<PAGE>
As filed with the Securities and Exchange Commission on March 16, 1999
Registration No. 333-72437
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------
MPATH INTERACTIVE, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
Delaware 7310 94-3217317
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)
</TABLE>
665 Clyde Avenue
Mountain View, CA 94043
(650) 429-3900
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------------
LYNN HEUBLEIN
Chief Operating Officer
MPATH INTERACTIVE, INC.
665 Clyde Avenue
Mountain View, California 94043
(650) 429-3900
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------------
Copies to:
<TABLE>
<CAPTION>
<S> <C>
Joshua L. Green Nora L. Gibson
Jeffrey Y. Suto Lindsay C. Freeman
David T. Sobota BROBECK, PHLEGER & HARRISON LLP
George A. Kellerman Spear Street Tower
VENTURE LAW GROUP One Market
A Professional Corporation San Francisco, CA 94105
2800 Sand Hill Road
Menlo Park, CA 94025
</TABLE>
---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. _________ [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. _________ [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. _________ [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================
Proposed
Class of Each Class Of Securities Maximum Aggregate Amount of
To Be Registered Offering Price(1) Registration Fee
- -----------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.00005 per
share ............................... $46,000,000 $12,788(2)
=============================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act.
(2) Previously paid.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1999
(logo)
MPATH INTERACTIVE, INC.
Shares
Common Stock
We are offering shares of our common stock. This is our initial
public offering, and no public market currently exists for our shares. We have
applied to have the shares we are offering approved for quotation on the Nasdaq
National Market under the symbol "MPTH." We anticipate that the initial public
offering price will be between $ and $ per share.
---------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 6.
---------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price........................................... $ $
Underwriting Discounts and Commissions.......................... $ $
Proceeds to Mpath............................................... $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
We have granted the underwriters a 30-day option to purchase up to an
additional shares of our common stock to cover over-allotments.
BancBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 1999.
---------------
BancBoston Robertson Stephens
Thomas Weisel Partners LLC
Warburg Dillon Read LLC
Wit Capital Corporation
as e-Manager(TM)
---------------
The date of this prospectus is , 1999.
<PAGE>
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. In this prospectus, references
to the "Company," "Mpath," "we," "us" and "our" refer to Mpath Interactive,
Inc., and its subsidiary.
Until , 1999 (25 days after the date of this prospectus), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
---------------------
TABLE OF CONTENTS
<TABLE>
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Page
----
<S> <C>
Prospectus Summary...................................................... 3
Risk Factors............................................................ 6
How We Intend to Use the Proceeds from this Offering.................... 20
Dividend Policy......................................................... 20
Capitalization.......................................................... 21
Dilution................................................................ 22
Selected Consolidated Financial Data.................................... 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 24
Business................................................................ 32
Management.............................................................. 48
Certain Transactions.................................................... 56
Principal Stockholders.................................................. 59
Description of Capital Stock............................................ 61
Shares Eligible for Future Sale......................................... 63
Underwriting............................................................ 65
Legal Matters........................................................... 67
Experts................................................................. 67
Additional Information.................................................. 67
Index to Financial Statements........................................... F-1
</TABLE>
---------------------
We own or have rights to trademarks or tradenames that we use in conjunction
with the sale of our products and services. Mpath Interactive and Mplayer are
registered trademarks owned by us. "Active communities," "people-to-people
communities," Mpath, the Mpath logo, Mplayer.com, the Mplayer.com logo, hearme,
HearMe.com, the HearMe.com logo, and POP.X are trademarks that are owned by us.
XOOM.com is a trademark of XOOM.com. This prospectus also makes reference to
trademarks of other companies.
This prospectus includes statistical data regarding the Internet industry.
Such data is taken or derived from information published by sources including
Jupiter Communications, LLC, a media research firm focusing on the Internet
industry and International Data Corporation, a provider of market and strategic
information for the information technology industry. Although we believe that
such data are generally indicative of the matters reflected therein, such data
are inherently imprecise and you are cautioned not to place undue reliance on
such data.
2
<PAGE>
[INSIDE FRONT COVER]
Title: "Mpath Interactive, Inc., Leading Technology Solutions for Live Internet
Communities"
Block of text on left side:
"Mpath Interactive, Inc., develops, licenses and operates technologies that
enable Internet sites to create and manage live Internet communities. These
communities are characterized by real-time interaction among multiple
simultaneous users. Mpath operates leading live communities, such as HearMe.com
and Mplayer.com, serving over 2.5 million registered users."
Overlaying the images described below is an arrow leading from "Conventional
Communities," going through "Technologies for Live Communities," ending on top
of "Live Communities," and pointing at "Benefits of Live Communities."
Graphics on left side bottom:
Four small graphic images creating a circle around the phrase "Conventional
Communities." The images include:
1. Image of an envelope with text "Email"
2. Image of a memo with text "Bulletin Boards"
3. Image of hands shaking with text "Text Chat"
4. Image of globe with text "Web Hosting"
Text and Graphics on right side bottom:
"Technologies for Live Communities. POP.X allows you to deploy and operate
multi-participant Internet applications quickly and easily." POP.X logo.
Graphics on right side center:
Five small graphic images creating a circle around the phrase "Live
Communities." The images include:
1. Image of two people talking to each other with text "Real-time Audio Chat
(with text and instant messaging)"
2. Image of a gavel and a block of wood with text "Live Auctions"
3. Image of race car with text "Multi-participant Games"
4. Image of microphone with text "Live Music Events"
5. Image of computer with text "Help Desk Applications"
Block of text on right side top:
"Benefits of Live Communities:
. Highly engaging experiences
. Lengthy member session times
. Rich media advertising
. Integrated, targeted advertising
. High leverage of member-created content"
<PAGE>
[GATE 1]
Title:
"Live Communities" with text centered below title reading: "Live Communities
reach millions of people, offering them the ability to interact in real-time,
while utilizing rich media tools such as audio chat, game play, graphics, text
chat and instant messaging and paging."
Text and graphics on left side of page:
Mplayer.com logo with text "Internet Multi-Participant Entertainment
Communities" and "www.mplayer.com." Five images of Mplayer.com Web pages that
show visitors to the site the steps involved in utilizing Mplayer.com's
services. The text associated with such images of Mplayer.com's Web pages is as
follows:
"1. Becoming a member of Mplayer.com takes a few simple steps and begins at the
www.mplayer.com site."
"2. To get started, sign up and download the Mplayer.com software. It's free
and installs automatically. Then choose a member name and password. Other
Mplayer.com members will know you by your member name."
"3. Log-on to the Mplayer.com Service. Click on the `Games' navigation button
and it will take you to the Main Menu. There are dozens of games to choose
from. You can visit one of the many chat rooms by clicking on the title."
"4. Once you have entered a Game Lobby, you may enter a Game Room and join in
the fun, or create your own room and invite others to join you. There are a
variety of tournaments, events, contests, sweepstakes and drawings in which to
participate. There are also many prizes to win, some awarded for skill, others
at random."
"5. Members can choose to participate in Mplayer.com's premium service, which
offers Ratings and Rankings that display an icon next to the player's name to
demonstrate their ranking in a particular game. Premium service also includes
special events, contests, magazine subscriptions, special features and exclusive
games."
Text and graphics on right side of page:
HearMe.com logo with text "Live Internet Audio Communities" and
"www.hearme.com." Five images of HearMe.com Web pages that show visitors to the
site the steps involved in utilizing HearMe.com's services. The text associated
with such images of HearMe.com's Web pages is as follows:
"1. Joining the Live Audio Communities on HearMe.com involves a few quick steps
and the process begins by visiting www.hearme.com."
"2. To start, download the free HearMe.com self-installing software. It will
allow you to enter live audio chat rooms. You'll only need to download the
first time you join."
"3. Now you can select a Lobby to enter. There are several communities to
choose from to suit all tastes."
"4. Inside the Lobby, join a specific audio room that suits your mood or create
you own room. Using your PC microphone and speakers, you can hold personal
conversations or conference calls with friends and family. These private live
audio communities allow you to lock or password protect your chat. Musically-
inclined members are invited to the On Stage community to perform or to sit back
and listen."
"5. You can use the HearMe.com pager to see if your friends and family are on
the service and page them to join you in an audio room You can also send them
instant messages if they're on the service or a telegram will be waiting for
them the next time they sign on."
<PAGE>
PROSPECTUS SUMMARY
Because this is only a summary, it does not contain all the information that
may be important to you. You should read the entire prospectus, especially
"Risk Factors" and the consolidated financial statements and notes, before
deciding to invest in shares of our common stock. This prospectus assumes that
the underwriters have not exercised the over-allotment option and that all
shares of preferred stock have been converted into shares of common stock.
Our Company
Mpath develops, licenses and operates technologies that enable Internet sites
to create and manage live communities characterized by real-time interaction
among multiple simultaneous users. We also operate our own leading live
communities serving over 2.6 million registered users with over 50,000 unique
daily visitors generating over 100 minutes of average daily usage per visitor,
as of January 1999. Our robust and scaleable technology solutions include
graphics, text and sound interactivity, such as voice and music over the
Internet, as well as integrated network and site management capabilities. We
leverage our proprietary technology by licensing third party site operators
software products and providing services for building live communities that may
be self-managed or hosted by us on an outsourced basis. The real-time nature of
live communities creates highly engaging environments that drive long usage
times and strong user loyalty, demonstrated by frequent repeat visits. Our
technologies offer Internet advertisers a differentiated opportunity to reach
targeted audiences participating in absorbing, memorable activities and to do
so with message formats that go beyond the simple "banner" ads common to the
Web. We believe we thereby deliver high value solutions that significantly
enhance the impact of a broad range of e-business sales and marketing efforts.
The Internet is an increasingly significant global interactive medium for
communications, content and commerce. According to International Data
Corporation ("IDC"), the number of Web users worldwide will grow from 97
million at the end of 1998 to 320 million by the year 2002. The Internet now
represents the fastest growing form of media in history. As Internet
accessibility, usage and functionality grow, the Internet is increasingly being
used as a medium for direct communication as well as a rapidly growing sales
and marketing channel. Jupiter Communications estimates that total online
advertising revenue in the U.S. in 1997 was $940 million and expects this
amount to grow to $4.4 billion by 2000. Although sites representative of the
early stages of Internet commercialization provide valuable services, they did
not initially enable Web users to interact or communicate with other
individuals. As a result, people-to-people communities have emerged to satisfy
user demand for interaction and communication. We believe an opportunity exists
to create, operate and enable higher quality people-to-people communities
characterized by real-time simultaneous interaction among multiple users, which
we call live communities. Creating successful live communities presents
numerous technological challenges, requiring high standards of scalability,
performance, accessibility, ease-of-use, security and content management. Given
the attractiveness live communities offer users, advertisers and e-businesses,
and given the time and effort required to build such communities, we believe a
significant opportunity exists for delivering proven online technologies and
services that enable rapid creation and management of full-featured live
communities on the Internet.
Through our Mpath Foundation business unit, we are a leading provider of
enabling technology and services to a growing customer base of online companies
seeking to create and operate live communities on the Internet. With its
innovative POP.X technology system, Mpath Foundation offers its customers broad
technological expertise in networks, operations, information systems,
integration technologies, and the customer support capabilities necessary to
deploy live community applications rapidly and manage large Internet
communities. In addition, we provide fully-functional online game services
through our first generation product and we provide log-in, account management,
billing and database management services to companies operating online content
through our Customer Management System service. Customers of Mpath Foundation
consist of a growing base of leading online entertainment companies such as CSK
Sega, Eidos Interactive, Electronic Arts, Fujitsu, GTECH, LG Internet,
Macromedia and Sony.
3
<PAGE>
Through our Live Communities business unit we have developed and operate two
services, Mplayer.com and HearMe.com. In October 1996, we launched Mplayer.com,
a premier live entertainment service on the Internet. The Mplayer.com service
now consists of three active communities that are built around common interests
and offers over 100 of the most popular online multi-participant games. Total
usage time on Mplayer.com exceeds 200 million user minutes per month, as of
January 1999, compared to 67 million user minutes as of January 1998. After
less than two years of operations, Mplayer.com has become the number eleven
Internet site in terms of total usage time per month according to our usage
data. In January 1999, we launched HearMe.com, our second live community
service. HearMe.com is currently comprised of seven live communities, making
live audio interaction available to people whose interests extend beyond
entertainment. We intend to build the HearMe.com services through relationships
with Web sites that want to offer live audio communities to their members. We
intend to continue to expand this business unit by creating additional services
and live communities.
To maintain our leadership position in providing enabling technologies for
companies seeking to build live communities on the Internet and in operating
our own premier live communities, we have adopted the following strategies:
. expand our sales and marketing efforts;
. promote membership growth and usage;
. maintain and extend technology leadership and expertise;
. maximize value for advertisers and e-businesses; and
. pursue multiple revenue streams.
We have assembled an impressive group of corporate partners, including
Infoseek, XOOM.com, Intel, Yahoo!, Excite, Macromedia, GTECH, Sega and Cox
Enterprises. These partners bring capital, brand recognition, promotional
strength and technology expertise to our service offering and facilitate the
growth of our overall business.
Our principal executive offices are located at 665 Clyde Avenue, Mountain
View, California 94043. Our telephone number at that location is (650) 429-
3900. Information contained on our Web sites at http://www.mpath.com,
http://www.mplayer.com and http://www.hearme.com do not constitute part of this
prospectus.
The Offering
<TABLE>
<C> <S>
Common stock offered by Mpath...................... shares
Common stock to be outstanding after the offering.. shares(1)
Use of proceeds.................................... Working capital and
general corporate
purposes(2)
Proposed Nasdaq National Market symbol............. MPTH
</TABLE>
- --------
(1) Based on the number of shares outstanding as of December 31, 1998. Includes
the conversion of 10,416,615 shares of preferred stock outstanding at
December 31, 1998 and the conversion of 3,035,306 shares of preferred stock
we sold to certain investors in January 1999. Also includes the exercise
and subsequent conversion to common stock of warrants for 77,422 shares of
Series E Preferred Stock issued in January 1999 and assumed to be exercised
immediately before completion of this offering. Excludes (a) shares
issuable upon conversion of a promissory note, in the principal amount of
$1,864,000 that is convertible upon a sale of us or this offering, (b)
1,673,410 shares subject to outstanding options under our 1995 Stock
Option/Stock Issuance Plan, (c) 1,986,282 shares subject to outstanding
warrants, (d) 2,500,000 shares reserved for issuance under our 1999 Stock
Incentive Plan, (e) 300,000 shares reserved for issuance under our 1999
Directors' Stock Option Plan, (f) 750,000 shares reserved for issuance
under our 1999 Employee Stock Purchase Plan. See "Management--Stock Plans"
and the notes to our consolidated financial statements.
(2) Please see "How We Intend to Use the Proceeds from this Offering."
4
<PAGE>
Summary Consolidated Financial Information
(in thousands, except per share data)
In the following summary consolidated financial data, the consolidated
statement of operations data for the years ended December 31, 1996, 1997 and
1998 and consolidated balance sheet data as of December 31, 1998 are derived
from and qualified in their entirety by the annual consolidated financial
statements of Mpath. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1996 1997 1998
-------- -------- --------------
<S> <C> <C> <C>
Statement of Operations Data:
Net revenues:
Live Communities.......................... $ 12 $ 686 $ 3,022
Foundation................................ 112 2,041 5,005
-------- -------- --------
Total revenues.......................... 124 2,727 8,027
Cost of net revenues:
Live Communities.......................... 35 1,808 2,221
Foundation................................ 90 620 790
-------- -------- --------
Total cost of revenues.................. 125 2,428 3,011
-------- -------- --------
Gross profit (loss)................... (1) 299 5,016
Operating expenses.......................... 25,328 13,852 16,848
Loss from operations........................ (25,329) (13,553) (11,832)
Net loss.................................... $(25,039) $(13,648) $(11,945)
Basic and diluted net loss per share........ $ (3.99)
Weighted average shares outstanding used in
basic and diluted net loss per share
calculation................................ 2,992
<CAPTION>
December 31, 1998
----------------------------------
1996 1997 1998
-------- -------- --------------
<S> <C> <C> <C>
Selected Non-Financial Data:
Total registered users..................... -- 317 2,340
Total user minutes per month............... -- 45,917 181,341
<CAPTION>
December 31, 1998
----------------------------------
Pro Pro Forma
Actual Forma(1) As Adjusted(2)
-------- -------- --------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................... $ 1,114 $ 20,158
Working capital............................. (2,067) (18,477)
Property and equipment, net................. 1,878 1,878
Total assets................................ 6,177 25,221
Long term notes payable..................... 1,864 1,864
Stockholders' deficit (equity).............. (4,348) 16,196
</TABLE>
- -------
(1) Reflects (i) the sale of 3,035,306 shares of preferred stock we sold to
certain investors in January 1999 for an aggregate purchase price of
$20.0 million, (ii) the proceeds of $510,985 from the exercise of warrants
to purchase 77,422 shares of stock that will be exercised effective as of
the closing of this offering (iii) the repayment of $1,500,000 in notes
payable upon the sale of preferred stock in January 1999 and (iv) the
conversion of all outstanding shares of preferred stock into shares of
common stock upon the closing of this offering.
(2) Reflects the receipt of the net proceeds from the sale of the shares of
common stock sold in this offering at an assumed initial public offering
price of $ per share, after deducting estimated underwriting discounts
and commissions and estimated offering expenses. Please see "How We Intend
to Use the Proceeds from this Offering" and "Capitalization."
Unless otherwise indicated, all information in this prospectus assumes (1)
the sale of 3,035,306 shares of preferred stock in January 1999, (2) the
exercise and subsequent conversion into common stock of warrants to purchase
77,422 shares of preferred stock, (3) the repayment of $1,500,000 in notes
payable upon the sale of preferred stock in January 1999 and (4) the conversion
of each outstanding share of preferred stock into one share of common stock,
all of which will occur on or before the closing of this offering. In addition,
all information in this prospectus assumes no exercise of the Underwriters'
over-allotment option.
5
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision in our company. In addition, you should keep in mind that
the risks described below are not the only risks that we face. Additional risks
not presently known to us, or risks that we currently believe are immaterial,
may also impair our business operations. Moreover, you should refer to the
other information contained in this prospectus for a better understanding of
our business.
Our business, financial condition, or results of operations could be
adversely affected by any of the following risks. If we are adversely affected
by such risks, then the trading price of our common stock could decline, and
you could lose all or part of your investment.
This prospectus contains forward-looking statements that relate to future
events or to our future financial performance. These statements are only
predictions. Actual events or performance results may differ significantly from
those anticipated in the forward-looking statements.
We have a limited operating history upon which to base your investment decision
We were founded in January 1995 and have a limited operating history. We did
not begin generating advertising or licensing revenues until October 1996. For
the year ended December 31, 1997, we generated revenues of $2.7 million, and
for the year ended December 31, 1998, we generated revenues of $8.0 million. As
an investor in our common stock, you should consider the risks and difficulties
that we face as an early stage company in a new and rapidly evolving market.
Some of the specific risks we face include our:
. ability to maintain and to increase levels of traffic on our live
communities;
. ability to develop and extend the Mplayer.com and HearMe.com brands;
. ability to increase demand for our products and services;
. substantial dependence on software licensing revenues;
. ability to maintain projected advertising rates;
. ability to adapt to rapidly changing technologies and developing
markets;
. ability to manage rapidly expanding operations and increasing Internet
traffic effectively;
. ability to attract, retain, and motivate qualified personnel;
. substantial dependence on products that have limited market acceptance;
and
. ability to compete in a highly competitive market.
In addition, we depend on the growing use of the Internet for commerce,
communication and advertising. We also depend on the sale of advertising on the
Mpath live communities and the licensing of our POP.X technology for future
revenue growth. We cannot be certain that our business strategy will be
successful or that we will successfully address these risks.
Due to our limited operating history, it is difficult or impossible for us to
predict future results of operations. As a result, you should not expect future
revenue growth to be comparable to our recent revenue growth. We believe that
period-to-period comparisons of our operating results are not meaningful and
you should not rely on the results for any period as an indication of future
performance.
We have had a history of losses
We have had substantial losses since our inception, and we cannot assure you
that we will ever become or remain profitable. As of December 31, 1998, we had
an accumulated deficit of $53.0 million, which includes a write-off of $14.5
million of goodwill and in-process research and development expenses incurred
in connection with our acquisition of Catapult Entertainment in 1996. Although
we have experienced growth in net revenues, members, customers and Internet
reach in recent periods, we cannot be certain that such growth rates will
continue at their current levels or increase in the future.
6
<PAGE>
We have not yet become profitable on a quarterly or annual basis, and we
anticipate that we will continue to incur net losses for the foreseeable
future. The extent of these losses will be contingent, in part, on the amount
of growth in our revenues from advertising, licensing, commerce and premium
subscription fees. We expect our operating expenses to increase significantly,
especially in the areas of engineering, sales and marketing and brand
promotion, and, as a result, we will need to generate increased quarterly
revenues to become profitable.
If our revenues fail to grow at anticipated rates, our operating expenses
increase without a commensurate increase in our revenues or we fail to adjust
operating expense levels accordingly, our business, results of operations and
financial condition will be adversely affected. Our operating losses may
increase in the future and we cannot be certain that we will ever become or
remain profitable.
The sales and implementation cycle(s) for our Mpath Foundation products and
services is long
Our Mpath Foundation customers often take a long time to evaluate our
products and services, and many people are involved in the sales process. We
spend a lot of time educating and providing information to our prospective
customers regarding the use and benefits of our products and services. Even
after deciding to license our products, our customers tend to deploy our
products slowly and deliberately depending on the skill set of the customer,
the size of deployment, the complexity of the customer's system architecture,
the quantity of hardware involved, and the degree of hardware and software
configuration necessary to deploy our products. The long sales and
implementation cycles for our products and services and the timing of these
sales may cause license and service revenues and operating results to vary
significantly from period to period.
We depend on advertising contracts and most of these contracts are short-term
We derive a significant portion of our revenues from the sale of advertising.
These advertising sales are made under short-term contracts that average two to
three months in length. Consequently, many of our advertising customers can
cease advertising on our Web site quickly and without penalty. As a result, our
quarterly revenues and operating results depend heavily on advertising revenues
from contracts entered into within the quarter and on our ability to adjust
spending in a timely manner to compensate for any unexpected revenue shortfall.
If customers cancel or defer existing advertising or commerce contracts or if
we fail to obtain new contracts in any quarter, our business, results of
operations and financial condition for that quarter and future periods will be
adversely affected.
Furthermore, our advertising revenues are based in part on the amount of
traffic on Mplayer.com and HearMe.com. Accordingly, if the amount of traffic on
our live communities falls below our expectations or those of existing or
potential advertisers, we may lose advertising customers. In addition,
substantially all of our advertising contracts require us to guarantee a
minimum number of impressions. In the event that we fail to deliver such
minimum impressions, we could be required to provide credit for additional
impressions and we may have to reduce advertising rates in order to maintain
existing advertisers and attract new advertisers.
The unpredictability of our quarterly results may adversely affect the trading
price of our common stock
Our operating results may fluctuate significantly in the future as a result
of a variety of factors, many of which are outside of our control. These
factors include:
. demand for and market acceptance of our products and services and Web-
based advertising;
. long sales cycles for our Mpath Foundation products and services;
. budgeting cycles of advertisers;
. amount and timing of capital expenditures and other costs relating to
the expansion of our operations and future acquisitions;
. introduction of new or enhanced products and services by us or our
competitors;
. loss of one or more of our key advertising contracts or relationships;
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. changes in our pricing policy or those of our competitors;
. engineering or development fees that we may pay for new Web site
development and publishing tools;
. technical difficulties with our live communities; and
. general economic conditions.
As a strategic response to changes in the competitive environment, we may
from time to time make certain pricing, service or marketing decisions or
business combinations that could have a material adverse effect on our
business, results of operations and financial condition. In order to accelerate
the promotion of the Mplayer.com and HearMe.com brands, we intend to
significantly increase our marketing budget. Such an increase in marketing
expenditures may adversely affect our results of operations for a number of
quarterly periods.
Due to our relatively short operating history we have limited meaningful
historical financial data upon which to base our planned operating expenses.
Accordingly, our expense levels are based in part on our expectations as to
future revenues from advertising, software licensing fees, commerce revenue-
sharing arrangements, premium membership service fees and our anticipated
growth in memberships and to a large extent are fixed. We cannot be certain
that we will be able to accurately predict our revenues, particularly in light
of the intense competition for the sale of Web-based advertisements, revenue-
sharing opportunities and new members, our limited operating history and the
uncertainty as to the broad acceptance of the Web as an advertising and
commerce medium. If we fail to accurately predict revenues in relation to
fixed-expense levels, our business, results of operations and financial
condition could be adversely affected.
We face intense competition
Mpath Live Communities
The market for Internet users and advertisers is new and rapidly evolving.
Competition is intense and is expected to increase significantly in the future.
In addition, barriers to entry are relatively insubstantial. We believe that
the principal competitive factors for companies seeking to create live
communities on the Internet include the following:
. critical mass and functionality;
. brand recognition;
. member affinity and loyalty;
. broad demographic focus; and
. open access for visitors.
Other companies creating Web-based live communities on the Internet are
Cendant, E-Pub Services (Uproar.com), Lipstream, Microsoft, SegaSoft and Sony.
We will also likely face competition in the future from Web directories, search
engines, shareware archives, online communities, Internet telephony, content
sites, commercial online service providers, sites maintained by Internet
service providers and other entities that attempt to or establish communities
on the Internet either by developing their own community or acquiring one of
our competitors.
In addition, our future competition could include traditional media
companies, a number of which, including CBS, Disney and NBC, have recently
invested in and acquired Internet companies. Our competitors and potential
competitors may develop superior communities or communities that achieve
greater market acceptance than our community. We also compete for visitors with
many Internet content providers and Internet service providers, including Web
directories, search engines, shareware archives, content sites, commercial
online services and sites maintained by Internet service providers, as well as
thousands of Internet sites operated by individuals and government and
educational institutions. These competitors include free
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information, search and content sites or services, such as America Online,
CNET, CNN/Time Warner, Excite, Infoseek, Lycos, Microsoft, Netscape and Yahoo!.
We also compete with the foregoing companies, as well as traditional forms of
media such as newspapers, magazines, radio and television, for advertisers and
advertising revenues. We believe that the principal competitive factors in
attracting advertisers include the amount of traffic on our Web site, brand
recognition, customer service, the demographics of our members and viewers, our
ability to offer targeted audiences and the overall cost-effectiveness of the
advertising medium we offer. We believe that the number of Internet companies
relying on Web-based advertising revenue will increase substantially in the
future. Accordingly, we will likely face increased competition, resulting in
increased pricing pressures on our advertising rates which could in turn have a
material adverse effect on our business, results of operations and financial
condition.
Many of our existing and potential competitors, including Web directories and
search engines and large traditional media companies, have longer operating
histories in the Web market, greater name recognition, larger customer bases
and significantly greater financial, technical and marketing resources than we
have. Such competitors can undertake more extensive marketing campaigns for
their brands and services, adopt more aggressive advertising pricing policies
and make more attractive offers to potential employees, distribution partners,
commerce companies, advertisers and third-party content providers. Advertisers
may perceive Internet content providers and Internet service providers,
including Web directories, search engines, shareware archives, sites that offer
professional editorial content, commercial online services and sites maintained
by Internet service providers as more desirable Web sites for placement of
advertisements.
In addition, substantially all of our current advertising customers and
strategic partners also have established collaborative relationships with
certain of our competitors or potential competitors, and other high-traffic Web
sites. Accordingly, we cannot be certain that we will be able to grow our
membership base, traffic levels and advertiser customer base at historical
levels or retain our current members, traffic levels or advertiser customers.
Advertisers may find other Web sites more attractive if Web traffic grows at a
faster rate on the Web sites of competitors. and our strategic partners may
decline to renew their agreements with us. We may not be able to compete
successfully against our current or future competitors and competition could
have a material adverse effect on our business, results of operations and
financial condition.
Mpath Foundation
The market for software and services for the Internet is relatively new,
constantly evolving and intensely competitive and we expect that competition
will only intensify in the future. As part of our business, we sell and license
products and services for people-to-people community applications. Our
principal competitors in this market include Acuity Software and in-house
developers of such applications. Competitive factors in this market include the
following:
. quality and reliability of software;
. features for creating, editing and adapting content;
. ease of use and interactive user features;
. scaleability and cost per user; and
. compatibility with the user's existing network components and software
systems.
To expand our user base and further enhance the user experience, we must
continue to innovate and improve the performance of our POP.X technology. Many
of our existing and potential competitors have longer operating histories,
greater name recognition and significantly greater financial, technical and
marketing resources than we do. We are committed to continued market
penetration of our brand, products and services and we may implement pricing,
licensing, service or marketing changes as a strategic response to changes in
the competitive environment in an effort to extend our current brand and
technology franchise. If we make price concessions or if our pricing and
distribution strategies emerge from our competitors, our business, financial
condition and results of operations may be adversely affected.
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We rely on our ability to maintain and develop strategic relationships
Although we view our strategic relationships as a key factor in our overall
business strategy, we cannot be certain that we will be successful in
developing new strategic relationships or that our strategic partners will view
such relationships as significant to their own business or that they will
continue their commitment to us in the future. Additionally, any party to a
strategic agreement with us may fail to perform its contractual obligations and
we cannot be certain that we could enforce any such agreement. We do not
generally establish minimum performance requirements for our strategic partners
but instead rely on their voluntary efforts. In addition, most of these
agreements may be terminated by either party with little notice. Therefore, we
cannot be certain that these relationships will be successful. Our business,
results of operations and financial condition may be materially adversely
affected if any strategic partner discontinues its relationship with us for any
reason.
Our Mpath Foundation business unit has a limited number of customers upon whom
we rely
Mpath Foundation revenues have accounted for the majority of our revenues to
date. Historically, we have received a significant portion of our Mpath
Foundation revenues from a limited number of sales and license agreements. We
believe that a customer's decision to license our technology is relatively
discretionary and, for large-scale users, often involves a significant long-
term commitment of resources. Therefore, any downturn in the business of
potential customers could have a material adverse effect on our revenues and
quarterly results of operations. We currently have eight Mpath Foundation
customers, two of which accounted for approximately 35% and 11% of our total
revenues during 1997, and three of which accounted for approximately 23%, 12%
and 10% of our total revenues during 1998.
We rely on advertising revenue and our results of operations could be adversely
affected if the Web does
not continue its development as an effective advertising medium
Intense competition in the sale of advertising on the Web has resulted in a
wide variety of pricing models, rate quotes and advertising services, making it
difficult to project future levels of advertising revenues and rates. It is
also difficult to predict which pricing models, if any, will achieve broad
acceptance among advertisers. We have derived a significant portion of our
revenues to date from the sale of advertisements. Our strategy is to continue
to emphasize advertising as a method of generating revenues. Our current
business model is therefore highly dependent on the amount of traffic on our
Web site. This type of business model, however, is relatively unproven. The
Internet as an advertising medium has not been available for a sufficient
period of time to gauge our effectiveness as compared with traditional
advertising media. Many of our advertisers have only limited experience with
the Web as an advertising medium, have not yet devoted a significant portion of
their advertising budgets to Web-based advertising and may not find such
advertising to be effective for promoting their products and services relative
to traditional print and broadcast media. For 1998, advertising on the Web
represented a nominal portion of overall advertising revenues in the United
States. Our ability to generate significant advertising revenues will also
depend on, among other things, our ability to provide advertisers with a large
base of users possessing demographic characteristics attractive to advertisers
as well as our ability to develop or acquire effective advertising delivery and
measurement systems.
The process of managing advertising within a large, high-traffic Web site
such as ours is an increasingly important and complex task. We license our
advertising sales and management system from NetGravity. Any replacement of
this system could disrupt our ability to manage our advertising operations for
a period of time. In addition, to the extent that we encounter system failures
or material difficulties in the operation of this system, we could be unable to
deliver banner advertisements and sponsorships through our Web site.
Any extended failure of, or material difficulties encountered in connection
with, our advertising management system may expose us to "make good"
obligations with our advertisers, which, by displacing saleable advertising
inventory, among other consequences, would reduce revenues and have a material
adverse effect on our business, results of operations and financial condition.
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We rely on our intellectual property and proprietary rights and may be unable
to protect these rights
Our success depends in part on our ability to protect our proprietary
software and other intellectual property. To protect our proprietary rights, we
rely generally on patent, copyright, trademark and trade secret laws,
confidentiality agreements with employees and third parties, and license
agreements with consultants, vendors and customers, although we have not signed
such agreements in every case. Despite our efforts to protect our proprietary
rights, unauthorized third parties could, copy or otherwise obtain and use our
products or technology, or develop similar technology. Other parties may breach
confidentiality agreements and other protective contracts we have entered into.
As a result we may not become aware of, or have adequate remedies in the event
of, such a breach.
We currently have six issued patents in the U.S. with expiration dates
ranging from 2014 to 2016, two allowed patents and 16 patents pending (one of
which is a provisional patent). We cannot be certain that any pending or future
patent applications will be granted, that any existing or future patent will
not be challenged, invalidated or circumvented, or that the rights granted
under any patent that has issued or may issue will provide competitive
advantages to us. Many of our current and potential competitors dedicate
substantially greater resources than we do to protection and enforcement of
intellectual property rights, especially patents. If a blocking patent has
issued or issues in the future, we would need to either obtain a license or
design around the patent. We cannot be certain that we would be able to obtain
such a license on acceptable terms, if at all, or to design around the patent.
We pursue the registration of certain of our trademarks and service marks in
the U.S. and in certain other countries, although we have not secured
registration of all our marks. As of February 11, 1999, we had four registered
U.S. and four foreign trademarks or service marks, and had applications pending
for an additional five U.S. and six foreign trademarks or service marks, and
one intent to use trademark application in the U.S.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any of our proprietary rights or of similar rights of
other companies within this market. We cannot be certain that the steps taken
by us will prevent misappropriation or infringement of our proprietary
information.
Any such infringement or misappropriation, should it occur, could have a
material adverse effect on our business, results of operations and financial
condition. In addition, we are currently involved in litigation and additional
litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets or to determine the validity and scope of
the proprietary rights of others. Such litigation might result in substantial
costs and diversion of resources and management attention and could have a
material adverse effect on our business, results of operations and financial
condition. Furthermore, it is possible that our business activities may
infringe upon the proprietary rights of others, or that other parties may
assert infringement claims against us.
From time to time, we have been, and expect to continue to be, subject to
claims in the ordinary course of our business including claims of alleged
infringement of the trademarks, service marks and other intellectual property
rights of third parties by us and the content generated by our members.
Although such claims have not resulted in any significant litigation or had a
material adverse effect on our business to date, such claims and any resultant
litigation, should it occur, might subject us to significant liability for
damages. In addition, even if such claims are not meritorious, they could be
time consuming and expensive to defend. Finally, as a result of such claims,
our proprietary rights could be invalidated. Any of the foregoing could result
in the diversion of management time and attention, any of which might have a
material adverse effect on our business, results of operations and financial
condition.
We also rely on certain technology and content that we license from third
parties, including software that is integrated with our internally developed
software and used in our products and Web site, to perform key functions.
Although we are generally indemnified against claims that such third-party
technology or content
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infringes the proprietary rights of others, such indemnification is not always
available for all types of intellectual property rights (for example, patents
may be excluded), and in some cases the scope of such indemnification is
limited. Even if we receive broad indemnification, third-party indemnitors are
not always well capitalized and may not be able to indemnify us in the event of
infringement, resulting in substantial exposure to us.
Infringement or invalidity claims arising from the incorporation of third-
party technology or content, and claims for indemnification from our customers
resulting from such claims, may be asserted or prosecuted against us. As a
result of such claims, even if not meritorious, we could incur expenditures of
significant financial and managerial resources in addition to potential product
redevelopment costs and delays, all of which could materially and adversely
affect our business, financial condition and results of operations. See
"Business--Proprietary Rights."
We will need to manage our expanding business effectively
We have experienced and may continue to experience rapid growth, which has
placed, and could continue to place, a significant strain on our managerial,
financial and operational resources. We are required to manage multiple
relationships with various strategic partners, technology licensors, members,
POP.X licensees, advertisers and other third parties.
These requirements will be exacerbated in the event of our further growth or
in the number of third-party relationships, and we cannot be certain that our
systems, procedures or controls will be adequate to support our operations or
that our management will be able to manage any growth effectively. To
effectively manage our potential growth, we must continue to implement and
improve our operational, financial and management information systems and to
expand, train and manage our employee base. As of December 31, 1998, we had
grown to 111 full-time employees from 97 as of December 31, 1997, and we
anticipate that the number of our employees will increase significantly in the
next 12 months.
We depend on certain key personnel
Our performance is substantially dependent on the performance of our senior
management and other key employees. Three members of the management team have
only been employed by us for less than three months. We do not currently have
"key person" life insurance policies on any of our employees. The loss of the
services of any of our executive officers or other key employees could have a
material adverse effect on the business, results of operations and financial
condition. Competition for senior management, experienced media sales and
marketing personnel, software developers, qualified engineers and other
employees is intense, and we cannot be certain that we will be successful in
attracting and retaining such personnel.
We have experienced difficulty from time to time in hiring and retaining the
personnel necessary to support the growth of our business, and we may
experience similar difficulty in the future. Our failure to successfully manage
our personnel requirements would have a material adverse effect on our
business, results of operations and financial condition.
We will face risks if we make acquisitions
As part of our business strategy, we review acquisition prospects that would
complement our existing business or enhance our technological capabilities.
Although we do not currently have any agreement with respect to any material
acquisitions, we may make acquisitions of complementary businesses, products or
technologies in the future. However, we may not be able to locate suitable
acquisition opportunities. Future acquisitions by us could result in
potentially dilutive issuances of equity securities, large and immediate write-
offs, the incurrence of debt and contingent liabilities or amortization
expenses related to goodwill and other intangible assets, any of which could
materially and adversely affect our results of operations.
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Furthermore, acquisitions entail numerous risks and uncertainties, including
difficulties in the assimilation of operations, personnel, technologies,
products and the information systems of the acquired companies, diversion of
management's attention from other business concerns, risks of entering
geographic and business markets in which we have no or limited prior
experience and potential loss of key employees of acquired organizations.
Except for our acquisition of Catapult, we have not made any material
acquisitions in the past. We cannot be certain that we would be able to
successfully integrate any businesses, products, technologies or personnel
that might be acquired in the future, and our failure to do so could have a
material adverse effect on our business, results of operations and financial
condition.
We depend on access to commercial content and must pay for that access
Our future success depends in large part upon our ability to aggregate and
deliver compelling content over the Internet. Although we create some of our
own content such as poker and chess, we also rely on third-party content
providers, such as game developers, for entertaining content. Our ability to
aggregate and deliver compelling content provided by third parties may be
adversely impacted by a number of factors, including the following:
. third-parties may increase the price of the content they provide;
. many of our third-party content providers compete with us for members
and advertising and may decide not to provide us with content;
. our contracts with third-party content providers are usually short-term
and may be canceled by such providers if we do not fulfill our
obligations; and
. our competitors and many of our third-party content providers provide
content that is similar or the same as our content and may do so at a
lower cost.
If we fail to aggregate and deliver compelling third-party content to our
users, Web traffic to our site might decrease and, as a result, advertising
revenue might decrease. This could have a material adverse effect on our
business, results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
System failure may cause interruption of our services
The performance of our server and networking hardware and software
infrastructure is critical to our business and reputation and our ability to
attract Web users, advertisers, new members and commerce partners to our live
communities. Because we have incorporated third-party software into our
systems and we depend upon Internet service providers to provide consumers
with access to our products and services, we are limited in our ability to
prevent system failures. We have sustained system failures for significant
periods of time and may experience similar failures in the future. Users have
also occasionally experienced difficulties due to system failures unrelated to
our systems. These system failures caused an interruption in our live
community services resulting in less traffic. If similar failures were
sustained or repeated, our advertising revenues, our reputation and the
attractiveness of our brand name could be impaired.
Our disk storage is configured to survive multiple drive failures without
data loss. To ensure backup and restoration of all production data, our system
is comprised of several dedicated servers and tape libraries that have the
capacity to backup the Mpath live communities sites every 24 hours. We rotate
backup media into offsite archives to ensure data integrity should
catastrophic events occur onsite.
There is much legal uncertainty regarding regulating the activities conducted
on the Internet
We are not currently subject to direct regulation by any governmental
agency, other than laws and regulations generally applicable to businesses,
although certain U.S. export controls and import controls of other countries,
including controls on the use of encryption technologies, may apply to our
products. Due to the
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increasing popularity and use of the Internet, it is possible that a number of
laws and regulations may be adopted in the U.S. and abroad with particular
applicability to the Internet. It is possible that governments will enact
legislation that may be applicable to us in areas such as content, network
security, encryption and the use of key escrow, data and privacy protection,
electronic authentication or "digital" signatures, illegal and harmful content,
access charges and retransmission activities. Moreover, the applicability to
the Internet of existing laws governing issues such as property ownership,
content, taxation, defamation and personal privacy is uncertain. The majority
of such laws were adopted before the widespread use and commercialization of
the Internet and, as a result, do not contemplate or address the unique issues
of the Internet and related technologies. Any such export or import
restrictions, new legislation or regulation or governmental enforcement of
existing regulations may limit the growth of the Internet, increase our cost of
doing business or increase our legal exposure. Any of these factors could have
a material adverse effect on our business, financial condition and results of
operations.
We face potential liability for claims based on the nature and content of the
materials that we distribute over the Internet, including claims for
defamation, negligence or copyright, patent or trademark infringement, which
claims have been brought, and sometimes successfully litigated, against
Internet companies. Our general liability insurance may not cover claims of
this type or may not be adequate to indemnify us for any liability that may be
imposed. Any liability not covered by insurance or in excess of insurance
coverage could have a material adverse effect on our business, financial
condition and results of operations.
Legislation over content distributed over the Internet could damage the
growth of the Internet generally and decrease the demand for our products and
services. Although two recently enacted federal laws regulating the content
distributed over the Internet have either been partially struck down or
enjoined, similar laws may be proposed and adopted. Portions of the
Communications Decency Act of 1996, which proposed to impose criminal penalties
on anyone distributing "indecent" material to minors over the Internet, were
held to be unconstitutional by the U.S. Supreme Court. In addition, a federal
judge recently issued a preliminary injunction against the Child Online
Protection Act, a law attempting to protect children from pornography over the
Internet. While we do not distribute the types of materials that these acts
were designed to regulate, the nature of similar legislation and the manner in
which it may be interpreted and enforced cannot be fully determined and,
therefore, such similar legislation could subject us to potential liability,
which in turn could have an adverse effect on our business, financial condition
and results of operations. See "--We rely on our intellectual property and
proprietary rights, and seek to protect our intellectual property and
proprietary rights."
Due to the global nature of the Web, it is possible that, although
transmissions by us over the Internet originate primarily in the State of
California, the governments of other states and foreign countries might attempt
to regulate our transmissions or prosecute us for violations of their laws.
Violations of local laws may be alleged or charged by state or foreign
governments, we may unintentionally violate such laws and such laws may be
modified, or new laws enacted, in the future. Any of the foregoing developments
could have a material adverse effect on our business, results of operations and
financial condition.
We could face liability or regulation of the personal identifying information
obtained from people using
our Web site
The Federal Trade Commission is considering regulation regarding the
collection and use of personal identifying information obtained from
individuals, including children, when accessing Web sites. Such regulation may
include a requirement that companies establish certain procedures to, among
other things:
. give adequate notice to consumers regarding information collection and
disclosure practices;
. provide consumers with the ability to have personal identifying
information deleted from a company's database;
. clearly identify affiliations or a lack thereof with third parties which
may collect information or sponsor activities on a company's Web site;
and
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. obtain express parental consent prior to collecting and using personal
identifying information obtained from children under 13 years of age.
While we have implemented or intend to implement programs designed to
enhance the protection of the privacy of our members, including children, we
cannot be certain that such programs will conform with any regulation adopted
by the Federal Trade Commission. Moreover, even in the absence of such
regulation, the Federal Trade Commission has begun investigations into the
privacy practices of companies that collect information on the Internet. One
such investigation has resulted in a consent decree pursuant to which the
Internet company has agreed to establish programs to implement the four
principles noted above. We may become subject to such an investigation, and
the Federal Trade Commission's regulatory and enforcement efforts may
adversely affect the ability to collect demographic and personal information
from members. These developments could have an adverse effect on our ability
to target product offerings and attract advertisers and would have a material
adverse effect on our business, results of operations and financial condition.
In addition, at the international level, the European Union has adopted a
directive that will impose restrictions on the collection and use of personal
data, effective October 1998. Such directive could, among other things, affect
U.S. companies that collect information over the Internet from individuals in
European Union member countries, and may impose restrictions that are more
stringent than current Internet privacy standards in the United States. We
cannot be certain that such directive will not adversely affect the activities
of entities such as us that engage in data collection from users in European
Union member countries.
We are subject to litigation
On September 20, 1996, Mpath, MPCAT Acquisition Corporation (a wholly-owned
subsidiary of Mpath), and Catapult Entertainment, Inc. executed an Agreement
and Plan of Reorganization. The agreement provided for the merger of MPCAT
into Catapult such that Catapult would be the surviving corporation and would
become a wholly-owned subsidiary of Mpath. In addition, Catapult agreed, as
part of the merger agreement, that it would file a voluntary bankruptcy
petition. On October 10, 1996, Catapult filed a voluntary bankruptcy petition
under Chapter 11 of the United States Bankruptcy Code with the United States
Bankruptcy Court for the Northern District of California, San Jose Division.
On November 15, 1996, the Bankruptcy Court entered its order, which approved
the merger between MPCAT and Catapult. At the same time, the Bankruptcy Court
entered a separate order that authorized Catapult to assume two patent
licenses that it had obtained from Steve Perlman prior to filing the
bankruptcy petition. Mr. Perlman objected to the assumption of his licenses by
Catapult, so on November 18, 1996, Mr. Perlman filed an appeal with the United
States District Court for the Northern District of California, San Jose
Division. On August 7, 1997, the District Court affirmed the Bankruptcy Court
decision. On September 8, 1997, Mr. Perlman filed an appeal with the Ninth
Circuit Court of Appeals, and on January 28, 1999, the Ninth Circuit reversed
the Bankruptcy Court and the District Court. The Ninth Circuit held that
Catapult could not assume Mr. Perlman's licenses without Mr. Perlman's
consent. Catapult expects to file a petition for a writ of certiorari with the
United States Supreme Court prior to April 28, 1999.
Mpath has been informed that the current holder of the rights to these
patents is Microsoft. We believe that the technology used by Mpath in its
products and services do not infringe upon these patents. However, if a court
were to rule that our technology did infringe upon these patents we believe we
will be able to work around these patents. Even if we were unable to work
around these patents and were required to remove these portions of our
technology, we do not believe that this would have a material adverse effect
on our business, results of operations, or financial condition.
From time to time we have been, and expect to continue to be, subject to
legal proceedings and claims in the ordinary course of business, including
claims of alleged infringement of third-party trademarks and other
intellectual property rights by us and our licensees. Such claims, even if not
meritorious, could result in the expenditure of significant financial and
managerial resources and could materially and adversely affect our business,
financial condition and results of operations.
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We may be vulnerable to unauthorized access, computer viruses and other
disruption problems
Despite the implementation of security measures, our networks may be
vulnerable to unauthorized and illegal access, computer viruses and other
disruptive problems. A party who is able to circumvent security measures could
misappropriate proprietary information or cause interruptions in our Internet
operations. Internet service providers and online service providers have in the
past experienced, and may in the future experience, interruptions in service as
a result of the accidental or intentional actions of Internet users, current
and former employees or others. We may be required to expend significant
capital or other resources to protect against the threat of security breaches
or to alleviate problems caused by such breaches.
Although we intend to continue to implement industry-standard security
measures, we cannot be certain that measures implemented by us will not be
circumvented in the future. Eliminating computer viruses and alleviating other
security problems may require interruptions, delays or cessation of service to
users accessing our Web sites, which could have a material adverse effect on
our business, results of operations and financial condition.
Our products are new and face rapid technological changes
The market for our products is characterized by:
. rapid technological advances;
. evolving standards in the Internet and software markets;
. changes in customer requirements; and
. frequent new product and service introductions and enhancements.
As a result, our future success depends upon our ability to enhance our
current products and services and to develop and introduce new products and
services that will achieve market acceptance. If we do not adequately respond
to the need to develop and introduce new products or services, then our
business, operating results and financial condition will be adversely affected.
