferred to a public or quasi-public body in
lieu of proceeding to a judgment of condemnation (hereinafter, "taken"), this
Sublease shall terminate and rent shall be adjusted to the date of termination.
(b) If any portion of the Subleased Premises shall be taken and Subtenant is
unable, in Subtenant's sole but reasonable discretion, to carry on its normal
business operations, Subtenant may, at its option, request Sublandlord to
exercise its rights to terminate the Lease with respect to the Subleased
Premises,which Sublandlord agrees to do. Upon any partial taking, if Sublandlord
does not terminate the Lease:
(1) Rent shall be reduced proportionally to reflect the reduced area of the
Subleased Premises but only to the extent that rent is reduced under the Lease.
(2) All repairs necessary to restore the Subleased Premises or Buildings as
nearly as possible to their original condition shall be commenced within thirty
(30) days after the taking or transfer; performed in a diligent and workmanlike
8.
<PAGE>
manner with material of at least the quality used in the original construction
of the Building and Subleased Premises; and completed by Landlord at Landlord's
sole expense with a minimum of interference in Subtenant's normal operations.
If, in Sublandlord's sole but reasonable judgment, Landlord shall not have
performed any of the above obligations in strict compliance therewith, then
Sublandlord may, but shall not be required to, undertake such obligations at
Landlord's expense.
(c) If all or any portion of the Subleased Premises, the Building or Complex
shall be temporarily taken for a period of less than one (1) year, and Subtenant
is unable, in Subtenant's sole but reasonable discretion, to carry on its normal
business operations, rent shall be abated to the extent rent under the Lease is
abated and Tenant shall receive from the award or settlement, any amount paid or
awarded for Subtenant's reasonable costs of relocation.
(d) If all or any portion of the Subleased Premises shall be temporarily taken
for a period of one (1) year or more, and Subtenant is unable, in Subtenant's
sole but reasonable discretion, to carry on its normal business operations
Subtenant may, at its option, request Sublandlord to exercise its rights to
terminate the Lease with respect to the Subleased Premises, which Sublandlord
agrees to do. Upon any temporary taking Subtenant shall receive from the award
or settlement any amount paid or awarded for Subtenant's reasonable costs of
relocation.
(e) Notwithstanding anything in this Sublease to the contrary, in the event of
either a partial or total condemnation, Subtenant shall be entitled to any
condemnation award, or payment made under threat of condemnation, for loss of
goodwill, moving costs, the unamortized portion of any Subtenant improvements
made at the expense of Subtenant, the loss of Subtenant's personal property and
trade fixtures or any separate award, which Subtenant by Law is entitled
(excluding Subtenant's interest in the Sublease hold estate, including by way of
example, damages for the increased market rent paid by the Subtenant at a new
location.
8. NOTICES
-------
All notices shall be sent U. S. Registered Mail, Return Receipt Requested
to the following addresses:
TO SUBLANDLORD: TO SUBTENANT:
Xerox Corporation Noosh, Inc.
Attn: XSERV Lease Administration 3401Hillview Ave
800 Long Ridge Road Palo Alto CA 94304
P. O. Box 1600 Attn: Todd Ford
Stamford, Connecticut 06904
9.
<PAGE>
WITH A COPY TO:
Xerox Corporation
Attention: Manager, Acquitions/Dispositions
800 Long Ridge Road
P.O. Box 1600
Stamford, Connecticut 06904
Any notice shall be deemed to have been given on the date set forth on the
Registry Receipt given to the sender at the time of mailing, except that for the
purposes of Paragraphs 19 and 21, of the Master Lease, such notice shall be
deemed to have been received on the earlier of (a) the date set forth on the
Return Receipt, (b) the date of delivery as shown on the Post Office records, or
(c) the date delivery was refused as shown on the Post Office records.
9. CONDITION OF SUBLEASED PREMISES
-------------------------------
Subtenant hereby agrees to accept possession of the Subleased Premises in
an "as is" condition.
Notwithstanding anything in this Sublease to the contrary, Sublandlord
warrants that to the best of its knowledge, as of the commencement Date: (a) the
Subleased Premises shall comply with all laws, codes, ordinances and other
governmental requirements then applicable to the Subleased Premises and the
building and/or complex in which the Subleased Premises are located, and (b) the
Subleased Premises, including the improvements and equipment therein, shall be
in good working order, condition, and repair, and (c) the Subleased Premises and
the building, in which the Subleased Premises are locate, shall be free of
contamination by and petroleum, asbestos, "PCB's," or radioactive materials or
any other hazardous or toxic substances then regulated by any applicable local,
state, or federal law. In the event of any breach of any of the foregoing
warranties, Sublandlord shall promptly rectify the same at its sole cost and
expense and shall indemnify, defend, and hold Subtenant harmless from and
against any damages, liability, suits, losses, claims, actions, costs or
expenses (including attorneys' and consultants' fees and costs) suffered by
Subtenant in connection with any such breach.