We strive to incorporate new technology into the Mpath live communities and
our Mpath Foundation products for the benefit of our members, visitors,
licensees and advertising and commerce partners. Introducing new technology
into our systems involves numerous technical challenges, substantial amounts of
personnel resources and often times takes many months to complete. We cannot be
certain that we will be successful at integrating such technology into the
Mpath live communities and our Mpath Foundation products on a timely basis. In
addition, such integration may degrade the responsiveness and speed of the
Mpath live communities and our Mpath Foundation products and we cannot be
certain that, once integrated, such technology will function as expected.
Major product enhancements and new products and services often require long
development and testing periods to achieve market acceptance. In addition, our
software products are complex and, despite vigorous testing and quality control
procedures, may contain undetected errors or "bugs" when first introduced or
updated. Any inability to timely deliver quality products and services could
have a material adverse effect on our business, results of operations and
financial condition. See "--We may be sued for product liability claims and our
products may contain defects."
We will increasingly depend on distributors for our Mpath Foundation products
and services
We currently sell the vast majority of our Mpath Foundation products and
services through our internal sales staff. If demand for our products and
services increases, however, we will need to enter into reseller arrangements
with Web development firms, enterprise applications resellers and OEM partners
to distribute our products and technologies. Resellers and OEMs frequently have
exclusive sales territories pursuant to
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individually negotiated contracts, which may limit our ability to build and
expand our network of resellers and OEMs. In addition, some resellers and OEMs
may offer products of one or more of our competitors, and they may emphasize
our competitors' products at the expense of our products. If we do not
adequately develop and maintain a network of resellers and OEMs, our business,
results of operations and financial condition could be adversely impacted.
We may be sued for product liability claims and our products may contain
defects
By licensing and supporting our products, we run the risk of product
liability and related claims. Although our license agreements typically contain
provisions that are designed to limit our exposure to such claims, there can be
no assurance that these provisions will be enforceable in all jurisdictions
where we license and service our products. We currently have products liability
insurance coverage in the amount of $6,000,000, which covers claims resulting
from bodily injury or property damage. To the extent that any claims are not
covered by insurance, we may be adversely affected.
In addition, the computer software and hardware environment is characterized
by a wide variety of non-standard configurations that make pre-release testing
for programming or compatibility errors very difficult and time-consuming.
Despite testing by us and by our customers, there can be no assurance that
errors will not be found in new products or enhancements. The occurrence of any
errors in our products could result in adverse publicity, loss of or delay in
market acceptance, or claims by customers against us, any of which could have
an adverse effect upon our business, operating results and financial condition.
See "--Our products are new and face rapid technological changes."
We may require future capital to implement our business plan
We currently anticipate that the net proceeds of the offering, together with
our existing line of credit and available funds will be sufficient to meet our
anticipated needs for working capital and capital expenditures for at least the
next 12 months. We may need to raise additional funds in the future in order to
fund more aggressive brand promotions and more rapid expansion, to develop
newer or enhanced products or services, to fund acquisitions, to respond to
competitive pressures or to acquire complementary businesses, technologies or
services.
If additional funds are raised through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced,
stockholders may experience additional dilution and such securities may have
rights, preferences or privileges senior to those of the rights of our common
stock. We cannot be certain that additional financing will be available on
terms favorable to us, or at all. If adequate funds are not available or not
available on acceptable terms, we may not be able to fund our expansion,
promote our brand names as we desire, take advantage of unanticipated
acquisition opportunities, develop or enhance services or respond to
competitive pressures. Any such inability could have a material adverse effect
on our business, results of operations and financial condition.
We face risks associated with trying to become Year 2000 compliant
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 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies and governmental agencies may need
to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
We are not currently aware of any Year 2000 compliance problems relating to
our technology or our IT or non-IT systems that would have a material adverse
effect on our business, results of operations or financial condition, without
taking into account our efforts to avoid or fix such problems. We may discover
Year 2000 compliance problems in our technology that will require substantial
revisions. In addition, third-party software, hardware or services incorporated
into our material IT and non-IT systems may need to be revised or replaced,
17
<PAGE>
all of which could be time consuming and expensive. If we fail to fix our
technology or to fix or replace third-party software, hardware or services on
a timely basis, the result could be lost revenues, increased operating costs,
the loss of customers and other business interruptions, any of which could
have a material adverse effect on our business, results of operations and
financial condition. Moreover, the failure to adequately address Year 2000
compliance issues in our technology, and our IT and non-IT systems could
result in claims of mismanagement, misrepresentation or breach of contract and
related litigation, which could be costly and time-consuming to defend. In
addition, there can no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside our control will be Year 2000 compliant. The failure by such entities
to be Year 2000 compliant could result in a systemic failure beyond our
control, such as a prolonged Internet, telecommunications or electrical
failure, which could also prevent us from delivering our products and services
to our customers, decrease the use of the Internet or prevent users from
accessing the Web sites of our strategic partners, which could have a material
adverse effect on our business, results of operations and financial condition.
Officers and directors and their affiliates will continue to have substantial
control over Mpath after the
offering
After completion of this offering, our executive officers and directors and
their affiliates beneficially own approximately % of the shares of common
stock ( % if the underwriters exercise the over-allotment option in full).
As a result, our officers, directors and their affiliates will have the
ability to influence the election of our Board of Directors and the outcome of
corporate actions requiring stockholder approval. Such concentration of
ownership may have the effect of delaying or preventing a change in our
corporate control. See "Principal Stockholders."
There has been no prior market for our common stock and we expect the price of
our common stock to
be volatile
Prior to this offering, you could not buy or sell our common stock publicly.
An active public market for our common stock may not develop or be sustained
after the offering, and the market price might fall below the initial public
offering price. The initial public offering price may bear no relationship to
the price at which the common stock will trade upon completion of this
offering. The initial public offering price will be determined based on
negotiations between us and the representatives of the underwriters, based on
factors that may not be indicative of future market performance. The market
price of the common stock may fluctuate significantly in response to a number
of factors, some which are beyond our control, including:
. quarterly variations in operating results;
. changes in financial estimates by securities analysts;
. changes in market valuation of software and Internet companies;
. announcements by us of significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
. loss of a major customer or failure to complete significant license
transactions;
. additions or departures of key personnel;
. any shortfall in revenue or net income or any increase in losses from
levels expected by securities analysts;
. future sales of common stock; and
. stock market price and volume fluctuations, which are particularly
common among highly volatile securities of Internet and software
companies.
18
<PAGE>
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation.
Securities litigation could result in substantial costs and divert management's
attention and resources, which could have a material adverse effect on our
business, operating results and financial condition.
We have broad discretion in how we use the proceeds from this offering
Our management can spend most of the proceeds from this offering in ways with
which the stockholders may not agree. See "How We Intend to Use the Proceeds
from this Offering."
We may have substantial sales of our common stock after the offering
Sales of a substantial number of shares of common stock after the offering
could adversely affect the market price of the common stock and could impair
our ability to raise capital through the sale of additional equity securities.
On completion of this offering, we will have shares of common stock
outstanding or subject to currently exercisable options ( shares if the
Underwriters over-allotment option is exercised in full). The shares sold
in this offering ( shares if the Underwriter's over-allotment option is
exercised in full) will be freely tradable without restriction or further
registration under the Federal securities laws unless purchased by "affiliates"
of Mpath as that term is defined in Rule 144. The remaining 17,718,739 shares
of common stock outstanding on completion of the offering will be "restricted
securities" as that term is defined in Rule 144.
Our stock and option holders are subject to lock-up agreements that limit
their ability to sell common stock. These securityholders cannot sell or
otherwise dispose of any shares of common stock for a period of at least 180
days after the date of this prospectus without the prior written approval of
BancBoston Robertson Stephens. When the lock-up agreements expire, these shares
and the shares underlying the options will become eligible for sale, in some
cases only pursuant to the volume, manner of sale and notice requirements of
Rule 144. See "Management 1995 Stock Option/Stock Issuance Plan."
Certain provisions of our charter documents may have anti-takeover effects
Certain provisions of our Amended and Restated Certificate of Incorporation
and bylaws could make it more difficult for a third party to acquire us, even
if a change of control would be beneficial to our stockholders. For more
information, see "Description of Capital Stock."
New investors will suffer immediate substantial dilution
The initial public offering price is expected to be substantially higher than
the book value per share of the outstanding common stock. As a result,
investors purchasing common stock in this offering will incur immediate
substantial dilution. In addition, we have issued options to acquire common
stock at prices significantly below the initial public offering price. To the
extent such outstanding options are ultimately exercised, there will be further
dilution to investors in this offering. See "Dilution."
19
<PAGE>
HOW WE INTEND TO USE THE PROCEEDS FROM THIS OFFERING
Our net proceeds from the sale of the shares of common stock we are
offering are estimated to be $ ($ if the
Underwriters' over-allotment option is exercised in full) assuming an offering
price of $ per share and after deducting the underwriting discount and
commissions. We currently expect to use the net proceeds primarily for working
capital and general corporate purposes, funding product development and
expanding our sales and marketing organization. In addition, we may use a
portion of the net proceeds for further development of our product lines
through acquisitions of products, technologies and businesses. Accordingly,
although we have no present commitments or agreements with respect to any such
acquisitions, management will have significant discretion in applying the net
proceeds of this offering. Pending such uses, we will invest the net proceeds
in short-term, investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock or
preferred stock and anticipate that all future earnings, if any, will be
retained for development of its business. The payment of dividends will be at
the discretion of our Board of Directors and will depend upon, among other
things, future earnings, capital requirements, the financial condition of
Mpath, and general business conditions.
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Mpath (1) at December
31, 1998; (2) on a pro forma basis to show the effect of the conversion into
common stock of all outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock and
Series D Preferred Stock on the closing of the offering, the issuance of and
subsequent conversion of 3,035,306 shares of Series E Preferred Stock into
common stock and the issuance of 77,422 shares of common stock reflecting the
exercise and subsequent conversion of a Series E Preferred Stock warrant at an
exercise price of $6.60 per share on the closing of the offering; and (3) on a
pro forma as adjusted basis to show the effect of the sale by Mpath of
shares of common stock offered hereby at an assumed public offering price of
$ per share (after deducting the underwriting discount and estimated
expenses of the offering). See "How We Intend to Use the Proceeds from this
Offering" and notes to our consolidated financial statements. The information
set forth below is unaudited and should be read in conjunction with Mpath's
consolidated financial statements and notes thereto.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long term notes payable, less current portion.. $ 1,864 $ 1,864
Long term capital lease obligations, less
current portion............................... 326 326
Stockholders' equity (deficit):
Preferred stock, $0.00005 par value;
16,294,986 shares authorized actual,
10,416,615 shares issued and outstanding,
actual; 2,000,000 shares authorized, no
shares issued or outstanding pro forma and
pro forma as adjusted...................... 1 --
Common stock warrants........................ 2 2
Common stock, $0.00005 par value, 25,000,000
shares authorized actual, 50,000,000 shares
authorized pro forma and pro forma as
adjusted; 3,834,815 shares issued and
outstanding actual; 17,364,158 shares
issued and outstanding pro forma(1);
shares issued and outstanding pro forma as
adjusted (2)............................... -- 1
Additional paid in capital................... 49,655 70,199
Notes receivable from stockholders........... (1,020) (1,020)
Accumulated deficit.......................... (52,986) (52,986)
-------- -------- ---
Total stockholders' equity (deficit)....... (4,348) 16,196
-------- -------- ---
Total capitalization..................... $ (2,158) $ 18,386
======== ======== ===
</TABLE>
- --------
(1) Based on the number of shares outstanding as of December 31, 1998. Includes
the conversion of 10,416,615 shares of preferred stock outstanding at
December 31, 1998 and the conversion of 3,035,306 shares of preferred stock
we sold to certain investors in January 1999. Also includes the exercise of
warrants for 77,422 shares of Series E Preferred Stock issued in January
1999 and assumed to be exercised immediately before completion of this
offering. Excludes (a) shares issuable upon conversion of a promissory note
in the principal amount of $1,864,000 that is convertible upon a sale of us
or this offering, (b) 1,673,410 shares subject to outstanding options under
our 1995 Stock Option/Stock Issuance Plan, (c) 1,986,282 shares subject to
outstanding warrants, (d) 2,500,000 shares reserved for issuance under our
1999 Stock Incentive Plan, (e) 300,000 shares reserved for issuance under
our 1999 Directors' Stock Option Plan and (f) 750,000 shares reserved for
issuance under our 1999 Employee Stock Purchase Plan. See "Management--
Stock Plans" and the notes to our consolidated financial statements.
(2) Adjusted for the effect of the sale of shares of common stock hereby
offered at an assumed public offering price of $ per share after
deducting the underwriting discount and estimated expenses of the offering.
21
<PAGE>
DILUTION
Mpath's pro forma net tangible book value as of December 31, 1998 was
approximately $16.2 million or $0.93 per share of common stock. "Net tangible
book value" per share represents the amount of our total tangible assets
reduced by the amount of our total liabilities and divided by the total number
of shares of common stock outstanding, as adjusted to show the effect of the
conversion into common stock of all outstanding shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series C-1 Preferred
Stock and Series D Preferred Stock on the closing of the offering, the issuance
of and subsequent conversion of 3,035,306 shares of Series E Preferred Stock
into common stock the repayment of $1,500,000 in notes payable upon the sale of
the Series E Preferred Stock, and the issuance of 77,422 shares of common stock
reflecting the exercise and subsequent conversion of a warrant to purchase
Series E Preferred Stock at an exercise price of $6.60 per share on the closing
of the offering. After giving effect to the sale of the shares of common
stock offered by us at an assumed initial public offering price of $ per
share, and the adjustments set forth above, our pro forma net tangible book
value as of December 31, 1998 would have been $ or $ per share of common
stock. This represents an immediate increase in net tangible book value of
$ per share to existing stockholders and an immediate dilution of $ per
share to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
Pro forma net tangible book value per share before the
offering..................................................... $0.93
Increase attributable to new investors.........................
-----
Pro forma net tangible book value after the offering............
--------
Dilution per share to new investors............................. $
========
</TABLE>
The following table summarizes on a pro forma basis, as of December 31, 1998,
the differences between the existing stockholders, as adjusted, and new
investors with respect to the number of shares of common stock purchased from
us, the total consideration paid to us, and the average price per share paid.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..... 17,364,158 % $67,744,000 % $
New investors.............
---------- ----- ----------- -----
Totals.................. 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>
The information presented with respect to existing stockholders assumes no
exercise of warrants to purchase 1,986,282 shares that were outstanding on
February 11, 1999 and no exercise of outstanding options under the 1995 Stock
Option/Stock Issuance Plan. As of February 11, 1999, options to purchase
1,673,410 shares were outstanding under our 1995 Stock Option/Stock Issuance
Plan; 124,694 shares are reserved for issuance upon exercise of options that
may be granted subsequent to February 11, 1999 under the 1995 Stock
Option/Stock Issuance Plan; 2,500,000 shares are reserved for issuance under
our 1999 Stock Incentive Plan; 300,000 shares are reserved for issuance upon
exercise of options that may be granted under the 1999 Directors' Stock Option
Plan; and 750,000 shares are reserved for issuance under the 1999 Employee
Stock Purchase Plan. The issuance of common stock under these plans will result
in further dilution to new investors. These figures also include 3,035,306
shares of preferred stock (which will be converted into 3,035,306 shares of
common stock upon the closing of this offering) and the exercise and subsequent
conversion into common stock of a warrant to purchase 77,422 shares of
preferred stock issued after December 31, 1998 in a private placement to
certain investors. See "Management--Stock Plans," "Certain Relationships and
Related Transactions" and the notes to our consolidated financial statements.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements and the notes thereto
and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which are included elsewhere in this prospectus. The
consolidated statements of operations data for the years ended December 31,
1996, 1997 and 1998, and the consolidated balance sheet data at December 31,
1997 and 1998, are derived from audited consolidated financial statements
included elsewhere in this prospectus. The consolidated statement of operations
data for the period from inception to December 31, 1995 and the consolidated
balance sheet data as of December 31, 1995 and 1996 are derived from audited
financial statements not included in this prospectus.
<TABLE>
<CAPTION>
Period from
January 9,
1995
(inception) to Year Ended December 31,
December 31, ---------------------------------
1995 1996 1997 1998
-------------- -------- -------------- --------
Statement of operations Data (in thousands, except for per share data)
<S> <C> <C> <C> <C>
Net revenues:
Live Communities................ $ -- $ 12 $ 686 $ 3,022
Foundation...................... -- 112 2,041 5,005
------- -------- -------- --------
Total revenue.................. -- 124 2,727 8,027
Cost of net revenues:
Live Communities................ -- 35 1,808 2,221
Foundation...................... -- 90 620 790
------- -------- -------- --------
Total cost of revenues......... -- 125 2,428 3,011
------- -------- -------- --------
Gross profit (loss).......... -- (1) 299 5,016
Operating expenses:
Research and development........ 1,502 5,261 2,436 3,132
Sales and marketing............. 171 3,937 6,906 7,847
General and administrative...... 746 2,877 2,841 3,274
Stock based compensation........ 34 377 1,669 2,595
Write-off of acquired
intangibles.................... -- 12,876 -- --
------- -------- -------- --------
Total operating expenses....... 2,453 25,328 13,852 16,848
------- -------- -------- --------
Loss from operations............. (2,453) (25,329) (13,553) (11,832)
Interest and other income
(expense), net................. 99 291 (93) (111)
------- -------- -------- --------
Loss before provision for income
taxes........................... (2,354) (25,038) (13,646) (11,943)
Provision for income taxes...... (1) (1) (2) (2)
------- -------- -------- --------
Net loss......................... $(2,355) $(25,039) $(13,648) $(11,945)
======= ======== ======== ========
Basic and diluted net loss per
share........................... $ (2.53) $ (11.40) $ (5.34) $ (3.99)
Weighted average shares
outstanding used in basic and
diluted net loss per-share
calculation..................... 932 2,196 2,556 2,992
<CAPTION>
December 31,
------------------------------------------------
1995 1996 1997 1998
-------------- -------- -------------- --------
<S> <C> <C> <C> <C>
Balance Sheet Data: (in thousands)
Cash and cash equivalents........ 3,548 $ 5,511 $ 9,132 $ 1,114
Working capital (deficit)........ 3,169 4,006 7,580 (2,067)
Total assets..................... 4,333 8,142 12,356 6,177
Long term notes payable.......... -- 2,756 1,864 1,864
Stockholders' equity (deficit)... 3,548 2,364 5,138 (4,348)
<CAPTION>
December 31,
---------------------------------
1996 1997 1998
-------- -------------- --------
Selected Non-Financial Data: (in thousands)
<S> <C> <C> <C> <C>
Total registered users........................ -- 317 2,340
Total user minutes per month.................. -- 45,917 181,341
</TABLE>
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the discussion in
this prospectus contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, that involve risks and
uncertainties. Our actual results could differ materially from those discussed
here. Factors that could cause or contribute to such differences include, but
are not limited to, those discussed below, as well as those discussed elsewhere
in this prospectus. The following discussion should be read in conjunction with
the consolidated financial statements and notes thereto included elsewhere in
this prospectus.
Overview
Mpath develops, licenses and operates technologies that enable Internet sites
to create and manage live communities characterized by real-time interaction
among multiple simultaneous users. We were incorporated and commenced
operations in January 1995. From inception through September 1996, our
activities primarily consisted of recruiting employees and raising capital,
performing product and technology development, engaging in marketing activities
and negotiating strategic relationships. In November 1995, we entered into an
agreement with PSINet, Inc. for the deployment of a low-latency network, which
provided a platform for launching and operating the Mplayer.com service.
Testing of the Mplayer.com service began in February 1996 and the service was
launched commercially in October 1996. In April 1996, we licensed our live
community software and network services to SegaSoft Networks, Inc., which
occurred concurrently with an equity investment by affiliates of SegaSoft's
parent, CSK Corporation. In November 1996, we acquired Catapult Entertainment,
Inc., in order to acquire its enabling network technology. In January 1999, we
launched HearMe.com, our second live community service. During the period from
January 1995 to December 31, 1998, we raised gross proceeds of approximately
$34.9 million from the sale of equity securities to venture capital investors
and strategic partners. In January 1999, we raised an additional $20.0 million
from the sale of equity securities to venture capital investors and strategic
partners. The proceeds from these financings have primarily been used to
finance our research and development and the sales and marketing of our
products and services. In addition, we also issued 868,254 shares of Series C
Preferred Stock in our acquisition of Catapult.
We generate our revenues from two business units, Live Communities and Mpath
Foundation. With respect to Live Communities, we derive the substantial
majority of revenues from advertising fees. While the Mplayer.com and the
HearMe.com services are free to all registered members, users may also pay
subscription fees to us in exchange for access to premium services such as
special events, rankings and ratings, contests, magazine subscriptions, special
features and exclusive games. We also have a subscription plan that allows the
members to purchase a year's subscription up front at a discounted rate.
Additionally, we have begun to derive revenues from e-commerce activities,
including fees from special event promotions and merchandise sales. Advertising
revenue is recognized ratably over the term of each particular advertising
agreement. E-commerce revenue is recognized when notification of shipment has
taken place and the revenue has been earned. With respect to Mpath Foundation,
we derive revenues from licensing fees for our technology and related services.
We also derive incremental Mpath Foundation revenues from service, maintenance
and upgrade fees, which represent a significant source of recurring revenues
each year. Monthly service revenues are recognized over the period in which
services are provided. Development revenue is recognized at the time services
are completed or as development milestones are achieved. License revenue is
recognized in the period earned. Deferred revenue consists primarily of monthly
service revenue billed and paid in advance.
Since we launched our first Live Community service in October 1996 and began
negotiating certain license agreements through the Mpath Foundation business
unit, we have generated $10.9 million in revenues through December 31, 1998.
For the period from inception to December 31, 1998 we have incurred a
cumulative net loss of $53.0 million, of which $14.5 million came from a one-
time write-off of goodwill and in-process research and development expenses
associated with our acquisition of Catapult.
24
<PAGE>
Cost of net revenues for Live Communities consists primarily of the cost of
operating the network infrastructure and royalties paid to third-party content
providers. Cost of revenues for Mpath Foundation consists primarily of network
operating expenses in conjunction with providing services to Mpath Foundation
customers.
Mpath's operating expenses consist of sales and marketing expenses, research
and development expenses and general and administrative expenses. Sales and
marketing expenses consist principally of salaries paid to employees in sales
and marketing activities, advertising and promotional materials, public
relations costs and travel. Research and development expenses consist
principally of salaries and compensation paid to employees and consultants
engaged in research and development activities and product testing. General and
administrative expenses consist principally of salaries and compensation paid
to employees and consultants engaged in activities other than sales and
marketing and research and development, facilities and related depreciation,
in-house and outside legal and accounting fees and related costs, and travel.
All operating costs are expensed as incurred.
We have a limited operating history upon which an evaluation of us, our
current business, and our prospects can be based. In addition, our revenue
model is evolving and relies substantially upon the sale of advertising on our
Mplayer.com and HearMe.com services and the licensing of our POP.X technology.
Our business must be considered in light of the risks, expenses and problems
frequently encountered by companies in their early stages of development,
particularly companies in new and rapidly evolving markets such as the
Internet. Our results of operations and financial condition may be subject to
volatility in future periods.
RESULTS OF OPERATIONS
The following table presents Mpath's statement of operations data for the
periods indicated as a percentage of total revenues.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Net revenues:
Live Communities................................ 9.7 % 25.2 % 37.6 %
Foundation...................................... 90.3 74.8 62.4
------- ------- -------
Total revenues................................ 100.0 100.0 100.0
Cost of net revenues:
Live Communities................................ 28.2 66.3 27.7
Foundation...................................... 72.6 22.7 9.8
------- ------- -------
Total cost of revenues........................ 100.8 89.0 37.5
------- ------- -------
Gross profit (loss).......................... (0.8) 11.0 62.5
Operating expenses:
Research and development........................ 42.4 89.3 39.0
Sales and marketing............................. 31.7 253.2 97.8
General and administrative...................... 23.2 104.2 40.8
Stock compensation.............................. .3 61.2 32.3
Write-off of acquired intangibles............... 103.7 -- --
------- ------- -------
Total operating expenses...................... 201.3 507.9 209.9
------- ------- -------
Loss from operations.............................. (201.3) (496.9) (147.4)
Interest and other income(expense), net......... 2.3 (3.4) (1.4)
------- ------- -------
Loss before provision for income tax.............. (199.0) (500.3) (148.8)
Provision for income taxes...................... -- -- --
------- ------- -------
Net loss.......................................... (199.0)% (500.3)% (148.8)%
======= ======= =======
</TABLE>
25
<PAGE>
Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997
Revenues. Net revenues increased 194.3% from approximately $2.7 million for
the year ended December 31, 1997 to approximately $8.0 million for the year
ended December 31, 1998. Net revenues from Live Communities increased from
$686,000 to $3.0 million. This increase was primarily driven by growth in
advertising revenues associated with an expanding number of advertisers and the
growth of traffic and usage time in our live communities. Net revenues from
Mpath Foundation increased from $2.0 million for the year ended December 31,
1997 to approximately $5.0 million for the year ended December 31, 1998. This
increase was primarily attributable to the successful development and release
of our POP.X technology, an increase in the number of Mpath Foundation
customers and the related increase in license revenues.
Cost of revenues. Cost of revenues increased 24.0% from approximately $2.4
million, or 89.0% of net revenues, for the year ended December 31, 1997 to
approximately $3.0 million, or 37.5% of net revenues, for the year ended
December 31, 1998. Cost of revenues declined as a percentage of net revenues
primarily due to the substantial increase in net revenues between 1997 and
1998. Cost of revenues for Live Communities increased from approximately
$1.8 million for the year ended December 31, 1997 to approximately $2.2 million
for the year ended December 31, 1998. This increase was primarily due to server
and network costs associated with the growth of the Live Communities business
unit and royalties paid to third-party content providers. Cost of revenues for
Mpath Foundation increased from approximately $620,000 for the year ended
December 31, 1997 to approximately $790,000 for the year ended December 31,
1998. The increase was attributable to connectivity and server costs associated
with services provided to Mpath Foundation customers.
Research and development. Research and development expenses increased 28.6%
from approximately $2.4 million, or 89.3% of net revenues, for the year ended
December 31, 1997 to approximately $3.1 million, or 39.0% or net revenues, for
the year ended December 31, 1998. Research and development expenses declined as
a percentage of net revenues primarily because of the substantial increase in
net revenues between 1997 and 1998. The increase in research and development
expenses was primarily due to an increase of salary expense in 1998 as
additional engineers were hired to support the Mpath Foundation development of
the POP.X technology and to additional equipment and software expenditures
associated with the increased headcount.
Sales and marketing. Sales and marketing expenses increased 13.6% from
approximately $6.9 million, or 253.2% of net revenues, for the year ended
December 31, 1997, to approximately $7.8 million, or 97.8% of net revenues, for
the year ended December 31, 1998. Sales and marketing expenses decreased as a
percentage of net revenues primarily because of the substantial increase in net
revenues between 1997 and 1998. The increase in sales and marketing expenses
was primarily due to an increase in additional salary expense related to
expanding our sales force in order to grow advertising revenues in our Live
Communities business unit, offset by decreases in other costs associated with
marketing and public relations expenses as well as decreased depreciation of
the assets acquired from Catapult.
General and administrative. General and administrative costs increased 15.2%
from approximately $2.8 million, or 104.2% of net revenues, for the year ended
December 31, 1997 to approximately $3.3 million, or 40.8% of net revenues, for
the year ended December 31, 1998. General and administrative costs decreased as
a percentage of net revenues primarily because of the substantial increase in
net revenues between 1997 and 1998. These increases were primarily due to
salary increases in the operations support area, patent filings and legal
expenses associated with general corporate matters.
Stock based compensation. Stock based compensation costs increased from
approximately $1.7 million in the year ended December 31, 1997 to approximately
$2.6 million or 32.3% of net revenues in the year ended December 31, 1998. The
increase relates to an increase in employees as well as the fair market value
of the Company's common stock.
Interest and other income (expense), net. Interest and other income
(expense), net includes interest expense primarily related to lease and debt
obligations and interest income earned on short-term investment of cash.
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996
Revenues. Net revenues increased from approximately $124,000 in the year
ended December 31, 1996 to approximately $2.7 million in the year ended
December 31, 1997. Net revenues from Live Communities
26
<PAGE>
increased from approximately $12,000 for the year ended December 31, 1996 to
approximately $686,000 for the year ended December 31, 1997. This increase was
primarily attributable to an increase in advertising revenues associated with
the launch of the Mplayer.com service in October 1996. Net revenues from Mpath
Foundation increased from approximately $112,000 for the year ended December
31, 1996 to approximately $2.0 million for the year ended December 31, 1997.
This increase was primarily attributable to license revenues generated by
relationships with key Mpath Foundation customers.
Cost of revenues. Cost of revenues increased from approximately $125,000 in
the year ended December 31, 1996 to approximately $2.4 million, or 89.0% of net
revenues, in the year ended December 31, 1997. Cost of revenues for Live
Communities increased from approximately $35,000 for the year ended December
31, 1996 to approximately $1.8 million for the year ended December 31, 1997.
This increase was primarily due to server and network costs associated with the
Live Communities services, royalties to third-party content providers and
Internet service provider access charges. Cost of revenues for Mpath Foundation
increased from approximately $90,000 for the year ended December 31, 1996 to
approximately $620,000 for the year ended December 31, 1997. This increase was
primarily due to an increase in server and network costs necessary to support
Mpath Foundation customers.
Research and development. Research and development expenses decreased from
approximately $5.3 million in the year ended December 31, 1996 to approximately
$2.4 million, or 89.3% of net revenues, in the year ended December 31, 1997.
This decrease was primarily due to $1.6 million in-process research and
development expense associated with the acquisition of Catapult in November
1996. The remaining decrease was primarily associated with reduced cost in
consulting fees and software support fees, which were required during the
development of Mplayer.com client and server software in 1996. These decreases
were offset by an increase of salary expense in 1997 as additional engineers
were hired to support the Mpath Foundation contracts.
Sales and marketing. Sales and marketing costs increased from approximately
$3.9 million in the year ended December 31, 1996 to approximately $6.9 million,
or 253.2% of net revenues, in the year ended December 31, 1997. This increase
was primarily due to additional salary expense, depreciation for Catapult
assets and outside consulting. This increase was partially offset by decreases
in the costs associated with member acquisition, branding, product development
and public relations. We were able to make these expense reductions in 1997, as
Mplayer.com went from a primarily subscription-based model to an advertising-
based model.
General and administrative. General and administrative costs decreased from
approximately $2.9 million in the year ended December 31, 1996 to approximately
$2.8 million, or 104.2% of net revenues, in the year ended December 31, 1997.
Expenditures are primarily for salary, patent filings and legal expenses
associated with general corporate matters.
Write-off of acquired intangibles. The write-off of acquired intangibles is
associated with the November 1996 acquisition of Catapult. We acquired all of
the assets and assumed the liabilities of Catapult as part of a Chapter 11 Plan
of Reorganization under the United States Bankruptcy Code. The acquisition was
accounted for as a purchase. The purchase price, including liabilities assumed,
in excess of the fair value of assets acquired was allocated to in-process
research and development of $1.6 million, which was immediately expensed as
research and development expenses, and goodwill of $12.9 million. The goodwill
was originally assigned a two-year life but was written off in December 1996
due to a change in our business strategy relating to the use of the technology
and business acquired from Catapult. As a result of this change in strategy,
the Company determined that it had no use for and that there would be no future
cash flows from the Catapult assets.
Interest and other income (expenses), net. Interest and other income
(expenses), net includes interest expense primarily related to lease and debt
obligations and interest income earned on short-term investment of cash.
Stock compensation. Stock compensation costs increased from approximately
$377,000 in the year ended December 31, 1996 to approximately $1.7 million or
61.2% of net revenues in the year ended December 31, 1997. The increase relates
to an increase in employees as well as the fair market value of the Company's
common stock.
27
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Quarterly Results of Operations
The following tables set forth certain unaudited consolidated statements of
operations data for the eight quarters ended December 31, 1998, as well as the
percentage of our revenues represented by each item. This data has been derived
from unaudited interim consolidated financial statements prepared on the same
basis as our audited consolidated financial statements contained in this
prospectus and, in our opinion, include all adjustments, consisting only of
normal recurring adjustments, that we consider necessary for a fair
presentation of such information when read in conjunction with our consolidated
financial statements and the notes thereto appearing elsewhere in this
prospectus. Our operating results may fluctuate significantly in the future as
a result of a variety of factors, many of which are outside of our control. See
"Risk Factors--The unpredictability of our quarterly results may adversely
affect the trading price of our common stock," for a list of factors affecting
our quarterly operating results. In addition, our quarterly results may be
adversely impacted by the long sales cycle for our Mpath Foundation products
and services. See "Risk Factors--The sales cycle for our Mpath Foundation
products and services is long."
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------------
Mar. 31, Jun. 30, Sep. 30, Dec. 31, Mar. 31, Jun. 30, Sep. 30, Dec. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- -------- -------- -------- -------- -------- --------
(in thousands, except as a percentage of net revenues)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of operations:
Net revenues:
Live Communities....... $ 120 $ 176 $ 145 $ 245 $ 317 $ 393 $ 931 $ 1,381
Foundation............. 171 344 449 1,077 1,134 1,103 1,287 1,481
-------- ------- ------- ------- ------- ------- ------- -------
Total revenues........ 291 520 594 1,322 1,451 1,496 2,218 2,862
Cost of net revenues:
Live Communities....... 235 475 508 590 584 567 463 607
Foundation............. 203 121 153 143 192 190 210 198
-------- ------- ------- ------- ------- ------- ------- -------
Total cost of
revenues............. 438 596 661 733 776 757 673 805
-------- ------- ------- ------- ------- ------- ------- -------
Gross profit (loss).... (147) (76) (67) 589 675 739 1,545 2,057
Operating expenses:
Research and
development........... 665 597 551 623 779 767 779 807
Sales and marketing.... 2,155 1,468 1,630 1,653 1,852 1,896 2,058 2,041
General and
administrative........ 789 616 766 670 767 820 785 902
Stock based
eompensation.......... 417 417 417 418 649 649 649 648
-------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............. 4,026 3,098 3,364 3,364 4,047 4,132 4,271 4,398
-------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... (4,173) (3,174) (3,431) (2,775) (3,372) (3,393) (2,726) (2,341)
Interest and other
income (expense), net.. (41) (82) 19 11 (15) 146 (87) (155)
-------- ------- ------- ------- ------- ------- ------- -------
Loss before provision
for income taxes....... (4,214) (3,256) (3,412) (2,764) (3,387) (3,247) (2,813) (2,496)
Provision for income
taxes.................. -- -- -- (2) -- -- -- (2)
-------- ------- ------- ------- ------- ------- ------- -------
Net loss................ $ (4,214) $(3,256) $(3,412) $(2,766) $(3,387) $(3,247) $(2,813) $(2,498)
======== ======= ======= ======= ======= ======= ======= =======
As a percentage of net
revenues:
Net revenues........... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues....... 150.8 111.3 109.8 53.2 53.5 50.6 30.4 28.1
-------- ------- ------- ------- ------- ------- ------- -------
Gross profit (loss)... (50.8) (11.3) (9.8) 46.8 46.5 49.4 69.6 71.9
Operating expenses:
Research and
development........... 228.9 114.6 92.7 47.2 53.7 51.3 35.1 28.2
Sales and marketing.... 741.6 284.9 275.8 127.3 127.6 126.7 92.8 71.3
General and
administrative........ 271.6 118.3 129.0 50.6 52.9 54.8 35.4 31.5
Stock based
compensation.......... 143.5 80.2 70.2 31.6 44.7 43.4 29.3 22.6
-------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............. 1.385.6 598.0 567.7 256.8 278.9 276.2 192.6 153.6
-------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... (1,436.4) (609.3) (577.5) (210.0) (232.4) (226.8) (123.0) (81.7)
Interest and other
income (expense), net.. (14.1) (15.7) 57.5 .7 (1.0) 9.7 (3.9) (2.3)
-------- ------- ------- ------- ------- ------- ------- -------
Loss before provision
for income taxes....... (1,422.3) (593.6) (520.0) (210.6) (231.4) (236.5) (119.1) (84.0)
Provision for income
taxes.................. -- -- -- -- -- -- -- --
-------- ------- ------- ------- ------- ------- ------- -------
Net loss................ (1,422.3)% (593.6)% (520.0)% (210.6)% (231.4)% (236.5)% (119.1)% (84.0)%
======== ======= ======= ======= ======= ======= ======= =======
</TABLE>
28
<PAGE>
As a strategic response to changes in the competitive environment, we may
from time to time make certain pricing, service or marketing decisions or
business combinations that could have a material adverse effect on our
business, results of operations and financial condition. In order to accelerate
the promotion of the Mplayer.com and HearMe.com brands, we intend to
significantly increase their marketing budgets. A substantial increase in
marketing expenditures will have a negative impact on our results of operations
for a number of quarterly periods.
As a result of our limited operating history, we have limited meaningful
historical financial data upon which to base planned operating expenses.
Accordingly, our expense levels are based in part on our expectations as to
future revenues from advertising, software licensing, commerce revenue-sharing
arrangements, premium membership service fees and our anticipated growth in
membership. There can be no assurance that we will be able to accurately
predict our revenues, particularly in light of the intense competition for the
sale of Web-based advertisements, revenue-sharing opportunities and new
members, our limited operating history and the uncertainty as to the broad
acceptance of the Web as an advertising and commerce medium. Any failure by us
to accurately predict revenues in relation to fixed-expense levels could have a
material adverse effect on our business, results of operations and financial
condition.
Liquidity and Capital Resources
We have generated limited revenues from operations to date. Since our
inception, we have financed our operations primarily through the private sale
of equity securities and, to a lesser extent, capitalized leases and bank
borrowings. As of December 31, 1998, we had raised approximately $34.9 million
from the issuance of preferred stock which does not include an additional $20.0
million we raised from the issuance of preferred stock in January 1999. We had
also drawn down approximately $2.5 million from a $4.0 million financing
agreement. As of December 31, 1998, we had approximately $1.1 million of cash
and cash equivalents, which does not include an additional $20.0 million we
raised from the issuance of preferred stock in January 1999.
Net cash used in operating activities was $9.4 million, $11.1 million and
$9.3 million in fiscal 1996, 1997 and 1998, respectively. For such periods, net
cash used by operating activities was primarily a result of funding ongoing
operations.
Net cash used in investing activities was $3.8 million, $1.0 million and
$719,000 in fiscal 1996, 1997 and 1998, respectively. Cash used in investing
activities in each period was primarily related to purchases of property and
equipment, except for fiscal 1996, when $2.4 million was used as payment for
the Catapult acquisition.
Net cash provided by financing activities of $15.1 million, $15.7 million and
$2.0 million in fiscal 1996, 1997 and 1998, respectively, was primarily
attributable in each period to net proceeds from the issuance of preferred
stock and notes payable. We have funded our operations primarily by capital
contributed by investors in five rounds of private financing. The first round,
completed in January 1995, raised approximately $1.4 million through the sale
of Series A Preferred Stock. The second round, completed between August 1995
and January 1996, raised approximately $4.5 million through the sale of Series
B Preferred Stock. The third round, completed between April 1996 and January
1997, raised approximately $15.4 million through the sale of Series C Preferred
Stock. The fourth round completed between July 1997 and August 1997, raised a
total of approximately $16.8 million, through the sale of Series D Preferred
Stock. Of the $16.8 million raised with Series D Preferred Stock, approximately
$14.9 million was cash and $1.8 million was through conversion of a promissory
note and Series C Preferred Stock. In January 1999, we completed a fifth round
in which we raised a total of approximately $20.0 million through the sale of
Series E Preferred Stock.
In 1995, we entered into a capital lease agreement with Lighthouse Capital
and have drawn down all available funds of approximately $1.5 million. We
entered into a $4.0 million financing agreement in July 1998. The agreement
consisted of a term loan for $1.5 million, an accounts receivable revolving
line of credit for $1.5 million and a capital equipment loan of $1.0 million.
Amounts borrowed under these agreements
29
<PAGE>
are collateralized by substantially all our assets. As of December 31, 1998 we
had drawn down $1.5 million against the term loan agreement and approximately
$1.0 million against the capital equipment agreement. We fully repaid the term
loan with a portion of the net proceeds from the sale of our Series E Preferred
Stock in January 1999.
In November 1996, we acquired all of the assets and assumed the liabilities
of Catapult as part of a Chapter 11 Plan of Reorganization under the United
States Bankruptcy Code. The total acquisition cost was approximately $11.8
million, which consisted of (1) cash payments of approximately $2.4 million,
including approximately $549,000 paid to fund Catapult's unsecured creditor
payments; (2) shares of Series C Preferred Stock, and (3) legal and accounting
costs of approximately $367,000. Net liabilities in excess of assets assumed by
Mpath amounted to approximately $2.6 million.
We currently anticipate that the net proceeds of the offering, together with
our existing lines of credit and available funds will be sufficient to meet our
anticipated needs for working capital and capital expenditures for at least the
next 12 months. We may need to raise additional funds in the future in order to
fund more aggressive brand promotions and more rapid expansion, to develop
newer or enhanced products or services, to fund acquisitions, to respond to
competitive pressures, or to acquire complementary businesses, technologies or
services. There can be no assurance that additional financing will be available
on terms favorable to Mpath, or at all.
Year 2000 Compliance
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 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies and governmental agencies may need
to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
State of Readiness. We have made a preliminary assessment of the Year 2000
readiness of our information technology ("IT") systems, including the hardware
and software that enable us to provide and deliver our products and services.
Our assessment plan consists of:
. quality assurance testing of our internally developed proprietary
software incorporated in our products;
. contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related to
the delivery of our products and services;
. contacting vendors of material non-IT systems;
. assessment of repair or replacement requirements;
. repair or replacement;
. implementation; and
. creation of contingency plans in the event of Year 2000 failures.
We plan to perform a Year 2000 simulation on our technology during the third
quarter of 1999 to test system readiness. Based on the results of our Year 2000
simulation test, we intend to revise the code of our technology as necessary to
improve its Year 2000 compliance. We have been informed by many of our hardware
and software component vendors that the products we use are currently Year 2000
compliant. We will require our other material hardware and software component
vendors to provide assurance of their Year 2000 compliance. We will complete
this process during 1999. We are currently assessing our non-IT systems and
will seek assurance of Year 2000 compliance from providers of material non-IT
systems. Until such testing is complete and such vendors and providers are
contacted, we will not be able to completely evaluate whether our IT systems or
non-IT systems will need to be revised or replaced.
30
<PAGE>
Costs. To date, we have incurred approximately $10,000 in connection with
identifying or evaluating Year 2000 compliance issues. Our expenses have
related to the operating costs associated with time spent by employees in the
evaluation process and Year 2000 compliance matters generally. We anticipate
our costs will continue to include employee expenses and will increase for
purchases of Year 2000 compliant upgrades to our existing hardware and software
platforms. We estimate that these costs will total between $150,000 and
$200,000; however, if these costs are substantially higher than anticipated, it
could have a material adverse effect on our business, results of operations and
financial condition.
Risks. We are not currently aware of any Year 2000 compliance problems
relating to our technology or our IT or non-IT systems that would have a
material adverse effect on our business, results of operations or financial
condition, without taking into account our efforts to avoid or fix such
problems. We may discover Year 2000 compliance problems in our technology that
will require substantial revisions. In addition, third-party software, hardware
or services incorporated into our material IT and non-IT systems may need to be
revised or replaced, all of which could be time consuming and expensive. If we
fail to fix our technology or to fix or replace third-party software, hardware
or services on a timely basis, the result could be lost revenues, increased
operating costs, the loss of customers and other business interruptions, any of
which could have a material adverse effect on our business, results of
operations and financial condition. Moreover, the failure to adequately address
Year 2000 compliance issues in our technology, and our IT and non-IT systems
could result in claims of mismanagement, misrepresentation or breach of
contract and related litigation, which could be costly and time-consuming to
defend. In addition, there can no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside our control will be Year 2000 compliant. The failure by such entities
to be Year 2000 compliant could result in a systemic failure beyond our
control, such as a prolonged Internet, telecommunications or electrical
failure, which could also prevent us from delivering our products and services
to our customers, decrease the use of the Internet or prevent users from
accessing the Web sites of our strategic partners, which could have a material
adverse effect on our business, results of operations and financial condition.
Contingency Plan. As discussed above, we are engaged in an ongoing Year 2000
assessment and the development of contingency plans. The results of our Year
2000 simulation testing and the responses received from third-party vendors and
service providers will be taken into account in determining the nature and
extent of any contingency plans.
Recently Issued Accounting Principles
On March 4, 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use" (SOP 98-1). SOP 98-1 provides guidance on accounting for the
costs of computer software developed or obtained for internal use. Costs
incurred prior to the initial application of SOP 98-1 should not be adjusted to
the amounts that would have been capitalized had this SOP been in effect when
those costs were incurred. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Accordingly, the Company will
adopt SOP 98-1 in its financial statements for the year ending December 31,
1999. The impact on the financial statements of the adoption of this standard
has not yet been determined, but is not expected to be significant.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily
to the increase or decrease in the amount of interest income we can earn on our
investment portfolio and on the increase or decrease in the amount of interest
expense we must pay with respect to our various outstanding debt instruments.
The risk associated with fluctuating interest expense is limited, however, to
the exposure related to those debt instruments and credit facilities which are
tied to market rates. We do not use derivative financial instruments in our
investment portfolio. We ensure the safety and preservation of our invested
principal funds by limiting default risks, market risk and reinvestment risk.
We mitigate default risk by investing in high-credit quality securities.
31
<PAGE>
BUSINESS
The discussion in this prospectus contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially
from those discussed in the forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Overview
Mpath develops, licenses and operates technologies that enable Internet sites
to create and manage live communities characterized by real-time interaction
among multiple simultaneous users. We also operate our own leading live
communities serving over 2.6 million registered users with over 50,000 unique
daily visitors generating over 100 minutes of average daily usage per visitor,
as of January 1999. Our robust and scaleable technology solutions include
graphics, text and sound interactivity, such as voice and music over the
Internet, as well as integrated network and site management capabilities. We
leverage our proprietary technology by licensing third party site operators
software products and providing services for building live communities that may
be self-managed or hosted by us on an outsourced basis. The real-time nature of
live communities creates highly engaging environments that drive long usage
times and strong user loyalty, demonstrated by frequent repeat visits. Our
technologies offer Internet advertisers a differentiated opportunity to reach
targeted audiences participating in absorbing, memorable activities and to do
so with message formats that go beyond the simple "banner" ads common to the
Web. We believe we thereby deliver high value solutions that significantly
enhance the impact of a broad range of e-business sales and marketing efforts.
Through our Mpath Foundation business unit, we are a leading provider of
enabling technology and services to a growing customer base of online companies
seeking to create and operate live communities on the Internet. Mpath
Foundation is dedicated to delivering proven online technologies and services
that enable the creation of full-featured, live communities on the Internet.
With our innovative POP.X technology system, Mpath Foundation offers our
customers broad technological expertise in networks, operations, information
systems, integration technologies, and the customer support capabilities
necessary to deploy live community applications rapidly and manage large
Internet communities. In addition, we provide fully-functional online game
services through our first generation product and we provide log-in, account
management, billing and database management services to companies operating
online content through our Customer Management System service. Customers of
Mpath Foundation consist of a growing base of leading online entertainment
companies such as CSK Sega, Eidos Interactive, Electronic Arts, Fujitsu, GTECH,
LG Internet, Macromedia and Sony.
Through our Live Communities business unit we have developed and operate two
services, Mplayer.com and HearMe.com. In October 1996 we launched Mplayer.com,
a premier live entertainment service on the Internet. The Mplayer.com service
now consists of three active communities that are built around common interests
and offers over 100 of the most popular online multi-participant games. Total
usage time on Mplayer.com exceeds 200 million user minutes per month, as of
January 1999, compared to 67 million user minutes per month as of January 1998.
After less than two years of operations, Mplayer.com has become the number
eleven Internet site in terms of total usage time per month according to our
usage data. In January 1999, we launched HearMe.com, our second live community
service. HearMe.com is currently comprised of seven live communities, making
live audio interaction available to people whose interests extend beyond
entertainment. We intend to build the HearMe.com services through relationships
with Web sites that want to offer live audio communities to their members. We
intend to continue to expand this business unit by creating additional services
and live communities.
Industry Opportunity
The Internet and the World Wide Web
The Internet is an increasingly significant global interactive medium for
communications, content and commerce. According to International Data
Corporation ("IDC"), the number of Web users worldwide will grow from 97
million at the end of 1998 to 320 million by the year 2002. The Internet now
represents the
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fastest growing form of media in history. According to a recent study, the
Internet achieved a reach of 50 million households in only 5 years, whereas
cable television, broadcast television and radio each attained a similar level
of adoption only after at least 10 years. The dramatic growth in Internet usage
has been fueled by a number of key factors, including:
. technological, functional and infrastructure advances in computing and
communications;
. relatively lower costs associated with publishing content on the
Internet as compared to traditional media;
. increased quantity and improved quality of information and services
offered on the Web; and
. increased affordability of, access to and resulting proliferation of
multimedia PCs.
As Internet accessibility, usage and functionality grow, the Internet is
increasingly being used as a medium for direct communication as well as a
rapidly growing sales and marketing channel. Jupiter Communications estimates
that total online advertising revenue in the U.S. in 1997 was $940 million and
expects this amount to grow to $4.4 billion by 2000. We anticipate that the
growth in Web advertising will be largely driven by the unique interactive
character of the Internet. Specifically, the Internet allows advertisers to
target their messages to distinct, self-qualified audiences, measure the
effectiveness of their advertisements and modify campaigns on a real-time
basis.
The Demand for Live Communities on the Internet
During the Internet's brief history, we believe three stages of
commercialization have emerged, with each successive stage building upon the
experience and momentum of the previous stage. The first stage has enabled
users to search and view Web sites containing professionally created content on
topics of general interest such as current events, sports, weather and finance.
During this stage, Internet search and information destination sites (e.g.,
CNET, Disney, ESPN SportsZone, Excite, Infoseek, Yahoo!, etc.) have gained
widespread prominence as they provided a valuable function for users seeking
Web content. The second stage has been characterized by the emergence of
commerce-centric sites (e.g., Amazon, eBay, E*Trade, priceline.com, etc.). Such
sites typically offer visitors a wide variety of compelling commerce
opportunities allowing the Internet to serve as a substitute for direct retail,
telephone or catalog sales, thereby generating substantial levels of user
traffic.
Although sites representative of the first two stages of commercialization
provide valuable services, they did not initially enable Web users to interact
or communicate with other individuals. As a result, people-to-communities such
as GeoCities, theglobe.com and XOOM.com have emerged as the third stage of
Internet commercialization to address the demand by users to interact and
communicate with each other. Using existing technologies, these people-to-
people communities aggregate large numbers of people and leverage member-
generated content by offering user-created personal web sites, free e-mail,
user-defined bulletin boards, text chat and shared-interest categories.
However, the attractiveness of the interactive experience within these people-
to-people communities depends on several factors, including the nature of the
communication, the richness of the media and the quality of member-created
content. We believe an opportunity exists to create, operate and enable higher
quality people-to-people communities characterized by real-time simultaneous
interaction among multiple users, which we call live communities.
We believe that live communities are differentiated from existing people-to-
people communities because they offer a more complete interactive experience.
Within live communities, thousands of people can communicate in real-time,
while using rich media tools such as audio, graphics, text chat and instant
messaging. The combination of these tools and capabilities provides users with
the ability to engage with others in activities such as live concerts, live
auctions, group conferencing, help desk applications, distance learning, multi-
player games and more. While live communities enhance the quality of the
interactive experience for users, we believe they also provide advertisers and
e-businesses with an attractive means of promoting and selling their products
and services over the Web. These communities allow advertisers and e-businesses
to reach highly targeted audiences within a more personalized context, thereby
improving the impact of sales and
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marketing efforts. The real-time interactive nature of live communities
typically results in long usage times and repeat visits, providing further
value for advertisers and e-businesses. In addition, the use of advanced
interactive technologies enables advertisers to create rich and effective
advertisements that go beyond existing banner advertisements.
Creating successful live communities presents numerous technological
challenges, requiring high standards of scalability, performance,
accessibility, ease-of-use, security and content management. Given the
attractiveness live communities offer users, advertisers and e-businesses, and
given the time and effort required to build such communities, we believe there
is a tremendous opportunity to deliver proven online technologies and services
that enable the rapid creation and management of full-featured live communities
on the Internet.
The Mpath Solution
We are well-positioned to capitalize on the demand and future growth
prospects for live communities through licensing of our proprietary
technologies and the operation of our premier live communities. We are a
leading provider of enabling technology and services to a growing customer base
of online companies seeking to create and operate live communities on the
Internet. In addition, as a recognized leader in the creation of live
communities, we have developed and operate Mplayer.com, a premier live
entertainment service comprised of multi-participant entertainment communities,
and HearMe.com, a service comprised of live audio communities.
Through our Mpath Foundation business unit, we offer our customers
proprietary software technologies necessary to rapidly deploy live community
applications. Additionally, we provide broad technological expertise in
networks, operations, information systems, integration technologies and
services necessary to manage large Internet communities. We have developed
POP.X, the first commercially available, platform-independent end-to-end system
for rapid deployment of mass-consumer, live community applications on the
Internet. POP.X delivers proven technology that allows companies to build
Internet community features without being concerned about scaling issues, back-
end customer management systems, browser compatibility, large downloads or
consumer difficulties regarding ease-of-use.
Through our Live Communities business unit, we have developed and operate our
own live communities serving over 2.5 million registered users with over 50,000
unique daily visitors generating over 100 minutes of average daily usage per
visitor, as of February 1999. Launched in October 1996, Mplayer.com is a
premier live multi-participant entertainment service on the Internet. In
January 1999, we launched HearMe.com, our second live community service.
HearMe.com is currently comprised of seven live audio communities, making live
audio interaction available to people whose interests extend beyond
entertainment. We believe Mplayer.com and HearMe.com offer one of the widest
range of opportunities to advertisers and e-businesses available on the
Internet today. Advertisers may choose among several options to achieve both
branding and direct marketing objectives. Our live communities offer
advertisers rich 3D and audio advertisements, targeting based on consumer data
and the ability to obtain direct customer feedback and research on the impact
of particular advertising campaigns. In addition, e-businesses can offer their
products directly to targeted consumers in a variety of vertical markets.
Mpath Strategy
In order to maintain our leadership position in providing enabling
technologies for companies seeking to build live communities on the Internet
and in operating our own premier live communities, we have adopted the
following strategies:
Expand Our Sales and Marketing Efforts. Through our direct sales efforts, we
have developed a base of large, high profile customers who provide an
attractive stream of both initial and follow-on revenues, validate our
reputation as a technology leader and help to demonstrate the capabilities of
our technology and services. While we will continue to pursue these customers
through direct sales efforts, we also intend to package diverse product
offerings and distribute them through reseller arrangements with Web
development firms,
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enterprise applications resellers and OEM partnerships with developers of
customer service, e-commerce or other applications. In addition, we plan to
develop an entry-level product with features and a price point more suited for
smaller Web sites and target customers who can use the capabilities of the
Mpath Foundation technology and services outside of the entertainment and media
market segments.
Promote Membership Growth and Usage. We plan to increase membership and usage
levels on Mplayer.com, HearMe.com and future services by continuing to provide
compelling content and services. In particular, we encourage member-created
content because it is often the most original, engaging and frequently updated
content available on the Internet. We seek to drive membership growth by
expanding distribution of the Mplayer.com and HearMe.com services through
partnering relationships with major sites, such as portal sites, destination
content and commerce sites, community sites and entertainment content
companies. In addition, we intend to expand our membership base and increase
usage by (1) adding new third-party content to our sites; (2) entering into
arrangements with content providers to co-market our live community sites;
(3) providing an entertaining community for current users, thereby motivating
current users to recruit new members; and (4) streamlining the registration and
installation process. In addition, we intend to increase membership and usage
by continuing to improve the community features offered by Mplayer.com and
HearMe.com, such as live audio chat, paging, tournaments and hosting of member
fan sites.
Maintain and Extend Technology Leadership and Expertise. We have developed
proprietary technology for, and accumulated extensive expertise in, delivering
a broad range of live community applications on the Internet. This technology
and expertise extends to several areas, including client software, network
infrastructure, Internet protocols, security, large systems development and
scaling. We will continue to expand our features, capabilities and customer
solutions with our POP.X technology. In particular, we intend to add support
for third party content authoring tools and add to our suite of POP.X
applications. This will make it easier for developers to create POP.X content
and further speed the launch of their custom Web applications on POP.X. We will
also add new features and capabilities to POP.X that will enable us to
significantly improve the customer experiences on our live community services,
such as simplifying and expediting the process of acquiring new customers and
immediately engaging them in an entertaining experience.
Maximize Value for Advertisers and E-businesses. We seek to maximize the
value our live communities offer to advertisers by providing an attractive,
growing and targeted audience, as well as by delivering innovative advertising
products and campaign management techniques. The Mplayer.com and HearMe.com
services consist of multiple desirable and demographically distinct
communities, with strong membership growth and long average usage times, which,
combined with our technology, allow advertisers to present TV-style full-screen
advertisements and other rich media advertising products. The Mplayer.com and
HearMe.com services allow advertisers to deliver different messages to
different users within the same community experience. Advertisers may also
conduct integrated campaigns such as event sponsorships coupled with regular
branded advertising and banner ads. Finally, advertisers may use the chat room
technology to conduct online focus groups prior to, during and following an
advertising campaign to help plan and measure the effectiveness of a particular
campaign. The combination of our live community context, highly specific and
desirable user demographics, and long usage times provides a favorable platform
for targeted and cost-effective online advertising and e-commerce.
Pursue Multiple Revenue Streams. Our proprietary technology and leading live
communities enable us to maximize revenue from multiple sources. Mpath
Foundation derives the majority of its revenues through licenses of its
technology solutions, including POP.X, to customers interested in creating live
communities on the Internet. The Live Community services, Mplayer.com and
HearMe.com, derive a majority of their revenues through advertising and we
intend to maximize advertising revenues by continuing to provide a compelling
value proposition for advertisers. We will also seek to increase premium
subscription revenues by improving the special benefits and features that are
available beyond the free services offered by these communities. These benefits
and features include access to special events, rankings and ratings, contests,
magazine subscriptions, special features and exclusive games. In addition, we
intend to derive revenues from e-commerce activities, including fees from
special event promotions and merchandise sales.
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PRODUCTS AND SERVICES
We derive revenues from two business units, Live Communities and Mpath
Foundation. Through our Live Communities business unit we have developed and
operate two services, Mplayer.com and HearMe.com, with over 2.6 million
registered users as of January 1999. Through our Mpath Foundation business
unit, we are a leading provider of enabling technology and services to a
growing customer base of online companies seeking to create and operate live
communities on the Internet.
Live Communities
Through our Live Communities business unit we have developed and operate two
services, Mplayer.com and HearMe.com. The Mplayer.com service consists of three
interactive communities built around common interests. The HearMe.com service
is also characterized by multiple communities which have been created by
members with similar interests. We intend to build the HearMe.com service
through relationships with Web sites that want to offer live audio communities
to their members. Our early efforts to recruit partners for HearMe.com will
focus on sites with targeted demographics attractive to key advertisers.
Title: "Mpath Live Communities"
Flow chart with "Live Communities" at the top with arrows pointing to two boxes
below it. The box below and to the left of "Live Communities" contains the
Mplayer.com logo and text reading "Entertainment." This box has arrows pointing
to three boxes below it, which contain text reading, from left to right: (Box 1)
"Classics and Casino Community," (Box 2) "Sports Community," and (Box 3) "Gamers
Community." The box below and to the right of "Live Communities" contains the
HearMe.com logo and text reading "Live Audio." This box has arrows pointing to
two boxes below it, which contain text reading, from left to right: (Box 1)
"HearMe.com communities, Family & Friends, On Stage, Romance, Teen Chat, Sports,
College, General Chat," and (Box 2) "Partner Communities, Developed by
Partners."
Our live community services are free to registered members. To join, users
log on to the Mplayer.com and HearMe.com Web sites, complete a short
registration form and download the client software for Mplayer.com and
HearMe.com either from the Web site or a retail CD-ROM. In addition,
Mplayer.com members may also choose to become Mplayer Plus members for a fee of
$39.95 for a one-year membership, $49.90 for a two-year membership or $3.95 for
a one-month membership. In exchange, they receive access to special events,
rankings and ratings, contests, magazine subscriptions, special features and
exclusive games.
Mplayer.com offers over 100 games for online play, more than any other
Internet game and entertainment service. These games cover a wide range of
interests including action, strategy, simulation and sports with top
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retail titles such as Army Men, Commandos, Links LS, Panzer General I & II,
Quake I & II, Rainbow 6, Total Annihilation and Unreal. The retail games are
licensed from leading game publishers such as ABC Multimedia, Acclaim
Entertainment, Broderbund Software, Eidos Interactive, Electronic Arts, Hasbro
Interactive, Id Software, MGM Interactive, Mindscape, THQ and The 3DO Company.
For certain titles, users must purchase the CD-ROM from the publisher to play
on Mplayer.com, while for other games a free shareware version of the game can
be downloaded from Mplayer.com. Unlike most other online game services, the
Mplayer.com technology offers multi-player games with low latency which,
combined with Mplayer.com's easy-to-use software, has enabled Mplayer.com to be
one of the leading live entertainment services on the Internet. In addition to
its retail games, Mplayer.com offers over a dozen classic board and card games,
such as checkers, backgammon, hearts and spades, most of which can be
downloaded for free. These games in the aggregate generate approximately the
same amount of usage as retail games. Many of these games offer in-game text
and live audio chat, allowing players to speak with one another using their
microphones during game play.
Our live communities also offer a rich set of community features including
text and live audio chat, buddy lists, paging, member profiles, ranking,
tournaments, member submitted editorial, a bulletin board service and hosting
of member game fan sites. Mplayer.com and HearMe.com live audio chat allows
members to speak with one another in real-time and requires only a microphone
to be connected to their PC. HearMe.com enables many popular community
activities including live concerts, live auctions, group conferencing, help
desk applications, distance learning, multi-player games and more.
We believe our live communities offer a wide range of Internet advertising
opportunities to marketers, allowing them to achieve both branding and direct
marketing objectives. In general, on Mplayer.com and HearMe.com, advertisers
can use a variety of formats, including rich media, to communicate their
messages to targeted audiences based on demographics and content. At the end of
an advertising campaign, Mplayer.com and HearMe.com facilitate market research
on the impact of the campaign. This research shows that effective campaigns
take advantage of a range of advertising products, thereby delivering an
advertiser's message within multiple contexts, which leads to increased
consumer brand awareness and purchase intent. Mplayer.com and HearMe.com's
advertising products include:
. TV-style full-screen ads, which, according to an industry analysis, are
the best branding vehicle on the Internet.
. the Pop-Up Box, an effective direct response vehicle that is shown to
all registered members when they log-on. It drives high request rates
for advertisers on our live communities.
. the WebViewer within live audio chat and entertainment rooms, which
provides direct traffic to the advertiser's Web site and allows our
registered members to surf within it without having to leave Mplayer.com
or HearMe.com.
. sponsorship of lobbies, channels, pagers and events, which provide
advertisers with persistent visibility and branding.
. member portraits, which provide users with the ability to use
advertisers' logos and brand icons as part of their online identities.
. e-mail newsletters, which provide a great direct response vehicle
through hyperlinks to the advertiser's Web site.
. banner ads and buttons, a well-established Internet branding and direct
response vehicle.
Mpath Foundation
Mpath Foundation is a leading provider of enabling technology and services to
a growing customer base of online companies seeking to create and operate live
communities on the Internet. Leveraging our technological expertise in creating
live communities, we recently introduced POP.X (short for POPulation
eXplosion), our second generation technology system built on the experiences
and knowledge obtained from
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the original architecture developed for Mplayer.com. In addition, we have
created another derivative service, the Customer Management System, which
provides log-in, account management, billing, database management and reporting
services to companies operating online content. POP.X is marketed and sold as a
licensable technology product, while the Customer Management System is offered
as an Mpath-hosted service option.
POP.X is the first commercially available, platform-independent, end-to-end
system providing for the rapid deployment of mass-consumer, live community
applications on the Internet. As the diagram below illustrates, the POP.X
technology permits users to quickly access live interactive experiences,
without the need for user installation, thereby increasing customer acquisition
and retention. When a user first visits a Web site that uses POP.X, the user's
browser downloads a lightweight Webtop from the Web site's server. This
lightweight Webtop receives user input, displays graphics and plays sounds
associated with live community applications. The POP.X application, which
resides on the Web site's server, processes the bulk of the information
required to enable the live community application. In particular, the Web
site's server guides media assets to an individual user's PC when needed and
communicates data between multiple users' Webtops in real-time.
Title: "POP.X Technology Solution"
Flow chart with interconnected boxes and numbered blocks of text. The numbered
blocks of text read as follows:
"1. Consumers visit Web site that uses POP.X for live people-to-people
application. Browser requests Web page with embedded POP.X application."
"2. If the first visit, POP.X Webtop is fetched from the Web server by the
browser to the consumer's PC."
"3. POP.X application server launches the applications associated with the
Webtop."
"4. Media assets are sent as needed to the Webtop."
"5. The Webtop displays graphics, plays sounds and animations and receives user
input under the direction of the POP.X application executing on the application
server."
"6. Application instances on application server communicate data to implement
people-to-people interaction."
In the center of the flow chart is a black circle with text reading "The
Internet." At the top of the flow chart there are three boxes with text
reading, from left to right: (Box 1) "Web Page," (Box 2) "Web Browser," and (Box
3) "POP.X Webtop." Leading from Box 2 is an arrow that points down and to the
left to a box that is subdivided into two boxes that contain text reading, from
top to bottom: "Customer-Created HTML For Web site" and "Industry Standard Web
Server." This subdivided box has an arrow pointing down to a cylinder with text
reading "Web Logs." Leading from Box 3 is an arrow that points down to a
subdivided box that contains text reading, from top to bottom: "Customer-Created
Applications, Mpath-Supplied Community Applications," "POP.X Application
Server," "Asset Manager," and "Data Analysis Tools." Below "Asset Manager" is
an arrow pointing down to a cylinder with text reading "Media Assets." Below
"Data Analysis Tools" is an arrow pointing down to a cylinder with text reading
"Service Data Base." Below both of these cylinders is text reading "Web site
administrators extract reports and update media assets." To the right of "Data
Analysis Tools" is an arrow pointing to a box with text reading "Service Data &
Reports."
Using the POP.X technology, developers can create and deploy live community
applications in a significantly shorter time frame, and can instead focus on
creating such applications without being concerned about the inherent operating
restrictions of the Internet. POP.X enables communities to scale rapidly
without large technology or staffing expenditures, permits content to be easily
and rapidly changed and refreshed, and provides for key data analysis
capabilities (e.g., system operation diagnostics, service improvement analysis,
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data mining features, etc.). The architecture allows a complete online service
to be easily constructed out of multiple small, component applications, without
the developer having to become an expert in the details of scaleable, reliable
real-time system design. For example, a typical online service would consist of
three core applications: a chat application which implements a single chat
room, a lobby manager which allows a user to browse through a list of rooms,
and pager application which allows users to reach each other to determine where
they are. The developer's focus would be on the creation of three distinct user
experiences, without the concerns about how they would work and inter-operate.
In addition, given that many Web publishers have significant existing online
sites and services, POP.X's open architecture supports existing industry
standards for application development and legacy system integration, with well-
defined and documented interfaces and APIs.
The Customer Management System is a service offered to online publishers to
enable session and user-based tracking and billing. The Customer Management
System allows developers to extract value from their online application by
tracking usage, analyzing user behavior and billing for online services. The
Customer Management System is a well proven, reliable system that can be easily
integrated with any online application, allowing the publisher to reduce
development time and instead focus on their areas of expertise. Provided as an
Mpath-hosted service, the Customer Management System consists of a real-time
customer engine and a warehouse for data analysis. The real-time engine
provides secure value-based transactions and implements many billing models,
including subscription, pay-per-play and micro-transactions. The data warehouse
allows for trend analysis, thereby maximizing the application value. The
Customer Management System service provides connection to the Customer
Management System customer content site through secure links over the Internet
or dedicated frame relay connections.
Technology for Live Communities
We have developed technology solutions for creating a broad range of live
community applications on the Internet. Since 1995, we have invested heavily in
developing valuable proprietary software and related technologies, incurring
over $12.3 million of research and development expenses in the aggregate. In
particular, we have developed expertise and technology in four major areas:
client software and user experience, network infrastructure for real-time live
community applications, Internet protocols and security, and large systems
development and scaling.
The key to successfully delivering any mass-consumer real-time experience on
the Internet is a strong command of client PC software technology and user
experience design. Our proprietary software remedies difficult problems in this
area including streaming real-time media to client PCs, implementing rich
applications as software components for flexible Web-based delivery,
integrating applications with browsers and robust Webtop technology that hide
PC software configuration issues from applications. We have also built software
and developed flexible and powerful technology for automatically updating our
software that resides on users' PCs, while taking into account varying software
versions and configurations.
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As the diagram below illustrates, the level of technology required to enable
people-to-people communities is driven by the type of community application
offered within a particular Web site. Conventional communities, which offer
users Web page hosting, bulletin board and email services, require relatively
simple technology such as Web servers, Java and email servers. Live
communities, however, require highly sophisticated software and technology
including multicast protocols, latency matching software and distributed
infrastructures. Primary examples of real-time live community applications are
live auctions, help desk applications, distance learning, live audio chat, live
music performance and multi-player fast-action games. We operate two branded
services, Mplayer.com and HearMe.com, which enable these applications. We have
also developed and marketed POP.X, which is the first commercially available,
platform-independent, end-to-end system providing for the rapid deployment of
live community experiences on the Internet.
Title: "Technology for People-to-People Communications"
Flow chart with interconnected blocks of text. At the top of the chart there
are two column headings: "Conventional Communities" and "Live Communities." On
the left-hand side of the chart there are three row headings: "Examples,"
"Enabling Technology" and "Applications." At the bottom of the chart, there is
an arrow pointing from left to right with the text "Asynchronous Communication"
appearing on the left side of the arrow and the text "Real-time Communication"
appearing on the right side of the arrow. There are eight boxes within the
chart located in the three rows described above. Each box within a row has an
arrow pointing to the box to its right. The first box, located on the left side
of the "Examples" row, contains the text "Geocities, theglobe.com, XOOM.com."
The second box, located to the right of the first box, contains the text
"Mplayer.com, HearMe.com." In addition, the bottom of the second box contains
an arrow pointing from left to right with the text "POP.X" written across it.
The third box, located on the left side of the "Enabling Technology" row,
contains the text "Web servers, Java, Mail servers." The fourth box, located to
the right of the third box, contains the text "Mpath: POP.X and community
applications, Others: Custom built point solutions." The fifth box, located to
the right of the fourth box, contains the text "Mpath: POP.X Multicast
protocols, Latency matching, Distributed Infrastructure." The sixth box,
located on the left side of the "Applications" row, contains the text "Web page
hosting, Bulletin boards, Email." The seventh box, located to the right of the
sixth box, contains the text "Live auctions, Help desk applications, Distance
learning, Games, Text Chat." The eighth box, located to the right of the
seventh box, contains the text "Live audio chat, Live music performance, Fast
Actions Games."
We have significant experience designing, deploying and managing high
performance network infrastructures necessary to deliver real-time live
community applications. Mplayer.com and HearMe.com leverage the same
distributed Internet infrastructure, thereby delivering reliable and
predictable low latency experiences. We have developed extensive technology in
network transport protocols for different types of data streams and security
for delivering a broad range of live-community applications. In particular, our
protocols enable very low delay (latency) for data transport between client
PCs, multicast services to manage data rates, and scaling for large numbers of
simultaneous users. Our technology provides a robust and secure environment for
operating live communities on the Internet.
Large mass-consumer real-time communities also require significant back-end
systems for operating the applications. We have developed significant software
technology and expertise in large back end systems for operating commercial
live communities. Our software technology is designed to automatically deal
with scaling and load balancing, and we also provide interfaces for commercial
software packages, such as databases, billing systems and advertising tracking
and rotation systems.
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We believe that we have created a significant barrier to potential
competitors in the area of live Internet communities. This barrier is comprised
of multiple pieces. The broad range of skills and technologies needed to enable
live communities is difficult to assemble in a single company. We have
accumulated multiple years of development experience. We aggressively protect
our intellectual property and continue to heavily invest in new technology
development. Our research and development expenses for the prior three years
were as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------------
<S> <C>
1998............................ $3.1 million
1997............................ $2.4 million
1996............................ $5.3 million
</TABLE>
Strategic Relationships
Mpath has entered into strategic relationships with some of the most
prominent media and technology companies in order to increase membership and
usage, maximize revenues, build brand recognition, accelerate product
development and acquire content. Certain of these relationships are described
below.
Infoseek. Infoseek and Mpath have agreed to distribute a customized co-
branded version of the Mplayer.com client software and create, on Infoseek's Go
Network, co-branded pages that include Mplayer.com client software downloads
and certain online and interactive entertainment. Infoseek and Mpath also plan
to engage in significant cross-promotional activities and investigate certain
e-commerce opportunities.
XOOM.com. XOOM.com and Mpath have agreed to distribute a co-branded version
of the Mplayer.com client software and to create and maintain a co-branded
version of the Mplayer.com site for the use of XOOM.com members and site
visitors. The co-branded version of Mplayer.com will be promoted on the
XOOM.com site as "XOOM.com Games powered by Mplayer.com". Further, XOOM.com
will pay us a portion of revenue received from end users referred to XOOM.com
from the co-branded pages. This relationship brings us greater Internet reach,
broadens distribution of client software and creates additional e-commerce
revenue opportunities.
Intel. In the past, Intel has sponsored select micro sites on Mplayer.com to
promote and create awareness of Intel's Pentium II and Pentium processors with
MM technology. We have also developed certain products compatible with Intel
product releases. Intel is a repeat advertiser in Mplayer.com. Intel has used
Mpath screen shots and other Mpath promotional materials to demonstrate
innovative Internet technologies available on the Intel platform. Intel is also
an investor in our company.
Yahoo!. We have signed a Technology License and Integration Agreement with
Yahoo!, which licenses Yahoo! our audio chat technology to real-time, "one-to-
one," "one-to-many" and "many-to-many" live conversations of streaming audio
chat for use on Yahoo!'s Audio Chat Service for an initial six-month period. As
part of the arrangement we have issued Yahoo! a warrant to purchase 192,000
shares of our common stock, which Yahoo! can only exercise upon reaching
certain performance goals, including renewal of the license. We believe that
our relationship with Yahoo! will further validate our technology, promote
HearMe.com as a growing Web site on the Internet and increase the membership
and reach of our live communities.
Excite. Excite and Mpath have created a co-branded area on www.excite.com
that creates a portal to the Mplayer.com service and provides additional
distribution of the Mplayer.com client software. Excite and Mpath have also
undertaken activities to promote each other's services on the Internet. Our
agreement with Excite expands the distribution of the Mplayer.com client
software, promotes Mplayer.com on one of the Internet's largest Web sites and
helps to increase Mplayer.com's Internet reach.
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Macromedia. Macromedia and Mpath have agreed to collaborate on the
development of certain products, license certain technologies to each other,
and co-market their products and services. The companies anticipate working
together to develop tools and products used to create highly interactive and
large-scale Internet services and communities. Macromedia has agreed to license
POP.X from us. We have licensed Macromedia's Flash Player and will participate
in Macromedia's Traffic Affiliate Program. This relationship helps accelerate
acceptance of POP.X by leveraging Macromedia's standard for multi-participant
media development. The agreements between the companies also help to further
validate our technologies, create additional Internet reach for us and provide
us with revenue opportunities.
GTECH. GTECH was an early adopter of Mpath's POP.X technology. GTECH has
licensed POP.X from us for use with GTECH's entertainment and government-
sanctioned online lottery systems. This presents an exciting new application
and market for POP.X. Our relationship with GTECH has accelerated product
development, provided revenue, and added another important reference account to
validate our technology.
Sega. SegaSoft Networks was the first licensee of Mplayer.com technology and
uses the technology to operate its online service, www.heat.net. We have rights
to certain SegaSoft Networks content and payments from SegaSoft Networks.
SegaSoft Networks' parent company, CSK Corporation, is an investor in our
company, and we also have a business relationship with Sega of America,
Incorporated, another CSK subsidiary.
Cox. Cox Interactive Media has contracted with Mpath for distribution of the
Mplayer.com client software and the creation of a game channel for Cox. The
agreement with Cox Interactive Media features co-branding of various web pages
on the Cox Web sites and authorizes Cox to distribute the Mplayer.com client
software to end users. Cox Technology Investments, Inc., a Cox affiliate, is an
investor in our company. The Cox relationship will provide distribution of the
Mplayer.com client software, added promotion for Mplayer.com and extension of
our Internet reach.
Marketing and Sales
Live Communities
The marketing strategy for Mplayer.com and HearMe.com emphasizes two key
objectives. The first is to provide consumers with online communities in which
they can socialize, create their own experiences, engage in activities and
events, and play multi-player games. The second is to provide online
advertisers with opportunities to reach this attractive, targeted audience with
innovative advertising products. We also market additional value-added services
and products to Mplayer.com users.
We market advertising opportunities on our live communities to the
advertising industry through Web advertisements, trade shows, direct mail,
advertising in the trade press and general public relations. We intend to
expand our sales force in 1999 and to open new sales offices in locations that
can target attractive market segments.
We market Mplayer.com to consumers through Web advertising and publicity in
consumer publications and Web sites. The Web ads are primarily placed on
entertainment and community Web sites, which attract a similar psychographic
and demographic audience as Mplayer.com. Our survey data indicates that over
90% of the participants in our sports and gamers communities are male, and the
people within those communities are typically between the ages of 13 and 50;
however, approximately 40% of the participants in our classics and casino
community are women, and the people within that community are typically between
the ages of 25 and 50. The public relations activity is focused on consumer
publications such as Internet magazines, game magazines, news magazines,
entertainment magazines, and newspapers. We are following a similar strategy
for HearMe.com. Currently, over 40% of the participants on our HearMe.com
service are women, and the people within the service are typically between the
ages of 13 and 55. In addition, the significant majority of retail games
offered on Mplayer.com contain a "button" on the CD-ROM version of the game
linking to Mplayer.com.
Our marketing and sales organization is also responsible for acquiring and
developing original content for our live communities. We establish and maintain
relationships with the world's leading computer game
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developers, enlisting their content for distribution on the Mplayer.com service
while creating our own content for distribution within our live communities. In
addition, we attract and retain our members on both the Mplayer.com and
HearMe.com services by encouraging member-created content, hosting contests and
events, and building information-oriented Web pages.
Once a consumer becomes a registered member of our live communities, we begin
to market value-added services and products to the consumer, including premium
services, pay-per-play games and online purchasing of software and hardware
products. These products are marketed to the consumer directly through Web and
e-mail newsletter advertising and are sold online.
Mpath Foundation
To reach as many customer segments as possible and broaden the customer
penetration of POP.X, Mpath Foundation markets its products and services
through both direct and indirect distribution channels, domestically and
internationally. In addition to addressing the needs of Web publishers seeking
a complete system for developing and deploying live communities applications,
Mpath Foundation has implemented a strategy to meet the needs of customers with
specific application requirements. As such, Mpath Foundation plans to implement
developer marketing programs targeted at creating a variety of highly
customizable POP.X applications. These applications include live audio chat,
pagers, classic games, event auditoriums and data analysis tools that are
designed to complement a Web publisher's existing content.
Mpath Foundation's direct sales force sells and markets products primarily to
the top 200 Web content publishers worldwide. The initial target customers for
POP.X include media companies, large portal sites, games publishers,
wagering/gaming providers, as well as major entertainment companies. The direct
sales force consists of regional account managers and technical sales
engineers, supported by in-house technical marketing and customer support
organizations. Customers such as Macromedia, GTECH and Sony enhance our ability
to further penetrate this market with POP.X technology and applications.
Mpath Foundation's reseller channel was established to create broader
customer penetration and drive POP.X application development. We have
established relationships with three classes of resellers including
(1) Developer Partners focused on developing and selling POP.X applications;
(2) Enterprise Partners delivering a full service solution to Web content
publishers including creative development, infrastructure and operations; and
(3) OEM Partners creating online products that incorporate POP.X components.
Mpath Foundation reseller programs are targeted at penetration of the top 2,000
Web site publishers and services.
Mpath Foundation participates in trade shows, conferences, and seminars,
provides product information through our Web sites, places online advertising
pieces through electronic media, participates in public relations activities,
drives reach programs through targeted direct mail, and sponsors special
reseller and developer programs, including its own conference. These programs
are primarily targeted at driving awareness of POP.X in the Web publishing
industry, creating brand recognition, and stimulating reseller and developer
engagement with Mpath Foundation's products and services.
Operations and Infrastructure
The network for our live communities is managed from our headquarters in
Mountain View, California. The central services are co-located with Exodus
Communications, a provider of Internet system and network management solutions.
Our central services utilize four Sun enterprise-class servers consisting of a
Master Control Program machine, a member database machine, a data warehouse
machine and a member services billing machine. In addition, the central
services utilize Sun servers for functions such as matchmakers, webservers and
information logging and an X86 architecture machine for matchmaking.
We also deploy numerous live communities servers across multiple locations at
Exodus, PSINet and @Home co-location sites. The live communities servers are
located as close as feasible to network interchange points to facilitate
improved connectivity and lower latency. In general, the network topology for
Mplayer.com and HearMe.com is designed to provide easy scalability and reduce
network downtime. Our distributed
43
<PAGE>
architecture for our live communities servers enables Mplayer.com and
HearMe.com to continue operations even in cases of severe Internet outages as
long as some connectivity to our central service facility remains functional.
The architecture also ensures optimal performance for users during game play.
We intend to expand our infrastructure as necessary to meet the demand for our
products and services.
The Operations department is comprised of three groups: the Central Services
Administration Group, the Network Operations Center Group and the Customer
Support Group. The Central Services Administration Group is responsible for web
services, network infrastructure, live communities administration and Mpath
Foundation administration. The Network Operations Center group is responsible
for real-time response and intervention into issues with its live communities
and Mpath Foundation production services, and is staffed twenty-four hours per
day, seven days a week. The Customer Support group is responsible for both
customer billing and account issues for Electronic Arts' Ultima Online, Mpath
Live Communities and other customers.
Competition
Mpath Live Communities
The market for Internet users and advertisers is new and rapidly evolving.
Competition is intense and is expected to increase significantly in the future.
In addition, barriers to entry are relatively insubstantial. We believe that
the principal competitive factors for companies seeking to create live
communities on the Internet include the following:
. critical mass and functionality;
. brand recognition;
. member affinity and loyalty;
. broad demographic focus; and
. open access for visitors.
Other companies creating Web-based live communities on the Internet are
Cendant, E-Pub Services (Uproar.com), Lipstream, Microsoft, SegaSoft and Sony.
We will also likely face competition in the future from Web directories, search
engines, shareware archives, online communities, Internet telephony, content
sites, commercial online service providers, sites maintained by Internet
service providers and other entities that attempt to or establish communities
on the Internet either by developing their own community or acquiring one of
our competitors.
In addition, our future competition could include traditional media
companies, a number of which, including CBS, Disney and NBC, have recently
invested in and acquired Internet companies. Our competitors and potential
competitors may develop superior communities or communities that achieve
greater market acceptance than our community. We also compete for visitors with
many Internet content providers and Internet service providers, including Web
directories, search engines, shareware archives, content sites, commercial
online services and sites maintained by Internet service providers, as well as
thousands of Internet sites operated by individuals and government and
educational institutions. These competitors include free information, search
and content sites or services, such as America Online, CNET, CNN/Time Warner,
Excite, Infoseek, Lycos, Microsoft, Netscape and Yahoo!. We also compete with
the foregoing companies, as well as traditional forms of media such as
newspapers, magazines, radio and television, for advertisers and advertising
revenues. We believe that the principal competitive factors in attracting
advertisers include the amount of traffic on our Web site, brand recognition,
customer service, the demographics of our members and viewers, our ability to
offer targeted audiences and the overall cost-effectiveness of the advertising
medium we offer. We believe that the number of Internet companies relying on
Web-based advertising revenue will increase substantially in the future.
Accordingly, we will likely face increased competition, resulting in increased
pricing pressures on our advertising rates which could in turn have a material
adverse effect on our business, results of operations and financial condition.
44
<PAGE>
Many of our existing and potential competitors, including Web directories and
search engines and large traditional media companies, have longer operating
histories in the Web market, greater name recognition, larger customer bases
and significantly greater financial, technical and marketing resources than we
have. Such competitors can undertake more extensive marketing campaigns for
their brands and services, adopt more aggressive advertising pricing policies
and make more attractive offers to potential employees, distribution partners,
commerce companies, advertisers and third-party content providers. Advertisers
may perceive Internet content providers and Internet service providers,
including Web directories, search engines, shareware archives, sites that offer
professional editorial content, commercial online services and sites maintained
by Internet service providers as more desirable Web sites for placement of
advertisements.
In addition, substantially all of our current advertising customers and
strategic partners also have established collaborative relationships with
certain of our competitors or potential competitors, and other high-traffic Web
sites. Accordingly, we cannot be certain that we will be able to grow our
membership base, traffic levels and advertiser customer base at historical
levels or retain our current members, traffic levels or advertiser customers.
Advertisers may find other Web sites more attractive if Web traffic grows at a
faster rate on the Web sites of competitors. and our strategic partners may
decline to renew their agreements with us. We may not be able to compete
successfully against our current or future competitors and competition could
have a material adverse effect on our business, results of operations and
financial condition.
Mpath Foundation
The market for software and services for the Internet is relatively new,
constantly evolving and intensely competitive and we expect that competition
will only intensify in the future. As part of our business, we sell and license
products and services for community applications. Our principal competitors in
this market include Acuity Software and in-house developers of such
applications. Competitive factors in this market include the following:
. quality and reliability of software;
. features for creating, editing and adapting content;
. ease of use and interactive user features;
. scaleability and cost per user; and
. compatibility with the user's existing network components and software
systems.
To expand our user base and further enhance the user experience, we must
continue to innovate and improve the performance of our POP.X technology. Many
of our existing and potential competitors have longer operating histories,
greater name recognition and significantly greater financial, technical and
marketing resources than we do. We are committed to continued market
penetration of our brand, products and services and we may implement pricing,
licensing, service or marketing changes as a strategic response to changes in
the competitive environment in an effort to extend our current brand and
technology franchise. If we make price concessions or if our pricing and
distribution strategies emerge from our competitors, our business, financial
condition and results of operations may be adversely affected. See "Risk
Factors--We face intense competition."
Proprietary Rights
Mpath's success depends in part on our ability to protect our proprietary
software and other intellectual property. To protect our proprietary rights, we
rely generally on patent, copyright, trademark and trade secret laws,
confidentiality agreements with employees and third parties, and license
agreements with consultants, vendors and customers, although we have not signed
such agreements in every case. Despite such protections, a third party could,
without authorization, copy or otherwise obtain and use our products or
technology, or develop similar technology. We cannot assure that our agreements
with employees, consultants and others who participate in product development
activities will not be breached, that we will have adequate remedies for any
breach, or that our trade secrets will not otherwise become known or
independently developed by competitors. In the U.S., we currently have six
issued patents in the U.S. with expiration dates ranging from 2014 to 2016,
45
<PAGE>
two allowed patents and 16 patents pending (one of which is a provisional
patent). There can be no assurance that any pending or future patent
applications will be granted, that any existing or future patent will not be
challenged, invalidated or circumvented, or that the rights granted under any
patent that has issued or may issue will provide competitive advantages to us.
Many of our current and potential competitors dedicate substantially greater
resources to protection and enforcement of intellectual property rights,
especially patents. If a blocking patent has issued or issues in the future, we
would need to either obtain a license or design around the patent. There can be
no assurance that we will be able to obtain such a license on acceptable terms,
if at all, or to design around the patent. We pursue the registration of
certain of its trademarks and service marks in the U.S. and in certain other
countries, although it has not secured registration of all its marks. As of
February 11, 1999, we had four registered U.S. and four foreign trademarks or
service marks, and had applications pending for an additional five U.S. and six
foreign trademarks or service marks, and one intent to use trademark
application in the U.S. See "Risk Factors--We rely on our intellectual property
and proprietary rights and may be unable to protect these rights."
Employees
As of December 31, 1998, we have 111 full-time employees, including 29 in
research and development, 51 in sales and marketing and 25 in general and
administrative functions. From time to time, we also employ independent
contractors to support our engineering, market, sales and support and
administrative organizations. See "Risk Factors--We depend on certain key
personnel."
Facilities
We are headquartered in Mountain View, California, where we lease
approximately 28,800 square feet of office space under a lease expiring in
January 2002. We also maintain a sales office in New York City. We believe that
our existing facilities are adequate to meet our current and foreseeable
requirements or that suitable additional or substitute space will be available
as needed.
Legal Proceedings
On September 20, 1996, Mpath, MPCAT Acquisition Corporation (a wholly-owned
subsidiary of Mpath), and Catapult Entertainment, Inc. executed an Agreement
and Plan of Reorganization. The agreement provided for the merger of MPCAT into
Catapult such that Catapult would be the surviving corporation and would become
a wholly-owned subsidiary of Mpath. In addition, Catapult agreed, as part of
the merger agreement, that it would file a voluntary bankruptcy petition. On
October 10, 1996, Catapult filed a voluntary bankruptcy petition under Chapter
11 of the United States Bankruptcy Code with the United States Bankruptcy Court
for the Northern District of California, San Jose Division. On November 15,
1996, the Bankruptcy Court entered its order, which approved the merger between
MPCAT and Catapult. At the same time, the Bankruptcy Court entered a separate
order that authorized Catapult to assume two patent licenses that it had
obtained from Steve Perlman prior to filing the bankruptcy petition. Mr.
Perlman objected to the assumption of his licenses by Catapult, and on November
18, 1996, Mr. Perlman filed an appeal with the United States District Court for
the Northern District of California, San Jose Division. On August 7, 1997, the
District Court affirmed the Bankruptcy Court decision. On September 8, 1997,
Mr. Perlman filed an appeal with the Ninth Circuit Court of Appeals, and on
January 28, 1999, the Ninth Circuit reversed the Bankruptcy Court and the
District Court. The Ninth Circuit held that Catapult could not assume Mr.
Perlman's licenses without Mr. Perlman's consent. Catapult expects to file a
petition for a writ of certiorari with the United States Supreme Court prior to
April 28, 1999.
We have been informed that the current holder of the rights to these patents
is Microsoft. We believe that the technology used in our products and services
does not infringe upon these patents. However, if a court were to rule that our
technology did infringe upon these patents we believe we will be able to work
around these patents. Even if we were unable to work around these patents and
were required to remove these portions of our technology, we do not believe
that this would have a material adverse effect on our business, results of
operations, or financial condition.
46
<PAGE>
From time to time we have been, and expect to continue to be, subject to
legal proceedings and claims in the ordinary course of business, including
claims of alleged infringement of third-party trademarks and other intellectual
property rights by us and our licensees. Such claims, even if not meritorious,
could result in the expenditure of significant financial and managerial
resources and could materially and adversely affect our business, financial
condition and results of operations.
47
<PAGE>
MANAGEMENT
The names and ages of Mpath's executive officers and directors as of February
10, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Paul Matteucci................... 43 President, Chief Executive Officer,
Acting General
Manager, Live Communities and Director
Lynn Heublein.................... 36 Chief Operating Officer
Linda Palmor..................... 43 Chief Financial Officer
Brian Apgar...................... 44 Chief Entrepreneur, Founder and
Director
Steven Roskowski................. 33 Chief Technical Officer
Robert Csongor................... 36 General Manager, Mpath Foundation
James Schmidt.................... 46 Vice President, Engineering
James W. Breyer (1).............. 37 Director
David A. Brown (2)............... 53 Director
Douglas G. Carlston (1).......... 51 Director
William McCall................... 38 Director
Gregory O'Brien.................. 51 Director
Ruthann Quindlen (2)............. 44 Director
</TABLE>
- --------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Paul Matteucci, President and Chief Executive Officer, joined Mpath and
became a Director in May 1995. From December 1994 to May 1995, Mr. Matteucci
was a Resident Entrepreneur at Institutional Venture Partners. From July 1986
to December 1994, Mr. Matteucci held various positions at Adaptec, Inc.,
including Vice President and General Manager. Prior to joining Adaptec, Inc.,
Mr. Matteucci held positions with Texas Instruments. Mr. Matteucci received an
M.B.A. from Stanford University and an M.A. from Johns Hopkins School of
Advanced International Studies. Mr. Matteucci received his undergraduate degree
from the University of Pacific in Stockton, California.
Lynn Heublein, Chief Operating Officer, joined Mpath in November 1996 upon
Mpath's acquisition of Catapult Entertainment, Inc., which is now a wholly-
owned subsidiary of Mpath. Catapult filed a voluntary petition under Chapter 11
of the United States Bankruptcy Code with the United States Bankruptcy Court
for the Northern District of California, San Jose Division, on October 10,
1996, and MPCAT Acquisition Corporation, a wholly-owned subsidiary of Mpath,
merged with and into Catapult upon the conclusion of the bankruptcy
proceedings. Ms. Heublein was a co-founder of Catapult, and from April 1994 to
November 1996, she was Executive Vice President, Business Development at
Catapult. From October 1993 to April 1994, she served as Vice President of
Marketing for THQ, Inc. Ms. Heublein has also served Mpath in the capacity of
Acting Chief Financial Officer and General Manager, Mpath Foundation. Ms.
Heublein holds a B.S. in Engineering from the University of Washington and an
M.B.A. from Stanford University.
Linda R. Palmor, Chief Financial Officer, joined Mpath in February 1999. From
February 1996 to February 1999, Ms. Palmor worked for Terayon Communication
Systems, a developer and marketer of cable modem systems, where she served in a
number of positions, including Vice President, Finance and Corporate
Controller. From 1995 to 1996, Ms. Palmor served as the Corporate Controller of
Electronic Arts, Inc., a multimedia software company. From 1991 to 1995, Ms.
Palmor held a number of financial positions with The Walt Disney Company, a
media conglomerate. Ms. Palmor is a certified public accountant, and she
received a B.Sc. degree in biochemistry from Manchester University in the
United Kingdom.
Brian Apgar, Chief Entrepreneur, Founder and Director, co-founded Mpath in
January 1995, where he has also served as President, Vice President,
Development, General Manager, and Chief Operating Officer. From October 1993 to
January 1995, Mr. Apgar served as a Resident Entrepreneur and in other
consulting capacities
48
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for several venture capital firms, including Merrill Pickard Anderson & Eyre,
Sigma Partners and Institutional Venture Partners. Mr. Apgar holds a B.A. in
Physics from Princeton University.
Steve Roskowski, Chief Technical Officer, joined Mpath in November 1996 upon
Mpath's acquisition of Catapult Entertainment, Inc., which is now a wholly-
owned subsidiary of Mpath. Catapult filed a voluntary petition under Chapter 11
of the United States Bankruptcy Code with the United States Bankruptcy Court
for the Northern District of California, San Jose Division, on October 10,
1996, and MPCAT Acquisition Corporation, a wholly-owned subsidiary of Mpath,
merged with and into Catapult upon the conclusion of the bankruptcy
proceedings. From March 1994 to December 1996, Mr. Roskowski was Vice
President, Engineering and a co-founder of Catapult. Mr. Roskowski has also
served Mpath as Vice President, Operations and Vice President, Technology,
Mpath Foundation. From October 1992 to March 1994, Mr. Roskowski was a manager
of hardware for General Magic. Prior to that, he was a Project Manager at Apple
Computer. Mr. Roskowski holds a B.S. in Engineering from the California
Institute of Technology.
Robert Csongor, General Manager, Mpath Foundation, joined Mpath in August
1996 where he initially served as Director of Product Marketing and also as
Vice President, Business Development and Marketing. From January 1995 to August
1996, he served as Director of Marketing at NVIDIA Corporation. From August
1986 to January 1995, Mr. Csongor served in various capacities at Adaptec,
Inc., including as Director of Marketing. Mr. Csongor holds a B.S. in
Electrical Engineering from Villanova University.
James Schmidt, Vice President, Engineering, joined Mpath in December 1998.
From December 1986 to December 1998, Mr. Schmidt worked for Adaptec Inc., where
he served in a number of positions, including Vice President and Chief
Information Officer, Vice President, Process Development and Infrastructure,
and Vice President, Engineering. Mr. Schmidt received both a B.S. degree in
Electrical Engineering and an M.S. degree in Electrical Engineering from
Wichita State University.
James W. Breyer has served as a Director of Mpath since January 1995. Mr.
Breyer has been a general partner of Accel Partners, a venture capital firm,
since 1990, and the Managing Partner since 1997. Prior to joining Accel, Mr.