10. BROKERAGE
---------
Sublandlord and Subtenant acknowledge that Cornish & Carey is the real
estate broker which brought about this sublease transaction, and Sublandlord
shall pay the brokerage commission to such broker pursuant to a separate
agreement. Sublandlord hereby indemnifies Subtenant against the claims of any
10.
<PAGE>
other broker arising from Sublandlord's acts, and Subtenant hereby indemnifies
Sublandlord against the claims of any other broker arising from Subtenant's
acts.
11. INDEMNIFICATION
---------------
Sublandlord shall in all cases remain responsible for the performance of
Subtenant of all such agreements, covenants, conditions and provisions.
Subtenant shall hold Sublandlord harmless from all liability, judgments, costs,
damages, claims or demands, including reasonable attorneys' fees, arising out of
Subtenant's failure to comply or perform Subtenant's obligations under both the
Master Lease and this Sublease.
Sublandlord agrees to indemnify and hold Subtenant harmless from and
against all claims and other liability (including amounts paid in settlement of
claims, reasonable attorneys fees, investigation costs, and reasonable cleanup,
removal and restoration required by a competent public agency) (collectively,
"Claims") to the extent such liability is attributable to: (i) Sublandlord's
breach of any provision of the Lease concerning Hazardous Materials; (ii)
Sublandlord's violation of applicable laws and regulations concerning Hazardous
Materials; or (iii) Sublandlord's use, storage or discharge of Hazardous
Materials at the Premises it leases under the Lease during the term of the
Sublease. Subtenant shall give Sublandlord prompt written notice, with full
particulars, of all Claims; and Sublandlord shall have the right, but not the
obligation, to control any and all legal or administrative proceedings
concerning all Claims. Subtenant will cooperate in such proceedings, and take
all measures that Sublandlord may reasonably require in connection with the
defense of any Claims or the remediation of any environmental contamination.
Sublandlord shall have no liability to pay or to reimburse Subtenant for any
amounts incurred or expended for any purpose (other than emergency measures, to
the extent indemnified hereunder) without Sublandlord's prior written approval,
which shall not be unreasonably withheld or delayed.
Sublandlord shall hold Subtenant harmless from all liability, judgments,
costs, damages, claims or demands, including reasonable attorneys' fees arising
out of Sublandlord's failure to comply or perform Sublandlord's obligations
under the Master Lease or this Sublease.
Notwithstanding anything to the contrary contained in this Sublease,
Subtenant shall have no obligation to "clean up," monitor, abate, or to comply
with any law regarding, or to reimburse, release, indemnify, or defend
Landlord with respect to any toxic or hazardous substances (including, without
limitation, asbestos and "PCB's") which now or hereafter become regulated by
and governmental authority or agency thereof (hereinafter "Hazardous
Materials" and which Subtenant did not store, dispose of, or transport in,
use, or cause to be on the Subleased Premises or Project in violation of any
Hazardous Materials laws.
11.
<PAGE>
12. SUBORDINATION OF SUBLEASE
-------------------------
This Sublease is subject and subordinate to the Master Lease, and Subtenant
shall have no greater rights in and to the Subleased Premises than Sublandlord
has as tenant under the Master Lease.
13. HOLDOVER
--------
If Subtenant remains in possession of the Demised Premises after expiration
of this Sublease, Tenant's occupancy shall be a month-to-month subtenancy at
125% of the rental rate applicable to the last month of the unexpired term and
under all the other terms, conditions and provisions hereof except those
pertaining to the term of the Sublease. Subtenant further agrees to indemnify,
defend and hold Sublandlord harmless from and against all claims, demands,
causes of action, losses and other liability of every kind and description
(including, without limitation, reasonable attorneys' fees) that arise from or
relate in any way to Subtenant's possession of the Demised Premises after
expiration of this Sublease.
14. TERMINATION OF MASTER LEASE
---------------------------
In the event that the Master Lease shall terminate by operation of law or
otherwise, or Master Landlord or Sublandlord as tenant under the Master Lease
cancels or terminates the Master Lease, as expressly provided therein, or in the
event that the Master Landlord shall terminate the Master Lease for any reason,
this Sublease shall thereupon automatically be canceled and terminated, and both
parties hereto shall thereupon be relieved of all further liability hereunder.