Breyer worked as a management consultant at McKinsey and Company, and he held
product management and marketing positions at Apple Computer and Hewlett
Packard. Mr. Breyer currently serves as a director of Actuate, RealNetworks,
Inc. and several privately held companies. Mr. Breyer holds a B.S. in Computer
Science and Economics from Stanford University and an M.B.A. from Harvard
University, where he was named a Baker Scholar.
David A. Brown has served as a Director of Mpath since June 1995. Mr. Brown
currently sits on the Board of Directors of Quantum Corporation, a mass storage
company he helped found in February 1980. Mr. Brown has also been a management
consultant and board member for various technology companies since February
1992. Mr. Brown received a B.S. in Engineering from San Jose State University
and an M.S. in Engineering from the University of Santa Clara.
Douglas G. Carlston has served as a Director of Mpath since February 1996.
Mr. Carlston was a founder of Broderbund Software Inc., and he served as
Chairman of the Board of Broderbund from November 1989 through August 1998. Mr.
Carlston also served as Chief Executive Officer of Broderbund from November
1989 until October 1996 and as President of Broderbund from September 1981
until November 1989. Mr. Carlston holds a B.A. and J.D. from Harvard
University.
William McCall has served as a Director of Mpath since November 1998. Mr.
McCall is the Director, New Media Development of Cox Enterprises, a media
company, a position he has held since March 1997. From November 1994 to March
1997, Mr. McCall was a director of TCI Interactive, the interactive division of
TCI, a cable company. From March 1994 to November 1994, Mr. McCall was employed
by Classic Sports. From February 1991 to March 1994, he was employed by Court
TV. Mr. McCall holds a B.A. in History from Connecticut College.
49
<PAGE>
Gregory O'Brien has served as a Director of Mpath since January 1999. Mr.
O'Brien has been Chief Administrative Officer at CSK Global Business Offices
since May 1998, and has held various other positions at CSK or its affiliates
since September 1990. CSK is a computer software and services company. Mr.
O'Brien has a B.BA. and an M.B.A. from Pace University.
Ruthann Quindlen has served as a Director of Mpath since January 1995. Ms.
Quindlen has been a partner at Institutional Venture Partners since 1994, where
she has focused on investments in Internet and software companies. Prior to
joining Institutional Venture Partners, Ms. Quindlen was a Managing Director at
Alex Brown & Sons. Ms. Quindlen serves on the boards of many other private
Internet companies including Digital Impact, Diffusion, FaceTime, Portera
Systems, and TimeHub. Ms. Quindlen has a B.S. in Economics from Georgetown
University and an M.B.A. from The Wharton School at the University of
Pennsylvania.
Board Composition
Directors are elected annually at Mpath's annual meeting of stockholders, and
serve for the term for which they are elected and until their successors are
duly elected and qualified. Mpath's Bylaws currently provide for a Board of
Directors comprised of eight directors.
Board Compensation
Mpath's directors do not receive cash compensation for their services as
directors, although certain directors are reimbursed for reasonable expenses
incurred in attending Board or committee meetings. In August 1995, Mr. Brown
purchased 60,000 shares of common stock at a price per share of $0.05. In
February 1996, Mr. Carlston purchased 60,000 shares of common stock at a price
per share of $0.21. The stock purchased by Messrs. Brown and Carlston is
subject to a right of repurchase by Mpath that lapses over a four-year period.
Officers of Mpath are appointed by the Board of Directors and serve at the
Board's discretion. Directors who are employees of Mpath are also eligible to
participate in Mpath's 1995 Stock Option/Stock Issuance Plan, and beginning in
1999, they will also be eligible to participate in Mpath's 1999 Employee Stock
Purchase Plan. Beginning in 1999, directors who are not employees of Mpath will
be eligible to participate in Mpath's 1999 Directors' Stock Option Plan. See
"Stock Plans."
Mpath has entered into indemnification agreements with each member of the
Board of Directors and certain of its officers providing for the
indemnification of such person to the fullest extent authorized, permitted or
allowed by law.
Board Committees
The Board of Directors has a Compensation Committee that reviews and
recommends to the Board the compensation arrangements provided to the
management of Mpath and administers the various stock option plans. The members
of the Compensation Committee are Ms. Quindlen and Mr. Brown.
The Board of Directors has an Audit Committee that reviews Mpath's annual
audit and meets with Mpath's independent auditors to review Mpath's internal
controls and financial management practices. The Board's Audit Committee
currently consists of Mr. Breyer and Mr. Carlston.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors consists of Mr. Brown
and Ms. Quindlen. No interlocking relationship exists between any member of our
Board of Directors or our Compensation Committee and any member of the board of
directors or compensation committee of any other company, and no such
interlocking relationship has existed in the past.
50
<PAGE>
Executive Compensation
The following table sets forth summary information concerning the
compensation received for services rendered to Mpath during the year ended
December 31, 1998 by the Chief Executive Officer and each of the other four
most highly compensated executive officers, each of whose aggregate
compensation during our last fiscal year exceeded, or would exceed on an
annualized basis, $100,000 (the "Named Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------------- ------------
Securities
Name and Principal Salary Other Annual Underlying All Other
Position ($) Bonus ($) Compensation ($)(1) Options (#) Compensation ($)
- ------------------ ------ --------- ------------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Paul Matteucci.......... $206,853 -- $9,566 300,000 --
President and Chief
Executive Officer
Lynn Heublein........... 178,786 -- 2,764 160,000 --
Chief Operating Officer
Brian Apgar............. 187,378 -- 5,870 15,000 --
Chief Entrepreneur and
Founder
Steven Roskowski........ 155,500 -- 2,357 40,000 --
Chief Technical Officer
Robert Csongor.......... 152,375 -- 5,759 25,000 --
General Manager, Mpath
Foundation
</TABLE>
- --------
(1) Other Annual Compensation consists of health insurance premiums paid for by
Mpath on behalf of the Named Officer, and in some cases, the spouse and
dependents of the Named Officer.
Option Grants
The following table provides certain summary information regarding stock
options granted to the Named Officers during the fiscal year ended December 31,
1998.
<TABLE>
<CAPTION>
Potential
Realizable Value
Individual Grants (1) At Assumed Annual
---------------------------------------------- Rates of Stock
Number Of Percent Of Price
Securities Total Options Appreciation For
Underlying Granted To Exercise Option Term (2)
Options Employees In Price Expiration -----------------
Name Granted (#) Fiscal Year ($/Share) Date 5% 10%
- ---- ----------- ------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Paul Matteucci.......... 300,000 18.9% $1.03 6/8/08 $194,328 $492,466
Lynn Heublein........... 160,000 10.1 1.03 10/8/08 103,642 262,649
Brian Apgar............. 15,000 0.9 1.03 10/8/08 9,716 24,623
Steven Roskowski........ 40,000 2.5 1.03 10/8/08 25,910 65,662
Robert Csongor(3)....... 25,000 1.6 1.03 10/8/08 16,194 41,039
</TABLE>
Option Grants in Last Fiscal Year
- --------
(1) Consists of options granted pursuant to Mpath's 1995 Stock Option/Stock
Issuance Plan. See "Stock Plans--1995 Stock Option/Stock Issuance Plan."
(2) Stock price appreciation of 5% and 10% is assumed pursuant to rules
promulgated by the Securities and Exchange Commission and does not
represent Mpath's predictions of its stock performance. There can be no
assurance that the actual stock price appreciation over the ten-year option
term will be at the assumed 5% and 10% levels or at any other defined
level.
(3) In January 1999, Mr. Csongor received an option to purchase 20,000 shares
of common stock at an exercise price of $4.62.
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<PAGE>
Option Exercises and Holdings
The following table provides summary information concerning the shares of
common stock acquired in 1998, the value realized upon exercise of stock
options in 1998, and the year end number and value of unexercised options with
respect to each of the Named Officers as of December 31, 1998.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired on Options at In-the-Money Options at
Exercise Value December 31, 1998 (#) December 31, 1998 ($)
Name (#) Realized ($)(1) (Exercisable/Unexercisable) (Exercisable/Unexercisable)(1)
- ---- ----------- --------------- --------------------------- ------------------------------
<S> <C> <C> <C> <C>
Paul Matteucci.......... 0 0 420,000/0 $617,400/$0
Lynn Heublein........... 174,584 $46,413 151,347/0 $216,702/$0
Brian Apgar............. 0 0 30,000/0 $ 44,100/$0
Steven Roskowski........ 139,829 $64,737 23,931/0 $ 29,400/$0
Robert Csongor.......... 120,000 $56,400 0/0 $ 0/$0
</TABLE>
- --------
(1) Value calculated by determining the difference between the fair market
value of underlying securities at exercise date (for value realized) or
year-end (for value at year-end), and the exercise price. The estimated
fair market value of Mpath's common stock on December 31, 1998 was $2.50
per share.
Stock Plans
1999 Stock Incentive Plan. Our 1999 Stock Incentive Plan was adopted by the
Board of Directors in February 1999 and we will be submitting it for approval
by our stockholders prior to the closing of this offering. A total of 2,500,000
shares of common stock has been reserved for issuance under the 1999 Stock
Incentive Plan. The number of shares reserved for issuance under the 1999 Stock
Incentive Plan will be subject to an annual increase on the first day of each
of our fiscal years in 2000, 2001, 2002, 2003, and 2004 equal to the lesser of
(1) 750,000 shares, (2) 3% of our outstanding common stock on the last day of
the immediately preceding fiscal year, or (3) such lesser number of shares as
the Board of Directors determines. No options to purchase shares of common
stock have been issued under the 1999 Stock Incentive Plan.
The 1999 Stock Incentive Plan provides for the grant of incentive stock
options to employees within the meaning of Section 422 of the IRS Code, and
nonstatutory stock options and restricted stock to employees, directors and
consultants. The 1999 Stock Incentive Plan is currently administered by the
Compensation Committee, which has been designated by the Board of Directors to
administer the 1999 Stock Incentive Plan with respect to different groups of
service providers. The number, vesting schedule, and exercise price for
options, or conditions for restricted stock, granted under the 1999 Stock
Incentive Plan will be as determined by the relevant administrator; provided,
however, that in no event may an individual employee receive option grants for
more than 2,500,000 shares in any fiscal year, and the exercise price of
incentive stock options must be at least equal to the fair market value of our
common stock on the date of grant.
In the event of a sale of all or substantially all of our assets of Mpath, or
the merger or consolidation of Mpath with or into another corporation in which
the ownership of more than 50% of the total combined voting power of Mpath's
outstanding securities changes hands, then restrictions on restricted stock
shall lapse, and outstanding options granted under the 1999 Stock Plan may be
assumed or an equivalent option substituted by the successor corporation, and
if not assumed or substituted by a successor corporation will accelerate and
become fully vested effective upon the consummation of such transaction.
The Board of Directors may amend, modify or terminate the 1999 Stock Plan at
any time as long as such amendment, modification or termination does not impair
vesting rights of plan participants and provided that
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stockholder approval shall be required for an amendment to the extent required
by applicable law, regulations or rules. The 1999 Stock Plan will terminate on
February 9, 2009, unless terminated earlier by the Board of Directors.
1995 Stock Option/Stock Issuance Plan. Our 1995 Stock Option/Stock Issuance
Plan (the "1995 Stock Plan") was adopted by the Board of Directors and approved
by our stockholders in April 1995. As of December 31, 1998, an aggregate of
3,453,000 shares of common stock had been reserved for issuance under the 1995
Stock Plan. The 1995 Stock Plan provides for the granting of incentive stock
options (within the meaning of Section 422 of the Code) to employees and
nonstatutory stock options and stock purchase rights to employees, non-employee
directors and consultants. As of February 11, 1999, 1,673,410 shares of common
stock were issuable upon exercise of outstanding options granted under the 1995
Stock Plan, 1,656,396 shares of common stock have been issued upon exercise of
options or pursuant to stock purchase rights. Options and stock purchase rights
granted under the 1995 Stock Plan will remain outstanding in accordance with
their terms, but the Board of Directors has determined that no further options
or other awards will be granted under the 1995 Stock Plan.
The 1995 Stock Plan may be administered by the Board of Directors or a
committee of the Board (the "Administrator") with the authority to grant option
and stock purchase rights and to determine the terms of such awards. Stock
options granted under the 1995 Stock Plan may not have a term of more than ten
years and generally remain exercisable for a period of three months following
termination of the optionee's relationship with Mpath (with longer periods
applying in the event such termination occurs as a result of death or
disability). The exercise price of all incentive stock options must be at least
equal to the fair market value of the common stock at the time of grant, and
the exercise price of nonstatutory stock options and the purchase price for
stock purchase grants must be at least 85% of the fair market value of the
common stock at the time of grant, however, the exercise price of stock options
and the purchase price of stock purchase rights granted to employees owning
stock that represents more than 10% of the total combined voting power of all
classes of outstanding capital stock of Mpath must in all cases be at least
110% of the fair market value of the common stock at the time of grant. The
Administrator has authority to grant stock options which are exercisable prior
to vesting, in which case the unvested portion of the exercised shares are
subject to a right of repurchase in favor of Mpath at the optionee's original
cost. Outstanding options vest, and repurchase rights as to exercise unvested
options and stock purchase rights lapse, generally at a rate of 25% upon
completion of one year of service after the grant and the balance in successive
equal monthly installments over the next three years of service. In the event
of a shareholder approved merger or consolidation of Mpath in which the
ownership of more than 50% of the total combined voting power of Mpath's
outstanding securities changes hands, or the sale of all or substantially all
of Mpath's assets in a complete liquidation or dissolution of Mpath,
outstanding options granted under the 1995 Stock Plan will terminate unless
assumed by a successor in interest to Mpath's business, and all Company stock
repurchase rights will terminate unless such repurchase rights are assigned to
the successor corporation.
1999 Directors' Stock Option Plan. Our 1999 Directors' Stock Option Plan (the
"Directors' Plan") was adopted by the Board of Directors in February 1999 and
we will be submitting it for approval by our stockholders prior to the closing
of this offering. A total of 300,000 shares of common stock has been reserved
for issuance under the Directors' Plan.
The Directors' Plan provides for an automatic initial grant of an option to
purchase 30,000 shares of common stock to each person who first becomes a
nonemployee director after the effective date of the plan upon appointment or
election. Initial grants to nonemployee directors shall become exercisable in
installments as to 25% of the total number of shares subject to the option on
the first, second, third and fourth anniversaries of the date of grant. The
Directors' Plan also provides for annual grants, on the date of each annual
meeting of Mpath's shareholders, to each nonemployee director who has served on
Mpath's Board of Directors for at least
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<PAGE>
six months. The annual grant to such nonemployee directors is an option to
purchase 7,500 shares of common stock, which option shall become exercisable in
full on the fourth anniversary of the date of grant. The exercise price of all
stock options granted under the Directors' Plan shall be equal to the fair
market value of a share of Mpath's common stock on the date of grant of the
option. Options granted under the Directors' Plan have a term of ten years,
however, the option will terminate earlier to the extent not vested when the
optionee ceases to serve as a Director or to the extent vested if it is not
exercised within 12 months after the Director's death or disability or within
90 days after the Director ceases to serve as a Director for any other reason.
In the event of a sale of all or substantially all of the assets of Mpath or
the merger or consolidation of Mpath with or into another corporation in which
the ownership of more than 50% of the total combined voting power of Mpath's
outstanding securities changes hands, all outstanding options will accelerate
and become fully vested effective upon the consummation of such transaction.
The Directors' Plan is designed to work automatically without administration;
however, to the extent administration is necessary, it will be performed by the
Board of Directors without participation by a director with respect to matters
in which such director has a personal interest. The Board of Directors may
amend or terminate the Directors' Plan; provided, however, that no such action
may adversely affect any outstanding option. If not terminated earlier, the
Directors' Plan will have a term of ten years.
1999 Employee Stock Purchase Plan. Our 1999 Employee Stock Purchase Plan (the
"Purchase Plan") was adopted by the Board of Directors in February 1999 and we
will be submitting it for approval by our stockholders prior to the closing of
this offering. A total of 750,000 shares of common stock has been reserved for
issuance under the Purchase Plan, none of which have been issued as of the date
of this offering. The number of shares reserved for issuance under the Purchase
Plan will be subject to an annual increase on the first day of each of Mpath's
fiscal years in 2000, 2001, 2002, 2003, and 2004 equal to the lesser of (1)
100,000 shares, (2) 1% of Mpath's outstanding common stock on the last day of
the immediately preceding fiscal year, or (3) such lesser number of shares as
the Board of Directors determines. The Purchase Plan becomes effective on the
date of this prospectus. Unless terminated earlier by the Board of Directors,
the Purchase Plan shall terminate in February 2019.
The Purchase Plan, which is intended to qualify under Section 423 of the
Code, will be implemented by a series of overlapping offering periods of 24
months' duration, with new offering periods (other than the first offering
period) commencing on May 1 and November 1 of each year. Each offering period
will consist of four consecutive purchase periods of six months' duration, at
the end of which six month period (a "purchase date") an automatic purchase
will be made for participants. The initial offering period is expected to
commence on the date of this offering and end on April 30, 2001; the initial
purchase period is expected to begin on the date of this offering and end on
October 31, 1999. The Purchase Plan will be administered by the Board of
Directors or by a committee appointed by the Board. Employees (including
officers and employee directors) of Mpath, or of any majority-owned subsidiary
designated by the Board, are eligible to participate in the Purchase Plan if
they are employed by Mpath or any such subsidiary for at least 20 hours per
week and more than five months per year. The Purchase Plan permits eligible
employees to purchase common stock through payroll deductions, which in any
event may not exceed 20% of an employee's compensation, at a price equal to the
lower of 85% of the fair market value of the common stock at the beginning of
each offering period or at the end of each purchase period. Employees may end
their participation in the Purchase Plan at any time during an offering period,
and participation ends automatically on termination of employment. The Board
may also implement provisions of the Purchase Plan that permit stock purchases
through cash or stock contributions.
No employee shall be granted an option under the Purchase Plan if immediately
after the grant such employee would own stock and/or hold outstanding options
to purchase stock equaling 5% or more of the total voting power or value of all
classes of stock of Mpath or its subsidiaries, or if such option would permit
an employee to purchase stock under all employee stock purchase plans of Mpath
and its subsidiaries to accrue at a rate that exceeds $25,000 of fair market
value of such stock for each calendar year in which the option is
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<PAGE>
outstanding at any time. In addition, no employee may purchase more than 2,000
shares of common stock under the Purchase Plan in any one purchase period. If
the fair market value of the common stock on a purchase date is less than the
fair market value at the beginning of the offering period, each participant in
the Purchase Plan shall automatically be withdrawn from the offering period as
of the end of the purchase date and re-enrolled in the new twenty-four month
offering period beginning on the first business day following the purchase
date.
The Purchase Plan provides that in the event of a merger or consolidation of
Mpath with or into another corporation or a sale of all or substantially all of
Mpath's assets, each right to purchase stock under the Purchase Plan will be
assumed or an equivalent right substituted by the successor corporation unless
the Board of Directors shortens any ongoing offering period so that employees'
rights to purchase stock under the Purchase Plan are exercised prior to the
transaction. The Board of Directors has the power to amend or terminate the
Purchase Plan and to change or terminate offering periods as long as such
action does not adversely affect any outstanding rights to purchase stock
thereunder, provided however that the Board may amend or terminate the Plan or
an offering period even if it would adversely affect outstanding options in
order to avoid Mpath's incurring adverse accounting charges.
Limitation of Liability and Indemnification Matters
As permitted by the Delaware General Corporation Law (the "Delaware Law"),
Mpath has included in its Restated Certificate of Incorporation a provision to
eliminate the personal liability of its officers and directors for monetary
damages for breach or alleged breach of their fiduciary duties as officers or
directors, respectively, subject to certain exceptions. In addition, Mpath's
Bylaws provide that Mpath is required to indemnify its officers and directors
under certain circumstances, including those circumstances in which
indemnification would otherwise be discretionary, and Mpath is required to
advance expenses to its officers and directors as incurred in connection with
proceedings against them for which they may be indemnified. Mpath has entered
into indemnification agreements with its officers and directors containing
provisions that are in some respects broader than the specific indemnification
provisions contained in the Delaware Law. The indemnification agreements
require Mpath, among other things, to indemnify such officers and directors
against certain liabilities that may arise by reason of their status or service
as officers and directors (other than liabilities arising from willful
misconduct of a culpable nature), to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified,
and to obtain directors' and officers' insurance if available on reasonable
terms. Mpath has also obtained directors' and officers' liability insurance.
At present, Mpath is not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent of Mpath in which
indemnification would be required or permitted. Mpath is not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification. Mpath believes that its charter provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors
and officers.
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CERTAIN TRANSACTIONS
Private Placements of Securities
In January 1995, we issued and sold a total of 100,000 shares of our common
stock at a price of $0.05 per share and 2,800,000 shares of our Series A
Preferred Stock at a price of $0.50 per share to IVP and its affiliates and
Accel Partners and its affiliates.
In August 1995 and January 1996, we issued and sold a total 2,190,842 shares
of our Series B Preferred Stock at a price of $2.07 per share to IVP, Accel
Partners, Sutter Hill Ventures and its affiliates and certain other private
investors.
In April 1996, we issued and sold a total of 1,154,580 shares of our Series C
Preferred Stock at a price of $10.28 per share to CSK Corporation and its
affiliates, IVP, Accel Partners, Sutter Hill and certain other private
investors. In November 1996, we issued and sold a total of 291,829 shares of
our Series C Preferred Stock at a price per share of $10.28 to CSK Corporation.
In March 1997, we issued and sold a total of 48,638 shares of our Series C
Preferred Stock at a price of $10.28 per share to Electronic Arts.
In November 1996, we acquired all of the outstanding capital stock of
Catapult Entertainment, Inc., a California corporation, in connection with
Catapult's reorganization. Pursuant to an Agreement and Plan of Reorganization
and an Agreement and Plan of Merger, Catapult merged with and into a wholly-
owned subsidiary of ours. In connection with the merger, we issued 868,254
shares of our Series C Preferred Stock and options to purchase 121,078 shares
of our common stock, valued at $10.28 per share, to the stockholders of
Catapult. In addition, we issued and sold a warrant to purchase up to 52,250
shares of our common stock at a price of $60.00 per share to Intel. This
warrant expires on December 31, 2000. We also issued two convertible promissory
notes to Intel for $1,150,000 and $150,000 respectively, and issued a
convertible senior subordinated promissory note to Viacom for $1,864,000. In
July 1997, the notes to Intel were canceled in exchange for shares of our
Series D Preferred Stock and warrants to purchase our common stock, based on a
purchase price of $5.40 per share. The Viacom Note is convertible into common
stock upon a sale of all or substantially all of Mpath, through a merger,
acquisition, or other transaction or upon an initial public offering of Mpath's
common stock pursuant to a registration statement. The Viacom Note is due and
payable on November 18, 2001.
In July and August 1997, we issued and sold a total of 3,111,110 shares of
our Series D Preferred Stock to Intel, Technology Crossover Ventures,
Electronic Arts, IVP, Accel Partners, Sutter Hill, Cox Technology Investments
and certain other private investors at a price of $5.40 per share. In addition,
in July and August 1997, we issued warrants to purchase 1,555,555 shares of
common stock at an exercise price of $5.40 per share to the purchasers of the
Series D Preferred Stock. These warrants to purchase common stock are
exercisable in stages. One-half of the shares subject to these common stock
warrants are exercisable upon the earlier to occur of (1) a sale of Mpath in
which the consideration per share received by us (on a fully-diluted basis) is
less than $10.80 per share and (2) two years from the date of their issuance.
The second half of the shares subject to these common stock warrants are
exercisable upon the earlier to occur of (1) a sale of Mpath in which the
consideration per share received by us (on a fully-diluted basis) is less than
$10.80 per share and (2) 30 months from the date of their issuance. The first
half of these warrants expire upon the earliest of (1) the issuance and sale of
shares of our common stock in an initial underwritten registered public
offering in which the price per share at least $10.80 and where we receive
total net proceeds of at least $15,000,000, (2) a sale of Mpath in which the
consideration per share received by us (on a fully-diluted basis) is at least
$10.80, (3) the closing of a private financing of Mpath in which the price per
share (on a fully-diluted basis) is at least $10.80 and where we receive total
net proceeds of at least $10,000,000 and (4) two years from the date of their
issuance. The second half of these warrants expire upon the same events as the
first half of these warrants, except that they may be exercisable for up to 30
months after their issuance, not just two years. In any event, these common
stock warrants expire five years from the date they become exercisable, if that
ever occurs.
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In July 1998, we entered into a Loan and Security Agreement with Greyrock
Business Credit, a Division of NationsCredit Commercial Corporation under which
Greyrock Business Credit made a $1,500,000 term loan to us and agreed to
provide additional loans for the purchase of equipment and for general working
capital purposes. In connection with the loan agreement with Greyrock Business
Credit, we issued and sold Greyrock Business Credit a warrant to purchase
23,000 shares of our Series D Preferred Stock at an exercise price of $5.40 per
share. This warrant is exercisable at any time and expires on July 30, 2003.
In January 1999, we issued and sold a total of 3,035,306 shares of our Series
E Preferred Stock to Intel, CSK Corporation, Technology Crossover Ventures,
IVP, Accel Partners, Sutter Hill, Wheatley Partners, HLM ICB Fund, Winfield
Capital Corp., Spinnaker Founders Fund and its affiliates and certain other
private investors at a price of $6.60 per share. In connection with this sale
of our Series E Preferred Stock, we issued a warrant to purchase 77,422 shares
of our Series E Preferred Stock at an exercise price of $6.60 per share to
NationsBanc Montgomery Securities LLC, the placement agent in the Series E
financing. This warrant expires on the closing of this offering.
Since inception, we from time to time have issued and sold shares of our
common stock and granted options to purchase common stock to our employees,
directors and consultants.
Transactions with Directors and Officers
Affiliate Relationships. The following members of the Board of Directors are
affiliated with certain private investors that participated in the foregoing
transactions: James W. Breyer (Accel Partners), William McCall (Cox Technology
Investments), Ruthann Quindlen (IVP) and Gregory O'Brien (CSK Corporation). In
addition, David Brown directly holds shares of our Preferred Stock.
Change of Control. On February 5, 1999, Linda Palmor, Chief Financial
Officer, received a non-qualified option to purchase 150,000 shares of our
common stock at an exercise price of $5.50 per share, which price represented
85% of our common stock's fair market value on the date of grant. The stock
issuable upon exercise of Ms. Palmor's option is subject to vesting over a
four-year period. Upon certain change of control events 40% of Ms. Palmor's
unvested stock shall immediately vest.
Promissory Notes. The executive officers listed on the table below have
executed full-recourse promissory notes in favor of Mpath in excess of $60,000.
All of the notes listed below were executed in connection with the purchase of
shares of our common stock.
<TABLE>
<CAPTION>
Name Date of Note Amount Interest Rate Term
---- ------------ ----------- ------------- ----
<S> <C> <C> <C> <C>
Lynn Heublein, 10/05/98 $ 78,105.23 5.12% (1)
Chief Operating Officer 11/22/98 $101,707.56 4.51% (1)
Linda Palmor, 02/05/99 $221,398.31 4.71% (2)
Chief Financial Officer
Steven Roskowski, 11/22/98 $144,999.78 4.51% (1)
Chief Technical Officer
Robert Csongor, 11/22/98 $123,594.00 4.51% (1)
General Manager, Mpath
Foundation
</TABLE>
- --------
(1) These notes will become due and payable upon the earlier of (a) 9 months
after our initial public offering, (b) 5 years from the date of issue or
(c) the termination of the executive officer's employment with us.
(2) This note will become due and payable upon the earlier of (a) 2 years after
our initial public offering, (b) 5 years from the date of issue or (c) the
termination of the executive officer's employment with us.
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<PAGE>
SegaSoft Agreement
In April 1996, we entered into a Technology License Agreement with SegaSoft.
Under the agreement with SegaSoft, we granted SegaSoft a non-exclusive license
to use certain proprietary information and technology to support multi-
participant interactive applications. In addition, we must provide technical
assistance to SegaSoft. and SegaSoft must develop at least two games in each 12
month period beginning December 1, 1997. At any time after April 1998, SegaSoft
may terminate the agreement upon 12 months written notice.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the shares of Mpath's common stock on a fully-diluted
basis as of February 11, 1999, and as adjusted to reflect the sale of the
common stock offered by Mpath pursuant to this prospectus (1) by each person
who is known by Mpath to own beneficially more than 5% of Mpath's common stock
on a fully-diluted basis; (2) by each director, the Chief Executive Officer and
the Named Officers; and (3) by all directors and executive officers of Mpath as
a group. In addition, common stock issuable upon conversion of all outstanding
preferred stock are considered outstanding. Except as otherwise noted, 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.
<TABLE>
<CAPTION>
Percent of
Class(2)
Shares -----------------
Beneficially Before After
Name Owed(1) Offering Offering
---- ------------ -------- --------
<S> <C> <C> <C>
Accel Partners (3)............................. 2,849,151 16.1%
IVP (4)........................................ 2,849,153 16.1%
CSK Corporation and affiliates (5)............. 1,338,528 7.8%
Sutter Hill Ventures (6)....................... 1,351,259 7.6%
Intel Corporation.............................. 1,087,239 6.1%
Cox Technology Investments, Inc.(7)............ 925,925 5.2%
Paul Matteucci (8)............................. 1,000,000 5.5%
Brian Apgar (9)................................ 639,000 3.6%
Lynn Heublein (10)............................. 424,728 2.4%
Steve Roskowski(11)............................ 242,402 1.4%
Robert Csongor(12)............................. 140,000 *
James W. Breyer (3)............................ 2,849,151 16.1%
David A. Brown................................. 195,757 1.1%
Douglas G. Carlston............................ 60,000 *
William McCall (7)............................. 925,925 5.2%
Gregory O'Brien (5)............................ 1,388,528 7.8%
Ruthann Quindlen (4)........................... 2,849,153 16.1%
All executive officers and directors as a group
(13 persons) (13)............................. 11,014,195 59.1%
</TABLE>
- --------
* Less than 1%.
(1) 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 of 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 February 11,
1999 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage of ownership of
each other person. The persons named in this 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 and except as indicated in the other footnotes to this table.
(2) Percent of beneficial ownership is based on 17,718,739 shares of common
stock outstanding as of February 11, 1999, and shares of
common stock outstanding after this offering.
(3) Consists of 2,609,824 shares held by Accel IV L.P., 105,417 shares held by
Accel Investors 94 L.P., 54,134 shares held by Accel Keiretsu L.P., 62,680
shares held by Ellmore C. Patterson Partners, and 17,096 shares held by
Prosper Partners. Mr. Breyer is an affiliate of each of the entities
listed in the previous sentence and disclaims his beneficial ownership of
such shares except to the extent of his pecuniary interest therein.The
address of Accel is 428 University Avenue, Palo Alto, California 94301.
(4) Consists of 2,733,993 shares held by Institutional Venture Partners VI,
56,075 shares held by Institutional Venture Management VI, 13,630 shares
held by IVP Founders Fund I, L.P. and 45,455 shares held by IVP Broadband
Fund, L.P. Ms. Quindlen is General Partner of each of the entities listed
in the previous sentence and disclaims beneficial ownership of such shares
except to the extent of her pecuniary interest therein. The address of IVP
is 3000 Sand Hill Road, Building 2, Suite 290, Menlo Park, California
94025.
(5) Consists of 694,263 shares held by CSK Corporation, 462,844 shares held by
CSK Venture Capital Co. Ltd., 115,711 shares held by CSK Venture Capital
Co. Ltd. as Investment Manager for CSK-2 Investment Fund, 57,855 shares
held by CSK Venture Capital Co. Ltd. as Investment Manager for CSK-1(A)
Investment Fund, and 57,855 shares held by CSK Venture Capital Co. Ltd. as
Investment Manager for CSK-1(B) Investment Fund. Mr. O'Brien is an officer
of a company affiliated with CSK Corporation and disclaims beneficial
ownership of such shares. The address of CSK Corporation is 25th Floor,
Shinjuku-Sumitomo Building, 2-6-1 Mishi-Shinjuku, Shinjuku-ku, Tokyo 163-
0227, Japan.
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(6) Consists of 998,852 shares held by Sutter Hill Ventures, and 352,407
shares held by 14 individuals or entities associated with Sutter Hill
Ventures. The address of Sutter Hill Ventures is 755 Page Mill Road, Suite
A200, Palo Alto, California 94304.
(7) Mr. McCall is Director, New Media Development of a company affiliated with
Cox Technology Investments, Inc. and disclaims beneficial ownership of
such shares except to the extent of his pecuniary interest therein. The
address of Cox Technology Investments, Inc. is 1400 Lake Hearn Drive,
Atlanta, Georgia 30319.
(8) Includes 420,000 shares exercisable under outstanding stock options within
60 days of February 11, 1999. The address of Mr. Matteucci is c/o Mpath
Interactive, Inc., 665 Clyde Avenue, Mountain View, California 94043.
(9) Includes 30,000 shares exercisable under outstanding stock options within
60 days of February 11, 1999.
(10) Includes 151,390 shares exercisable under outstanding stock options within
60 days of February 11, 1999.
(11) Includes 23,931 shares exercisable under outstanding stock options within
60 days of February 11, 1999.
(12) Includes 20,000 shares exercisable under outstanding stock options within
60 days of February 11, 1999.
(13) Includes 907,821 shares exercisable under outstanding stock options within
60 days of February 11, 1999.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, the authorized capital stock of Mpath
will consist of 50,000,000 shares of common stock, $.00005 par value, and
2,000,000 shares of undesignated preferred stock, $.00005 par value, after
giving effect to the amendment of Mpath's Certificate of Incorporation to
delete references to the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock, which will occur upon conversion of such preferred stock into common
stock upon the closing of this offering.
Common Stock
As of February 11, 1999, there were 17,718,739 shares of common stock
outstanding held of record by 199 stockholders, and options to purchase an
aggregate of 1,785,910 shares of common stock were also outstanding. There will
be shares of common stock outstanding (assuming no exercise of the
Underwriter's overallotment option, exercise of outstanding options under the
Stock Plans after February 11, 1999 or exercise of warrants outstanding after
the closing of this offering) after giving effect to the sale of the shares of
common stock to the public offered hereby.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The common stock
has no preemptive or conversion rights or other subscription rights. There are
no sinking fund provisions applicable to the common stock. The outstanding
shares of common stock are, and the shares of common stock to be issued upon
completion of this offering will be, fully paid and non-assessable.
Preferred Stock
Upon the closing of the offering, all outstanding shares of preferred stock
will be converted into 13,451,921 shares of common stock and automatically
retired. Thereafter, the Board of Directors is authorized to issue preferred
stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series, without further vote or action by the stockholders.
The issuance of preferred stock may have the effect of delaying, deferring or
preventing a change in control of Mpath without further action by the
stockholders. The issuance of preferred stock with voting and conversion rights
may adversely affect the voting power of the holders of common stock, including
voting rights, of the holders of common stock. In certain circumstances, such
issuance could have the effect of decreasing the market price of the common
stock. As of the closing of the offering, no shares of preferred stock will be
outstanding and Mpath currently has no plans to issue any shares of preferred
stock.
Registration Rights
The holders of 17,363,200 shares of common stock, including shares issuable
upon exercise of outstanding warrants, (the "Registrable Securities"), or their
transferees are entitled to certain rights with respect to the registration of
such shares under the Securities Act. These rights are provided under the terms
of an agreement between Mpath and the holders of the Registrable Securities.
Pursuant to such Agreement, on the written demand of holders of more than 50%
of the then outstanding Registrable Securities, Mpath shall use its best
efforts to register such shares and those of any other stockholders who, by
prompt notice, request registration, subject to certain cutbacks in
participation made by the managing underwriter. Mpath is not required to effect
more than two such demand registrations on Form S-1 at any time and more than
two such demand registrations on Form S-3 in any twelve-month period. Such
holders are also entitled to unlimited
61
<PAGE>
piggyback registration rights, subject to certain cutbacks in participation
made by the managing underwriter. All offering expenses in connection with such
registration will be borne by Mpath, excluding underwriting discounts and
commissions.
DELAWARE LAW AND THE EFFECT OF CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW
PROVISIONS
Mpath is subject to the provisions of Section 203 of the Delaware General
Corporation Law, and anti-takeover law. In general, the statute prohibits a
publicly-held Delaware corporation from engaging in a business combination with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the stockholder. For purposes of Section 203, an
"interested stockholder is defined to include any person that is:
. the owner of 15% or more of the outstanding voting stock of the
corporation;
. an affiliate or associate of the corporation and was the owner of 15% or
more of the voting stock outstanding of the corporation, at any time
within three years immediately prior to the relevant date; and
. an affiliate or associate of the persons described in the foregoing
bullet points.
Stockholders may, by adopting an amendment to the corporation's certificate
of incorporation or bylaws, elect for the corporation not to be governed by
Section 203, effective 12 months after adoption. Neither Mpath's Certificate of
Incorporation nor the Bylaws exempt Mpath from the restrictions imposed under
Section 203 of the Delaware General Corporation Law. It is anticipated that the
provisions of Section 203 of the Delaware General Corporation Law may encourage
companies interested in acquiring Mpath to negotiate in advance with the Board
of Directors of Mpath because the stockholder approval requirement would be
avoided if a majority of the directors then in office approve either the
business combination or the transaction that results in the stockholder
becoming an interested stockholder.
In February, 1999, our Board of Directors and stockholders approved certain
amendments to our Certificate of Incorporation and Bylaws to provide, among
other things, that directors of Mpath will be elected without the application
of cumulative voting. Such amendments also provide that, after the closing of
the offering contemplated hereby, any action required or permitted to be taken
by the stockholders of Mpath may be taken only at a duly called annual or
special meeting of the stockholders. The Bylaws also establish procedures,
including advance notice procedures with regard to the nomination, other than
by or at the direction of the Board of Directors, of candidates for election as
directors. See "Description of Capital Stock--Common Stock."
The foregoing provisions could have the effect of making it more difficult
for a third party to effect a change in the control of the Board of Directors.
In addition, these provisions could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire, a majority of the outstanding voting stock of Mpath.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is BankBoston, N.A. The
Transfer Agent's address and telephone number is 150 Royall Street, Campton,
Massachusetts, 02021, (781) 575-2000.
62
<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. Furthermore, since only a limited
number of shares will be available for sale shortly after this offering because
of certain contractual and legal restrictions on resale, sales of substantial
amounts of our common stock in the public market after such restrictions lapse
could adversely affect the prevailing market price and our ability to raise
equity capital.
Upon completion of the offering, we will have outstanding shares of
common stock. Of these shares, the shares sold in the 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 "affiliates" of Mpath as that term is defined in Rule 144 of the
Securities Act.
The remaining 17,718,739 shares of common stock outstanding are "restricted
securities" within the meaning of Rule 144. Restricted shares may be sold in
the public market only if registered or if they qualify for an exemption from
registration under Rule 144, Rule 144(k), or Rule 701 of the Securities Act,
all of which are summarized below. Sales of the restricted shares in the public
market, or the availability of such shares for sale, could adversely affect the
market price of our common stock.
Our stockholders have entered into lock-up agreements in which they have
agreed that they will not, without the prior written consent of BancBoston
Roberston Stephens, offer, sell, contract to sell, or grant any option to
purchase or otherwise dispose of their shares of our common stock for a period
of 180 days following the effective date of the registration statement filed
pursuant to this offering. These lock-up agreements also apply to any
securities owned by our stockholders that are exercisable for or convertible
into our common stock. As a result of these contractual restrictions,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144, 144(k) and 701, shares subject to lock-up agreements will not be
saleable until such lock-up agreements expire or are waived by BancBoston
Robertson Stephens. Taking into account the lock-up agreements, and assuming
BancBoston Robertson Stephens does not release stockholders from these
agreements, the following shares will be eligible for sale in the public market
at the following times:
. beginning on the effective date, only the shares sold in the offering
will be immediately available for sale in the public market;
. beginning 180 days after the effective date, approximately 14,606,011
shares will be eligible for sale pursuant to Rules 144, 144(k) and 701;
and
. an additional 3,112,728 shares will be eligible for sale pursuant to
Rule 144 after January 2000.
Shares eligible to be sold by affiliates pursuant to Rule 144 are subject to
volume restrictions. In general, under Rule 144, and beginning after the
expiration of the lock-up agreements, a person, or persons whose shares are
aggregated, who has beneficially owned restricted shares 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: (1) one percent of the number of shares of
common stock then outstanding, which will equal approximately shares
immediately after the offering; or (2) the average weekly trading volume of the
common stock during the four calendar weeks preceding the sale. Sales under
Rule 144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been an affiliate of
Mpath 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, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Pursuant to the lock-up agreements, all of our employees holding common stock
or stock options may not sell shares acquired upon exercise of their options
until 180 days after the effective date. Beginning 180 days
63
<PAGE>
after the effective date, any of our employees, officers, directors, or
consultants who purchased his or her shares pursuant to a written compensatory
plan or contract may be entitled to rely on the resale provisions of Rule 701.
Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144
without complying with the holding period requirements of Rule 144. Rule 701
further provides that non-affiliates may sell such shares in reliance on Rule
144 without having to comply with the holding period, public information,
volume limitation or notice provisions of Rule 144. In addition, Mpath intends
to file one or more registration statements under the Securities Act as
promptly as possible after the effective date to register shares to be issued
pursuant to the our employee benefit plans. As a result, any options exercised
under our stock option plans or any other benefit plan after the effectiveness
of such registration statement will also be freely tradable in the public
market, except that shares held by affiliates will still be subject to the
volume limitation, manner of sale, notice and public information requirements
of Rule 144 unless the shares are otherwise resaleable under Rule 701. As of
February 11, 1999, there were outstanding options for the purchase of 1,785,910
shares, all of which were exercisable. No shares have been issued to date under
our Employee Stock Purchase Plan or our Directors' Stock Option Plan. As of
February 11, 1999, there were outstanding warrants for the purchase of
1,986,282 shares that will survive the completion of this offering. See "Risk
Factors--New investors will suffer immediate substantial dilution,"
"Management--Stock Plans" and "Description of Capital Stock--Registration
Rights."
64
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Thomas Weisel Partners LLC, Warburg Dillon
Read LLC, a subsidiary of UBS AG, and Wit Capital Corporation acting as e-
Manager, have severally agreed with us, subject to the terms and conditions of
the underwriting agreement, to purchase from us the number of shares of common
stock set forth opposite their names below. The underwriters are committed to
purchase and pay for all such shares if any are purchased.
<TABLE>
<CAPTION>
Number
of
Underwriter Shares
----------- -------
<S> <C>
BancBoston Robertson Stephens Inc. ....................................
Thomas Weisel Partners LLC.............................................
Warburg Dillon Read LLC, a subsidiary of UBS AG........................
Wit Capital Corporation................................................
-------
TOTAL................................................................
=======
</TABLE>
The representatives of the underwriters have advised us that the underwriters
propose to offer the shares of common stock to the public at the public
offering price set forth on the cover page of this prospectus and to certain
dealers at such price less a concession not in excess of $ per share, of
which $ may be reallowed to other dealers. After this offering, the
public offering price, concession, and reallowance to dealers may be reduced by
the representatives. No such reduction shall change the amount of proceeds to
be received by us as set forth on the cover page of this prospectus. The common
stock is offered by the underwriters as stated herein, subject to receipt and
acceptance by them and subject to their right to reject any order in whole or
in part.
The underwriters, at our request, have reserved for sale at the initial
public offering price up to shares of common stock to visitors and
users of our services or our Web sites who express an interest in purchasing
such shares. The sale of such shares will be made by Wit Capital acting as e-
Manager in the offering. Purchases of the reserved shares are to be made
through an account at Wit Capital in accordance with Wit Capital's procedures
for opening an account and transacting in securities. Any reserved shares not
purchased by visitors and users to our services or Web sites will be offered by
the underwriters on the same basis as other shares offered hereby.
A prospectus in electronic format is being made available on an Internet Web
site maintained by Wit Capital. In addition, pursuant to an e-Dealer Agreement,
all dealers purchasing shares from Wit Capital in the offering similarly have
agreed to make a prospectus in electronic format available on Web sites
maintained by each of the e-Dealers.
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of common stock at the same price
per share as we will receive for the shares that the underwriters
have agreed to purchase. To the extent that the underwriters exercise such
option, each of the underwriters will have a firm commitment to purchase
approximately the same percentage of such additional shares that the number of
shares of common stock to be purchased by it shown in the above table
represents as a percentage of the shares offered hereby. If
purchased, such additional shares will be sold by the underwriters on the same
terms as those on which the shares are being sold. We will be
obligated, pursuant to the
65
<PAGE>
option, to sell shares to the extent the option is exercised. The underwriters
may exercise such option only to cover over-allotments made in connection with
the sale of the shares of common stock offered hereby. If such option is
exercised in full, the total price to public, underwriting discounts and
commissions and proceeds to company will be $ million, $ million
and $ million, respectively.
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements. Each of our officers and directors and certain other
holders of shares of our common stock have agreed, during the period ending 180
days after the date of this prospectus (the "Lock-Up Period"), subject to
certain exceptions, not to offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to any shares of
common stock or any options or warrants to purchase any shares of common stock,
or any securities convertible into or exchangeable for shares of common stock
owned as of the date of this prospectus or thereafter acquired directly by such
holders or with respect to which they have the power of disposition, without
the prior written consent of BancBoston Robertson Stephens Inc. However,
BancBoston Robertson Stephens Inc. may, in it sole discretion and at any time
without notice, release all or any portion of securities subject to the lock-up
agreements. There are no existing agreements between the representatives of the
underwriters and any of our stockholders providing consent to the sale of
shares prior to the expiration of the lock-up period.
Future Sales. In addition, we have agreed that during the lock-up period, we
will not, without the prior written consent of BancBoston Robertson Stephens
Inc., subject to certain exceptions, (1) consent to the disposition of any
shares held by stockholders subject to lock-up agreements prior to the
expiration of the lock-up period or (2) issue, sell, contract to sell, or
otherwise dispose of, any shares of common stock, any options to purchase any
shares of common stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock other than our sale of shares in this
offering, the issuance of common stock upon the exercise of outstanding
options, and the issuance of options under existing stock option and incentive
plans, provided such options do not vest prior to the expiration of the lock-up
period. See "Shares Eligible for Future Sale."
Listing. Application has been made to have our common stock approved for
quotation on the Nasdaq National Market under the symbol "MPTH."
No Prior Public Market. Prior to this offering, there has been no public
market for our common stock. Consequently, the public offering price for the
common stock offered by this prospectus will be determined through negotiations
among Mpath and the representatives of the underwriters. Among the factors to
be considered in such negotiations are prevailing market conditions, certain
financial information of Mpath, market valuations of other companies that Mpath
and the representatives believe to be comparable to Mpath, estimates of the
business potential of Mpath, the present state of Mpath's development and other
factors deemed relevant.
Stabilization. The representatives of the underwriters have advised us that,
pursuant to Regulation M under the Securities Act, certain persons
participating in this offering may engage in transactions, including
stabilizing bids, syndicate covering transactions or the imposition of penalty
bids, that may have the effect of stabilizing or maintaining the market price
of the common stock at a level above that which might otherwise prevail in the
open market. A "stabilizing bid" is a bid for or the purchase of common stock
on behalf of the underwriters for the purpose of fixing or maintaining the
price of the common stock. A "syndicate covering transaction" is the bid for or
the purchase of common stock on behalf of the underwriters to reduce a short
position incurred by the underwriters in connection with this offering. A
"penalty bid" is an arrangement permitting the representatives to reclaim the
selling concession otherwise accruing to an underwriter or syndicate member in
connection with this offering if the common stock originally sold by such
underwriter or syndicate member is purchased by the representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such underwriter or syndicate member. The representatives have advised us that
such transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.
66
<PAGE>
LEGAL MATTERS
The validity of our common stock offered hereby will be passed upon for Mpath
by Venture Law Group, A Professional Corporation, 2800 Sand Hill Road, Menlo
Park, California. Joshua L. Green and Jeffrey Y. Suto, Directors of Venture Law
Group, are the Secretary and Assistant Secretary, respectively, of Mpath.
Certain legal matters in connection with this offering will be passed upon for
the underwriters by Brobeck, Phleger & Harrison LLP, Spear Street Tower, One
Market, San Francisco, California. As of the date of this prospectus, two
Directors of Venture Law Group beneficially own an aggregate of 9,600 shares of
Mpath's common stock.
EXPERTS
The consolidated financial statements as of December 31, 1997 and 1998 and
for the years ended December 31, 1996, 1997 and 1998, which are included in the
prospectus, are included in reliance on the reports of PricewaterhouseCoopers
LLP, independent accountants, given to us on the authority of such firm as
experts in accounting and in auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement, which includes any amendments thereto, on Form S-1 under the
Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement. Certain
items are contained in exhibits to the registration statement as permitted by
the rules and regulations of the Securities and Exchange Commission. For
further information with respect to Mpath and our common stock offered hereby,
reference is made to the registration statement, including the exhibits
thereto, and the financial statements and notes filed as a part thereof.