Sublandlord represents to Subtenant that the Master Lease is in full force
and effect, and that no default or event that, with the passing of time or the
giving of notice or both, would constitute a default, exists on the part of
Sublandlord, or, to Sublandlord's knowledge, the Landlord. Sublandlord agrees to
maintain the Master Lease in full force and effect, except to the extent that
any failure to maintain the Master Lease is due to the failure of Subtenant to
comply with any of its obligations under this Sublease.
15. ENTIRE AGREEMENT
----------------
This Sublease represents the entire agreement between the parties, and
supersedes all prior agreements both written and oral between the parties, and
may be amended only by a written agreement executed by the parties. The terms ,
covenants and conditions of this Sublease shall be binding upon and shall inure
to the benefit of Sublandlord and Subtenant and their respective successors and
permitted assigns.
12.
<PAGE>
16. CONSENT
-------
This Sublease is subject to the written consent from the Landlord, and from
Stanford Management Company. In the event that Sublessee desires to take any
action that will require the consent of Landlord, Sublessor shall use reasonable
and diligent efforts to obtain such consent, provided that Sublessor shall not
be liable in any way for the failure of Landlord to so consent. Sublandlord
shall use its best efforts to obtain the consent of the Landlord upon the mutual
execution hereof.
17. SIGNAGE
-------
Subject to the written approval of Landlord and Sublandlord, which approval
shall not be unreasonably withheld or delayed, Subtenant may affix signage to
the front entrance doors of the building they occupy. Any such signage shall be
subject to Landlord's general sign program for the Complex as approved by the
City of Palo Alto and any approval required of Stanford under the Ground Lease.
18. SECURITY DEPOSIT / LETTER OF CREDIT
-----------------------------------
(a) On or before execution of this Sublease, Subtenant shall deliver to
Sublandlord a security deposit in the amount of Eighty Thousand Four Hundred
Seventy Eight ($80,478.00) U.S. Dollars (the "First Security Deposit") to be
used as security for the full and faithful performance of all of Subtenant's
obligations under this Sublease. In addition to any and all rights and remedies
Sublandlord may have at law and equity, Sublandlord may, but without obligation
to do so, use all or any portion of the First Security Deposit to compensate
Sublandlord for any and all losses, damages and expenses (including, without
limitation, reasonable attorneys fees and any deficiency in the reletting of the
Demised Premises) incurred before or after any re-entry by Landlord, and
resulting from any failure of Subtenant to timely perform any of its obligations
under the terms of this Sublease, including, without limitation, the obligation
to pay rent.
(b) In addition to the First Security Deposit, on or before Sublease
execution, Subtenant shall deliver to Sublandlord, as a second security deposit
(the "Second Security Deposit") for the full and faithful performance by
Subtenant of all of its obligations under this Sublease, an irrevocable letter
of credit, in the form attached hereto as Exhibit C running in favor of
Sublandlord issued by a national bank acceptable to Sublandlord in the initial
amount of Nine Hundred Sixty Five Thousand Seven Hundred and Thirty Six
($965,736.00) U.S. Dollars, which amount shall be subject to adjustment from
time to time in accordance with the adjustment schedule which shall be set forth
in said Letter
13.
<PAGE>
of Credit and which schedule shall state the specific dollar amount of each
adjustment and the date said adjustment shall occur, all of which shall be in
accordance with the terms of Subparagraph 18(f) below (the "Letter of Credit").
The Letter of Credit shall be (a) at sight and irrevocable and (b) maintained in
effect, throughout the initial term of this Sublease, with prompt replacement,
renewal or extension covering the period of any extension of said sublease term.
The terms and conditions of the Letter of Credit (and the bank issuing the same
which party is referred to herein as the "Bank") shall be acceptable to
Sublandlord and shall provide, among other things, that (1) Sublandlord, shall
have the right to draw down an amount up to the face amount of the Letter of
Credit upon the presentation to the Bank of Sublandlord's statement that such
amount is due to Sublandlord under the terms and conditions of this Sublease.
Subtenant further covenants and warrants that it will not assign or encumber the
Letter of Credit or any part thereof. If an event of default under the Sublease
occurs, Sublandlord may, but without obligation to do so, use the Second
Security Deposit by presenting the Letter of Credit to the bank accompanied by
Sublandlord's demand to draw down on said Letter of Credit, or any portion
thereof, in an amount not to exceed the amount required to cure the default
and/or to compensate Sublandlord for any and all losses, expenses and damages
sustained by Sublandlord resulting from Subtenant's default (including but not
limited to, reasonable legal and other related expenses, and any deficiency in
reletting the Demised Premises), whether occurring before or after re-entry by
Sublandlord.
(c) In the event that Sublandlord shall use the Second Deposit as provided
for in the immediately preceding sentence, Subtenant shall, immediately on
demand, deposit with the Bank another Letter of Credit in an amount equal to the
portion of the Second Security Deposit so applied or used so as to replenish the
amount of the Second Security Deposit to the amount that it was immediately
prior to Sublandlord's application of a portion of said security deposit to
Subtenant's default.
(d) In the event that Sublandlord applies or retains all or any portion of
either or both of the First Security Deposit or the Second Security Deposit
(together referred to as the "Security Deposits") as provided for herein,
Subtenant shall not be deemed to have cured its default which gave rise to the
application or retention of such funds unless Subtenant shall have deposited,
immediately upon demand, with Sublandlord the amount so applied or retained so
that the amount so applied or retained shall be fully replenished and
Sublandlord shall have the full amount of the Security Deposits as set forth
above restored and on deposit at all times during the term of this Sublease. To
the extent that the Terms of Paragraph 5 of this Sublease incorporate herein by
reference the terms of Paragraph 19 of the Master Lease (the default notice &
cure provisions) the same shall not be applicable to the obligation of Subtenant
to replenish the Security Deposits immediately upon demand.
14.
<PAGE>
(e) Except as otherwise required by applicable California law, Subtenant
shall not be entitled to, nor Sublandlord liable for, any interest on the first
Security Deposit.
(f) Beginning April 30, 2000 and continuing thereafter, so long as
Subtenant is not in default under the terms of this sublease, then thirty (30)
days after the end of each calendar quarter, the Bank shall reduce the amount of
the Letter of Credit by an amount equal to the total amount of basic rent
(excluding operating expenses, taxes, utilities and other charges) paid by
Subtenant under the terms of Paragraph 3 of this sublease for the immediately
preceding calendar quarter. Notwithstanding the forgoing, in no event shall the
Bank reduce the amount of the Letter of Credit if the Bank has received written
notice from Sublandlord stating that Subtenant is in default under the terms of
this sublease. In the event that the Bank receives such a notice of default from
Sublandlord then the Bank shall not take any further action to reduce the amount
of the Letter of Credit unless and until such time as Sublandlord shall send the
Bank written notice stating that the default has been cured by Subtenant or
waived by Sublandlord.
19. THIRD PARTY RIGHTS
- -----------------------
The benefit of the provisions of this Sublease is expressly limited to
Sublandlord and Subtenant and their permitted successors and assigns. Under no
circumstance will any third party be construed to have any rights as a third
party beneficiary with respect to any of the provisions contained within this
Sublease.
20. ADDITIONAL SPACE
----------------
It is understood that the Sublessee is requesting more space in the
building and that the Sublessor will use its best efforts to relocate the
current downstairs occupants to a separate area of the campus to accommodate any
request. The Sublessor will have thirty (30) days to determine if the
Sublessee's request can be accommodated.
21. EXHIBITS AND RIDERS
-------------------
Attached hereto and made a part hereof are the following:
A. Master Lease
B. Subleased Premises
C. Letter Of Credit
D. Ground Lease
E. Services Provided
15.
<PAGE>
F. Furniture Inventory
IN WITNESS WHEREOF, Sublandlord and Subtenant have executed this Sublease
as of the date and year first above written.
WITNESS XEROX CORPORATION
___________________ By:_________________
Manager, Real Estate Operations
(Sublandlord)
WITNESS Noosh,Inc
___________________ By: /s/ Ofer Ben-Shachar
_____________________
Ofer Ben-Shachar
________________________
(Subtenant)
16.
<PAGE>
EXHIBIT 10.8
PROMISSORY NOTE
$13,520.00 Palo Alto, CA
April 15, 1999
For Value Received, the undersigned hereby unconditionally promises to pay
to the order of NOOSH, Inc., a California corporation (the "Company"), at 575
High Street, Suite 200, Palo Alto, CA, or at such other place as the holder
hereof may designate in writing, in lawful money of the United States of America
and in immediately available funds, the principal sum of Thirteen Thousand Five
Hundred Twenty Dollars ($13,520.00) together with interest accrued from the date
hereof on the unpaid principal at the rate of 6% per annum, or the maximum rate
permissible by law (which under the laws of the State of California shall be
deemed to be the laws relating to permissible rates of interest on commercial
loans), whichever is less, as follows:
Principal Repayment. The outstanding principal amount hereunder shall
be due and payable in full on April 15, 2000.