Statements made in this prospectus concerning the contents of any document
referred to herein are not necessarily complete. With respect to each such
document filed with the Securities and Exchange Commission as an exhibit to the
registration statement, reference is made to the exhibit for a more complete
description of the matter involved. The registration statement, including
exhibits thereto and the financial statements and notes filed as a part
thereof, as well as such reports and other information filed with the
Securities and Exchange Commission, may be inspected without charge at the
public reference facilities maintained by the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Securities and Exchange Commission located at Seven
World Trade Center, 13th Floor, New York, New York, 10048, and the Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
all or any part thereof may be obtained from the Securities and Exchange
Commission upon payment of certain fees prescribed by the Securities and
Exchange Commission. Such reports and other information may also be inspected
without charge at a Web site maintained by the Securities and Exchange
Commission. The address of such site is http://www.sec.gov.
67
<PAGE>
MPATH INTERACTIVE, INC.
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit).................. F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Mpath Interactive, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows present fairly, in all material respects, the financial position
of Mpath Interactive, Inc. (the Company) at December 31, 1997 and 1998, and the
results of their operations and their cash flows for the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, CA
January 29, 1999, except as to Note 15, which is as of February 12, 1999
F-2
<PAGE>
MPATH INTERACTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31,
-------------------------------
1997 1998 1998
-------- -------- -----------
(Pro Forma)
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 9,132 $ 1,114
Accounts receivable, net of allowance for
doubtful accounts of $8 and $20
respectively............................... 651 2,226
Prepaid expenses and other current assets.... 364 710
-------- --------
Total current assets....................... 10,147 4,050
Restricted cash................................ 165 170
Property and equipment, net.................... 1,974 1,878
Other assets................................... 70 79
-------- --------
Total assets............................... $ 12,356 $ 6,177
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................. $ 429 $ 1,119
Accrued payroll and related expenses......... 787 1,029
Accrued expenses............................. 652 719
Current portion of capital lease
obligations................................ 399 458
Deferred revenue............................. 278 332
Notes payable................................ -- 2,426
Deferred rent................................ 22 34
-------- --------
Total current liabilities.................. 2,567 6,117
Convertible note payable....................... 1,864 1,864
Capital lease obligations, net of current
portion...................................... 784 326
Accrued stock compensation expense............. 2,003 2,218
-------- --------
Total liabilities.......................... 7,218 10,525
-------- --------
Commitments and contingencies (Note 5)
Stockholders' equity:
Convertible preferred stock:
Par value: $0.00005
Authorized: 16,294,986 shares
Issued and outstanding: 10,425,921 and
10,416,615, respectively, and 0 pro forma
with liquidation preference of
$46,529,773............................... 1 1 $ --
Common stock warrants........................ 2 2 2
Common stock:
Par value: $0.00005
Authorized: 25,000,000 shares
Issued and outstanding: 2,584,150 and
3,834,815, respectively, and 14,251,430
pro forma................................. -- -- 1
Additional paid-in capital................... 46,259 49,655 49,655
Notes receivable from stockholders........... (83) (1,020) (1,020)
Accumulated deficit.......................... (41,041) (52,986) (52,986)
-------- -------- --------
Total stockholders' equity (deficit)....... 5,138 (4,348) $ (4,348)
-------- -------- --------
Total liabilities and stockholders' equity
(deficit)................................ $ 12,356 $ 6,177
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
MPATH INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Net revenues:
Live Communities.................................. $ 12 $ 686 $ 3,022
Foundation........................................ 112 2,041 5,005
------- ------- -------
Total revenues.................................. 124 2,727 8,027
Cost of net revenues:
Live Communities.................................. 35 1,808 2,221
Foundation........................................ 90 620 790
------- ------- -------
Total cost of revenues.......................... 125 2,428 3,011
------- ------- -------
Gross profit (loss)........................... (1) 299 5,016
------- ------- -------
Operating expenses:
Research and development.......................... 5,261 2,436 3,132
Sales and marketing............................... 3,937 6,906 7,847
General and administrative........................ 2,877 2,841 3,274
Stock based compensation.......................... 377 1,669 2,595
Write-off of acquired intangibles................. 12,876 -- --
------- ------- -------
Total operating expenses...................... 25,328 13,852 16,848
------- ------- -------
Loss from operations........................ 25,329 13,553 11,832
------- ------- -------
Interest and other income........................... 353 283 390
Interest and other expense.......................... (62) (376) (501)
------- ------- -------
Interest and other income (expense), net.......... 291 (93) (111)
------- ------- -------
Loss before provision for income taxes........ 25,038 13,646 11,943
Provision for income taxes.......................... (1) (2) (2)
------- ------- -------
Net loss.................................... $25,039 $13,648 $11,945
======= ======= =======
Net loss per common share:
Basic............................................. $(11.40) $ (5.34) $ (3.99)
======= ======= =======
Diluted........................................... $(11.40) $ (5.34) $ (3.99)
======= ======= =======
Weighted average shares outstanding:
Basic............................................. 2,196 2,556 2,992
======= ======= =======
Diluted........................................... 2,196 2,556 2,992
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
MPATH INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
<TABLE>
<CAPTION>
Convertible
Preferred Notes Total
Stock Common Stock Additional Receivable Stockholders'
------------- -------------- Paid-In From Accumulated Equity
Shares Amount Warrants Shares Amount Capital Stockholders Deficit (Deficit)
------ ------ -------- ------ ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995.................... 4,989 $ 1 $-- 2,277 $-- $ 5,939 $ (37) $ (2,354) $ 3,549
Conversion of prior year
stock par value......... -- -- -- -- -- -- -- -- --
Issuance of Series B
convertible preferred
stock net of offering
costs of $9............. 2 -- -- -- -- 5 -- -- 5
Issuance of common stock
for notes receivable.... -- -- -- 220 -- 46 (46) -- --
Exercise of stock
options................. -- -- -- 34 -- 2 -- -- 2
Issuance of Series C
convertible preferred
stock, net of offering
costs of $54............ 1,446 -- -- -- -- 14,816 -- -- 14,816
Issuance of Series C
convertible preferred
stock in consideration
of Catapult
acquisition............. 878 -- -- -- -- 9,021 -- -- 9,021
Stock based
compensation............ -- -- -- -- -- 12 -- -- 12
Net loss................ -- -- -- -- -- -- -- (25,039) (25,039)
------ --- ---- ----- ---- ------- ------- -------- -------
Balance at December 31,
1996.................... 7,315 1 -- 2,531 -- 29,841 (83) (27,393) 2,366
Issuance of Series C
convertible preferred... 49 -- -- -- -- 500 -- -- 500
Exchange of Series C
convertible preferred
stock for Series D
convertible preferred
stock................... 44 -- -- -- -- -- -- -- --
Issuance of Series D
convertible preferred
stock, net of offering
cost of $98 and
converted unamortized
debt discount of $360... 3,018 -- -- -- -- 15,841 -- -- 15,841
Issuance of common stock
warrants in conjunction
with Series D
convertible preferred
stock................... -- -- 2 -- -- -- -- -- 2
Exercise of stock
options................. -- -- -- 53 -- 14 -- -- 14
Stock based
compensation............ -- -- -- -- -- 63 -- -- 63
Net loss................ -- -- -- -- -- -- -- (13,648) (13,648)
------ --- ---- ----- ---- ------- ------- -------- -------
Balance at December 31,
1997.................... 10,426 1 2 2,584 -- 46,259 (83) (41,041) 5,138
Adjustment to Series C
relating to Catapult
escrow closing.......... (9) -- -- -- -- (96) -- -- (96)
Warrants issued to
purchase of Series D
preferred stock for
services rendered....... -- -- -- -- -- 64 -- -- 64
Exercise of common stock
options for notes
receivable and cash..... -- -- -- 852 -- 937 (937) -- --
Repurchase of stock
options................. -- -- -- (2) -- (2) -- -- (2)
Exercise of stock
options................. -- -- -- 400 -- 113 -- -- 113
Stock based
compensation............ -- -- -- -- -- 2,380 -- -- 2,380
Net loss................ -- -- -- -- -- -- -- (11,945) (11,945)
------ --- ---- ----- ---- ------- ------- -------- -------
Balances at December 31,
1998.................... 10,417 $ 1 2 3,834 $-- $49,655 $(1,020) $(52,986) $(4,348)
====== === ==== ===== ==== ======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
MPATH INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $(25,039) $(13,648) $(11,945)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................. 395 852 976
Stock based employee compensation............. 377 1,669 2,595
Non cash interest on debt..................... -- 30 32
Write-off of purchased in-process research
and development costs from Catapult.......... 1,600 -- --
Write-off of intangible assets acquired in
connection with the Catapult acquisition,
net of legal and accounting costs of $367.... 12,509 -- --
Loss (Gain) on sale of investment............. -- -- (166)
Amortization of notes payable discount........ 7 48 --
Changes in assets and liabilities:
Accounts receivable......................... (2) (588) (1,575)
Prepaid expenses and other current assets... (179) 74 (314)
Officer note receivable..................... 70 -- --
Other assets................................ 23 (1) (9)
Accounts payable............................ 161 (41) 690
Accrued payroll and related expenses........ 212 227 242
Accrued expenses............................ 505 3 67
Deferred revenue............................ (8) 268 54
Deferred rent............................... -- 23 12
-------- -------- --------
Net cash used in operating activities..... (9,369) (11,084) (9,341)
-------- -------- --------
Cash flows from investing activities:
Purchase of investment......................... -- -- (625)
Proceeds from sale of investment............... -- -- 791
Proceeds from disposal of fixed assets......... -- 57 0
Acquisition of property and equipment.......... (1,220) (1,092) (880)
Purchase of certificate of deposit (restricted
cash)......................................... (165) -- (5)
Payments for Catapult acquisition, net of cash
acquired of $30............................... (2,414) -- --
-------- -------- --------
Net cash used in investing activities..... (3,799) (1,035) (719)
-------- -------- --------
Cash flows from financing activities:
Proceeds from notes payable.................... -- -- 2,500
Payments of notes payable...................... (74)
Proceeds from capital lease transactions....... 431 678 --
Proceeds from refunds of capital lease
deposits...................................... -- 20 --
Payments under capital lease obligations....... (123) (360) (399)
Proceeds from exercise of common stock options,
net of repurchase............................. 2 14 111
Proceeds from issuance of Series B preferred
stock......................................... 5 -- --
Proceeds from issuance of Series C preferred
stock, net.................................... 14,816 500 (96)
Proceeds from issuance of Series D preferred
stock, net.................................... -- 13,287 --
Proceeds from issuance of bridge loans......... -- 1,600 --
Proceeds from common stock warrants issued with
Series D preferred stock...................... -- 1 --
-------- -------- --------
Net cash provided by financing
activities............................... 15,131 15,740 2,042
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents.............................. 1,963 3,621 (8,018)
-------- -------- --------
Cash and cash equivalents, beginning of period... $ 3,548 $ 5,511 $ 9,132
======== ======== ========
Cash and cash equivalents, end of period......... $ 5,511 $ 9,132 $ 1,114
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1996, 1997 and 1998
1. FORMATION AND BUSINESS OF THE COMPANY:
Mpath Interactive, Inc. (the Company), was incorporated in Delaware and
commenced operations in January 1995. Mpath designs, develops, operates and
markets a people-to-people entertainment and game community on the Internet and
provides technology and services to third parties seeking to create online
communities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents:
The Company considers all highly liquid investments with original maturities
of three months or less, to be cash equivalents. Cash and cash equivalents are
stated at cost, which approximates market.
Restricted Cash:
At December 31, 1997 and 1998, cash balances of approximately $165,000 and
$170,000, respectively, were restricted from withdrawal and held by a bank in
the form of certificates of deposit. These certificates of deposit serve as
collateral to a letter of credit issued to the Company's landlord as a security
deposit, and as a deposit against the Company's credit card.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of cash and cash equivalents and accounts
receivable. The Company deposits its cash and cash equivalents with two major
banks. The Company has not experienced any losses on its deposits of cash and
cash equivalents. Management believes that these banks are financially sound
and, accordingly, minimal credit risk exists.
With respect to accounts receivable, the Company's customer base is
dispersed across many different geographic areas and range from individual
consumers to a variety of commercial entities. The Company performs ongoing
credit evaluations of its customers and generally does not require collateral.
The Company periodically reviews the need for reserves for potential credit
losses and such losses have been within management's expectations.
No customer accounted for more than 10% of total revenues during the year
ended December 31, 1996. During the year ended December 31, 1997, sales to two
customers accounted for approximately 35% and 11% of total revenues. During the
year ended December 31, 1998 three customers accounted for 10%, 12% and 23% of
total revenues. One customer accounted for 43% of total accounts receivable at
December 31, 1997. As of December 31, 1998, two customers accounted for
approximately 19% and 27% of total accounts receivable.
Fair Value of Financial Instruments:
The carrying amount of notes payable and capital lease obligations
approximate fair value.
Consolidation:
The consolidated financial statements include those of the Company and its
subsidiary. Inter-company balances and transactions have been eliminated in
consolidation.
F-7
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property and Equipment:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets, generally three to five years. When property and
equipment are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and the resulting gain
or loss is included in income.
Long-Lived Assets:
The Company accounts for long-lived assets under Statement of Financial
Accounting Standards No. 121 (SFAS No. 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
the Company to review for impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets, whenever events or changes
in circumstances indicate that the carrying amount of an asset might not be
recoverable. When such an event occurs, the Company estimates the future cash
flows expected to result from the use of the asset and its eventual
disposition. If the undiscounted expected future cash flows is less than the
carrying amount of the asset, an impairment loss is recognized.
Revenue Recognition:
Live Communities
Advertising revenues are recognized ratably over the period in which the
advertisement is displayed provided that no significant obligations remain and
collection of the resulting receivable is probable. Advertising rates are
dependent on the services provided and the placement of the advertisements. To
date, the duration of the Company's advertising commitments has generally
averaged from two to three months.
Revenues derived from monthly subscription services and on line only games
are recognized over the period in which the services are provided.
Foundation
The Company has adopted the provisions of Statement of Position 97-2, or
SOP 97-2, "Software Revenue Recognition," as amended by Statement of Position
98-9, "Software Revenue Recognition With Respect to Certain Transactions." The
Company recognizes product revenue upon shipment if a signed contract exists,
the fee is fixed and determinable, collection of resulting receivables is
probable and product returns are reasonably estimable. For contracts with
multiple obligations (e.g., maintenance, unspecified upgrades), the Company
allocates revenue to each component of the contract based on objective evidence
of its fair value, which is specific to the Company, or for products not being
sold separately, the price established by management. The Company recognizes
revenue allocated to maintenance fees for ongoing customer support and
unspecified upgrades ratably over the period of the maintenance contract or
upgrade period.
Revenues derived from software development activities are recognized using
the percentage of completion methodology. The Company evaluates these long term
contracts periodically for potential loss situations; any such loss would be
recorded when identified.
Research and Development Costs:
Research and development expenditures are charged to operations as incurred.
F-8
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Advertising Costs:
Costs related to advertising and promotion of products is charged to sales
and marketing expense as incurred. Advertising cost charged to expenses for the
years ended December 31, 1996, 1997, and 1998 were approximately $921,000,
$572,000, $1,201,000, respectively.
Earnings per Share
Statement of Financial Accounting Standards No. 128 (SFAS No. 128),
"Earnings per Share", establishes standards for computing and presenting
earnings per share. Basic earnings per share is calculated using the average
shares of common stock outstanding while diluted earnings per share reflects
the potential dilution that could occur because of preferred stock and if stock
options and warrants were exercised. Preferred stock, stock options and
warrants are excluded from the calculation if their effect would be
antidilutive.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123 (SFAS No. 123),
"Accounting for Stock-Based Compensation", defines a fair value based method of
accounting for an employee stock option or similar equity instrument. This
statement gives entities a choice of recognizing related compensation expense
by adopting the fair value method or measuring compensation using the intrinsic
value approach under Accounting Principles Board (APB) Opinion No. 25. The
Company has chosen to continue to use the measurement prescribed by APB Opinion
No. 25 for employee stock options and to make supplemental disclosures to show
the effects of using the fair value-based measurement criteria. The Company
accounts for options granted to non-employees under SFAS No. 123.
Income Taxes:
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax 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.
Certain Risks and Uncertainties:
The Company is subject to all of the risks inherent in an early stage
business in the technology and entertainment industries. The risks include but
are not limited to limited operating history, limited management resources,
reliance on advertising for revenues where acceptance of advertising on the
Internet is uncertain, reliance on relationships with content providers,
dependence on the Internet and related security risks and the changing nature
of the Internet industry.
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,
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.
Comprehensive Income:
The Company has adopted the accounting treatment prescribed by Financial
Accounting Statement No. 130, "Comprehensive Income." The adoption of this
statement had no impact on the Company's financial statements for the periods
presented.
F-9
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Segment Information:
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
(SFAS No. 131). SFAS No. 131 supersedes FAS 14, "Financial Reporting for
Segments of a Business Enterprise," replacing the "industry segment" approach
with the "management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. SFAS
No. 131 also requires disclosures about products and services, geographic
areas, and major customers. The adoption of SFAS No. 131 did not affect results
of operations or financial position but did affect the disclosure of segment
information (see Note 13).
Recent Accounting Pronouncements:
On March 4, 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use" (SOP 98-1). SOP 98-1 provides guidance on accounting for the
costs of computer software developed or obtained for internal use. Costs
incurred prior to the initial application of SOP 98-1 should not be adjusted to
the amounts that would have been capitalized had this SOP been in effect when
those costs were incurred. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Accordingly, the Company will
adopt SOP 98-1 in its financial statements for the year ending December 31,
1999. The impact on the financial statements of the adoption of this standard
has not yet been determined, but is not expected to be significant.
Pro Forma Balance Sheet (unaudited):
The accompanying unaudited pro forma balance sheet at December 31, 1998
reflects the assumed conversion of the Series A, Series B, Series C, Series C-1
and Series D preferred stock into common stock as of December 31, 1998.
Reclassifications:
Certain prior year amounts have been reclassified for consistency with
current year financial statement presentation.
3. CATAPULT ACQUISITION:
In November 1996, the Company acquired all of the assets and assumed the
liabilities of Catapult Entertainment, Inc. ("Catapult") as part of a Chapter
11 Plan of Reorganization under the United States Bankruptcy Code. The total
acquisition cost was approximately $11,831,000 and consisted of (i) cash
payments of $2,444,000, including $549,000 paid to Catapult's unsecured
creditors; (ii) 877,560 shares of Series C preferred stock valued at $10.28 per
share (see Note 7); and (iii) legal and accounting costs of $367,000. Net
liabilities in excess of assets assumed by the Company amounted to $2,644,000.
Approximately 105,000 shares of Series C Preferred Stock were placed in escrow
in the event that the Company was required to pay allowable unsecured claims in
excess of $549,000. As of May 1998, the final payment of $121,000 had been
requested by Catapult creditors for which the Company was entitled to receive
reimbursement from Series C preferred stock in escrow. The Series C preferred
stock held in escrow was reduced by 9,306 shares and the remaining 95,665
shares were released to the stockholders of Catapult.
The acquisition was accounted for as a purchase. Accordingly, the results of
operations of Catapult have been included in the consolidated statements of
operations from the date of acquisition.
F-10
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The purchase price, including liabilities assumed, in excess of the fair
value of assets acquired was allocated to in-process research and development
($1,600,000), which was immediately expensed, and goodwill ($12,876,000).
The goodwill was originally assigned a two-year life but in December 1996
the Company decided to changed their business strategy relating to the use of
the technology and business acquired from Catapult. As a result of this change
in strategy, the Company determined that it had no use for and that there would
be no future cash flows from the Catapult assets. Accordingly, the Company
wrote off the goodwill as soon as the impairment was identified.
In June 1998, the Company exercised warrants, received in connection with
the Catapult Acquisition, and immediately sold the acquired shares, realizing a
gain of approximately $167,000. The gain was included in other income during
the year ended December 31, 1998.
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
----------------
Useful
1997 1998 Life
------- ------- -------
<S> <C> <C> <C>
Software.................. $ 212 $ 212 3 years
Computer equipment........ 1,198 2,078 3 years
Furniture and fixtures.... 86 86 5 years
Leasehold improvements.... 109 109 5 years
Equipment under capital
lease:
Software................ 56 56
Computer equipment...... 1,546 1,546
------- -------
3,207 4,087
Less accumulated
depreciation and
amortization............. (1,233) (2,209)
------- -------
$ 1,974 $ 1,878
======= =======
</TABLE>
The accumulated amortization on assets under capital lease was approximately
$455,000 and $900,000 at December 31, 1997 and 1998, respectively.
5. COMMITMENTS AND CONTINGENCIES:
Contingencies:
The Company has received notice of certain claims for potential patent
infringement. The Company believes that these claims are without merit, intends
to defend them vigorously. However, litigation is subject to inherent
uncertainties and thus, there can be no assurance that these claims will be
resolved favorably to the Company or that they will not have a material adverse
affect on the Company's financial statements.
F-11
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Lease Obligations:
Future minimum lease payments under capital and operating leases at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
--------- ----------
<S> <C> <C>
1999................................................ $ 523,000 $ 419,000
2000................................................ 334,000 422,000
2001................................................ 10,000 435,000
2002................................................ -- 36,000
--------- ----------
Total minimum lease payments...................... 867,000 $1,312,000
==========
Less amount representing interest................... (83,000)
---------
784,000
Less current portion................................ (458,000)
---------
$ 326,000
=========
</TABLE>
Rent expense for the years ended December 31, 1996, 1997 and 1998, was
approximately $458,000, $500,000, and $498,000, respectively.
6. NOTES PAYABLE:
In conjunction with its acquisition of Catapult (Note 3), the Company
assumed certain indebtedness of Catapult. Included in the indebtedness assumed
were convertible, non-interest bearing promissory notes payable totaling
$1,300,000 which were due in full in November 2001. Associated with these
notes was unamortized debt discount, which was calculated using an interest
rate of 8.25%. Warrants to purchase the Company's common stock were issued in
conjunction with the convertible promissory notes at the time of the Catapult
acquisition. In July 1997, these notes were converted into 981,481 shares of
Series D preferred Stock and warrants to purchase 490,741 shares of the
Company's common stock. These warrants have an exercise price of $5.40 per
share and have exercisability and expiration terms defined in Note 7--Common
Stock Warrants. The unamortized debt discount was recorded as a reduction to
additional paid-in capital in connection with the conversion of the notes into
the Series D preferred stock.
The Company also assumed a convertible note payable from Catapult bearing
interest at prime (7.75% at December 31, 1998) which is due with interest in
November 2001. At December 31, 1997 and 1998, the Company had $1,864,000
outstanding under this note payable. The entire amount of unpaid principal and
accrued interest may be converted, at the option of the note holder, into
shares of the Company's common stock, upon (i) a sale of all or substantially
all of the Company, through a merger, acquisition or other transaction, or
(ii) upon an initial public offering of the Company's common stock.
In May 1997, the Company received convertible bridge loans totaling
$1,600,000 from certain of its stockholders. The bridge loans carried interest
at 6.23 % per annum. In July 1997, the bridge loans and accrued interest of
approximately $14,000 were converted into 647,405 shares of Series D preferred
stock and warrants to purchase 323,702 shares of the Company's common stock.
These warrants have an exercise price of $5.40 per share and have
exercisability and expiration terms defined in Note 7--Warrants.
In July 1998, the Company entered into a revolving line of credit agreement
for up to $1,500,000 or 80% of the Company's accounts receivable, a capital
equipment purchase line agreement for up to $1,000,000 and a term loan
agreement up to $1,500,000, all bearing interest rates of prime plus 2.0%
(9.75% at December 31,
F-12
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1998). Amounts borrowed under these agreements are collateralized by
substantially all assets of the Company. In conjunction with this agreement,
the Company issued a warrant to purchase 23,000 shares of the Company's Series
D preferred stock at an exercise price of $5.40 per share, which expires July
31, 2003. As the fair value of these warrants was determined to be immaterial
at the date of issuance, no additional debt issuance costs were recorded.
As of December 31, 1998, the Company has borrowed $1,500,000 and $1,000,000
against the term loan agreement and the capital equipment purchase line
agreement, respectively. Amounts drawn against the revolving line of credit,
term loan and capital equipment purchase line are due no later than June 30,
1999. The term loan was repaid in January 1999 (see Note 14). The Company is
required to make monthly payments on the capital equipment purchase line equal
to 1/48th of the balance until June 30, 1999. As of December 31, 1998, the
Company has not drawn down any of the available funds on the revolving line of
credit.
7. STOCKHOLDERS' EQUITY (DEFICIT):
Convertible Preferred Stock:
The Company has authorized a total of 13,182,258 shares of convertible
preferred stock. The following is outstanding:
<TABLE>
<CAPTION>
Issued and
Outstanding December
31,
---------------------
Designated 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Series A................................. 2,800,000 2,800,000 2,800,000
Series B................................. 2,234,320 2,190,842 2,190,842
Series C................................. 2,323,969 2,323,969 2,314,663
Series C-1............................... 2,323,969 --
Series D................................. 3,500,000 3,111,110 3,111,110
---------- ----------
Total convertible preferred stock........ 10,425,921 10,416,615
========== ==========
</TABLE>
The rights, preferences and privileges of the preferred stockholders are as
follows:
Dividends:
The holders of Series A, Series B, Series C, Series C-1 and Series D
preferred stock are entitled to receive dividends, out of any assets legally
available prior and in preference to any declaration or payment of any dividend
on the common stock at the rate of $.05, $.205, $1.03, $1.03 and $0.54 per
share per annum, respectively, when and if declared by the Board of Directors.
Such dividends are not cumulative. After payment of the dividend preference,
outstanding shares of Series A, Series B, Series C, Series C-1 and Series D
preferred stock shall participate with shares of common stock as to any
additional declaration or payment of any dividend. As of December 31, 1998, no
dividends have been declared or paid.
Liquidation:
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the holders of Series D preferred stock shall
be entitled to receive, prior and in preference to any distribution of any of
the assets of the Company to the holders of Series A, Series B, Series C and
Series C-1 preferred stock and common stock, an amount per share equal to the
sum of (i) $5.40 for each outstanding share of Series D preferred stock and
(ii) an amount equal to declared but unpaid dividends on such shares. If upon
the occurrence of such event, the assets and funds thus distributed among the
holders of Series D preferred stock
F-13
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
shall be insufficient to permit the payment of preferential amounts, then the
entire assets and funds to the Company legally available for distribution shall
be distributed ratably among the holders of Series D preferred stock in
proportion to the aggregate liquidation preference for the shares owned by each
such holder.
After completion of distribution to the preferred Series D stockholders, the
holders of Series A, Series B, Series C and Series C-1 preferred stock shall be
entitled to receive, prior and in preference to any distribution of any assets
of the Company to the holders of common stock, an amount per share equal to the
sum of (i) $.50 for each outstanding share of Series A preferred stock, $2.07
for each outstanding share of Series B preferred stock, $10.28 for each
outstanding share of Series C and Series C-1 preferred stock, and (ii) an
amount equal to declared but unpaid dividends on such shares. If upon the
occurrence of such an event, the assets and funds distributed among the holders
of Series A, Series B, Series C and Series C-1 preferred stock shall be
insufficient to permit the payment of preferential amounts, then the entire
assets and funds of the Company legally available for distribution shall be
distributed ratably among the holders of the Series A, Series B, Series C and
Series C-1 preferred stock in proportion to the aggregate liquidation
preference for the share of such stock owned by each holder.
After completion of distribution to the preferred stockholders, the
remaining assets of the Company will be distributed to the holders of Series A
preferred stock and common stock pro rata based upon the number of shares of
common stock held by each (assuming conversion into common stock of all such
Series A preferred stock) until the holders of Series A preferred stock shall
have received an aggregate of $2.50 per share of Series A preferred stock held,
including amounts paid from above. Any remaining assets are to be distributed
ratably among the holders of the Company's common stock.
Conversion:
Each share of Series A, Series B, Series C, Series C-1 and Series D
preferred stock is convertible, at the option of the holder, into such number
of fully paid and nonassessable shares of common stock as determined by
dividing the applicable original issue price by the conversion price applicable
to such share in effect at the date of conversion. The original issue price
shall be adjusted for any stock splits. Each share of preferred stock shall
automatically be converted into shares of common stock immediately upon the
earlier of (i) the closing of a firm commitment underwritten public offering
results in not less than $10.28 per share and aggregate net proceeds to the
Company of more than $15,000,000 or (ii) written consent or agreement of the
holders of 66 2/3% of the then outstanding preferred stock. At December 31,
1998, each share of Series A, Series B, Series C, Series C-1 and Series D
preferred stock can be converted to one share of common stock, subject to
adjustments under specific circumstances. The Company has reserved a total of
14,642,477 shares of common stock in the event of preferred stock conversion.
Redemption:
The preferred stock is not redeemable.
Voting Rights:
The holder of each share of Series A, Series B, Series C, Series C-1 and
Series D preferred stock is entitled to one vote for each share of common stock
into which such share of the preferred stock is convertible.
Common Stock:
Previously the Company had issued 2,397,000 shares of its common stock to
the founders and key employees of the Company under restricted stock purchase
agreements in exchange for notes receivable bearing interest at 5.2% to 6.8%
per annum.
F-14
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In the period ending December 31, 1998, the Company issued 852,378 options
for shares of its common stock to seven key employees of the Company. All of
the options were exercised immediately in exchange for cash and notes
receivable bearing interest rates ranging from 5.93% to 6.02% per annum.
Under the terms of the agreements, the Company has the option to repurchase
all or any portion of the purchased shares in which the founders and key
employees have not acquired a vested interest, should the individuals cease to
be employed, at the holder's original purchase price. The Company's right to
repurchase such shares generally lapses 25% on the first anniversary date of
the purchase of the common stock and thereafter ratably over three years. At
December 31, 1998, 195,354 shares of the founders common stock and 589,599
shares of the options exercised were subject to the Company's right of
repurchase.
Warrants:
In conjunction with a capital lease agreement, the Company granted warrants
to purchase up to 43,477 shares of its Series B preferred stock at an exercise
price of $2.07 per share and expire September 30, 1999. The warrants are
exercisable based on the amount of the lease line used. As the fair value of
these warrants was determined to be immaterial at the date of issuance, no
charge to rent expense was recorded. At December 31, 1998 warrants to purchase
43,477 shares of Series B preferred stock were fully exercisable. The Company
has reserved 43,477 shares of Series B preferred stock for the exercise of
these warrants.
In conjunction with the issuance of the Series D preferred stock, issued
during July and August 1997, the Company issued warrants to the Series D
investors to purchase 1,555,555 shares of common stock at a price of $5.40 per
share (subject to adjustments under certain circumstances). This grant of
1,555,555 includes the 490,741 convertible promissory note grant and the
323,702 bridge loan conversion grant (see Note 6). No charge was recorded for
the fair value of these warrants at the date of grant (of $529,000) as the
warrants were costs of financing recorded against additional paid-in capital.
One-half of the warrants shall become exercisable upon the earlier of the sale
of the Company for a price which is less than $10.80 per share or July 18, 1999
and the remaining warrants shall become exercisable upon the earlier of the
sale of the Company for a price which is less than $10.80 per share or January
19, 2001.
One-half of the warrants expire upon (i) the closing of an initial public
offering with a price per share greater than $10.80 per share (subject to
adjustments under certain conditions) and having aggregate net proceeds to the
Company greater than $15,000,000, (ii) the sale of the Company for a price per
share greater than $10.80 per share (subject to adjustment) or (iii) a private
financing with a price per share greater than $10.80 per share (subject to
adjustment); provided that the event occurs before 24 months from the date of
purchase. The remaining warrants expire under the same circumstances provided,
however, that the event occurs before 30 months from the date of purchase and
the offering has an aggregate net proceeds to the Company greater than
$10,000,000.
The Company has entered into an agreement with a national Internet Service
Provider (service provider) to provide the equipment necessary for the
Company's services. In connection with this agreement, the Company has granted
warrants to the service provider to purchase up to 120,000 shares of common
stock. The terms of such agreement are to be governed by a mutually agreed-upon
warrants and equipment leasing agreement between the parties. As of December
31, 1998, such agreement has not been finalized. On February 12, 1999, the
Company finalized the agreement which involved the issuance of warrants to
purchase 12,000 shares of common stock at $0.21 per share and 108,000 shares at
$1.03 per share. These warrants are immediately exercisable and expire in
February 2004. The Company will evaluate the fair value of these warrants and
recognize the related expense as cost of revenues over the remaining term of
the agreement.
F-15
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company issued a warrant to purchase up to 52,250 shares of common stock
at a price of $60 per share (subject to adjustments under certain
circumstances) in connection with the issuance of notes payable by Catapult
prior to its acquisition by the Company (See Note 6). The warrant is
exercisable, in whole or in part, at any time on or after November 18, 1996,
based on certain conditions as defined, and expires on December 31, 2000. The
Company has reserved 52,250 shares of common stock for the exercise of this
warrant. As the fair value of these warrants was determined to be immaterial at
the date of issuance, no charge was recorded.
The following table summarizes the outstanding warrants at December 31,
1998:
<TABLE>
<CAPTION>
Number
Date of of Exercise
Grant Issued to Type Warrants Price Expires
------- ---------------------------- ------------------ --------- -------- --------------
<S> <C> <C> <C> <C> <C>
September 1995 Capital lessor Series B Preferred 43,477 $2.07 September 1999
November 1996 Promissory noteholder Common 52,250 $60.00 November 2000
July 1997 Series D Preferred investors Common 1,555,555 $5.40 *
July 1998 Note financer Series D Preferred 23,000 $5.40 July 2003
* Internet service provider Common 120,000 * *
</TABLE>
*- See further information in Note 7--Warrants and Note 6.
1995 Stock Option/Stock Issuance Plan:
During 1995, the Company adopted the 1995 Stock Option/Stock Issuance Plan
(the Plan). The Plan is divided into an Option Grant Program under which
employees may be granted options to purchase common stock and a Stock Issuance
Program under which employees may be issued shares of common stock directly,
either through the immediate purchase of such shares or for services rendered
to the Company. Options are granted at an exercise price determined by the
board of directors and are fully exercisable on date of grant, subject to
repurchase (at the original price) by the Company. The repurchase right lapses
for 25% of the shares upon completion of one year of service and the balance in
successive equal monthly installments over three years. Options expire ten
years after issuance. As of December 31, 1998 shares authorized under the plan
were 3,453,000.
As part of the Catapult acquisition, the Company exchanged options to
purchase 122,403 shares of stock under the Plan for Catapult options
outstanding prior to the acquisition. These options, which were fully vested
upon consummation of the acquisition, are exercisable following termination of
employment for a period up to four years after the Company's acquisition of
Catapult or nine months after an initial public offering of the Company,
(unless the lock-up period following the initial public offering imposed upon a
particular by the underwriters is longer than six months, in which case such
option's shall not terminate until three months after expiration of such lock-
up period). Shares issuable upon exercise of 15,453 of the options were held as
part of the escrow described under Note 3. The Catapult options held in escrow
were reduced by 1,325 options and the remaining 14,128 options were released
from escrow in 1998. The exercise price of the options was based on the
exchange ratio in the acquisition and range from $1.01 to $6.29 per share.
F-16
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Activity under the Plan, including options granted in connection with the
above Catapult acquisition, is as follows:
<TABLE>
<CAPTION>
Weighted
Options Average
Available Number of Exercise Aggregate Exercise
for Grant Options Price Price Price
---------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balances, December 31,
1995................... 728,000 595,000 $0.05-$0.21 $ 62,000 $ 0.10
Options additionally
reserved............. 380,000
Options granted....... (457,903) 457,903 $0.21-$6.29 777,000 $ 1.70
Options canceled...... 55,500 (55,500) $0.21-$1.03 (16,000) $ 0.29
Options exercised..... (33,750) $0.05-$0.21 (2,000) $ 0.07
---------- ---------- -----------
Balances, December 31,
1996................... 705,597 963,653 $0.05-$6.29 821,000 $ 0.85
Options additionally
reserved............. 600,000
Options granted....... (837,750) 837,750 $ 1.03 863,000 $ 1.03
Options canceled...... 144,525 (144,525) $0.21-$1.03 (93,000) $ 0.65
Options exercised..... (53,400) $0.05-$1.03 (15,000) $ 0.28
---------- ---------- -----------
Balances, December 31,
1997................... 612,372 1,603,478 $0.05-$6.29 1,576,000 $ 0.98
Options additionally
reserved............. 1,150,000
Options granted....... (1,586,750) 1,586,750 $1.03-$2.50 1,992,000 $ 1.26
Options repurchased... 1,500 $ 1.03 $ 1.03
Options canceled...... 152,166 (152,166) $0.05-$6.29 (134,000) $(0.88)
Options exercised..... (1,252,165) $0.05-$1.13 (1,050,000) $(0.84)
---------- ---------- -----------
Balances, December 31,
1998................... 329,288 1,785,897 $0.05-$6.29 $ 2,384,000 $ 1.33
========== ========== ===========
</TABLE>
At December 31, 1996, 1997 and 1998, options for 1,455,088, 12,501 and
589,599 shares remain subject to the Company's right of repurchase.
The options outstanding and currently exercisable by exercise price at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Options Currently
Options Outstanding Exercisable
--------------------------------------------------- -----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
----------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.05 106,334 6.3 years $0.05 106,334 $0.05
$0.21 38,187 5.2 years $0.21 38,187 $0.21
$1.01-$1.13 1,308,736 9.2 years $1.03 1,308,736 $1.03
$1.50 46,500 9.9 years $1.50 46,500 $1.50
$2.01 30,712 2.1 years $2.01 30,712 $2.01
$2.50 189,000 10 years $2.50 189,000 $2.50
$6.29 66,428 1.9 years $6.29 66,428 $6.29
--------- ---------
$0.05-$6.29 1,785,897 8.6 years $1.34 1,785,897 $1.33
========= =========
</TABLE>
F-17
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For financial reporting purposes, the Company has determined that the
deemed fair market value on the date of grant of employee stock options granted
since 1995 was in excess of the exercise price of the options. The difference
is considered stock compensation expense and is charged against income over the
vesting period of the options. Future compensation expense from options granted
through December 31, 1998 is estimated to be $3,577,000, $3,287,000,
$2,099,000, and $1,084,000 for the years ending December 31, 1999, 2000, 2001,
and 2002, respectively.
Pro Forma Stock-Based Compensation:
The Company accounts for employee stock options under APB Opinion No. 25.
Had the Company determined compensation expense under SFAS No. 123, the effect
on the Company's net earnings would have been insignificant. These pro forma
results are not necessarily indicative of results which may be expected in the
future as additional grants are made each year and options vest over several
years. The weighted average fair value of the options and warrants granted or
modified for the years ended December 31, 1996, 1997 and 1998 was $0.17, $0.40
and $0.22 respectively.
The following weighted average assumptions were used in the above
calculations:
<TABLE>
<CAPTION>
1996 1997 1998
--------- ------- -------
<S> <C> <C> <C>
Risk free interest rate....................... 6.11% 6.05% 5.13%
Expected life................................. 5.5 years 4 years 4 years
Volatility.................................... -- -- --
Dividend yield................................ -- -- --
</TABLE>
8. NET LOSS PER SHARE:
In accordance with the requirements of SFAS No. 128, a reconciliation of the
numerator and denominator of basic and diluted loss per share is provided as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Numerator--Basic and Diluted:
Net loss........................... $(25,039,000) $(13,648,000) $(11,945,000)
Denominator--Basic and Diluted:
Weighted average common shares
outstanding....................... 2,195,922 2,556,202 2,992,077
Basic and Diluted loss per share..... $ (11.40) $ (5.34) $ (3.99)
</TABLE>
Options and warrants to purchase common and preferred shares and preferred
securities are not included in the diluted loss per share calculations as their
effect is antidilutive for all periods presented. These dilutive securities at
December 31, 1998 included weighted average common stock equivalents relating
to preferred stock and options and warrants to purchase common and preferred
shares (as calculated using the treasury method), as follows:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ----------
<S> <C> <C> <C>
Preferred stock............................. 5,332,682 8,662,706 10,416,615
Options..................................... 630,168 1,106,273 1,403,983
Warrants.................................... -- 216,088 543,436
</TABLE>
F-18
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. EMPLOYEE BENEFIT PLAN:
The Company created a 401(k) Plan (the Plan) to provide tax deferred salary
deductions for all eligible employees. Participants may make voluntary
contributions to the Plan up to 20% of their compensation, not to exceed the
annual 402(g) limitation for any plan year. The Company's matching contribution
is discretionary as determined by the Board of Directors. During 1996, 1997 and
1998, the Company did not contribute to the Plan.
10. INCOME TAXES:
For the years ended December 31, 1996, 1997 and 1998 the provision for
income taxes comprised minimum state tax expense.
The components of the net deferred tax assets comprised (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------
1997 1998
-------- --------
<S> <C> <C>
Net operating loss carryforwards.......................... $ 14,552 $ 17,588
Tax credit carryforwards.................................. 988 988
Accruals, depreciation and amortization................... 389 528
Intangible assets......................................... 6,957 5,097
-------- --------
22,886 24,201
Less valuation allowance.................................. (22,886) (24,201)
-------- --------
Net deferred tax asset.................................... $ -- $ --
======== ========
</TABLE>
Due to uncertainty surrounding the realization of the favorable tax
attributes in future tax returns, the Company has placed a valuation allowance
against its net deferred tax assets.
The difference between the statutory rate of approximately 40% (34% federal
and 6% state, net of federal tax benefits) and the tax benefit of zero recorded
by the Company is primarily due to the Company not recording the benefit
received from the accumulation of their net deferred tax assets.
At December 31, 1997 and 1998, the Company had federal and state net
operating loss carryforwards of approximately $32,816,000 and $45,232,000,
respectively, available to offset future regular and alternative minimum
taxable income. Of the total net operating loss carryforwards, $16,231,000 was
attributed to Catapult's carryforwards (see Note 3). The Company's net
operating loss carryforwards expire on various dates after the year 1999, if
not utilized.
Due to changes in the Company's ownership, future utilization of these net
operating losses and credit carryforwards will be subject to certain annual
limitations as defined by the Tax Reform Act of 1986. Due to separate return
limitations, future utilization of the net operating losses and credits of
Catapult will be subject to additional limitations.
Due to changes in the Company's ownership, future utilization of these net
operating loss carryforwards may be subject to certain limitations on annual
utilization as deferred by the Tax Reform Act of 1986.
F-19
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. RELATED PARTY TRANSACTIONS:
One of the Company's major customers is also an investor and has a seat on
the Board of Directors. The Company had revenue transactions in the normal
course of business with this customer totaling $515,000 and $1,901,000 in the
years ending December 31, 1997 and 1998, respectively. During the year ending
December 31, 1996, the Company did not have revenue transactions with this
customer. As of December 31, 1998, the Company has an accounts receivable
balance of $376,000 outstanding from this customer.
12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1997 1998
---------- ---------- ---------
<S> <C> <C> <C>
Cash paid for interest......................... $ 40,000 $ 115,000 $ 222,000
Exercise of common stock options for notes
receivable.................................... 46,000 -- 937,000
Issuance of Series C preferred stock in
consideration of Catapult acquisition in
November 1996................................. 9,021,000 -- --
Assumption of notes payable in connection with
the Catapult acquisition, net of original
discount of $415,000.......................... 2,756,000 -- --
Conversion of Series C preferred stock to
Series D preferred stock...................... -- 500,000 --
Exchange of notes payable for Series D
preferred stock............................... -- 1,300,000 --
Conversion of bridge loans and accumulated
interest into Series D preferred stock........ -- 1,614,000 --
Non cash payment for common stock warrants..... -- 1,000 --
Buyout of Catapult leases with deposit funds... -- 74,000 --
Non cash financing cost in conjunction with
financing arrangement for warrant of 23,000
shares of Series D preferred stock............ -- -- 64,000
Compensation accrued for options granted....... 365,000 1,606,000 215,000
Compensation recorded for options exercised.... 12,000 63,000 2,380,000
</TABLE>
13. SEGMENTS:
As discussed in Note 2, the Company has two reportable segments: Live
Communities and Foundation. Live Communities provides a live entertainment and
game community on the Internet. Foundation leverages the technology expertise
developed in creating Live Communities by providing licensed technology,
developmental and supporting services to companies seeking to create online
communities.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on profit or loss from operations before income tax and
including nonrecurring gains and losses.
F-20
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business has different strategies. The following table provides financial
information by segment (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
----------------- ----------------- ----------------
Percent Percent Percent
of of of
Dollar Total Dollar Total Dollar Total
Value Revenue Value Revenue Value Revenue
-------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net revenues:
Live Communities........ $ 12 10% $ 686 25 % $ 3,022 38%
Foundation.............. 112 90% 2,041 75 % 5,005 62%
-------- --- -------- --- ------- ---
Total................. $ 124 100% $ 2,727 100 % $ 8,027 100%
======== === ======== === ======= ===
Cost of net revenues:
Live Communities........ $ 35 28% $ 1,808 66 % $ 2,221 28%
Foundation.............. 90 72% 620 23 % 790 10%
-------- -------- -------
Total................. $ 125 $ 2,428 $ 3,011
======== ======== =======
Gross profit (loss):
Live Communities........ $ (23) -18% $ (1,122) (41)% $ 801 10%
Foundation.............. 22 18% 1,421 52 % 4,215 52%
-------- -------- -------
Total................. $ (1) $ 299 $ 5,016
======== ======== =======
Operating expenses:
Live Communities........ $ 11,648 $ 8,106 $ 9,740
Foundation.............. 427 4,077 4,513
-------- -------- -------
Total................. $ 12,075 $ 12,183 $14,253
======== ======== =======
Operating loss:
Live Communities........ $(11,671) $ (9,228) $(8,939)
Foundation.............. (405) (2,656) (298)
-------- -------- -------
Total................. $(12,076) $(11,884) $(9,237)
======== ======== =======
</TABLE>
In 1996, operating expenses and operating loss do not agree to the amounts on
the statement of operations as the write-off of acquired intangibles was not
considered to be a part of either operating segment. In 1996, 1997 and 1998,
the operating expenses and operating loss do not agree to the amounts on the
statements of operations as the stock compensation was not classified within
either operating segment.
14. SUBSEQUENT EVENTS:
In January of 1999 the Company increased the authorized number of shares of
preferred stock to 16,294,986 and issued 3,035,306 shares of Series E
convertible preferred stock, with a par value of $.00005 per share, at a price
of $6.60 per share. An additional 77,422 shares of Series E preferred stock are
reserved for issuance upon exercise of warrants granted to the investment
bankers at an exercise price of $6.60 per share. The warrants expire upon the
earlier of January 15, 2004, the sale or merger of substantially all of the
Company's assets or an underwritten public offering of securities. The fair
value of these warrants of $104,000 will be recorded as a reduction of
additional paid-in capital.
Each share of Series E preferred stock is convertible at the option of the
holder into one share of common stock. All preferred shares will automatically
convert into common stock upon the earlier of the closing of an
F-21
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
underwritten public offering of common stock for not less than $10.80 per
share, with aggregate net proceeds of more than $15,000,000, or the date
specified by written consent or agreement of the holders of at least sixty-six
and two thirds percent (66.67%) of the then outstanding shares of preferred
stock.
The holders of Series E preferred stock are entitled to receive, on an equal
basis, non- cumulative dividends in preference to holders of common stock at
the rate of $0.66 per share, when and if declared by the Board of Directors.
Upon liquidation, dissolution, or winding up of the Company, the holders of
preferred stock are entitled to receive on an equal basis in conjunction with
holders of preferred Series D and in preference to holders of common and
holders of Series A,B,C and C-1 an amount equal to $6.60 for each share of
Series E and $5.40 for each share of Series D then held plus any declared but
unpaid dividends. Holders of Series A,B,C and C-1 preferred stock shall then
receive distributions based on their liquidation rates.
After completion of the distribution to the preferred stockholders the
remaining assets will be distributed to the holders of Series A Preferred Stock
and common stock on a common equivalent of $2.50 per share. Thereafter, the
holders of common stock will be entitled to receive all remaining assets.
The holders of each share of Series E preferred stock shall have the right
to that number of votes equal to the number of shares of common held on as
converted basis.
Immediately subsequent to the issuance of Series E preferred stock the term
loan for $1,500,000 (see Note 6) became due and payable. The Company has fully
repaid this obligation.