Interest Payments. Interest shall be payable annually in arrears on
the Principal Repayment Date and shall be calculated on the basis of a 360-
day year for the actual number of days elapsed;
provided, however, that in the event that the undersigned's employment by or
association with the Company or its Affiliate is terminated for any reason prior
to payment in full of this Note, this Note shall be accelerated and all
remaining unpaid principal and interest shall become due and payable immediately
after such termination.
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid toward
the satisfaction of this Note shall be applied first to the payment of interest
as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Early Exercise Stock Purchase Agreement and Stock Pledge Agreement of even date
herewith between the undersigned and the Company.
1.
<PAGE>
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed /s/ David Hannebrink
---------------------------
David Hannebrink
<PAGE>
EXHIBIT 10.9
PROMISSORY NOTE
$300,000.00 Palo Alto, CA
October 8, 1999
For Value Received, the undersigned hereby unconditionally promises to pay
to the order of NOOSH, Inc., a California corporation (the "Company"), at 3401
Hillview Avenue, Building B, Palo Alto, CA, or at such other place as the holder
hereof may designate in writing, in lawful money of the United States of America
and in immediately available funds, the principal sum of Three Hundred Thousand
Dollars ($300,000.00) together with interest accrued from the date hereof on the
unpaid principal at the rate of 6% per annum, or the maximum rate permissible by
law (which under the laws of the State of California shall be deemed to be the
laws relating to permissible rates of interest on commercial loans), whichever
is less, as follows:
Principal Repayment. The outstanding principal amount hereunder shall
be due and payable in full on October 8, 2002.
Interest Payments. Interest shall be payable annually in arrears on
the Principal Repayment Date and shall be calculated on the basis of a 360-
day year for the actual number of days elapsed;
provided, however, that in the event that the undersigned's employment by or
association with the Company or its Affiliate is terminated for any reason prior
to payment in full of this Note, this Note shall be accelerated and all
remaining unpaid principal and interest shall become due and payable immediately
after such termination.
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid toward
the satisfaction of this Note shall be applied first to the payment of interest
as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Early Exercise Stock Purchase Agreement and Stock Pledge Agreement of even date
herewith between the undersigned and the Company.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
1.
<PAGE>
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed /s/ Hagi Schwartz
---------------------------
Hagi Schwartz
2.
<PAGE>
EXHIBIT 10.10
PROMISSORY NOTE
$100,000.00 Palo Alto, CA
November 1, 1999
For Value Received, the undersigned hereby unconditionally promises to pay
to the order of NOOSH, Inc., a California corporation (the "Company"), at 3401
Hillview Avenue, Palo Alto, CA 94304 or at such other place as the holder hereof
may designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of One Hundred Thousand Dollars
($100,000.00) together with interest accrued from the date hereof on the unpaid
principal at the rate of 6% per annum, or the maximum rate permissible by law
(which under the laws of the State of California shall be deemed to be the laws
relating to permissible rates of interest on commercial loans), whichever is
less, as follows:
Principal Repayment. The outstanding principal amount hereunder shall
be due and payable in full on November 1, 2000.
Interest Payments. Interest shall be payable annually in arrears on
the Principal Repayment Date and shall be calculated on the basis of a 360-
day year for the actual number of days elapsed;
provided, however, that in the event that the undersigned's employment by or
association with the Company is terminated for any reason prior to payment in
full of this Note, this Note shall be accelerated and all remaining unpaid
principal and interest shall become due and payable immediately after such
termination.
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid toward
the satisfaction of this Note shall be applied first to the payment of interest
as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Stock Pledge Agreement and Joint Escrow Instructions of even date herewith
between the undersigned and the Company.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
<PAGE>
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed /s/ David Hannebrink
-----------------------
David Hannebrink
2.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-1 of our reports dated January 21, 2000 relating to the
financial statements and financial statement schedule, which appear in the
Noosh, Inc. Annual Report on Form S-1 for the year ended December 31, 1999. We
also consent to the reference to us under the headings "Experts" in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
San Jose, California
January 21, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-03-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 1,117 48,349
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,143 49,296
<PP&E> 72 3,797
<DEPRECIATION> 3 458
<TOTAL-ASSETS> 1,239 53,029
<CURRENT-LIABILITIES> 241 2,058
<BONDS> 0 0
0 0
1,303 63,925
<COMMON> 9 893
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 1,239 53,029
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 314 17,697
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 (648)
<INCOME-PRETAX> (314) (17,049)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (314) (17,049)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (314) (17,049)
<EPS-BASIC> (0.14) (3.19)
<EPS-DILUTED> (0.14) (3.19)
</TABLE>