15. ADDITIONAL SUBSEQUENT EVENTS:
In February 1999, the Company's Board of Directors approved the 1999 Stock
Incentive Plan, which is still subject to stockholder approval. A total of
2,500,000 shares of common stock has been reserved for issuance under this
plan, which is subject to annual increases. This plan provides for the grant of
incentive stock options to employees and nonstatutory stock options and
restricted stock to employees, directors and consultants. The terms of the
option and restricted stock grants will be determined by the Board of Directors
on the date of issuance.
In February 1999, the Company's Board of Directors approved the 1999
Directors' Stock Option Plan (the "Directors' Plan"), which is still subject to
stockholder approval. A total of 300,000 shares of common stock has been
reserved for issuance under the Directors' Plan. The Directors' Plan provides
for an initial grant of an option to purchase 30,000 shares of common stock to
each person who becomes a non-employee director after the effective date of the
Directors' Plan. These options vest and become exercisable 25% annually upon
the first, second, third and fourth anniversaries of the date of grant. The
Directors' Plan also calls for annual grants upon each annual meeting of
options to purchase 7,500 common shares, which option becomes exercisable and
vested in full upon the fourth anniversary of the date of grant. Options must
be granted at the fair market value on the date of grant and have a term of the
lesser ten years or the term of the optionees' service as a director.
In February 1999, the Company's Board of Directors approved the 1999
Employee Stock Purchase Plan (the "Purchase Plan"), which is still subject to
stockholder approval. A total of 750,000 shares of common stock has been
reserved for issuance under the Purchase Plan, which is subject to annual
increases. The Purchase Plan allows for eligible employees to purchase a
limited number of shares of the Company's Common Stock at 85% of the fair
market value during certain plan-defined dates.
F-22
<PAGE>
MPATH INTERACTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On February 11, 1999, the Company entered into a Letter of Understanding
with Yahoo! Inc., which outlines an arrangement to license to Yahoo! certain
technology. As part of this arrangement, the Company issued Yahoo! a warrant to
purchase 192,000 shares of common stock at an exercise price of $10.29 per
share, which Yahoo! can exercise upon certain milestones. The Company will
evaluate the fair market value of these warrants at the date the warrants are
earned to determine if an adjustment to sales and marketing expense is
required.
F-23
<PAGE>
[INSIDE BACK COVER]
Title: "Advertising Products." Text: "The Mpath technologies offer Internet
advertisers an opportunity to reach targeted audiences who are participating
in activities that keep them absorbed in our Live Communities. Our Live
Communities serve over 2.5 million registered users with over 50,000 unique
daily visitors generating over 100 minutes of average daily usage per visitor.
Mpath's Live Communities advertising leverages rich media to provide enhanced
opportunities for building brand awareness and loyalty and increasing
customers' purchase intent. Live Communities can also target ads to distinct
demographic and psychographic groups. Live Communities offer standard banner
advertising and also go beyond-the banner to offer TV-style interstitials, Web
viewers, buttons, sponsorships, contests, promotions and special offers."
Center of page:
Seven overlapping images of Web pages, banner ads, and buttons, which display
the various types of advertising mediums available. Each image has text
associated with it, and the text for such images is as follows:
1. "Email Newsletters. Deliver messages directly to the live communities
membership and hyperlink to the advertiser's Web site."
2. "Banner Ads and Buttons. Target by content, demographics, geography,
browser and domain."
3. "Intersitials. Offer innovative, full-screen, TV style ads--using
animation, audio or static graphics."
4. "Web Viewers. Target by content, demographics and geography with guaranteed
visibility so members can navigate the advertiser's site from directly within
our live communities."
5. "Sponsorships. Display high visibility ad or logo by lobby, community or
pager sponsorship and link ad or logo to the advertiser's Web site."
6. "Member Portraits. Customize a member portrait with the advertiser's
corporate logo or icon."
Bottom of page:
Text: "Strategic Relationships. Mpath has entered into strategic relationships
with some of the most prominent media technology companies in order to
increase membership and usage, maximize revenues, build brand recognition,
accelerate product development and acquire content." Small corporate logos for
the following entities:
1. Infoseek Corporation
2. XOOM, Inc.
3. Intel Corporation
4. Excite, Inc.
5. Macromedia, Inc.
6. GTECH Corporation
7. SegaSoft Networks, Inc. (Heat logo)
8. Cox Interactive Media, Inc.
<PAGE>
[MPATH LOGO]
[OUTSIDE BACK COVER PAGE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Mpath in connection with the
sale of common stock being registered. All amounts are estimates except the
Securities and Exchange Commission registration fee and the NASD filing fee and
the Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Securities and Exchange Commission registration fee................. $ 12,788
NASD filing fee..................................................... 5,100
Nasdaq National Market listing fee.................................. 90,000
Printing and engraving expenses..................................... 225,000
Legal fees and expenses............................................. 300,000
Accounting fees and expenses........................................ 207,000
Blue Sky qualification fees and expenses............................ 3,000
Transfer Agent and Registrar fees................................... 10,000
Miscellaneous fees and expenses..................................... 100,000
--------
Total............................................................. 952,888
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's Board of Directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article X of Mpath's Certificate of
Incorporation (Exhibit 3.1 hereto) and Article VII, Section 6 of Mpath's Bylaws
(Exhibit 3.3 hereto) provide for indemnification of Mpath's directors,
officers, employees and other agents to the maximum extent permitted by
Delaware Law. In addition, Mpath has entered into Indemnification Agreements
(Exhibit 10.1 hereto) with its officers and directors. The Underwriting
Agreement (Exhibit 1.1) also provides for cross-indemnification among Mpath and
the Underwriters with respect to certain matters, including matters arising
under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since January, 1995, Mpath has sold and issued the following securities:
1. In January and March 1995, Mpath issued and sold for cash a total of
100,000 shares of its Common Stock at a price of $0.05 per share to two
investors and 2,800,000 shares of its Series A Preferred Stock at a price of
$0.50 per share to seven investors.
2. In August 1995 and January 1996, Mpath issued and sold for cash a
total of 2,190,842 shares of its Series B Preferred Stock at a price of $2.07
per share to 29 private investors.
3. In April, May and July 1996, Mpath issued and sold for cash a total of
1,154,580 shares of its Series C Preferred Stock at a price of $10.28 per share
to 35 private investors. In November 1996, Mpath issued and sold a total of
291,829 shares of its Series C Preferred Stock at a price per share of $10.28.
In March 1997, Mpath issued and sold 48,638 shares of its Series C Preferred
Stock at a price of $10.28 per share to one private investor.
II-1
<PAGE>
4. In November 1996, Mpath acquired one hundred percent of the
outstanding stock of Catapult Entertainment, Inc., a California corporation
("Catapult"), in connection with Catapult's reorganization. Pursuant to an
Agreement and Plan of Reorganization and an Agreement and Plan of Merger,
Catapult merged with and into a wholly-owned subsidiary of Mpath and Mpath
issued 868,254 shares of Series C Preferred Stock and options to purchase
121,078 shares of Common Stock, valued at $10.28 per share, to 26
securityholders of Catapult. In addition, Mpath issued and sold a warrant to
purchase up to 52,250 shares of Common Stock at a price of $60.00 per share
(the "Intel Warrant") to Intel. Mpath also issued two Convertible Promissory
Notes to Intel for $1,150,000 and $150,000 respectively (the "Intel Notes") and
issued a Convertible Senior Subordinated Promissory Note to Viacom
International, Inc. for $1,864,000 (the "Viacom Note").
5. In July and August 1997, Mpath issued and sold a total of 3,111,110
shares of Series D Preferred Stock to 28 private investors for cash and the
cancellation of debt at a price of $5.40 per share. In addition, in July and
August 1997, Mpath issued warrants to purchase 1,555,555 shares of Common Stock
at an exercise price of $5.40 per share to the purchasers of the Series D
Preferred Stock (the "Series D Warrants").
6. In July 1998, Mpath entered into a Loan and Security Agreement
pursuant to which Mpath received a $1,500,000 term loan. In connection with the
Loan and Security Agreement, Mpath issued and a warrant to purchase 23,000
shares of Series D Preferred Stock at an exercise price of $5.40 per share.
7. In January 1999, Mpath issued and sold for cash a total of 3,035,306
shares of Series E Preferred Stock to 69 private investors at a price of $6.60
per share. In addition, Mpath issued a warrant to purchase 77,422 shares of its
Series E Preferred Stock at an exercise price of $6.60 per share and paid a
commission of $1,201,980 to NationsBanc Montgomery Securities, LLC, the
placement agent in the Series E financing.
8. Since inception, Mpath has issued an aggregate of 3,329,806 options to
purchase its Common Stock (net of lapsed options) to 184 of its employees,
directors and consultants with exercise prices ranging from $0.05 to $5.50, and
has issued and sold an aggregate of 4,201,896 shares of its Common Stock (net
of repurchases) to 101 of its employees, directors and consultants at prices
ranging from $0.005 to $5.50.
II-2
<PAGE>
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of such
Securities Act as transactions by an issuer not involving any public offering.
In addition, certain issuances described in Item 8 were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and warrants issued
in such transactions. All recipients had adequate access, through their
relationships with Mpath, to information about Mpath.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
1.1 Form of Underwriting Agreement (subject to negotiation).*
3.1 Amended and Restated Certificate of Incorporation of Mpath.
3.2 Amended and Restated Certificate of Incorporation of Mpath (as
proposed).
3.3 Amended and Restated Bylaws of Mpath.
3.4 Amended and Restated Bylaws of MPath (as proposed).
4.1 Specimen Stock Certificate.*
4.2 Fourth Amended and Restated Investors' Rights Agreement dated January
15, 1999.
4.3 Form of Common Stock Purchase Warrant, issued in connection with the
Series D Preferred Stock financing.
4.4 Warrant to Purchase Shares of Capital Stock dated November 18, 1996,
issued by Registrant in favor of Intel Corporation.
4.5 Common Stock Purchase Warrant dated February 12, 1999, issued by
Registrant in favor of PSINet, Inc.
4.6 Common Stock Purchase Warrant dated February 12, 1999, issued by
Registrant in favor of PSINet, Inc.
4.7 Common Stock Purchase Warrant dated February 11, 1999, issued by
Registrant in favor of Yahoo! Inc.+
4.8 Preferred Stock Purchase Warrant dated September 29, 1995, issued by
Registrant in favor of Lighthouse Capital Partners, LP.
4.9 Warrant to Purchase Stock dated July 29, 1998, issued by Registrant in
favor of Greyrock Business Credit.
4.10 Series E Preferred Stock Purchase Warrant dated January 15, 1999,
issued by Registrant in favor of NationsBanc Montgomery Securities LLC.
4.11 Convertible Senior Subordinated Promissory Note dated November 18,
1996, issued by Registrant to Viacom International, Inc.
5.1 Opinion of Venture Law Group regarding the legality of the common stock
being registered.
10.1 Form of Indemnification Agreement between Mpath and each of its
officers and directors.
10.2 1995 Stock Option/Stock Issuance Plan.
10.3 1999 Stock Incentive Plan.
10.4 1999 Employee Stock Purchase Plan.
10.5 1999 Directors' Stock Option Plan.
10.6 Distribution Agreement dated April 22, 1998 between Mpath and Cox
Interactive Media, Inc.+
10.7 Content License and Co-branded Area Agreement dated April 15, 1998
between Mpath and Excite, Inc.+
10.8 POP.X(TM) License Agreement dated June 26, 1998 between Mpath and GTECH
Corporation.+
10.9 Application Development Agreement dated November 9, 1998 between Mpath
and Intel Corporation.+
10.10 Technology License Agreement dated April 15, 1996 between Mpath and
SegaSoft Networks, Inc.+
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
10.11 Amendment #1 to Technology License Agreement dated November 27, 1996
between Mpath and SegaSoft Networks, Inc.+
10.12 Amendment #2 to Technology License Agreement dated March 28, 1998
between Mpath and SegaSoft Networks, Inc.+
10.13 Amendment #3 to Technology License Agreement dated October 27, 1998
between Mpath and SegaSoft Networks, Inc.+
10.14 Content Provider Agreement dated December 23, 1998 between Mpath and
Infoseek Corporation.+
23.1 Consent of Independent Accountants.
23.2 Consent of Attorney (See Exhibit 5.1).
24.1 Power of Attorney (See page II-6).
27.1 Financial Data Schedule.**
</TABLE>
- --------
*To be filed by amendment.
**Previously Filed.
+Confidential treatment requested as to certain portions of this Exhibit.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the city of
Mountain View, State of California on March 16, 1999.
MPATH INTERACTIVE, INC.
By: /s/ Paul Matteucci
----------------------------------
Paul Matteucci
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Paul Matteucci President, Chief Executive March 16, 1999
____________________________________ Officer and Director
Paul Matteucci (Principal Executive
Officer)
* Director March 16, 1999
____________________________________
Brian Apgar
* Director March 16, 1999
____________________________________
James W. Breyer
* Director March 16, 1999
____________________________________
David A. Brown
* Director March 16, 1999
____________________________________
Douglas G. Carlston
* Director March 16, 1999
____________________________________
William McCall
* Director March 16, 1999
____________________________________
Gregory O'Brien
* Director March 16, 1999
____________________________________
Ruthann Quindlen
*By: /s/ Paul Matteucci March 16, 1999
__________________________________
Paul Matteucci
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints, jointly and severally, Paul Matteucci
and Lynn Heublein and each of them, as her attorney-in-fact, with full power of
substitution, for her in any and all capacities, to sign any and all amendments
to this Registration Statement (including post-effective amendments), and any
and all Registration Statements filed pursuant to Rule 462 under the Securities
Act of 1933, as amended, in connection with or related to the offering
contemplated by this Registration Statement and its amendments, if any, and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming my signature as it may be signed by my said attorney to any and all
amendments to said Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ LINDA R. PALMOR Chief Financial Officer March 16, 1999
____________________________________ (Principal Financial and
Linda R. Palmor Accounting Officer)
</TABLE>
II-6
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The undersigned Paul Matteucci and Joshua Green hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of this corporation.
TWO: The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on January 9, 1995. This
corporation was originally incorporated under the name of Amber Software, Inc.
THREE: The Certificate of Incorporation of this corporation shall be
amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is Mpath Interactive, Inc.
ARTICLE II
The address of the corporation's registered office in the State of Delaware
is 1013 Centre Road, City of Wilmington, County of New Castle. The name of the
corporation's registered agent at such address is Corporation Service Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE 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
Forty-One Million Two Hundred Ninety-Four Thousand Nine Hundred Eighty-Six
(41,294,986) shares. Twenty Five Million (25,000,000) shares shall be Common
Stock, par value $0.00005 per share, and Sixteen Million Two Hundred Ninety-Four
Thousand Nine Hundred Eighty-Six (16,294,986) shares shall be Preferred Stock,
par value $0.00005 per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The Preferred
-------------------------------------------------------
Stock authorized by this Amended and Restated Certificate of Incorporation may
be issued from time to time in one or more series. The rights, preferences,
privileges, and restrictions granted to and imposed on the Series A Preferred
Stock, which series shall consist of two million eight hundred thousand
(2,800,000) shares (the "Series A Preferred Stock"), the Series B Preferred
Stock, which series shall consist of two million two hundred thirty-four
thousand three hundred
<PAGE>
twenty (2,234,320) shares (the "Series B Preferred Stock"), the Series C
Preferred Stock, which series shall consist of two million three hundred twenty-
three thousand nine hundred sixty-nine (2,323,969) shares (the "Series C
Preferred Stock"), the Series C-1 Preferred Stock, which series shall consist of
two million three hundred twenty-three thousand nine hundred sixty-nine
(2,323,969) shares (the "Series C-1 Preferred Stock"), the Series D Preferred
Stock, which series shall consist of three million five hundred thousand
(3,500,000) shares (the "Series D Preferred Stock") and the Series E Preferred
Stock, which series shall consist of three million one hundred twelve thousand
seven hundred twenty-eight (3,112,728) shares (the "Series E Preferred Stock"),
are as set forth below in this Article IV(B). The Board of Directors is hereby
authorized to fix or alter the rights, preferences, privileges and restrictions
granted to or imposed upon additional series of Preferred Stock, and the number
of shares constituting any such series and the designation thereof, or of any of
them. Subject to compliance with applicable protective voting and other rights
which have been or may be granted to the Preferred Stock or series thereof in
the corporation's Certificate of Incorporation as amended and restated from time
to time and requirements and restrictions of applicable law (collectively,
"Protective Provisions"), the rights, privileges, preferences and restrictions
of any such additional series may be subordinated to, pari passu with
---- -----
(including, without limitation, inclusion in provisions with respect to
liquidation and acquisition preferences, redemption and/or approval of matters
by vote or written consent), or senior to any of those of any present or future
class or series of Preferred or Common Stock. Subject to compliance with
applicable Protective Provisions, the Board of Directors is also authorized to
increase or decrease the number of shares of any series (other than the Series
A, Series B, Series C, Series C-1, Series D or Series E Preferred Stock), prior
or subsequent to the issue of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be so decreased, the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
1. Dividend Provisions. The holders of shares of Series A, Series B,
-------------------
Series C, Series C-1, Series D and Series E Preferred Stock shall ratably be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this corporation) on the Common Stock of this
corporation, at the rate of $0.05, $0.205, $1.03, $1.03, $0.54 and $0.66 per
share (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) per annum for each
share of Series A, Series B, Series C, Series C-1, Series D and Series E
Preferred Stock, respectively, held by such holder, payable when, as and if
declared by the Board of Directors. Such dividends shall not be cumulative.
After payment of the dividend preference referred to above,
outstanding shares of Series A, Series B, Series C, Series C-1, Series D and
Series E Preferred Stock shall participate with shares of Common Stock as to any
additional declaration or payment of any dividend (payable other than in Common
Stock or other securities and rights convertible into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common Stock
pursuant to an event causing the Conversion Price of the Series A, Series B,
Series C, Series C-1,
<PAGE>
Series D or Series E Preferred Stock to be adjusted pursuant to Section 4(d)
hereof), with the outstanding shares of Series A, Series B, Series C, Series C-
1, Series D and Series E Preferred Stock participating as though they had all
been converted into Common Stock.
2. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series D
and Series E Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of this corporation to the
holders of Series A, Series B, Series C and Series C-1 Preferred Stock and
Common Stock and by reason of their ownership thereof, an amount per share equal
to the sum of (i) $5.40 (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares) for each
outstanding share of Series D Preferred Stock (the "Original Series D Issue
Price") and $6.60 (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) for each outstanding
share of Series E Preferred Stock (the "Original Series E Issue Price") and (ii)
an amount equal to declared but unpaid dividends on such shares. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series D and Series E Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then the entire assets and funds of this corporation legally available for
distribution shall be distributed ratably among the holders of the Series D and
Series E Preferred Stock in proportion to the aggregate liquidation preference
for the shares of such stock owned by each such holder. The Original Series A
Issue Price, Original Series B Issue Price, Original Series C Issue Price,
Original Series C-1 Issue Price, Original Series D Issue Price and Original
Series E Issue Price is referred to as the "Original Issue Price" for the series
of Preferred Stock to which it relates.
(b) Upon the completion of the distribution required by
subparagraph (a) of this Section 2 above, the holders of Series A, Series B,
Series C and Series C-1 Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets of this corporation to
the holders of Common Stock by reason of their ownership thereof, an amount per
share equal to the sum of (i) $0.50 (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) for each outstanding share of Series A Preferred Stock (the "Original
Series A Issue Price"), $2.07 (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) for each outstanding share of Series B Preferred Stock (the "Original
Series B Issue Price"), $10.28 (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) for each outstanding share of Series C Preferred Stock (the "Original
Series C Issue Price") and $10.28 (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) for each outstanding share of Series C-1 Preferred Stock (the "Original
Series C-1 Issue Price") and (ii) an amount equal to declared but unpaid
dividends on such shares. If upon the occurrence of such event, the assets and
funds thus distributed among the holders of the Series A, Series B, Series C,
and Series C-1 Preferred Stock shall be insufficient to permit the payment to
such holders of the full aforesaid preferential amounts, then the entire assets
and funds of this corporation legally available for distribution shall be
distributed ratably among the holders of the Series A, Series B,
<PAGE>
Series C and Series C-1 Preferred Stock in proportion to the aggregate
liquidation preference for the shares of such stock owned by each such holder.
(c) Upon the completion of the distribution required by
subparagraphs (a) and (b) of this Section 2, the remaining assets of this
corporation available for distribution to stockholders shall be distributed
among the holders of Series A Preferred Stock and Common Stock pro rata based on
the number of shares of Common Stock held by each (assuming conversion into
Common Stock of all such Series A Preferred Stock) until the holders of Series A
Preferred Stock shall have received an aggregate of $2.50 per share of Series A
Preferred Stock held (including amounts paid pursuant to subparagraph (b) of
this Section 2); thereafter, if any assets or funds remain in this corporation,
the holders of the Common Stock shall receive all such remaining assets or funds
pro rata based on the number of shares of Common Stock held by each.
(d)(i) A consolidation or merger of this corporation with or into
any other corporation or corporations that results in a change of greater than
50% of the voting control of this corporation, or a sale, conveyance or
disposition of all or substantially all of the assets of this corporation or the
effectuation by this corporation of a transaction or series of related
transactions in which more than 50% of the voting power of this corporation is
disposed of, shall be deemed to be a liquidation, dissolution or winding up
within the meaning of this Section 2.
(ii) In any of such events, if the consideration received by this
corporation is other than cash, its value will be deemed its fair market value.
Any securities shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability:
(1) If traded on a securities exchange or through the
Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the thirty-day period
ending three (3) days prior to the closing of any transaction described in
subsection 2(d)(i) above;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty-day period ending three (3) days prior to such
closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the Board of
Directors of this corporation and the holders of at least sixty-six and two-
thirds percent (66 2/3%) of the voting power of all then outstanding shares of
Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount
<PAGE>
from the market value determined as above in (A) (1), (2) or (3) to reflect the
approximate fair market value thereof, as mutually determined by the Board of
Directors of this corporation and the holders of at least sixty-six and two-
thirds percent (66 2/3%) of the voting power of all then outstanding shares of
such Preferred Stock.
(iii) In the event the requirements of this subsection 2(d) are
not complied with, this corporation shall forthwith either:
(A) cause the closing referenced in subsection 2(d)(ii)
above to be postponed until such time as the requirements of this Section 2 have
been complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Series A, Series B, Series C,
Series C-1, Series D and Series E Preferred Stock shall revert to and be the
same as such rights, preferences and privileges existing immediately prior to
the date of the first notice referred to in subsection 2(d)(iv) hereof.
(iv) This corporation shall give each holder of record of
Series A, Series B, Series C, Series C-1, Series D and Series E Preferred Stock
written notice of such impending transaction not later than twenty (20) days
prior to the stockholders' meeting called to approve such transaction, or twenty
(20) days prior to the closing of such transaction, whichever is earlier, and
shall also notify such holders in writing of the final approval of such
transaction promptly after such final approval and, in any event, at least five
days prior to such closing. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 2, and this corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than twenty (20) days after this corporation has given the first notice
provided for herein or sooner than ten (10) days after this corporation has
given notice of any material changes provided for herein; provided, however,
that such periods may be shortened upon the written consent of the holders of
Preferred Stock that are entitled to such notice rights or similar notice rights
and that represent at least sixty-six and two-thirds percent (66 2/3%) of the
voting power of all then outstanding shares of such Preferred Stock.
3. Redemption. The Preferred Stock is not redeemable.
----------
4. Conversion. The holders of the Series A, Series B, Series C,
----------
Series C-1, Series D and Series E Preferred Stock shall have conversion rights
as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A, Series B, Series
----------------
C, Series C-1, Series D and Series E Preferred Stock shall be convertible, at
the option of the holder thereof, at any time after the date of issuance of such
share at the office of this corporation or any transfer agent for such stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the applicable Original Issue Price by the Conversion
Price applicable to such share, determined as hereafter provided, in effect on
the date the certificate is surrendered for conversion. The initial Conversion
Price per share for shares of
<PAGE>
Series A Preferred Stock shall be the Original Series A Issue Price, the initial
Conversion Price per share for shares of Series B Preferred Stock shall be the
Original Series B Issue Price, the initial Conversion Price per share for shares
of Series C Preferred Stock shall be the Original Series C Issue Price, the
initial Conversion Price per share for shares of Series C-1 Preferred Stock
shall be the Original Series C-1 Issue Price, the initial Conversion Price per
share for shares of Series D Preferred Stock shall be the Original Series D
Issue Price and the initial Conversion Price per share for shares of Series E
Preferred Stock shall be the Original Series E Issue Price; provided, however,
that the Conversion Price for the Series A, Series B, Series C, Series C-1,
Series D and Series E Preferred Stock shall be subject to adjustment as set
forth in subsection 4(d).
(b) Automatic Conversion. Each share of Series A, Series B,
--------------------
Series C, Series C-1, Series D and Series E Preferred Stock shall automatically
be converted into shares of Common Stock at the Conversion Price at the time in
effect for such share immediately upon the earlier of (i) this corporation's
sale of its Common Stock in a firm commitment underwritten public offering
pursuant to a registration statement on Form S-l under the Securities Act of
1933, as amended, the public offering price of which was not less than $10.80
per share (adjusted to reflect subsequent stock dividends, stock splits,
combinations or recapitalizations) and having aggregate net proceeds to this
corporation of more than $15,000,000 or (ii) the date specified by written
consent or agreement of the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the then outstanding shares of Preferred Stock.
(c) Mechanics of Conversion. Before any holder of Series A,
-----------------------
Series B, Series C, Series C-1, Series D or Series E Preferred Stock shall be
entitled to convert the same into shares of Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed, at the office of this
corporation or of any transfer agent for the Series A, Series B, Series C,
Series C-1, Series D and Series E Preferred Stock, and shall give written notice
by mail, postage prepaid, to this corporation at its principal corporate office,
of the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued; provided, however, that in the event of an automatic conversion, as
described in subsection 4(b) above, the outstanding shares of Series A, Series
B, Series C, Series C-1, Series D or Series E Preferred Stock shall be converted
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to this
corporation or its transfer agent; and provided further that this corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon conversion unless the certificates evidencing such shares of
Series A, Series B, Series C, Series C-1, Series D or Series E Preferred Stock
are either delivered to this corporation or its transfer agent as provided
above, or the holder notifies this corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to this corporation to indemnify this corporation from any loss
incurred by it in connection with such certificates. This corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Series A, Series B, Series C, Series C-1, Series D or Series E Preferred
Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
<PAGE>
immediately prior to the close of business on the date of such surrender of the
shares of Series A, Series B, Series C, Series C-1, Series D or Series E
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offering
of securities registered pursuant to the Securities Act of 1933, as amended, the
conversion will, unless otherwise designated by the holder tendering Series A,
Series B, Series C, Series C-1, Series D or Series E Preferred Stock for
conversion, be conditioned upon the closing of the sale of securities pursuant
to such offering, and the person(s) entitled to receive the Common Stock
issuable upon such conversion of such Series A, Series B, Series C, Series C-1,
Series D or Series E Preferred Stock shall not be deemed to have converted such
Series A, Series B, Series C, Series C-1, Series D or Series E Preferred Stock
until immediately prior to the closing of such sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for Certain
-----------------------------------------------------------
Dilutive Issuances, Splits and Combinations. The Conversion Prices of the
- -------------------------------------------
Series A, Series B, Series C, Series C-1, Series D and Series E Preferred Stock
shall be subject to adjustment from time to time as follows:
(i) (A) If this corporation shall issue, after the date
upon which any shares of Series C Preferred Stock were first issued (the "Series
C Purchase Date"), any Series C Additional Stock (as defined below) without
consideration or for a consideration per share less than the Conversion Price
for the Series C Preferred Stock in effect immediately prior to the issuance of
such Series C Additional Stock, the Conversion Price for the Series C Preferred
Stock in effect immediately prior to each such issuance shall forthwith (except
as otherwise provided in this clause (i)) be adjusted to a price equal to the
quotient obtained by dividing the total computed under clause (x) below by the
total computed under clause (y) below as follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the shares of
the Series C Preferred Stock sold pursuant to the agreement pursuant
to which shares of Series C Preferred Stock were first issued (the
"Stock Purchase Agreement"), plus
(2) the aggregate consideration, if any, received
by the corporation for all Series C Additional Stock issued on or
after the Series C Purchase Date;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the shares of
Series C Preferred Stock sold pursuant to the Stock Purchase Agreement
divided by the Conversion Price for the shares of Series C Preferred
Stock in effect at the Series C Purchase Date, plus
<PAGE>
(2) the number of shares of Series C Additional
Stock issued since the Series C Purchase Date.
(B) If the Corporation shall issue (i) after the date
upon which any shares of Series D Preferred Stock were first issued (the "Series
D Purchase Date") or (ii) after the date upon which any shares of Series E
Preferred Stock were first issued (the "Series E Purchase Date" or the "Purchase
Date" as the Series C Purchase Date, the Series D Purchase Date and the Series E
Purchase Date are sometimes referred to herein with respect to such series), any
Series D Additional Stock (as defined below) or Series E Additional Stock (as
defined below), as applicable, without consideration or for a consideration per
share less than the Conversion Price for such series in effect immediately prior
to the issuance of such Series D Additional Stock or Series E Additional Stock,
as applicable, the Conversion Price for such series in effect immediately prior
to each such issuance shall automatically (except as otherwise provided in this
clause (i)) be adjusted to a price determined by multiplying such Conversion
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance (the "Outstanding
Common") plus the number of shares of Common Stock that the aggregate
consideration received by the Corporation for such issuance would purchase at
such Conversion Price; and the denominator of which shall be the number of
Outstanding Common plus the number of shares of such Series D Additional Stock
or Series E Additional Stock, as applicable.
(C) No adjustment of the Conversion Price for the
Series C, Series D and Series E Preferred Stock shall be made in an amount less
than one cent ($0.01) per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
three (3) years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of three (3) years from the date of
the event giving rise to the adjustment being carried forward. Except to the
limited extent provided for in subsections 4(d)(i)(F)(3) and (F)(4), no
adjustment of such Conversion Price pursuant to this subsection 4(d)(i) shall
have the effect of increasing the Conversion Price above the Conversion Price in
effect immediately prior to such adjustment.
(D) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any discounts, commissions or other expenses allowed, paid or
incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(E) In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined reasonably
and in good faith by the Board of Directors of this corporation irrespective of
any accounting treatment.
(F) In the case of the issuance (whether before, on or
after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to
<PAGE>
purchase or rights to subscribe for such convertible or exchangeable securities,
the following provisions shall apply for all purposes of this subsection 4(d)(i)
and subsection 4(d)(ii):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of
any conditions to exercisability, including without limitation, the
passage of time, but without taking into account potential
antidilution adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in subsections
4(d)(i)(D) and (d)(i)(E)), if any, received by this corporation upon
the issuance of such options or rights plus the minimum exercise price
provided in such options or rights for the Common Stock covered
thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for
(assuming the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time,
but without taking into account potential antidilution adjustments)
any such convertible or exchangeable securities or upon the exercise
of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration, if any, received by the corporation for
any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the
corporation upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subsections 4(d)(i)(D)
and (d)(i)(E)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price of each of the
Series C, Series D and Series E Preferred Stock, to the extent in any
way affected by or computed using such options, rights or securities,
shall be recomputed to reflect such change, but no further adjustment
shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights
or the conversion or exchange of such securities.
(4) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the
<PAGE>
Conversion Price of each of the Series C, Series D and Series E
Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities or options or rights related
to such securities, shall be recomputed to reflect the issuance of
only the number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually issued upon
the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or
rights related to such securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 4(d)(i)(F)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either subsection 4(d)(i)(F)(3) or (4).
(ii) (A) "Series C Additional Stock" shall mean any shares
of Common Stock issued (or deemed to have been issued pursuant to subsection
4(d)(i)(F)) by this corporation after the Series C Purchase Date to an entity
that has, contemporaneous with such issuance, entered into, or proposed to enter
into, or is then negotiating to enter into, or has agreed with this corporation
to enter into or negotiate to enter into an agreement with this corporation,
which includes the license or the distribution of technology to or from this
corporation with such entity or its affiliates.
(B) "Series D Additional Stock" shall mean any shares
of Common Stock or Preferred Stock issued (or deemed to have been issued
pursuant to Section 4(d)(i)(F)) by this corporation after the Series D Purchase
Date.
(C) "Series E Additional Stock" shall mean any shares
of Common Stock or Preferred Stock issued (or deemed to have been issued
pursuant to Section 4(d)(i)(F)) by this Corporation after the Series E Purchase
Date.
(D) Notwithstanding the foregoing subsections
4(d)(ii)(A), (B) and (C), the following shall be excluded from the definition of
Series C Additional Stock, Series D Additional Stock and Series E Additional
Stock:
(1) Common Stock issued pursuant to a transaction
described in Section 4(d)(iii) hereof;
(2) Up to 3,793,000 shares of Common Stock
issuable or issued to employees, consultants or directors of this corporation
directly or pursuant to a stock option plan or restricted stock plan approved by
the Board of Directors of this corporation;
(3) Up to 500,000 shares of capital stock, or
options or warrants to purchase capital stock, issued to financial institutions
or lessors in
<PAGE>
connection with bona fide commercial credit arrangements, equipment financings
or similar transactions or in connection with transactions with content
providers or similar transactions approved by the Board of Directors of this
corporation;
(4) Shares of Common Stock or Preferred
Stock issuable upon exercise of warrants outstanding as of the date of this
Amended and Restated Certificate of Incorporation;
(5) Capital stock or warrants or options to
purchase capital stock issued in connection with bona fide acquisitions, mergers
or similar transactions, the terms of which are approved by the Board of
Directors of this corporation;
(6) Shares of Common Stock issued or
issuable upon conversion of the Series A, Series B, Series C, Series C-1, Series
D or Series E Preferred;
(7) Shares of C-1 Preferred Stock issued or
issuable upon conversion of the Series C Preferred Stock;
(8) Shares of Common Stock issued or
issuable in a public offering with respect to which all outstanding shares of
Series A, Series B, Series C, Series C-1, Series D and Series E Preferred Stock
are required, prior to or in connection with which offering, to be converted to
Common Stock;
(9) Shares of Common Stock issuable upon
exercise of that certain warrant to purchase Common Stock issued or to be issued
to PSINet Inc.;
(10) Shares of Common Stock issuable upon
exercise of that certain warrant to purchase Common Stock issued to Intel
Corporation in November 1996;
(11) Shares of Series D Preferred Stock; and.
(12) Shares of Series E Preferred Stock.
(iii) In the event this corporation should at any time
or from time to time fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A, Series B, Series C, Series C-1, Series D and Series E
Preferred Stock shall be appropriately decreased so that the number of shares of
Common Stock issuable on conversion of each share of
<PAGE>
such series shall be increased in proportion to such increase of the aggregate
of shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding at
any time is decreased by a combination of the outstanding shares of Common
Stock, then, following the record date of such combination, the Conversion Price
for the Series A, Series B, Series C, Series C-1, Series D and Series E
Preferred Stock shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall be
decreased in proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(i), then, in
each such case for the purpose of this subsection 4(e), the holders of the
Series A, Series B, Series C, Series C-1, Series D and Series E Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of Common Stock into which their
shares of Series A, Series B, Series C, Series C-1, Series D and Series E
Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of this corporation entitled to
receive such distribution.
(f) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or in Section 2) provision shall be made so that the holders of
the Series A, Series B, Series C, Series C-1, Series D and Series E Preferred
Stock shall thereafter be entitled to receive upon conversion of the Series A,
Series B, Series C, Series C-1, Series D and Series E Preferred Stock the number
of shares of stock or other securities or property of this corporation or
otherwise, to which a holder of Common Stock deliverable upon conversion would
have been entitled on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of the Series A, Series B, Series C,
Series C-1, Series D and Series E Preferred Stock after the recapitalization to
the end that the provisions of this Section 4 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A, Series B, Series C, Series C-1, Series D and Series
E Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
(g) No Impairment. This corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Amended and Restated Certificate of
Incorporation and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the
<PAGE>
holders of the Series A, Series B, Series C, Series C-1, Series D and Series E
Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A, Series B, Series C, Series C-
1, Series D or Series E Preferred Stock, and the number of shares of Common
Stock to be issued shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Series A, Series B, Series C, Series C-1,
Series D and Series E Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A, Series B, Series C, Series C-1, Series D
and Series E Preferred Stock pursuant to this Section 4, this corporation, at
its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Series A, Series B, Series C, Series C-1, Series D and Series E Preferred Stock
a certificate signed by the Chief Executive Officer or Chief Financial Officer
of this corporation setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. This
corporation shall, upon the written request at any time of any holder of Series
A, Series B, Series C, Series C-1, Series D and Series E Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(A) such adjustment and readjustment, (B) the Conversion Price for such series
of Preferred Stock at the time in effect and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of Series A, Series B, Series C, Series
C-1, Series D and Series E Preferred Stock.
(i) Notices of Record Date. In the event of any taking by this
----------------------
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 (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A, Series B, Series C, Series C-
1, Series D and Series E Preferred Stock, at least twenty (20) days prior to the
date specified therein, a notice specifying the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
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 A, Series B, Series C, Series C-1, Series
D and Series E Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series A, Series B, Series C, Series C-1, Series D and
Series E Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be
<PAGE>
sufficient to effect the conversion of all then outstanding shares of the Series
A, Series B, Series C, Series C-1, Series D and Series E Preferred Stock, in
addition to such other remedies as shall be available to the holder of such
Preferred Stock, this 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
purposes, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to these articles.
(k) Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Series A, Series B, Series C,
Series C-1, Series D or Series E Preferred Stock shall be deemed given if
personally delivered (including by courier service) or five business days
following being deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
corporation.
(l) Special Mandatory Conversion.
----------------------------
(i) At any time following the Purchase Date, if (a) a
holder of shares of Series C Preferred Stock is entitled to exercise the right
of first offer (the "Right of First Offer") set forth in Section 2.4 of the
Fourth Amended and Restated Investors' Rights Agreement by and between this
corporation and certain investors, as amended from time to time (the "Rights
Agreement"), with respect to the issuance of Series C Additional Stock at a
price per share that is less than the Conversion Price then in effect for the
Series C Preferred Stock (the "New Financing"), (b) this corporation has
complied with its notice obligations, or such obligations have been waived,
under the Right of First Offer with respect to such New Financing and this
corporation thereafter proceeds to consummate the New Financing and (c) such
holder (a "Non-Participating Holder") does not by exercise of such holder's
Right of First Offer acquire his, her or its Pro Rata Share (as defined in
Section 2.4 of the Rights Agreement) offered in such New Financing (a "Mandatory
Offering"), then all of such Non-Participating Holder's shares of Series C
Preferred Stock with respect to which such New Financing is dilutive shall
automatically and without further action on the part of such holder be converted
effective upon, subject to, and concurrently with, the consummation of the
Mandatory Offering (the "Mandatory Offering Date") into an equivalent number of
shares of Series C-1 Preferred Stock, as applicable. However, no such conversion
shall occur in connection with a particular New Financing if, pursuant to the
written request of this corporation, such holder agrees in writing to waive his,
her or its Right of First Offer with respect to such New Financing. Upon
conversion pursuant to this subsection 4(l)(i), the shares of Series C Preferred
Stock so converted shall be canceled and not subject to reissuance.
(ii) The holder of any shares of Series C Preferred Stock
converted pursuant to this subsection 4(l) shall deliver to this corporation
during regular business hours at the office of any transfer agent of the
corporation for the Series C Preferred Stock, or at such other place as may be
designated by the corporation, the certificate or certificates for the shares so
converted, duly endorsed or assigned in blank or to this corporation. As
promptly as practicable thereafter, this corporation shall issue and deliver to
such holder, at the place designated by such holder, a certificate or
certificates for the number of full shares of the Series
<PAGE>
C-1 Preferred Stock to be issued, as applicable, and such holder shall be deemed
to have become a shareholder of record of such Series C-1 Preferred Stock, as
applicable, on the Mandatory Offering Date unless the transfer books of this
corporation are closed on that date, in which event he, she or it shall be
deemed to have become a shareholder of record of such Series C-1 Preferred
Stock, as applicable, on the next succeeding date on which the transfer books
are open.
(iii) In the event that any Series C-1 Preferred Stock
shares are issued, concurrently with such issuance, this corporation shall use
its best efforts to take all such action as may be required, including amending
its Amended and Restated Certificate of Incorporation, (a) to cancel all
authorized shares of Series C-1 Preferred Stock, as applicable, that remain
unissued after such issuance, (b) to create and reserve for issuance upon
Special Mandatory Conversion of any such Series C Preferred Stock a new series
of Preferred Stock equal in number to the number of shares of Series C-1
Preferred Stock so canceled and designated Series C-2 Preferred Stock, as
applicable, with the designations, powers, preferences and rights and the
qualifications, limitations and restrictions identical to those then applicable
to the Series C-1 Preferred Stock except that the Conversion Price for such
shares of Series C-2 Preferred Stock once initially issued shall be the Series C
Conversion Price in effect immediately prior to such issuance and (c) to amend
the provisions of this subsection 4(l) to provide that any subsequent Special
Mandatory Conversion will be into shares of C-2 Preferred Stock rather than
Series C-1 Preferred Stock, as applicable. This corporation shall take the same
actions with respect to the Series C-2 Preferred Stock and each subsequently
authorized series of this corporation's Preferred Stock upon initial issuance of
shares of the last such series to be authorized. The right to receive any
dividend declared but unpaid at the time of conversion on any shares of this
corporation's Preferred Stock converted pursuant to the provisions of this
subsection 4(l) shall accrue to the benefit of the new shares of this
corporation's Preferred Stock issued upon conversion thereof.
5. Voting Rights.
-------------
The holder of each share of Preferred Stock shall have the right
to one vote for each share of Common Stock into which such Preferred Stock could
then be converted (with any fractional share determined on an aggregate
conversion basis being rounded to the nearest whole share), and with respect to
such vote, such holder shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the Bylaws of this Corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote.
6. Protective Provisions.
---------------------
(a) So long as any shares of Preferred Stock are outstanding,
this corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the then outstanding shares of Preferred Stock,
voting together as a single class:
<PAGE>
(i) amend or waive any provision of this corporation's
Certificate of Incorporation or Bylaws which amendment or waiver alters or
changes the rights, preferences, privileges or powers of, or the restrictions
provided for the benefit of, the shares of Preferred Stock so as to adversely
affect such shares;
(ii) increase or decrease the total number of authorized
shares of Common Stock or Preferred Stock;
(iii) authorize or issue, or obligate itself to issue, any
other equity class or series of stock (including any other security convertible
into or exercisable for any equity security) having a preference over, or being
on a parity with, the Series A, Series B, Series C, Series C-1, Series D and
Series E Preferred Stock with respect to voting, dividends or upon liquidation,
dissolution or winding up;
(iv) liquidate, dissolve or effect any reclassification or
recapitalization of its capital stock;
(v) sell, convey, or otherwise dispose of or encumber all
or substantially all of this corporation's assets, property or business or merge
into or consolidate with any other corporation (other than a wholly-owned
subsidiary corporation), as a result of which stockholders of this corporation
immediately prior to such merger or consolidation shall hold stock representing
less than fifty percent (50%) of the voting power of the outstanding stock of
the surviving corporation immediately following such merger or consolidation;
(vi) repurchase or redeem Common Stock of this corporation
(other than repurchase of Common Stock at cost from terminated employees,
directors and consultants to this corporation, as approved by the Board of
Directors);
(vii) declare or pay dividends on the outstanding Common
Stock; or
(viii) take any action that would require, under the General
Corporation Law of Delaware, the approval of the holders of the Series A, Series
B, Series C, Series C-1, Series D and Series E Preferred Stock, voting together
as a separate class; or
(b) So long as any shares of Series D Preferred Stock or Series
E Preferred Stock are outstanding, this corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) (i) of
the holders of at least seventy-five percent (75%) of the then outstanding
shares of Series D Preferred Stock, voting together as a single class or (ii) of
the holders of at least seventy-five percent (75%) of the then outstanding
shares of Series E Preferred Stock, voting together as a single class, as
applicable:
(i) take any action that would require, under the General
Corporation Law of Delaware, the approval of the holders of a majority of the
Series D Preferred Stock or Series E Preferred Stock, as applicable, voting
separately as a class from the other series of Preferred; or
<PAGE>
(ii) increase the total number of authorized shares of
Series D Preferred Stock or Series E Preferred Stock, as applicable.
7. Status of Converted Stock. In the event any shares of Series A,
-------------------------
Series B, Series C, Series C-1, Series D or Series E Preferred Stock shall be
converted pursuant to Section 4 hereof, the shares so converted shall be
canceled and shall not be issuable by this corporation. The Certificate of
Incorporation of this corporation shall be appropriately amended to effect the
corresponding reduction in this corporation's authorized capital stock.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends and
Section 1 of Subdivision B of this Article IV hereof, the holders of the Common
Stock shall be entitled to receive, when and as declared by the Board of
Directors, out of any assets of this corporation legally available therefor,
such dividends as may be declared from time to time by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of this corporation, the assets of this corporation shall be distributed as
provided in Section 2 of Subdivision (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of this corporation.
ARTICLE VI
The number of directors of this corporation shall be fixed from time
to time by a bylaw or amendment thereof duly adopted by the Board of Directors
or by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws
of this corporation shall so provide.
<PAGE>
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of this corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of this corporation.
ARTICLE IX
A director of this corporation shall not be personally liable to this
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to this corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporation action
further eliminating or limiting the personal liability of directors then the
liability of a director of this corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law as so
amended.
Any repeal or modification of the foregoing provisions of this Article
IX by the stockholders of this corporation shall not adversely affect any right
or protection of a director of this corporation existing at the time of such
repeal or modification.
ARTICLE X
To the fullest extent permitted by applicable law, this corporation is
also authorized to provide indemnification of (and advancement of expenses to)
such agents (and any other persons to which Delaware law permits this
corporation to provide indemnification) through Bylaw provisions, agreements
with such agents or other persons, vote of stockholders or disinterested
directors or otherwise, in excess of the indemnification and advancement
otherwise permitted by Section 145 of the General Corporation Law of the State
of Delaware, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to this
corporation, its stockholders, and others.
Any repeal or modification of any of the foregoing provisions of this
Article X shall not adversely affect any right or protection of a director,
officer, agent or other person existing at the time of, or increase the
liability of any director of this corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification.
ARTICLE XI
This corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
<PAGE>
ARTICLE XII
This corporation shall have perpetual existence.
* * *
<PAGE>
The foregoing Amended and Restated Certificate of Incorporation has
been duly adopted by this corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have executed this certificate on
January 15, 1999.
MPATH INTERACTIVE, INC.
By: /s/ Paul Matteucci
-------------------------
Paul Matteucci, President
By: /s/ Joshua Green
-------------------------
Joshua Green, Secretary
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
The undersigned Paul Matteucci and Joshua Green hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of this corporation.
TWO: The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on January 9, 1995. This
corporation was originally incorporated under the name of Amber Software, Inc.
THREE: The Certificate of Incorporation of this corporation shall be
amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is Mpath Interactive, Inc.
ARTICLE II
The address of the corporation's registered office in the State of Delaware
is 1013 Centre Road, City of Wilmington, County of New Castle. The name of the
corporation's registered agent at such address is Corporation Service Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE 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 Fifty-Two
Million (52,000,000) shares. Fifty Million (50,000,000) shares shall be Common
Stock, par value $0.00005 per share, and Two Million (2,000,000) shares shall be
Preferred Stock, par value $0.00005 per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The Preferred
-------------------------------------------------------
Stock authorized by this Amended and Restated Certificate of Incorporation may
be issued from time to time in one or more series. The Board of Directors is
hereby authorized, within the limitations and restrictions stated in this
Certificate of Incorporation, to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock, and the number of shares constituting any such series
and the designation
<PAGE>
thereof, or of 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 so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
ARTICLE V
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of this corporation.
ARTICLE VI
The number of directors of this corporation shall be fixed from time to
time by a bylaw or amendment thereof duly adopted by the Board of Directors or
by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws of
this corporation shall so provide. In the election of directors, each holder
of shares of any class or series of capital stock of this corporation shall be
entitled to one vote for each share held. No stockholder will be permitted to
cumulate votes at any election of directors.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of this corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of this corporation.
ARTICLE IX
If at any time this corporation shall have a class of stock registered
pursuant to the provisions of the Securities Exchange Act of 1934, for so long
as such class is so registered, any action by the stockholders of such class
must be taken at an annual or special meeting of stockholders and may not be
taken by written consent. This provision shall supersede any provision to the
contrary in the Bylaws of the corporation.
ARTICLE X
A director of this corporation shall not be personally liable to this
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to this corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporation action
further eliminating or limiting the personal liability of directors then
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<PAGE>
the liability of a director of this corporation shall be eliminated or limited
to the fullest extent permitted by the Delaware General Corporation Law as so
amended.
Any repeal or modification of the foregoing provisions of this Article IX
by the stockholders of this corporation shall not adversely affect any right or
protection of a director of this corporation existing at the time of such repeal
or modification.
ARTICLE XI
To the fullest extent permitted by applicable law, this corporation is also
authorized to provide indemnification of (and advancement of expenses to) such
agents (and any other persons to which Delaware law permits this corporation to
provide indemnification) through Bylaw provisions, agreements with such agents
or other persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by Section
145 of the General Corporation Law of the State of Delaware, subject only to
limits created by applicable Delaware law (statutory or non-statutory), with
respect to actions for breach of duty to this corporation, its stockholders, and
others.
Any repeal or modification of any of the foregoing provisions of this
Article X shall not adversely affect any right or protection of a director,
officer, agent or other person existing at the time of, or increase the
liability of any director of this corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification.
ARTICLE XII
This corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE XIII
This corporation shall have perpetual existence.
* * *
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<PAGE>
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by this corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have executed this certificate on
______ __, 1999.
MPATH INTERACTIVE, INC.
By: ________________________________________
Paul Matteucci, President
By: ________________________________________
Joshua Green, Secretary
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<PAGE>
EXHIBIT 3.3
BYLAWS
OF
MPATH INTERACTIVE, INC.
(formerly, Amber Software, Inc.)
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Dover, County of
Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held at such time and place as may be fixed from time to time by the
Board of Directors, and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held on such date and
time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting, at which they shall elect by a plurality
vote a board of directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than ten (10) nor more than sixty (60) days before the date of
the meeting.
<PAGE>
Section 4. The officer who has charge of the stock ledger of the corporation
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the certificate of incorporation,
may be called by the president and shall be called by the president or secretary
at the request in writing of the Chairman of the Board, a majority of the Board
of Directors or stockholders owning at least 10% of the entire capital stock of
the corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
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.
Section 7. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding and
entitled to vote there at, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present
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<PAGE>
or represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or represented
by proxy shall decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes or of the
certificate of incorporation or of these bylaws, a different vote is required,
in which case such express provision shall govern and control the decision of
such question.
Section 10. Unless otherwise provided in the certificate of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such 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. Prompt
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<PAGE>
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.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall initially be one (1). Thereafter, the number of directors shall be
determined by approval of the Board of Directors. Each director elected shall
hold office until his successor is elected and qualified. Directors need not be
stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors shall be filled by a majority of
the directors then in office, though less than a quorum, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute. 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 Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
Section 3. The business of the corporation shall be managed by or under the
direction of its board of directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these bylaws directed or required to be
exercised or done by the stockholders.
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<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings, both
regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected Board of Directors shall
be held at such time and place as shall be fixed by the vote of the stockholders
at the annual meeting and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to fix
the time or place of such first meeting of the newly elected Board of Directors,
or in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.
Section 6. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the president on
ten (10) days' notice to each director by mail or forty-eight (48) hours' notice
to each director either personally, by telegram, by facsimile or by courier
service; special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of two directors unless the
board consists of only one director, in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 8. At all meetings of the board a majority of the directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or the certificate of incorporation or these bylaws. If a quorum shall
not be present at any meeting of the Board of Directors,
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<PAGE>
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation or
these bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting,
if all members of the board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the board or committee.
Section 10. Unless otherwise restricted by the certificate of incorporation
or these bylaws, members of the Board of Directors, or any committee designated
by the Board of Directors, may participate in a meeting of the Board of
Directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a majority of
the whole board, designate one or more committees, each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board of
Directors, 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
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<PAGE>
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 amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the bylaws of the corporation; and, unless the resolution or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of incorporation
or these bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of incorporation
or these bylaws, any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of shares entitled to vote
at an election of directors.
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<PAGE>
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at such person's address as it appears on the records
of the corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail, by facsimile or by courier service. Notice to directors may also
be given by telegram.
Section 2. Whenever any notice is required to be given under the provisions
of the statutes or of the certificate of incorporation or of these bylaws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board of
Directors and shall be a president and a secretary. The Board of Directors may
elect from among its members a Chairman of the Board and a Vice Chairman of the
Board. The Board of Directors may also choose one or more vice-presidents,
assistant secretaries and assistant treasurers. Any number of offices may be
held by the same person, unless the certificate of incorporation or these bylaws
otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a president and a secretary and may choose
a vice president and a treasurer.
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<PAGE>
Section 3. The Board of Directors may appoint such other officers and agents
as it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the board.
Section 4. The salaries of all officers and agents of the corporation shall
be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all meetings
of the Board of Directors and of the stockholders at which he shall be present.
The Chairman of the Board shall have and may exercise such powers as are, from
time to time, assigned to such person by the Board and as may be provided by
law.
Section 7. In the absence of the Chairman of the Board, the Vice Chairman of
the Board, if any, shall preside at all meetings of the Board of Directors and
of the stockholders at which he shall be present. The Vice Chairman of the
Board shall have and may exercise such powers as are, from time to time,
assigned to such person by the Board and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENT
Section 8. The president shall be the chief executive officer of the
corporation unless the Board selects another individual as chief executive
officer, in which case such individual shall have all the authority set forth
below; and in the absence of the Chairman and Vice Chairman of the Board the
president shall preside at all meetings of the stockholders and the Board of
Directors; the president shall have general and active management of the
business
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<PAGE>
of the corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 9. The president shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 10. In the absence of the president or in the event of his inability
or refusal to act, the vice-president, if any, (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board of Directors
and all meetings of the stockholders and record all the proceedings of the
meetings of the corporation and of the Board of Directors in a book to be kept
for that purpose and shall perform like duties for the standing committees when
required. The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or president, under whose supervision such person shall be. The secretary shall
have custody of the corporate seal of the corporation and the secretary, or an
assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such assistant secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
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<PAGE>
Section 12. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of such person's inability or
refusal to act, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. The treasurer shall disburse the funds of the corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all such person's transactions as treasurer and of the financial condition of
the corporation.
Section 15. If required by the Board of Directors, the treasurer shall give
the corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of the office and for the restoration
to the corporation, in case of such person's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in such person's possession or under such person's control
belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the treasurer or in the
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event of his inability or refusal to act, perform the duties and exercise the
powers of the treasurer and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. 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 or
vice- chairman of the Board of Directors, or the president or a vice-president
and the treasurer or an assistant treasurer, or the secretary or an assistant
secretary of the corporation, certifying the number of shares owned by such
person in the corporation.
Certificates may be issued for partly paid shares and in such case upon the
face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of stock
or more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, 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.
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<PAGE>
Section 2. Any of or all the signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to 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. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum 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.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise
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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 shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any other action. 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.
REGISTERED STOCKHOLDERS
Section 6. 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 to hold liable for calls and assessments a person
registered on its books as the owner of shares and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. 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
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
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for such other purposes as the directors shall think conducive to the interest
of the corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation shall
be signed by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having inscribed
thereon the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized under the
laws of the State of Delaware, as those laws may be amended and supplemented
from time to time, indemnify any director made, or threatened to be made, a
party to an action or proceeding, whether criminal, civil, administrative or
investigative, by reason of being a director of the corporation or a predecessor
corporation or, at the corporation's request, a director or officer of another
corporation. The indemnification provided for in this Section 6 shall: (i) not
be deemed exclusive of any other rights to which those indemnified may be
entitled under any bylaw, agreement or vote of stockholders or disinterested
directors or otherwise, both as to action in their official capacities and as to
action in another capacity while holding such office, (ii) continue as to a
person who has ceased to be a director, and (iii) inure to the benefit of the
heirs, executors and administrators of such a person. The corporation's
obligation to provide
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indemnification under this Section 6 shall be offset to the extent of any other
source of indemnification or any otherwise applicable insurance coverage under a
policy maintained by the corporation or any other person.
Expenses incurred by a director of the corporation in defending a civil or
criminal action, suit or proceeding by reason of the fact that such person is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized by relevant sections
of the General Corporation Law of Delaware.
The foregoing provisions of this Section 6 shall be deemed to be a contract
between the corporation and each director who serves in such capacity at any
time while this bylaw is in effect, and any repeal or modification thereof shall
not affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any action, suit or proceeding theretofore
or thereafter brought based in whole or in part upon any such state of facts.
The Board of Directors in its discretion shall have power on behalf of the
corporation to indemnify any person, other than a director, made a party to any
action, suit or proceeding by reason of the fact that such person, his testator
or intestate, is or was an officer or employee of the corporation.
To assure indemnification under this Section 6 of all directors, officers and
employees who are determined by the corporation or otherwise to be or to have
been "fiduciaries" of any employee benefit plan of the corporation which may
exist from time to time, Section 145 of the General Corporation Law of Delaware
shall, for the purposes of this Section 6, be interpreted as follows: an "other
enterprise" shall be deemed to include such an employee benefit plan, including
without limitation, any plan of the corporation which is
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governed by the Act of Congress entitled "Employee Retirement Income Security
Act of 1974," as amended from time to time; the corporation shall be deemed to
have requested a person to serve an employee benefit plan where the performance
by such person of his duties to the corporation also imposes duties on, or
otherwise involves services by, such person to the plan or participants or
beneficiaries of the plan; excise taxes assessed on a person with respect to an
employee benefit plan pursuant to such Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new bylaws may
be adopted by the stockholders or by the Board of Directors, when such power is
conferred upon the Board of Directors by the certificate of incorporation at any
regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal bylaws
is conferred upon the Board of Directors by the certificate of incorporation it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal bylaws.
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EXHIBIT 3.4
BYLAWS
OF
MPATH INTERACTIVE, INC.
(formerly, Amber Software, Inc.)
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Dover, County of
Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held at such time and place as may be fixed from time to time by the
Board of Directors, and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held on such date and
time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting, at which they shall elect by a plurality
vote a board of directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than ten (10) nor more than sixty (60) days before the date of
the meeting.
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Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of the Chairman of the Board, a
majority of the Board of Directors or stockholders owning at least 50% of the
entire capital stock of the corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
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.
Section 7. Only persons who are nominated in accordance with the
procedures set forth in this Article II Section 7 shall be eligible for election
as directors. Nominations of persons for election to the Board of Directors of
the corporation may be made at a meeting of stockholders by or at the direction
of the Board of Directors or by any stockholder of the corporation entitled to
vote for the election of directors at the meeting who complies with the notice
procedures set forth in this Article II Section 6. Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the secretary of the corporation.
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the corporation (a) in the case
of an annual meeting, not less than sixty (60) days nor more than ninety (90)
days 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
changed by more than thirty (30) days from such anniversary date, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth (10th) day following the earlier of the day on which such
notice of the date of the meeting was mailed or such public disclosure was made;
and (b) in the case of a special meeting at which directors are to be elected,
not later than the close of business on the tenth (10th) day following the
earlier of the day on which notice of the date of the meeting was mailed or
public disclosure was made. Such stockholder's notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or re-
election as a director (i) the name, age, business address and residence address
of such person, (ii) the principal occupation or employment of such person,
(iii) the class and number of shares of the corporation which are beneficially
owned by such person and (iv) any other information relating to such person that
is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including, without
limitation, such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); and (b) as to the
stockholder giving the notice (i) the name and address, as they appear on the
corporation's books, of such stockholder, (ii) the class and number of shares of
the corporation which are beneficially owned by such stockholder and also which
are owned of record by such stockholder and (iii) a description of all
arrangements or understandings between such stockholder and each nominee and any
other person or persons (naming such person or persons) relating to the
nomination. At the request of the Board of Directors any person nominated by
the Board of Directors for election as a director shall furnish to the secretary
of the corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee.
No person shall be eligible for election as a director of the corporation
unless nominated in accordance with the procedures set forth in this Article II
Section 7. The Chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the Bylaws, and if he or she should so determine, he or
she shall so declare to the meeting and the defective nomination shall be
disregarded. Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Bylaw.
Section 8. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 9. The holders of a majority of the stock issued and outstanding
and entitled to vote there at, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or
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represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 10. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the certificate of incorporation or of these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 11. Unless otherwise provided in the certificate of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 12. Any action required to be taken at any annual or special
meeting of stockholders of the corporation, or any action which may be taken at
any annual or special meeting of such stockholders, must be taken at an annual
or special meeting of stockholders, and no such actions may be taken by written
consent of the stockholders.
ARTICLE III
DIRECTORS
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Section 1. The number of directors which shall constitute the whole board
shall initially be one (1). Thereafter, the number of directors shall be
determined by approval of the Board of Directors. Each director elected shall
hold office until his successor is elected and qualified. Directors need not be
stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors shall be filled by a majority of
the directors then in office, though less than a quorum, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced. If there
are no directors in office, then an election of directors may be held in the
manner provided by statute. 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 Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
Section 3. The business of the corporation shall be managed by or under the
direction of its board of directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these bylaws directed or required to be
exercised or done by the stockholders.
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MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected Board of Directors shall
be held at such time and place as shall be fixed by the vote of the stockholders
at the annual meeting and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to fix
the time or place of such first meeting of the newly elected Board of Directors,
or in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.
Section 6. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the president on
ten (10) days' notice to each director by mail or forty-eight (48) hours' notice
to each director either personally, by telegram, by facsimile or by courier
service; special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of two directors unless the
board consists of only one director, in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 8. At all meetings of the board a majority of the directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or the certificate of incorporation or these bylaws. If a quorum shall
not be present at any meeting of the Board of Directors, the
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directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation
or these bylaws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of incorporation
or these bylaws, members of the Board of Directors, or any committee designated
by the Board of Directors, may participate in a meeting of the Board of
Directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, 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
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the power or authority in reference to amending the certificate of
incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
bylaws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of incorporation
or these bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of incorporation
or these bylaws, any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of shares entitled to vote
at an election of directors.
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ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at such person's address as it appears on the records
of the corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail, by facsimile or by courier service. Notice to directors may also be
given by telegram.
Section 2. Whenever any notice is required to be given under the provisions
of the statutes or of the certificate of incorporation or of these bylaws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board of
Directors and shall be a president and a secretary. The Board of Directors may
elect from among its members a Chairman of the Board and a Vice Chairman of the
Board. The Board of Directors may also choose one or more vice-presidents,
assistant secretaries and assistant treasurers. Any number of offices may be
held by the same person, unless the certificate of incorporation or these bylaws
otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a president and a secretary and may choose
a vice president and a treasurer.
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Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board .
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the Board
of Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. Any vacancy occurring in any office of the corporation
shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. The Chairman of the Board shall have and may exercise such powers as
are, from time to time, assigned to such person by the Board and as may be
provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice Chairman
of the Board, if any, shall preside at all meetings of the Board of Directors
and of the stockholders at which he shall be present. The Vice Chairman of the
Board shall have and may exercise such powers as are, from time to time,
assigned to such person by the Board and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENT
Section 8. The president shall be the chief executive officer of the
corporation unless the Board selects another individual as chief executive
officer, in which case such individual shall have all the authority set forth
below; and in the absence of the Chairman and Vice Chairman of the Board the
president shall preside at all meetings of the stockholders and the Board of
Directors; the president shall have general and active management of the
business of the corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect.
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Section 9. The president shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the corporation.
Section 10. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if any, (or in the event there
be more than one vice-president, the vice-presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or president, under whose supervision such person shall be. The secretary shall
have custody of the corporate seal of the corporation and the secretary, or an
assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such assistant secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
Section 12. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors (or if
there be no such
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determination, then in the order of their election) shall, in the absence of the
secretary or in the event of such person's inability or refusal to act, perform
the duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. The treasurer shall disburse the funds of the corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all such person's transactions as treasurer and of the financial condition of
the corporation.
Section 15. If required by the Board of Directors, the treasurer shall give
the corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of the office and for the restoration
to the corporation, in case of such person's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in such person's possession or under such person's control
belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
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ARTICLE VI
CERTIFICATE OF STOCK
Section 1. 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 or vice-chairman of the Board of Directors, or the president or a vice-
president and the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the corporation, certifying the number of shares owned by
such person in the corporation.
Certificates may be issued for partly paid shares and in such case upon the
face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, 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.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before
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<PAGE>
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer, transfer agent or registrar at the date of
issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to 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. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum 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.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days
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<PAGE>
prior to any other action. 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.
REGISTERED STOCKHOLDERS
Section 6. 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 to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. 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
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
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
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<PAGE>
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized under
the laws of the State of Delaware, as those laws may be amended and supplemented
from time to time, indemnify any director made, or threatened to be made, a
party to an action or proceeding, whether criminal, civil, administrative or
investigative, by reason of being a director of the corporation or a predecessor
corporation or, at the corporation's request, a director or officer of another
corporation. The indemnification provided for in this Section 6 shall: (i) not
be deemed exclusive of any other rights to which those indemnified may be
entitled under any bylaw, agreement or vote of stockholders or disinterested
directors or otherwise, both as to action in their official capacities and as to
action in another capacity while holding such office, (ii) continue as to a
person who has ceased to be a director, and (iii) inure to the benefit of the
heirs, executors and administrators of such a person. The corporation's
obligation to provide indemnification under this Section 6 shall be offset to
the extent of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the corporation or any other
person.
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<PAGE>
Expenses incurred by a director of the corporation in defending a civil or
criminal action, suit or proceeding by reason of the fact that such person is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized by relevant sections
of the General Corporation Law of Delaware.
The foregoing provisions of this Section 6 shall be deemed to be a contract
between the corporation and each director who serves in such capacity at any
time while this bylaw is in effect, and any repeal or modification thereof shall
not affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any action, suit or proceeding theretofore
or thereafter brought based in whole or in part upon any such state of facts.
The Board of Directors in its discretion shall have power on behalf of the
corporation to indemnify any person, other than a director, made a party to any
action, suit or proceeding by reason of the fact that such person, his testator
or intestate, is or was an officer or employee of the corporation.
To assure indemnification under this Section 6 of all directors, officers
and employees who are determined by the corporation or otherwise to be or to
have been "fiduciaries" of any employee benefit plan of the corporation which
may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation
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<PAGE>
also imposes duties on, or otherwise involves services by, such person to the
plan or participants or beneficiaries of the plan; excise taxes assessed on a
person with respect to an employee benefit plan pursuant to such Act of Congress
shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new bylaws
may be adopted by the stockholders or by the Board of Directors, when such power
is conferred upon the Board of Directors by the certificate of incorporation at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal bylaws is
conferred upon the Board of Directors by the certificate of incorporation it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal bylaws.
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<PAGE>
EXHIBIT 4.2
MPATH INTERACTIVE, INC.
FOURTH AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
January 15, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Registration Rights................................................... 1
1.1 Definitions.................................................... 1
1.2 Request for Registration....................................... 3
1.3 Company Registration........................................... 4
1.4 Obligations of the Company..................................... 5
1.5 Furnish Information............................................ 6
1.6 Expenses of Demand Registration................................ 6
1.7 Expenses of Company Registration............................... 6
1.8 Underwriting Requirements...................................... 7
1.9 Delay of Registration.......................................... 8
1.10 Indemnification................................................ 8
1.11 Reports Under Securities Exchange Act of 1934.................. 10
1.12 Form S-3 Registration.......................................... 10
1.13 Assignment of Registration Rights.............................. 11
1.14 Limitations on Subsequent Registration Rights.................. 12
1.15 "Market Stand-Off" Agreement................................... 12
1.16 Termination of Registration Rights............................. 13
2. Covenants of the Company.............................................. 14
2.1 Delivery of Financial Statements............................... 14
2.2 Inspection..................................................... 15
2.3 Termination of Information and Inspection Covenants............ 15
2.4 Right of First Offer........................................... 15
2.5 Qualified Small Business Stock................................. 17
2.6 Employee Stock................................................. 17
2.7 Voting Agreement............................................... 17
2.8 IPO Allocation................................................. 17
3. Miscellaneous......................................................... 18
3.1 Successors and Assigns......................................... 18
3.2 Governing Law.................................................. 18
3.3 Counterparts................................................... 18
3.4 Titles and Subtitles........................................... 18
3.5 Notices........................................................ 18
3.6 Expenses....................................................... 18
3.7 Amendments and Waivers......................................... 18
3.8 Addition of PSI................................................ 19
3.9 Severability................................................... 19
3.10 Aggregation of Stock........................................... 19
3.11 Entire Agreement............................................... 19
Schedule A Schedule of Investors
</TABLE>
<PAGE>
FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
-------------------------------------------------------
THIS FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Agreement") is made as of the 15th day of January, 1999, by and among Mpath
Interactive, Inc., a Delaware corporation (the "Company"), the investors listed
on Schedule A hereto, each of which is herein referred to as an "Investor," and
Brian A. Apgar, Paul Matteucci, Brian Moriarty and Jeffrey Rothschild, each of
whom is herein referred to as a "Founder."
RECITALS
--------
WHEREAS, certain of the Investors (the "Existing Investors") hold shares of
the Company's Series A Preferred Stock and/or shares of Common Stock issued upon
conversion thereof (the "Series A Preferred Stock"), Series B Preferred Stock
and/or Common Stock issued upon conversion thereof (the "Series B Preferred
Stock"), Series C Preferred Stock and/or shares of Common Stock issued upon
conversion thereof (the "Series C Preferred Stock"), Series D Preferred Stock
and/or Common Stock issued upon conversion thereof (the "Series D Preferred
Stock") and/or Common Stock (the "Common Stock") and possess registration
rights, information rights and other rights pursuant to a Third Amended and
Restated Investors' Rights Agreement dated as of July 18, 1997 by and between
the Company and such Existing Investors (the "Prior Agreement");
WHEREAS, the Existing Investors are holders of at least 66-2/3% of the
"Registrable Securities" of the Company less "Founders Stock" (both as defined
in the Prior Agreement), and desire to terminate the Prior Agreement and to
accept the rights created pursuant hereto in lieu of the rights granted to them
under the Prior Agreement; and
WHEREAS, certain of the Investors are parties to the Series E Preferred
Stock Purchase Agreement of even date herewith between the Company and such
Investors (the "Purchase Agreement"), certain of the Company's and such
Investors' obligations under which are conditioned upon the execution and
delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the Existing Investors hereby agree that the Prior Agreement shall
be superseded and replaced in its entirety by this Agreement, and the parties
hereto further agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
-------------------
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents
<PAGE>
filed by the Company with the SEC, other than a form designated for use in
connection with the registration of securities to be issued in an acquisition by
the issuer.
(c) The term "Holder" means any person owning or having the right
to acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
(d) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(e) The term "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, (ii) the
Common Stock issued pursuant to that certain Series A Preferred Stock and Common
Stock Purchase Agreement dated January 23, 1995, between the Company and the
investors listed on Schedule A thereto, (iii) the Common Stock issuable or
issued upon conversion of the Series B Preferred Stock, (iv) the Common Stock
issuable or issued upon conversion of the Series C Preferred Stock, (v) the
Common Stock issuable or issued upon conversion of the Series C-1 Preferred
Stock issuable upon the occurrence of certain events as set forth in the
Company's Amended and Restated Certificate of Incorporation, (vi) the Common
Stock issued or issuable upon conversion of the Series D Preferred Stock, (vii)
the Common Stock issued or issuable upon conversion of the Series E Preferred
Stock, (viii) the Common Stock issuable or issued pursuant to warrants issued
pursuant to that certain Series D Preferred Stock and Common Stock Warrant
Purchase Agreement dated July 18, 1997 (the "Prior Purchase Agreement"), (ix)
the Common Stock issuable upon conversion of the Preferred Stock available to
each of Lighthouse Capital Partners, L.P and Performance Systems International,
Inc. ("PSI") upon exercise of the Warrants granted to those parties, (x) the
Common Stock issuable to Intel Corporation upon exercise of that certain Warrant
dated November 18, 1996, (xi) Common Stock issuable or issued pursuant to a
Warrant to purchase Common Stock issued to PSI, (xii) the shares of Common Stock
issued to the Founders (the "Founders' Stock"); provided, however, that for the
purposes of Section 1.2, 1.12 or 1.14 such shares of Founders' Stock shall not
be deemed Registrable Securities and the Founders shall not be deemed Holders,
and (xiii) 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 the shares referenced in (i)-(xii) above, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his rights under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding that are, and the number of shares of Common Stock issuable pursuant
to then exercisable or convertible securities that are, Registrable Securities.
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<PAGE>
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier
of (i) July 18, 2000, or (ii) six (6) months after the effective date of the
first registration statement for a public offering of securities of the Company
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction), a written request from the Holders
of a majority of the Registrable Securities then outstanding that the Company
file a registration statement under the Act covering the resale of at least ten
percent (10%) of the Registrable Securities then outstanding (or a lesser
percentage if the anticipated aggregate offering price, net of underwriting
discounts and commissions, would exceed $5,000,000), then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
(ii) use its best efforts to effect as soon as practicable,
and in any event within sixty (60) days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request to be registered, subject to the limitations of subsection 1.2(b),
within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 3.5.
(b) If the Holders initiating the registration request hereunder
("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 subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the Company. In such
event, the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders and the Company
in writing that marketing factors require a limitation of the number of shares
to be underwritten, then the Company shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto, and the number
of shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders thereof, including the Initiating Holders,
in proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder; provided, however, that the
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<PAGE>
number of shares of Registrable Securities to be included in such underwriting
shall not be reduced unless all other securities are first excluded entirely
from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish
to the Holders requesting a registration statement pursuant to this Section 1.2,
a certificate signed by the Chief Executive Officer 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 stockholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 120 days after receipt
of the request of the Initiating Holders; provided, however, that the Company
may not utilize this right more than once in any twelve (12)-month period.
(d) In addition, the Company shall not be obligated to effect,
or to take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) 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 1.12 below.
1.3 Company Registration. If (but without any obligation to do so)
--------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities, a registration relating to a transaction covered by Rule
145 under the Act, or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after delivery of such notice by the
Company in accordance with Section 3.5, the Company shall, subject to the
provisions of Section 1.8, cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.
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<PAGE>
1.4 Obligations of the Company. Whenever required under this Section
--------------------------
1 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 its best 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 a period of up to one hundred twenty (120)
days or until the distribution contemplated in the Registration Statement has
been completed.
(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
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 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 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 of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereto and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
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<PAGE>
(i) Use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
1.5 Furnish Information.
-------------------
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of distribution of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, by virtue of
subsection 1.5(a), 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 subsection 1.2(a) or subsection 1.12(b)(2),
whichever is applicable.
1.6 Expenses of Demand Registration. The Company shall bear and pay
-------------------------------
all expenses other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to Section
1.2, including (without limitation) all registration, filing and qualification
fees, printers' and accounting fees, fees and disbursements of counsel for the
Company and the fees and disbursements of one counsel for the selling Holders
selected by them; provided, however, that the Company shall not be required to
pay for any expenses of any registration proceeding begun pursuant to Section
1.2 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (in which
case all Participating Holders shall bear such expenses on a pro rata basis
according to the number of Registrable Securities of each participating Holder),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right
-6-
<PAGE>
may be assigned as provided in Section 1.13), including (without limitation) all
registration, filing, and qualification fees, printers' and accounting fees
relating or apportionable thereto and the fees and disbursements of one counsel
for the selling Holders selected by them, but excluding underwriting discounts
and commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company; provided, however, that
the Company will use its reasonable best efforts to negotiate the terms of such
underwriting agreement to provide that no Holder (other than a Founder) shall be
required to make any customary representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such Holder, its ownership of and title to the Registrable
Securities, and its intended method of distribution, and any liability of any
Holder (other than a Founder) to any underwriter or other person under such
underwriting agreement shall be limited to an amount equal to the net proceeds
that it derives from such registration. If the total amount of securities,
including Registrable Securities, requested by stockholders to be included in
such offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling stockholders according to the total amount of securities
entitled to be included therein owned by each selling stockholder or in such
other proportions as shall mutually be agreed to by such selling stockholders)
but in no event shall (i) the amount of securities of the selling Holders
included in the offering be reduced below twenty-five percent (25%) of the total
amount of securities included in such offering, unless such offering is the
initial public offering of the Company's securities in which case the selling
stockholders may be excluded entirely if the underwriters make the determination
described above and no other stockholder's securities are included, (ii)
notwithstanding (i) above, any shares being sold by a stockholder exercising a
demand registration right similar to that granted in Section 1.2 be excluded
from such offering or (iii) any securities held by the Founders or any person
who is not selling Registrable Securities be included if any securities held by
any selling Holder are excluded. For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder that is a Holder of
Registrable Securities and which is a partnership, corporation or limited
liability company, the partners, retired partners and stockholders of such
Holder, or the estates and family members of any such partners, members, retired
members and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "selling stockholder," and any
pro rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder," as defined in
this sentence.
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1.9 Delay of Registration. 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 1.
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
or the 1934 Act, 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"): (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 Act, the 1934 Act or any
rule or regulation promulgated under the Act, or the 1934 Act; and the Company
will pay to each such Holder, underwriter or controlling person, 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 subsection 1.10(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 or delayed), 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 any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act, 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 expressly for use in connection
with such registration; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 1.10(b), in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected
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<PAGE>
without the consent of the Holder, which consent shall not be unreasonably
withheld or delayed; provided further, that, in no event shall any indemnity
under this subsection 1.10(b) exceed the net proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 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 1.10, 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
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate 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 prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, 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 1.10.
(d) If the indemnification provided for in this Section 1.10 is
for any reason unavailable or insufficient to hold harmless an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
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 statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined 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. Notwithstanding the foregoing, in no event shall any
contribution under this subsection 1.10(d) by a selling Holder exceed the net
proceeds from the offering received by such Holder.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
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<PAGE>
(f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
following the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days following the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 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; 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
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<PAGE>
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 1.12: (1) if Form S-3 is not available for such offering by the Holders;
(2) if the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public of less than $500,000; (3) if the Company shall furnish to the Holders a
certificate signed by the President 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 stockholders 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 1.12; provided, however, that the Company shall not utilize
this right more than once in any twelve (12) month period; (4) if the Company
has, within the twelve (12) month period preceding the date of such request,
already effected two registrations on Form S-3 for the Holders pursuant to this
Section 1.12; or (5) 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
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 and keep such registration statement
effective for up to one hundred eighty (180) days or until the distribution
contemplated in the registration statement has been completed. All expenses,
other than underwriting discounts, commissions or other selling expenses,
incurred in connection with a registration requested pursuant to Section 1.12,
including (without limitation) all registration, filing, qualification,
printers' and accounting fees and the reasonable fees and disbursements of one
counsel for the selling Holder or Holders and counsel for the Company, shall be
borne by the Company. Registrations effected pursuant to this Section 1.12 shall
not be counted as demands for registration or registrations effected pursuant to
Sections 1.2 or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 200,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided: (a) the Company is, within a reasonable time after
such transfer, furnished with 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; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.15 below;
(c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act, (d) the CSK Entities on Schedule A shall
be treated as a single Investor, all of which together, subject to the 200,000
share requirement, shall be deemed a "Major Investor" and such 200,000 share
minimum shall
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<PAGE>
not apply to transfers of Registrable Securities among the entities indicated as
CSK Entities on Schedule A or their affiliates, (e) Technology Crossover
Ventures II. L.P. and its affiliated funds indicated on Schedule A hereto shall
be treated as a single Investor, all of which together shall, subject to the
200,000 share requirement, be deemed a "Major Investor" and (f) Cox Technology
Investments, Inc., Cox Enterprises, Inc. and its affiliates (collectively,
"Cox") shall be treated as a single investor, all of which together shall,
subject to the 200,000 shares requirement, be deemed a "Major Investor" and Cox
shall have the right to assign its registrations rights hereunder to any of its
affiliates; provided, however, that each of Cox and its affiliates agree to be
bound by the terms and conditions of this Agreement, including, without
limitation the terms and conditions set forth in this Section 1.13. For the
purposes of determining the number of shares of Registrable Securities held by a
transferee or assignee, the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership (including
spouses and ancestors, lineal descendants and siblings of such partners or
spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership; provided that
all assignees and transferees who would not qualify individually for assignment
of registration rights shall have a single attorney-in-fact for the purpose of
exercising any rights, receiving notices or taking any action under this Section
1.
1.14 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of at least sixty-six and two-thirds percent (66 2/3%) of
the outstanding Preferred Stock (or Common Stock issued upon conversion of the
Preferred Stock), enter into any agreement with any holder or prospective holder
of any securities of the Company which (a) would allow such holder or
prospective holder to include such securities in any registration filed under
Section 1.2 or Section 1.3 hereof, unless under the terms of such agreement,
such holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of his securities will not
reduce the amount of the Registrable Securities of the Holders which is
included, (b) would allow such holder or prospective holder to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2 or (c) would grant registration
rights to such holder or prospective holder substantially similar to those
granted hereunder that are on a parity with, superior or prior to the
registration rights granted hereunder.
1.15 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
---------------------------
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the date of the first
sale to the public pursuant to a registration statement of the Company filed
under the Act, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any Registrable Securities held by it at any time during such period
except common stock included in such registration; provided, however, that:
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<PAGE>
(a) such agreement shall be applicable only to the first
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company, all one percent
(1%) stockholders and all other persons with registration rights (whether or not
pursuant to this Agreement) are subject to similar restrictions;
(c) such market stand-off time period shall not exceed one
hundred and eighty (180) days; and
(d) any discretionary waiver or termination of the restrictions
of such agreements by the Company or the representatives of the underwriters
shall apply to all persons subject to such agreements pro rata based on the
number of shares of Registrable Securities held by such persons.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 1.15 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms which may be promulgated in the future.
1.16 Termination of Registration Rights.
----------------------------------
(a) No Holder shall be entitled to exercise any right provided
for in this Section 1 after five (5) years following the closing of the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with a firm commitment underwritten offering of its securities
to the general public resulting in aggregate net proceeds to the Company of more
than $15,000,000 at a public offering price per share (prior to underwriting
discounts and commissions) of at least $10.80 (as adjusted to reflect subsequent
stock dividends, stock splits, combinations or recapitalizations).
(b) In addition, the right of any Holder to request registration
or inclusion in any registration pursuant to Section 1.3 shall terminate on the
closing of the first Company-initiated registered public offering of Common
Stock of the Company if all shares of Registrable Securities held or entitled to
be held upon conversion by such Holder may immediately be sold under Rule 144
during any ninety (90)-day period, or on such date after the closing of the
first Company-initiated registered public offering of Common Stock of the
Company as all shares of Registrable Securities held or entitled to be held upon
conversion by such Holder may immediately be sold under Rule 144 during any
ninety (90)-day period; provided, however, that the provisions of this Section
1.16(b) shall not apply to any Holder who
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<PAGE>
owns more than 500,000 shares (as adjusted to reflect subsequent stock
dividends, stock splits, combinations or recapitalizations) of the Company's
outstanding stock until such time as such Holder owns less than 500,000 shares
(as adjusted to reflect subsequent stock dividends, stock splits, combinations
or recapitalizations) of the outstanding stock of the Company.
(c) The registration rights granted to a Founder shall terminate
as to such Founder at such time as such Founder is no longer providing services
to the Company as a employee, director or consultant.
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. The Company shall deliver to
--------------------------------
each Investor that owns more than 200,000 shares (as adjusted to reflect
subsequent stock dividends, stock splits, combinations or recapitalizations) of
the Company's Registrable Securities (a "Major Investor"):
(a) as soon as practicable, but in any event within thirty (30)
days prior to the end of each fiscal year, a budget and business plan for the
next fiscal year, which budget and business plan shall (i) be prepared in
reasonable detail and (ii) provide information on a monthly basis (the "Annual
Plan");
(b) as soon as practicable, but in any event within thirty (30)
days of the end of each month, (i) an unaudited income statement and schedule as
to the sources and application of funds and balance sheet for and as of the end
of such month, in reasonable detail and (ii) a report comparing the Company's
monthly results to the Annual Plan and to the comparable period in the prior
year;
(c) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited profit or loss statement, a statement of cash
flows for such fiscal quarter and an unaudited balance sheet as of the end of
such fiscal quarter;
(d) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income statement for
such fiscal year, a balance sheet of the Company and statement of stockholder's
equity as of the end of such year, and a schedule as to the sources and
applications of funds for such year, such financial statements to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles ("gaap"), and audited and certified by independent public accountants
of nationally recognized standing selected by the Company;
(e) with respect to the financial statements called for in
subsections (b) and (d) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with gaap consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by gaap) and fairly present the financial condition of the Company and
its results of operations for the period specified, subject to year-end audit
adjustment;
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<PAGE>
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as a Major Investor may
from time to time request, provided, however, that the Company shall not be
obligated under this subsection (e) or any other subsection of Section 2.1 to
provide information which it deems in good faith to be a trade secret or similar
confidential information.
2.2 Inspection. The Company shall permit each Major Investor, at its
----------
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by such
Major Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 2.2 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
2.3 Termination of Information and Inspection Covenants. The
---------------------------------------------------
covenants set forth in subsections 2.1(a), (b), (d) and (e) and Section 2.2
shall terminate as to Investors and be of no further force or effect upon the
earlier to occur of (a) the completion of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
offering of its securities to the general public and (b) when the Company first
becomes subject to the periodic reporting requirements of Sections 13(a) or
15(d) of the 1934 Act, whichever event shall first occur.
2.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.4, the Company hereby grants to each Major Investor
a right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). For purposes of this Section 2.4, Major Investor
includes any general partners and affiliates of a Major Investor. A Major
Investor shall be entitled to apportion the right of first offer hereby granted
it among itself and its partners and affiliates in such proportions as it deems
appropriate.
Each time the Company proposes to offer and sell for cash any shares
of, or securities convertible into or exercisable for any shares of, any class
of its capital stock ("Shares"), the Company shall first make an offering of
such Shares to each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) By written notification received by the Company, within
twenty (20) calendar days after giving of the Notice, each Major Investor may
elect to purchase or obtain, at the price and on the terms specified in the
Notice, up to that portion of such Shares that equals the proportion that the
number of shares of Common Stock issued and held, or issuable upon conversion
and exercise of all convertible or exercisable securities then held, by such
Major Investor bears to the total number of shares of Common Stock then
outstanding (assuming full conversion and exercise of all convertible or
exercisable securities) (such Major Investor's "Pro Rata Share"). The Company
shall promptly, in writing, inform each Major Investor that
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<PAGE>
purchases all the shares available to it ("Fully-Exercising Investor") of any
other Major Investor's failure to do likewise. During the ten (10)-day period
commencing after receipt of such information, each Fully-Exercising Investor
shall be entitled to obtain that portion of the Shares for which Major Investors
were entitled to subscribe but which were not subscribed for by the Major
Investors that is equal to the proportion that the number of shares of Common
Stock issued and held, or issuable upon conversion and exercise of all
convertible or exercisable securities then held, by such Fully-Exercising
Investor bears to the total number of shares of Common Stock then outstanding
(assuming full conversion and exercise of all convertible or exercisable
securities).
(c) If all Shares referred to in the Notice are not elected to
be obtained as provided in subsection 2.4(b) hereof, the Company may, during the
thirty (30)-day period following the expiration of the period provided in
subsection 2.4(b) hereof, offer the remaining unsubscribed portion of such
Shares to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than, those specified in the Notice. If the Company
does not enter into an agreement for the sale of the Shares within such period,
or if such agreement is not consummated within thirty (30) days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
Shares shall not be offered unless first reoffered to the Major Investors in
accordance herewith.
(d) The right of first offer in this Section 2.4 shall not be
applicable (i) to the issuance or sale of up to 3,793,000 shares of Common Stock
(or options therefor) to employees or directors of, or consultants to, the
Company pursuant to stock plans or agreements approved by the Board of
Directors, for the primary purpose of soliciting or retaining their services on
behalf of the Company, (ii) after consummation of a bona fide, firmly
underwritten public offering of shares of Common Stock, registered under the Act
pursuant to a registration statement on Form S-1, (iii) the issuance of
securities pursuant to the conversion or exercise of convertible or exercisable
securities, (iv) the issuance of securities in connection with a bona fide
business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise unanimously approved by
the Company's Board of Directors or (v) to issuances of stock, including for
purposes of such calculation any warrants or other securities or rights to
purchase or receive shares of Common Stock to persons or entities with which the
Company has business relationships not for the primary purpose of equity
financing approved by four (4) members of the Company's Board of Directors or,
if a lesser number of individuals are serving on the Board of Directors, such
lesser number, up to an aggregate of four percent (4%) of the total outstanding
securities of the Company on a fully-diluted basis in any twelve-month period.
(e) The right of first offer set forth in this Section 2.4 may
not be assigned or transferred, except to the extent provided in the first
paragraph of this Section 2.4.
(f) The Existing Investors hereby waive their rights of first
offer, including the notice provisions thereof, set forth in Section 2.4 of the
Prior Agreement, with respect to the issuance of the Series E Preferred Stock
issued pursuant to the Purchase Agreement.
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2.5 Qualified Small Business Stock. The Company shall use
-----------------------------
commercially reasonable efforts to cause shares of Series D Preferred Stock, the
Common Stock issued or issuable upon conversion of the Series D Preferred Stock,
the Common Stock issued upon exercise of the warrants issued pursuant to the
Prior Purchase Agreement, the shares of Series E Preferred Stock issued pursuant
to the Purchase Agreement and the Common Stock issued or issuable upon
conversion of the Series E Preferred Stock to qualify as "qualified small
business stock" as defined in Section 1202(c) of the Internal Revenue Code of
1986, as amended (the "Code"). The Company shall submit to its stockholders
(including the Investors) and to 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 ten (10) days after any Investor has delivered
to the Company a written request therefor, the Company shall deliver to such
Investor a written statement informing the Investor whether, to the Company's
best knowledge, such Investor's interest in the Company constitutes "qualified
small business stock" as defined in Section 1202(c) of the Code. The Company's
obligation to furnish the written statement pursuant to this Section 2.5 shall
continue notwithstanding the fact that a class of the Company's stock may be
traded on an established securities market.
2.6 Employee Stock. With respect to any shares issued or options or
--------------
rights granted, unless the Board of Directors of the Company unanimously agrees
otherwise, the Company shall cause each Founder, member of the Board of
Directors and employee of the Company to enter into an agreement (i) providing
for vesting of such shares or options or rights over forty-eight (48) months,
with no shares or options or rights being vested for twelve (12) months from the
date of issuance or grant, as the case may be, at which time 12/48ths of the
shares or options or rights shall be vested; (ii) providing for the repurchase
price in the event the Holder's employment with or service to the Company
terminates; (iii) under which the Holder agrees to a market standoff requested
by the Company or the underwriters of any public offering of the Company's
securities, substantially as set forth in Section 1.15; (iv) providing for a
right of first refusal in favor of the Company with respect to both vested and
unvested shares; and (v) providing for acceleration of vesting of such shares or
options or rights upon the involuntary termination of employment subsequent to a
change of control of the Company.
2.7 Voting Agreement. The Company shall cause each person acquiring
----------------
shares of the Company's stock in an amount equal to or greater than one percent
(1%) of the outstanding Common Stock of the Company (on a fully-diluted, as
converted and as exercised basis, after giving effect to such acquisition) to
enter into a Voting Agreement in the form attached to the Purchase Agreement as
Exhibit D as a condition to such person acquiring such shares unless the Board
of Directors unanimously agrees otherwise.
2.8 IPO Allocation. In the event of a bona fide, firm commitment
--------------
underwritten initial public offering of the capital stock of the Company (the
"IPO"), the Company shall use commercially reasonable best efforts to require
that the managing underwriters of the IPO establish a directed share program
(the "Program") in connection with the IPO. The Program shall consist of at
least that number of shares of capital stock (the "Program Shares") determined
by dividing $3,000,000 by the initial price to public set forth on the cover
page of the final prospectus distributed in connection with the IPO (the "IPO
Price").
-17-
<PAGE>
The Company shall cause the managing underwriters to give priority to the
holders of the Company's Series D Preferred Stock (or Common Stock issuable upon
conversion thereof) (the "Series D Holders" as applicable) with respect to the
Program Shares in allocating the shares available for purchase in the Program.
The Series D Holders shall have the option, but not the obligation, to purchase
all or any portion of the Program Shares at the IPO Price.
3. Miscellaneous.
-------------
3.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Delaware as applied to agreements among
California residents entered into and to be performed entirely within Delaware.
3.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon the
fifth day following deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties.
3.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement 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
sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities then
outstanding, not including Founders' Stock; provided that if such amendment has
-18-
<PAGE>
the effect of affecting the Founders' Stock (i) in a manner different than
securities issued to the Investors and (ii) in a manner adverse to the interests
of the holders of the Founders' Stock, then such amendment shall require the
consent of the holder or holders of a majority of the Founders' Stock. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any Registrable Securities then outstanding, each future
holder of all such Registrable Securities, and the Company.
3.8 Addition of PSI. Notwithstanding Section 3.7 above, the Company
---------------
shall have the right to add PSI as a party to this Agreement without any further
action on the part of the Investors, the Founders or any other holders of
Registrable Securities. Upon PSI's execution of this Agreement, PSI shall
thereafter be added to Schedule A and shall be granted all the rights and
privileges, and be subject to all of the terms and conditions, of an Investor
under this Agreement.
3.9 Severability. If one or more provisions of this Agreement are
------------
held to be invalid, illegal or unenforceable, it shall, to the extent possible,
be modified in such a manner as to be valid, legal and enforceable but so as to
most nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be excluded from this Agreement and the balance
of the Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
3.10 Aggregation of Stock. All shares of Registrable Securities held
--------------------
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.11 Entire Agreement. This Agreement (including the Schedules
----------------
hereto) constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
[REST OF PAGE LEFT INTENTIONALLY BLANK]
-19-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MPATH INTERACTIVE, INC.
By: /s/ Paul Matteucci
-------------------------------------
Paul Matteucci, President
Address: 665 Clyde Avenue
Mountain View, CA 94043
INVESTORS:
Intel Corporation
TCV II, V.O.F.
Technology Crossover Ventures II, L.P.
TCV II (Q), L.P.
TCV II Strategic Partners, L.P.
Technology Crossover Ventures II, C.V.
Cox Technology Investments, Inc.
Electronic Arts, Inc.
Institutional Venture Partners VI
Institutional Venture Management VI
IVP Founders Fund I, L.P.
Accel IV L.P.
Accel Investors `94 L.P.
Accel Keiretsu L.P.
Ellmore C. Patterson Partners
Sutter Hill Ventures, a California Limited Partnership
Tow Partners, a California Limited Partnership
Ronald L. Perkins
David L. Anderson
G. Leonard Baker, Jr.
William H. Younger, Jr., Trustee of The Younger Living Trust U/A/D 01/25/95
Tench Coxe
Paul G. Lego
Paul G. Koontz
Anvest, L.P.
Wells Fargo Bank, Trustee SHV M/P/T FBO Sherryl W. Hossack
CSK Corporation*
CSK Venture Capital Co., Ltd.*
CSK-1(A) Investment Fund*
CSK-1(B) Investment Fund*
<PAGE>
CSK-2 Investment Fund*
Viacom International, Inc.
Andrew Swett
Ed C. Frankenberg and Nicole Mathison, as Joint Tenants
Kurt D. Baumann
Mindsphere, Inc.
Insearch Management Consultants, Inc.
Don Thorson
Richard D. Stubblefield
Chris O'Meara
Amy Jo Kim
Martin L. Schoffstall
Saunders Holdings, L.P.
Dave Jevans
Tiffany Fuller
Joe F. Britt, Jr.
Brian Topping
Stacey Chaney
Andrew T. McFadden
Teddy Zee
WS Investments 94B
Phillip R. Altinger
Alison Locke
David S. Lundeen
Timothy Cotter
Yair Landau
Ayres-Plant Family Trust U/D/T 3/12/92
Robert Riccomini
Nissho Iwai Corporation
Hallberg & Schireson
John T. McDonald
Adam Grosser
Lynn Heublein
Konstantin Othmer
Steve Roskowski
Steve Perlman
Lee Treymane
Doug Camplejohn
*Referred to collectively as the CSK Entities.
COMMON STOCKHOLDERS:
Brian A. Apgar
Paul Matteucci
Brian Moriarty
Jeffrey Rothschild
<PAGE>
EXHIBIT 4.3
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE
HEREUNDER HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED ("THE ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO SUCH WARRANT OR SECURITIES
UNDER THE ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER THE ACT.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS
WARRANT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA OR ANY OTHER STATE AND
THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SUCH SECURITIES IS
EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE OR SUCH PROVISIONS OF THE
CORPORATIONS CODE OF ANY SUCH OTHER STATE.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON
PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE `GEORGIA SECURITIES
ACT OF 1973,' AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN
EFFECTIVE REGISTRATION UNDER SUCH ACT.
COMMON STOCK PURCHASE WARRANT
MPATH INTERACTIVE, INC.
Date Issued:
- ------------
1. Issuance. This Warrant ("Warrant") is issued to _______________
-------- -------
("Purchaser"), by Mpath Interactive, Inc., a Delaware corporation (the
---------
"Company"), pursuant to that certain Series D Preferred Stock and Common Stock
-------
Warrant Purchase Agreement dated July 18, 1997, by and among the Company,
Purchaser and the investors listed on Schedule A thereto (the "Agreement") at an
---------
issuance price of $.001 per each share of Common Stock subject to the Warrant.
2. Purchase Price; Number of Shares.
--------------------------------
(a) Subject to the terms and conditions set forth herein, the
registered holder of this Warrant (the "Holder") is entitled upon surrender of
------
this Warrant with the Notice of Exercise attached hereto as Exhibit A duly
------------------ ---------
executed, at the principal office of the Company, to purchase from the Company
at a price per share (the "Purchase Price") of $5.40 (subject to adjustment as
--------------
provided herein), up to _______ fully paid and nonassessable shares of common
stock, $0.00005 par value, of the Company (the "Common Stock").
------------
<PAGE>
(b) Until such time as this Warrant is exercised in full or expires,
the Purchase Price and the number of shares of Common Stock issuable upon
exercise of this Warrant are subject to adjustment as hereinafter provided. The
person or persons in whose name or names any certificate representing shares of
Common Stock is issued hereunder shall be deemed to have become the holder of
record of the shares represented thereby as at the close of business on the date
this Warrant is exercised with respect to such shares, whether or not the
transfer books of the Company shall be closed.
3. Payment of Purchase Price. The Purchase Price for this Warrant (or the
-------------------------
portion thereof being exercised) may be paid (i) in cash or by check, (ii) by
the surrender by the Holder to the Company of all or any portion of any
promissory notes or other obligations issued by the Company, with all such notes
and obligations so surrendered being credited against the Purchase Price in an
amount equal to the principal amount thereof plus accrued interest to the date
of surrender, or (iii) by any combination of the foregoing.
4. Net Issue Exercise.
------------------
(a) In lieu of remitting the Purchase Price for this Warrant as set
forth in Section 3 above, the Holder may elect to receive shares equal to the
value of this Warrant (or the portion thereof being exercised) less the
applicable Purchase Price, in which event the Company shall issue to the Holder
a number of shares of Common Stock computed using the following formula:
X = Y(A - B)
--------
A
Where X = The number of shares of Common Stock to be issued to the Holder.
Y = the number of shares of Common Stock purchasable under this
Warrant (or such portion as is being exercised).
A = the Fair Market Value (as defined below) of one share of such
Common Stock.
B = the Purchase Price (as adjusted to the date of such calculation).
(b) For purposes of this Section 4, "Fair Market Value" of a share of
Common Stock as of a particular date (the "Determination Date") shall mean:
(i) If the Warrant is exercised in connection with and
contingent upon a Public Offering (as defined below), and if the Company's
Registration Statement relating to such Public Offering ("Registration
Statement") has been declared effective by the Securities and Exchange
Commission, then the initial "Price to Public" specified in the final prospectus
with respect to such offering.
<PAGE>
(ii) If the Warrant is not exercised in connection with and
contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange, the Fair Market
Value of the Common Stock shall be deemed to be the average of the closing
prices of the Common Stock on such exchange over the five-day period ending one
business day prior to the Determination Date or, if less, such number of days as
the Common Stock has been traded on such exchange;
(B) If traded over-the-counter, the Fair Market Value of the
Common Stock shall be deemed to be the average of the closing bid prices of the
Common Stock over the five-day period ending one business day prior to the
Determination Date or, if less, such number of days as the Common Stock has been
traded over-the-counter; and
(C) If there is no public market for the Common Stock, then
Fair Market Value shall be determined by mutual agreement of the holders of 75%
in interest in the Warrants (as defined in the Agreement) and the Company.
5. Partial Exercise. This Warrant may be exercised in part, and the
----------------
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which this
Warrant shall not have been exercised pursuant to the payment terms set forth in
Section 3 or Section 4 of this Warrant.
6. Fractional Shares. In no event shall any fractional share of Common
-----------------
Stock be issued upon any exercise of the Warrants. In lieu of any fractional
share to which the Holder would otherwise be entitled, the Company will pay cash
equal to the product of such fraction multiplied by the Common Stock's Fair
Market Value (as defined in Section 4(b)) as of the date of exercise.
7. Reserved Shares; Valid Issuance. The Company covenants that it will at
-------------------------------
all times from and after the date hereof reserve and keep available such number
of its authorized shares of Common Stock, free from all preemptive or similar
rights therein, as will be sufficient to permit the exercise of this Warrant in
full. The Company further covenants that such shares as may be issued pursuant
to such exercise will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
8. Exercisability; Expiration.
--------------------------
(a) This Warrant shall become exercisable as to one-half (1/2) of the
shares subject to this Warrant (the "First Tranche Shares") upon the earlier to
--------------------
occur of (i) the closing of a "Sale of the Company" (as defined below) wherein
the consideration per share received by the Company as measured on a "Fully-
Diluted Basis" (as defined below) is less than the "Trigger Price" (as defined
below), and (ii) 24 months following the date of the Closing (as defined in the
Agreement).
(b) The remaining shares subject to this Warrant (the "Second Tranche
--------------
Shares") shall be exercisable upon the earlier to occur of (i) a Sale of the
- ------
Company wherein the
<PAGE>
consideration per share received by the Company as measured on a Fully-Diluted
Basis is less than the Trigger Price and (ii) 30 months following the date of
the Closing.
(c) This Warrant shall expire and no longer be exercisable as to the
First Tranche Shares upon: (i) the closing of a "Qualified IPO" (as defined
below), (ii) a Sale of the Company wherein the consideration per share received
by the Company as measured on a Fully-Diluted Basis is greater than or equal to
the Trigger Price and (iii) the closing of a "Qualified Financing" (as defined
below); provided, that such event in (i), (ii) or (iii) occurs within 24 months
following the date of the Closing.
(d) This Warrant shall expire and no longer be exercisable as to the
Second Tranche Shares upon: (i) the closing of a Qualified IPO, (ii) a Sale of
the Company wherein the consideration per share received by the Company as
measured on a Fully-Diluted Basis is greater than or equal to the Trigger Price
and (iii) the closing of a Qualified Financing; provided, that such event in
(i), (ii) or (iii) occurs within 30 months following the date of the Closing.
(e) A "Sale of the Company" shall mean a consolidation or merger of
the Company with or into any other corporation or corporations that results in a
change of greater than 50% of the voting control of the Company, or a sale,
conveyance or disposition (in a single transaction or a series of related
transactions) of all or substantially all of the assets of the Company or the
effectuation by the Company of a transaction or series of related transactions
in which more than 50% of the voting power of the Company is disposed of.
(f) A "Qualified IPO" shall mean the issuance and sale of shares of
the Common Stock of the Company in its first bona fide firm commitment
underwritten public offering pursuant to a registration statement on Form S-l
under the Securities Act of 1933, as amended, the public offering price per
share of which is not less than the Trigger Price and having aggregate net
proceeds to the Company of not less than $15,000,000.
(g) A "Qualified Financing" shall mean a private financing of the
Company the price per share of which on a Fully-Diluted Basis is not less than
the Trigger Price and having aggregate net proceeds to the Company of not less
than $10,000,000.
(h) "Fully-Diluted Basis" with respect to the shares of the Company
shall mean taking into account all outstanding securities of the Company as
measured on an as-converted, as-exercised basis, without taking into account
vesting provisions or other similar rights of repurchase on behalf of the
Company.
(i) "Trigger Price" shall mean $10.80 as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like which result in
any adjustment to the conversion price of the Company's Series D Preferred
Stock.
(j) The value of the consideration per share, if other than cash,
shall be deemed its fair market value. Except as provided in Section 4(b) with
respect to a net issue exercise, any securities shall be valued as follows:
<PAGE>
(A) Securities not subject to investment letter or other similar
restrictions on free marketability:
(1) If traded on a securities exchange or through the Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the thirty-day period ending
three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty-day period ending three (3) days prior to the
closing; and
(3) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by the Board of Directors
of the Company and the holders of at least sixty-six and two-thirds percent (66
2/3%) of the voting power of all then outstanding shares of the Preferred Stock
of the Company.
(B) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a stockholder's status as an affiliate or former
affiliate) shall be to make an appropriate discount from the market value
determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as mutually determined by the Board of Directors of the
Company and the holders of at least sixty-six and two-thirds percent (66 2/3%)
of the voting power of all then outstanding shares of Preferred Stock of the
Company.
(j) This Warrant shall expire and no longer be exercisable as to the
First Tranche Shares (unless sooner terminated pursuant to Section 8(c) above)
five years after the date this Warrant becomes exercisable as to the First
Tranche Shares, if at all, pursuant to Section 8(a) above.
(k) This Warrant shall expire and no longer be exercisable as to the
Second Tranche Shares (unless sooner terminated pursuant to Section 8(d) above)
five years after the date this Warrant becomes exercisable as to the Second
Tranche Shares, if at all, pursuant to Section 8(b) above.
9. Stock Splits, Dividends and Other Issuances.
-------------------------------------------
(a) Splits, Subdivisions or Combination of Shares. If the Company at
---------------------------------------------
any time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the Common Stock, the Purchase Price shall forthwith be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(b) Adjustment for Dividends or Distributions of Stock or Other
-----------------------------------------------------------
Securities or Property. If the Company at any time while this Warrant is
- ----------------------
outstanding and unexpired shall make or issue, or shall fix a record date for
the determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the shares of Common Stock issuable upon exercise
of this Warrant (or any shares of stock or other securities at the time issuable
upon exercise of the
<PAGE>
Warrant) payable in (i) securities of the Company or (ii) assets (excluding cash
dividends paid or payable solely out of retained earnings), then, in each such
case, the Holder of this Warrant on exercise hereof at any time after the
consummation, effective date or record date of such dividend or other
distribution, shall receive, in addition to such shares of Common Stock (or such
other stock or securities) issuable on such exercise prior to such date, and
without the payment of additional consideration therefor, the securities or such
other assets of the Company to which such Holder would have been entitled upon
such date if such Holder had exercised this Warrant on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock available
by it as aforesaid during such period giving effect to all adjustments called
for by this Section 9(b).
(c) Certain Events. If at any time while this Warrant is outstanding
--------------
and unexpired (i) any event occurs of a type that would have an effect on the
rights granted under this Warrant similar to the effect of any event described
by the other provisions of Section 9 or Section 10 and (ii) such event is not
expressly provided for by such other provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights and other rights
with equity features), then an appropriate adjustment in the Purchase Price and
the number of shares of Common Stock obtainable upon exercise of this Warrant so
as to protect the rights of the Holder shall be made.
(d) Adjustment of Number of Shares. Upon each adjustment of the
------------------------------
Purchase Price pursuant to Sections 9 (other than clause (b) thereof) or 10
hereof, the number of shares of Common Stock purchasable hereunder shall be
adjusted by multiplying the number of shares purchasable immediately prior to
such adjustment in the Purchase Price by a fraction (i) the numerator of which
shall be the Purchase Price immediately prior to such adjustment and (ii) the
denominator of which shall be the Purchase Price immediately thereafter, and
then rounding downward to the nearest whole share.
10. Mergers and Reclassifications. If, after the date hereof the Company
-----------------------------
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Common Stock which might have been purchased by the Holder
immediately prior to such Reorganization, and in any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
to the end that the provisions hereof (including without limitation, provisions
for the adjustment of the Purchase Price and the number of shares issuable
hereunder) shall thereafter be applicable in relation to any shares of stock or
other securities and property thereafter deliverable upon exercise hereof. For
the purposes of this Section 10, the term "Reorganization" shall include without
--------------
limitation any reclassification, capital reorganization or change of the Common
Stock (other than as a result of a subdivision, combination, stock dividend, or
other distribution provided for in Section 9 hereof), or any Sale of the Company
(other than a sale or conveyance of all or substantially all of the assets of
the Company).
<PAGE>
11. Certificate of Adjustment. Whenever the Purchase Price is adjusted as
-------------------------
provided herein, the Company shall promptly deliver to the Holder (by first
class mail, postage prepaid) a certificate of the Company's chief financial
officer setting forth the amount of the adjustment, the method by which such
adjustment was calculated, the Purchase Price after such adjustment, the number
of shares purchasable upon exercise of this Warrant subsequent to the adjustment
and a brief statement of the facts requiring such adjustment.
12. Loss, Theft or Destruction of Securities. In case this Warrant, or any
----------------------------------------
certificate representing the shares of Common Stock issuable upon exercise
hereof, shall be mutilated, lost, stolen or destroyed, the Company shall issue a
new warrant or certificate of like tenor and denomination and deliver the same
(i) in exchange and substitution for and upon surrender and cancellation of any
mutilated Warrant or certificate, or (ii) in lieu of any Warrant or certificate
lost, stolen or destroyed, upon receipt of an affidavit of the Holder or other
evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant or certificate.
13. Notices of Record Date, Etc. In the event of:
---------------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;
(b) any reclassification of the capital stock of the Company, capital
reorganization of the Company, consolidation or merger involving the Company, or
sale or conveyance of all or substantially all of its assets; or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company; or
(d) the filing by the Company of a registration statement on Form S-1
under the Act for the initial firm commitment underwritten public offering of
the Common Stock (a "Public Offering"),
then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof. Such notice shall be provided at least twenty
(20) business days (ten (10) business days in the case of subsection (d)) prior
to the date specified in such notice on which any such action is to be taken.
14. Amendment. The terms of this Warrant and any provision hereof may be
---------
amended, waived or modified upon the written consent of the Company and holders
of at least two-thirds of all the Warrants issued pursuant to the Agreement,
provided that all such Warrants are amended, waived or modified in a like
manner.
15. No Impairment. The Company will not, by amendment of its Amended and
-------------
Restated Certificate of Incorporation or through any reclassification, capital
reorganization,
<PAGE>
consolidation, merger, sale or conveyance of assets, dissolution, liquidation,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant.
16. Transfers and Exchanges.
-----------------------
(a) This Warrant shall not be transferable in whole or in part unless
and until the transferee has agreed in writing for the benefit of the Company to
be bound by Section 4 of the Agreement and the Investors' Rights Agreement (as
defined in the Agreement) (or any then-operative restatement of such agreement),
unless such disposition is made pursuant to clause (i) below or in accordance
with Rule 144, in which case no agreement of the transferee shall be required,
and:
(i) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(ii) (A) Purchaser 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 (B) if
reasonably requested by the Company, Purchaser shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company that such
disposition will not require registration of such Securities under the
Securities Act of 1933. It is agreed that the Company will not require opinions
of counsel for transactions made pursuant to Rule 144.
(b) It shall be a further condition to each such transfer that the
transferor shall complete and execute the Notice of Assignment (attached hereto
--------------------
as Exhibit B) with respect thereto.
---------
(c) It shall be a further condition to each such transfer that the
transferee shall receive and accept a warrant, of like tenor and date, executed
by the Company.
(d) All new warrants issued in connection with permitted transfers or
exchanges shall be identical in form and provision to this Warrant except as to
the number of shares if less than the full amount of this Warrant is transferred
or exchanged.
(e) Notwithstanding the foregoing, this Warrant or any portion
thereof may be freely assigned or transferred to any affiliate of the Purchaser.
17. Rights as Stockholders. No holder of this Warrant, as such, shall be
----------------------
entitled to vote or receive dividends or be deemed the holder of Common Stock,
or any other securities of the Company which may at any time be issuable on the
exercise thereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised
<PAGE>
and the Common Stock purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
18. Governing Law. The provisions and terms of this Warrant shall be
-------------
governed by and construed in accordance with the laws of the State of Delaware
without regard to its conflicts of laws provisions.
19. Successors and Assigns. This Warrant shall be binding upon the
----------------------
Company's successors and assigns and shall inure to the benefit of the Holder's
successors and permitted assigns. Any assignment in violation of this Warrant
shall be void.
20. Remedies. In case any one or more of the covenants and agreements
--------
contained in this Warrant shall have been breached, the holder hereof (in the
case of a breach by the Company) or the Company (in the case of a breach by a
holder) may proceed to protect and enforce their or its rights either by suit in
equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
21. Severability. The invalidity or unenforceability of any provision of
------------
this Warrant in any jurisdiction shall not affect the validity or enforceability
of such provision in any other jurisdiction, or affect any other proviso of this
Warrant, which shall remain in full force and effect.
22. Recovery of Litigation Costs. If any legal action or other proceeding
----------------------------
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
23. Entire Agreement; Modification. This Warrant constitutes the entire
------------------------------
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
24. Valuation. This Warrant shall be deemed to be valued at $0.001 per
---------
share of Common Stock that this Warrant is exercisable into for tax and other
purposes.
[The remainder of this page intentionally left blank]
<PAGE>
Dated: _____________________
MPATH INTERACTIVE, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
ACKNOWLEDGED AND AGREED:
PURCHASER
By: ________________________
Address:
SIGNATURE PAGE TO WARRANT
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
To: _______________________
___________________________
___________________________
Attn: _____________________
1. The undersigned hereby elects to purchase __________ shares of Common
Stock of Mpath Interactive, Inc. pursuant to the terms of the attached Warrant,
and (please indicate either (a) or (b) below):
____ (a) tenders herewith payment of the purchase price of such shares in
full, or
____ (b) elects to effect such purchase through the Net Issue Exercise
provision set forth in Section 4 of the attached Warrant.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below
Name: _______________________________
Address: ____________________________
____________________________
____________________________
3. The undersigned represents that the aforesaid shares being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution (the term "distribution" shall have
the meaning as such term is used in Section 2(11) of the Securities Act of 1933,
as amended) thereof.
_________________________________
(Signature)
________________________
<PAGE>
EXHIBIT B
---------
NOTICE OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto the person(s) listed below the right to purchase that number of shares of
Common Stock of Mpath Interactive, Inc. ("Shares") pursuant to the terms of the
------
attached Warrant, together with all right, title and interest therein, with full
power of substitution in the premises:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME(S) OF ASSIGNEE(S) ADDRESS OF ASSIGNEE(S) # OF SHARES ASSIGNED
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
And if said number of Shares shall not be all the Shares represented by the
attached Warrant, a new Warrant is to be issued in the name of the undersigned
for the balance remaining of the Shares registered by said Warrant.
Dated: _____________________________
Signature: _____________________________
Address: _____________________________
_____________________________
_____________________________
Notice: The signature to the foregoing Assignment must correspond to the
name as written upon the face of the attached Warrant in every particular,
without alteration or any change whatsoever.
<PAGE>
EXHIBIT 4.4
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, THE SHARES OF CAPITAL STOCK
ISSUABLE HEREUNDER, AND SHARES OF CAPITAL STOCK WHICH MAY BE ISSUABLE UPON
CONVERSION OF SUCH CAPITAL STOCK HAVE BEEN AND WILL BE ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION
UNDER SUCH ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION, OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE COMMISSION
RULE 144.
WARRANT TO PURCHASE SHARES OF CAPITAL STOCK OF
----------------------------------------------
MPATH INTERACTIVE INC.
----------------------
1. NUMBER AND PRICE OF SHARES SUBJECT TO WARRANT. Subject to the terms
---------------------------------------------
and conditions set forth herein, for value received, Intel Corporation, a
Delaware corporation ("Intel" and, together with its permitted registered
-----
assigns, the "Holder"), is entitled, subject to the terms and conditions of this
------
Warrant, at any time before the Expiration Date (as such term is defined below),
to purchase from Mpath Interactive, Inc., a Delaware corporation (the
"Company"), up to 52,250 of fully paid and nonassessable shares of Common Stock
-------
of the Company (each a "Share" and collectively the "Shares") at a price per
----- ------
share equal to sixty dollars ($60.00) (the "Purchase Price"). The number of
--------------
Shares purchasable under this Warrant is subject to adjustment as provided
herein. This Warrant is issued pursuant to and is subject to the terms of that
certain Convertible Note and Warrant Purchase Agreement between the Company and
Intel, dated November 18, 1996 (the "Purchase Agreement"). The "Expiration Date"
------------------ ---------------
of this Warrant shall be December 31, 2000.
2. CERTAIN DEFINITIONS. Any capitalized terms used but not defined herein
-------------------
shall have the meaning given thereto in the Purchase Agreement. As used in this
Warrant:
2.1 The term "Common Stock" shall mean the common stock, par value
------------
$0.00005 per share of the Company.
2.2 The term "Grant Date" shall mean November 18, 1996.
----------
2.3 The term "Fair Market Value" of a Share as of a particular date
-----------------
(the "Determination Date ") shall mean (a) the average closing price of shares
------------------
of the same class on the primary national securities exchange on which such
shares are traded for the twenty (20) trading days prior to the Determination
Date, if shares of the same class are then traded on an exchange, (b) the
average of the closing sale prices of shares of the same class on the Nasdaq
National Market for the twenty (20) trading days prior to the Determination
Date, if shares of the
<PAGE>
same class are then traded on the Nasdaq National Market, or (c) the value of a
Share as determined in good faith by the Company's Board of Directors upon a
review of all relevant factors, including due consideration of the Holder's
determination of the value of the Company, if shares of the same class are not
then traded on a national securities exchange or the Nasdaq National Market.
2.4 The term "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
-------
Improvements Act of 1976, as amended.
2.5 The term "Qualified IPO" shall mean an initial public offering of
-------------
Common Stock by the Company which is underwritten on a firm commitment basis by
a nationally recognized underwriter, and results in aggregate gross proceeds to
the Company of not less than $10,000,000.
2.6 The term "Registered Holder" shall mean any the Holder in whose
-----------------
name this Warrant is registered upon the books and records maintained by the
Company.
2.7 The term "Warrant," as used herein, shall include this Warrant
-------
and any warrant delivered in substitution or exchange for this Warrant as
provided herein.
3. EXERCISE OF WARRANT
-------------------
3.l PAYMENT. Subject to compliance with the terms and conditions of
this Warrant and applicable securities laws, this Warrant may be exercised, in
whole or in part at any time on or after the Date of First Exercise through and
including the Expiration Date, by surrendering this Warrant at the principal
office of the Company together with (a) the form of Notice of Exercise attached
hereto as Exhibit 1 (the "Notice of Exercise") duly executed by the Holder, and
------------------
(b) payment (i) in cash, by check or by wire transfer to an account designated
by the Company, (ii) by cancellation by the Holder of any then outstanding
indebtedness of the Company to the Holder, or (iii) by a combination of (i) and
(ii), of an amount equal to the product obtained by multiplying the number of
Shares being purchased upon such exercise by the Purchase Price (the "Exercise
--------
Amount"), except that if the Holder is subject to HSR Act Restrictions (as
- ------
defined below), the Exercise Amount shall be paid to the Company within five (5)
business days of the termination of all HSR Act Restrictions (as defined in
Section 3.3 below). If, on or before the Expiration Date, the Holder has sent
the Notice of Exercise to the Company, and the Holder has not been able to
complete the exercise of this Warrant prior to the Expiration Date because of
the Company's inability to complete all action required to create the Common
Stock, issuable upon exercise of the Warrant, the Holder shall be entitled to
complete the process of exercising this Warrant in accordance with the
procedures contained herein notwithstanding the fact that completion of the
exercise of this Warrant would take place after the Expiration Date.
3.2 NET ISSUE EXERCISE. In lieu of the payment methods set forth in
------------------
Section 3.1(b) above, the Holder may elect to exchange all or a portion of this
Warrant for Shares equal to the value of the amount of the Warrant being
exchanged on the date of exchange. If the Holder elects to exchange this Warrant
as provided in this Section 3.2, the Holder shall tender to
-2-
<PAGE>
the Company the Warrant for the amount being exchanged, along with written
notice of the Holder's election to exchange some or all of the Warrant, and the
Company shall issue to the Holder the number of Shares computed using the
following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares purchasable under the amount of the
Warrant being exchanged.
A = the Fair Market Value of one Share.
B = the Purchase Price.
All references herein to an "exercise" of the Warrant shall include an
exchange pursuant to this Section 3.2. Upon receipt of a written notice of the
Company's intention to raise capital by selling shares of Common Stock in a
Qualified IPO (the "IPO Notice"), which notice shall be delivered to the Holder
promptly after the date of filing with the Securities and Exchange Commission of
the registration statement associated with such Qualified IPO, the Holder shall
use its reasonable efforts to determine whether or not the Holder will exercise
this Warrant pursuant to this Section 3.2 prior to the completion of the
Qualified IPO. Notwithstanding whether or not an IPO Notice has been delivered
to the Holder or any other provision of this Warrant to the contrary, if the
Holder decides to exercise this Warrant while a registration statement is on
file with the Securities and Exchange Commission in connection with the
Qualified IPO, this Warrant shall be deemed exercised on the closing of the
Qualified IPO and the Fair Market Value of a Share shall be the price at which
one share of Common Stock was sold to the public in the Qualified IPO. If the
Holder has elected to exercise this Warrant pursuant to this Section 3.2 while a
registration statement is on file with the Securities and Exchange Commission in
connection with a Qualified IPO and the Qualified IPO is not completed, then the
Holder's exercise of this Warrant shall not be effective.
3.3 HSR ACT. The Company and the Holder hereby acknowledge that
-------
exercise of this Warrant by the Holder may subject the Company and/or the Holder
to the filing requirements of the HSR Act and that the Holder may be prevented
from exercising this Warrant until the expiration or early termination of all
waiting periods imposed by the HSR Act ("HSR Act Restrictions"). If, on or
--------------------
before the Expiration Date, the Holder has sent the Notice of Exercise to the
Company and the Holder has not been able to complete the exercise of this
Warrant prior to the Expiration Date because of HSR Act Restrictions, the Holder
shall be entitled to complete the process of exercising this Warrant in
accordance with the procedures contained herein notwithstanding the fact that
completion of the exercise of this Warrant would take place after the Expiration
Date (or the completion of the Qualified IPO, in the case of net exercises
pursuant to Section 3.2).
-3-
<PAGE>
3.4 PARTIAL EXERCISE; EFFECTIVE DATE OF EXERCISE. In case of any
--------------------------------------------
partial exercise of this Warrant, the Company shall cancel this Warrant upon
surrender hereof and shall execute and deliver a new Warrant of like tenor and
date for the balance of the Shares purchasable hereunder. This Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
date of its surrender for exercise as provided above. However, if the Holder is
subject to HSR Act filing requirements, this Warrant shall be deemed to have
been exercised on the date immediately following the date of the expiration of
all HSR Act Restrictions. The person entitled to receive the Shares issuable
upon exercise of this Warrant shall be treated for all purposes as the holder of
record of such shares as of the close of business on the date the Holder is
deemed to have exercised this Warrant.
3.5 STOCK CERTIFICATES; FRACTIONAL SHARES. As soon as practicable on
-------------------------------------
or after the effective date of exercise, the Company shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of whole Shares issuable upon such exercise, together with cash
in lieu of any fraction of a Share in the amount of the current Fair Market
Value of one whole Share as of the date of exercise of this Warrant multiplied
by such fraction. No fractional shares or scrip representing fractional shares
shall be issued upon an exercise of this Warrant.
4. VALID ISSUANCE; TAXES. All Shares issued upon the exercise of this
---------------------
Warrant shall be validly issued, fully paid and non-assessable, and the Company
shall pay all taxes and other governmental charges that may be imposed in
respect of the issue or delivery thereof. The Company shall not be required to
pay any tax or other charge imposed in connection with any transfer involved in
the issuance of any certificate for Shares in any name other than that of the
Registered Holder of this Warrant, and in such case the Company shall not be
required to issue or deliver any stock certificate or security until such tax or
other charge has been paid, or it has been established to the Company's
reasonable satisfaction that no tax or other charge is due.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of
-------------------------------------------------
Shares issuable upon exercise of this Warrant (or any other securities or
property receivable or issuable upon exercise of this Warrant) and the Purchase
Price are subject to adjustment upon occurrence of the following events which
shall have affected shares of the class of capital stock for which this Warrant
is exercised (the "Affected Class"):
--------------
5.1 ADJUSTMENT FOR STOCK SPLITS, STOCK SUBDIVISIONS OR COMBINATIONS
---------------------------------------------------------------
OF SHARES. The Purchase Price of this Warrant shall be proportionally decreased
- ---------
and the number of Shares (or other securities) issuable upon exercise of this
Warrant shall be proportionally increased to reflect any stock split or
subdivision of shares of the Affected Class, and the Purchase Price of this
Warrant shall be proportionally increased and the number of Shares (or other
securities) issuable upon exercise of this Warrant shall be proportionally
decreased to reflect any combination of shares of the Affected Class.
5.2 ADJUSTMENT FOR DIVIDENDS OR DISTRIBUTIONS OF STOCK OR OTHER
-----------------------------------------------------------
SECURITIES OR PROPERTY. In case the Company shall make or issue, or shall fix a
- ----------------------
record date for the determination of eligible holders entitled to receive, a
dividend or other distribution with
-4-
<PAGE>
respect to the shares of the Affected Class (or any other securities at the time
issuable upon exercise of the Warrant after giving effect to all adjustments
called for by this Section 5 to the shares of the Affected Class) payable in (a)
securities of the Company, or (b) assets (excluding cash dividends paid or
payable solely out of retained earnings), then, in each such case, the Holder of
this Warrant, on exercise hereof at any time after the consummation, effective
date or record date of such dividend or other distribution, shall receive, in
addition to the Shares (or such other securities) issuable on such exercise
prior to such date, and without the payment of additional consideration
therefor, the securities or such other assets of the Company to which such
Holder would have been entitled upon such date if such Holder had exercised this
Warrant prior to that date and had thereafter retained such shares and/or all
other additional securities available to it as aforesaid during such period
giving effect to all adjustments called for by this Section 5.
5.3 RECLASSIFICATION. If the Company, by reclassification of
----------------
securities or otherwise, shall change any of the securities for which this
Warrant is exercisable on the date of exercise into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were issuable upon exercise of this Warrant immediately prior to
such reclassification or other change and the Purchase Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 5.0.
5.4 ADJUSTMENT FOR CAPITAL REORGANIZATION, MERGER OR CONSOLIDATION.
--------------------------------------------------------------
In case of any reorganization of the capital stock of the Company (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or in case the Company completes any merger or
consolidation of the Company with or into another corporation, or the sale or
transfer of all or substantially all the assets of the Company, then, and in
each such case, as a part of such reorganization, merger, consolidation, sale or
transfer, lawful provision shall be made so that the Holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price, the number
of shares of stock or other securities or property of the successor corporation
resulting from such reorganization, merger, consolidation, sale or transfer that
a holder of the shares deliverable upon exercise of this Warrant would have been
entitled to receive in such reorganization, merger, consolidation, sale or
transfer if this Warrant had been exercised immediately before such
reorganization, merger, consolidation, sale or transfer, all subject to further
adjustment as provided in this Section 5. The foregoing provisions of this
Section 5.4 shall similarly apply to successive reorganizations, and to
successive mergers, consolidations, sales and transfers, and to the stock or
securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the Holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may
-5-
<PAGE>
be, in relation to any shares or other property deliverable after that event
upon exercise of this Warrant. Notwithstanding the foregoing, this Warrant shall
terminate if not exercised by the Holder prior to the closing of any such
merger, consolidation, sale or transfer.
5.5 RESERVATION OF SECURITIES AND ASSETS. The Company shall reserve,
------------------------------------
for the life of this Warrant, such securities or such other assets of the
Company as the Holder is from time to time entitled to receive pursuant to this
Warrant after giving effect to all adjustments required under this Section 5.
6. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the
-----------------------------
Purchase Price, or number or type of shares issuable upon exercise of this
Warrant, the Chief Financial Officer of the Company shall compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of the adjusted Purchase
Price. The Company shall promptly send (by facsimile and by either first class
mail, postage prepaid or overnight delivery) a copy of each such certificate to
the Holder. Such certificate shall show the effect of such adjustment on the
capital stock for which this Warrant is exercisable.
7. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory
------------------
to the Company of the ownership of and the loss, theft, destruction or
mutilation of this Warrant, and of indemnity reasonably satisfactory to it, and
(in the case of mutilation) upon surrender and cancellation of this Warrant, the
Company shall execute and deliver in lieu thereof a new Warrant of like tenor as
the lost, stolen, destroyed or mutilated Warrant.
8. RESERVATION OF CAPITAL STOCK. The Company hereby covenants that at all
----------------------------
times there shall be reserved for issuance and delivery upon exercise of this
Warrant such number of Shares of capital stock of the Company as are from time
to time issuable upon exercise of this Warrant and, from time to time, shall
take all steps necessary to amend its Certificate of Incorporation to provide
sufficient reserves of Shares issuable upon exercise of this Warrant. All such
shares shall be duly authorized, and when issued upon such exercise, shall be
validly issued, fully paid and non-assessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on sale and
free and clear of all preemptive rights, except encumbrances or restrictions
arising under federal or state securities laws. Issuance of this Warrant shall
constitute full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for Shares upon the exercise of this Warrant.
9. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this
---------------------
Warrant and compliance with all applicable securities laws, from and after the
Date of First Exercise, this Warrant and all rights hereunder may be
transferred, in whole or in part, on the books of the Company maintained for
such purpose at the principal office of the Company referred to above, by the
Registered Holder hereof in person, or by duly authorized attorney, upon
surrender of this Warrant properly endorsed and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer. Upon any
partial transfer, the Company will issue and deliver to the Registered Holder a
new Warrant or Warrants with respect to the portion
-6-
<PAGE>
of the Warrant not so transferred. Each taker and holder of this Warrant, by
taking or holding the same, consents and agrees that when this Warrant shall
have been so endorsed, the person in possession of this Warrant or any portion
thereof may be treated by the Company, and all other persons dealing with this
Warrant or such portion, as the absolute owner of this Warrant or such portion
for any purpose and as the person entitled to exercise the rights represented
hereby, any notice to the contrary notwithstanding; provided, however, that
-------- -------
until a transfer of this Warrant is duly registered on the books of the Company,
the Company may treat the Registered Holder hereof as the owner for all
purposes.
10. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees
------------------------
that, absent an effective registration statement filed with the U.S. Securities
and Exchange Commission ("SEC") under the Securities Act of 1933, as amended
(the "1933 Act"), covering the disposition or sale of this Warrant or the Shares
--------
issued or issuable upon exercise hereof, and registration or qualification under
applicable state securities laws, such Holder will not sell, transfer pledge, or
hypothecate any or all of such Warrant or Shares, as the case may be, unless
either (a) the Company has received an opinion of counsel, in form and substance
reasonably satisfactory to the Company, to the effect that such registration is
not required in connection with such disposition, or (b) the sale of such
securities is made pursuant to SEC Rule 144.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not
----------------------------------------
entitle the Holder to any voting rights or other rights as a stockholder of the
Company. In the absence of affirmative action by such Holder to purchase Shares
by exercise of this Warrant, no provisions of this Warrant, and no enumeration
herein of the rights or privileges of the Holder hereof, shall cause such Holder
to be a stockholder of the Company for any purpose.
12. "MARKET STAND-OFF" AGREEMENT. The Holder hereby agrees that, during
----------------------------
the period of duration specified by the Company and an underwriter of common
stock or other securities of the Company, following the date of the first sale
to the public pursuant to a registration statement of the Company filed under
the 1933 Act, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of this Warrant or the Shares for which this
Warrant may be exercised (other than to donees who agree to be similarly bound);
provided however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company and all one percent (1%)
stockholders and all other persons with registration rights are subject to
similar restrictions; and
(c) such market stand-off time period shall not exceed 180 days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the aforementioned Shares (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
-7-
<PAGE>
Notwithstanding the foregoing, the obligations described in this
Section 12 shall not apply to a registration relating solely to employee benefit
plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the
future, or a registration relating solely to a Commission Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.
13. NOTICES. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be (a)mailed by first class mail,
postage prepaid, or (b)sent by facsimile, with a copy by first class mail,
postage prepaid, in either case addressed, if to the Company, to its principal
executive office, and if to the Holder, to the address of such Holder set forth
in the Purchase Agreement or otherwise furnished to the Company in writing. All
such notices and other communications shall be deemed delivered (a) if sent by
mail, two (2) days after deposit in the United States first-class mail, postage
prepaid, and (b) if sent by facsimile, upon telephone confirmation of receipt
provided that a copy is sent by first class mail, postage prepaid.
14. HEADINGS. The headings in this Warrant are for purposes of
--------
convenience in reference only, and shall not be deemed to constitute a part
hereof.
15. GOVERNING LAW. This Warrant shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the state of Delaware
applicable to contracts made and to be wholly performed in such state.
16. NO IMPAIRMENT. The Company will not, by amendment of its Certificate
-------------
of Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Registered Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock issuable
upon the exercise of this Warrant above the amount payable therefor upon such
exercise, and (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and non-
assessable Shares upon exercise of this Warrant.
17. NOTICES OF RECORD DATE. In case:
----------------------
(a) the Company shall take a record of the holders of stock or other
securities at any time receivable upon the exercise of this Warrant for the
purpose of entitling them to receive any dividend or other distribution, or any
right to subscribe for or purchase any shares of stock of any class or any other
securities or to receive any other right; or
(b) of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the Capital Stock of the Company, or any conveyance of all or substantially all
of the assets of the Company to
-8-
<PAGE>
another corporation in which holders of the Company's stock are to receive
stock, securities or property of another corporation; or
(c) of any voluntary dissolution, liquidation or winding-up of the
Company; or
(d) of any redemption or conversion of all outstanding Common Stock or
Preferred Stock;
then, and in each such case, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, `conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of any stock or other securities
at the time receivable upon the exercise of this Warrant shall be entitled to
exchange their stock or other securities for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up. Such notice shall be
delivered at least ten (10) days prior to the date specified therein as to any
matter referred to in clause (i), and thirty (30) days prior to the date therein
specified as to any matter referred to in clause (ii).
18. SEVERABILITY. If any term, provision, covenant or restriction of this
------------
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
19. COUNTERPARTS. For the convenience of the parties, any number of
------------
counterparts of this Warrant may be executed by the parties hereto and each such
executed counterpart shall be, and shall be deemed to be, an original
instrument.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date
--------------------------
of this Warrant enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holder of this Warrant or otherwise
conflicts with the provisions hereof. The rights granted to the Holder hereunder
do not in any way conflict with and are not inconsistent with the rights granted
to holders of the Company's securities under any other agreements, except rights
that have been waived.
21. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a
-------------------------------
Saturday, Sunday or legal holiday, the Expiration Date shall automatically be
extended until the next business day.
[SIGNATURE PAGE FOLLOWS]
-9-
<PAGE>
This Warrant is issued as of the 18/th/ day of November, 1996.
AGREED:
INTEL CORPORATION MPATH INTERACTIVE, INC.
By: /s/ By: /s/ Paul Matteucci
------------------------------ ----------------------------------
Name/Title: _____________________ Name/Title: Paul Matteucci, Presdient
--------------------------
and CEO
--------------------------
Date: ___________________________ Date: _______________________________
-10-
<PAGE>
EXHIBIT 1
---------
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
________________ CORPORATION:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
shares of capital stock, as provided for therein, and (check the applicable
box):
. tenders herewith payment of the purchase price in full in the form of
cash, by check or wire transfer, in the amount of $__________________
for _____________ shares of Common Stock.
. Elects the Net Issue Exercise option pursuant to Section 3.2 of the
Warrant, and accordingly requests delivery of a net of
_________________ shares of Common Stock.
Please issue a certificate or certificates for such shares in the name
of, and pay any cash for any fractional share to (please print name, address and
social security number)
Name: ______________________________________________________
Address: ___________________________________________________
Signature: _________________________________________________
Note: The above signature should correspond exactly with the name on the first
page of this Warrant or with the name of the assignee appearing in the
assignment form below.
If said number of shares shall not be all the shares purchasable under
the within Warrant, a new Warrant is to be issued in the name of the Registered
Holder for the balance remaining of the shares purchasable thereunder together
with cash in lieu of any fraction of a share in the amount of the current Fair
Market Value of one whole share as of the date of exercise multiplied by such
fraction.
<PAGE>
EXHIBIT 2
---------
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, _______________________ hereby sells, assigns and
transfers unto _______________________ the within Warrant, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint __________________________ attorney, to transfer said Warrant on the
books of the within-named company with respect to the number of Shares set forth
below, with full power of substitution in the premises:
Name(s) of Assignee(s) Address No. of Shares
And if said number of Shares shall not be all of the Shares represented by
the Warrant, a new Warrant is to be issued in the name of the undersigned for
the balance remaining of the Shares.
Dated: ______________ 19___ Signature:
Notice: The signature to the foregoing
Assignment must correspond to the
name as written upon the face of
this security in every particular,
without alteration or any change
whatsoever; signature(s) must be
guaranteed by an eligible guarantor
institution (banks, stock brokers,
savings and loan associations and
credit unions with membership in an
approved signature guarantee
medallion program) pursuant to
Securities and Exchange Commission
Rule 17Ad-15.
<PAGE>
EXHIBIT 4.5
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE HEREUNDER HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"). THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH WARRANT OR
SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER THE ACT.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS WARRANT HAS NOT
BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA OR ANY OTHER STATE AND THE ISSUANCE OF SUCH SECURITIES OR THE
PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SUCH SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE OR SUCH PROVISIONS OF THE CORPORATIONS CODE OF
ANY SUCH OTHER STATE. THE RIGHTS OF THE HOLDER OF THIS WARRANT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
COMMON STOCK PURCHASE WARRANT
Warrant No. W-C29
MPATH INTERACTIVE, INC.
Issued February 12, 1999
- ------------------------
1. Issuance. This Warrant ("Warrant") is issued to PSINet Inc., a New
-------
York corporation ("PSINet"), by Mpath Interactive, Inc., a Delaware corporation
(the "Company"), pursuant to that certain Warrant Purchase Agreement dated
-------
February 12, 1999, by and between the Company and PSINet (the "Agreement"). Any
---------
capitalized terms not defined herein shall have the meaning as set forth in the
Agreement.
2. PURCHASE PRICE; NUMBER OF SHARES. The registered holder of this
Warrant (the "Holder"), commencing on the date hereof, is entitled upon
------
surrender of this Warrant with the Notice of Exercise attached hereto as Exhibit
------------------ -------
A duly executed, at the principal office of the Company, to purchase from the
- -
Company at a price per share (the "Purchase Price") of $0.21, up
--------------
<PAGE>
to 12,000 fully paid and nonassessable shares of common stock, $0.00005 par
value, of the Company (the "Common Stock");
------------
Until such time as this Warrant is exercised in full or expires, the
Purchase Price and the Common Stock issuable upon exercise of this Warrant are
subject to adjustment as hereinafter provided. The person or persons on whose
name or names any certificate representing shares of Common Stock is issued
hereunder shall be deemed to have become the holder of record of the shares
represented thereby as at the close of business on the date this Warrant is
exercised with respect to such shares, whether or not the transfer books of the
Company shall be closed.
3. PAYMENT OF PURCHASE PRICE. The Purchase Price for this Warrant (or the
portion thereof being exercised) may be paid (i) in cash or by check, (ii) by
the surrender by the Holder to the Company of any promissory notes or other
obligations issued by the Company, with all such notes and obligations so
surrendered being credited against the Purchase Price in an amount equal to the
principal amount thereof plus accrued interest to the date of surrender, or
(iii) by any combination of the foregoing.
4. NET ISSUE EXERCISE. Following the closing of the initial firm
commitment underwritten public offering of the Common Stock pursuant to a
registration statement on Form S-1 under the Securities Act of 1933, as amended
(the "Act"), in lieu of remitting the Purchase Price for this Warrant as set
forth in Section 3 above, the Holder may elect to receive shares equal to the
value of this Warrant (or the portion thereof being exercised) less the
applicable Purchase Price, in which event the Company shall issue to the Holder
a number of shares of Common Stock computed using the following formula:
X = Y(A - B)
--------
A
Where X = The number of shares of Common Stock to be issued to the Holder.
Y = the number of shares of Common Stock purchasable under this
Warrant (or such portion as is being exercised).
A = the Fair Market Value (as defined in the Agreement) of one share
of such Common Stock.
B = the Purchase Price (as adjusted to the date of such calculation).
5. PARTIAL EXERCISE. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which this
Warrant shall not have been exercised.
6. FRACTIONAL SHARES. In no event shall any fractional share of Common
Stock be issued upon any exercise of the Warrants. In lieu of any fractional
share to which the Holder would otherwise be entitled, the Company will pay cash
equal to the product of such fraction
2
<PAGE>
multiplied by the Common Stock's Fair Market Value (as defined in the Agreement)
as of the date of exercise.
7. RESERVED SHARES; VALID ISSUANCE. The Company covenants that it will at
all times from and after the date hereof reserve and keep available such number
of its authorized shares of Common Stock, free from all preemptive or similar
rights therein, as will be sufficient to permit the exercise of this Warrant in
full. The Company further covenants that such shares as may be issued pursuant
to such exercise will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
8. EXPIRATION DATE. This Warrant shall expire upon termination of the
Agreement and shall be void thereafter.
9. STOCK SPLITS AND DIVIDENDS.
(a) Splits, Subdivisions or Combination of Shares. If the Company at
---------------------------------------------
any time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the Common Stock, the Purchase Price shall forthwith be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(b) Stock Dividends. If the Company at any time while this Warrant is
---------------
outstanding and unexpired shall issue additional shares of Common Stock in
payment of a stock dividend on the Common Stock or make any other distribution
with respect to the Common Stock (except any distribution specifically provided
for in Section 9 or 10 hereof), then the Purchase Price shall be adjusted, from
and after the date of determination of stockholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Purchase
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
(c) Adjustment of Number of Shares. Upon each adjustment of the
------------------------------
Purchase Price pursuant to Sections 9(a) or (b) or 10 hereof, the number of
shares of Common Stock purchasable hereunder shall be adjusted by multiplying
the number of shares purchasable immediately prior to such adjustment in the
Purchase Price by a fraction (i) the numerator of which shall be the Purchase
Price immediately prior to such adjustment and (ii) the denominator of which
shall be the Purchase Price immediately thereafter.
(d) Adjustment for Certain Issuances. If, at any time after the date
--------------------------------
hereof, pursuant to a transaction conducted for equity financing purposes, the
Company shall issue or sell any additional shares of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock for a
consideration per share or having a conversion price or exchange price, either
initially or after any subsequent adjustment to such price (not including
adjustments made in transactions referenced in subsections 9(a) and (b) of this
Warrant), less than the then-applicable Purchase Price, such Purchase Price
shall be reduced, as of the date of
3
<PAGE>
such issuance or sale, to a price equal to the consideration per share or
conversion price or exchange price, whichever is
applicable.
10. MERGERS AND RECLASSIFICATIONS. If, after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Common Stock which might have been purchased by the Holder
immediately prior to such Reorganization, and in any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
to the end that the provisions hereof (including without limitation, provisions
for the adjustment of the Purchase Price and the number of shares issuable
hereunder) shall thereafter be applicable in relation to any shares of stock or
other securities and property thereafter deliverable upon exercise hereof. For
the purposes of this SECTION 10, the term "Reorganization" shall include without
--------------
limitation any reclassification, capital reorganization or change of the Common
Stock other than as a result of a subdivision, combination, stock dividend, or
other distribution provided for in SECTION 9 hereof), or any consolidation of
the Company with, or merger of the Company into, another corporation or other
business organization (other than a merger in which the Company is the surviving
corporation and which does not result in any reclassification or change of the
outstanding Common Stock), or any sale or conveyance of all or substantially all
of the assets of the Company.
11. CERTIFICATE OF ADJUSTMENT. Whenever the Purchase Price is adjusted as
provided herein, the Company shall promptly deliver to the Holder (by first
class mail, postage prepaid) a certificate of the Company's chief financial
officer setting forth the amount of the adjustment, the method by which such
adjustment was calculated, the Purchase Price after such adjustment, the number
of shares purchasable upon exercise of this Warrant subsequent to the adjustment
and a brief statement of the facts requiring such adjustment.
12. LOSS, THEFT OR DESTRUCTION OF SECURITIES. In case this Warrant, or any
certificate representing the shares of Common Stock issuable upon exercise
hereof, shall be mutilated, lost, stolen or destroyed, the Company, at its
expense, shall issue a new warrant or certificate of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant or certificate, or (ii) in lieu of any
Warrant or certificate lost, stolen or destroyed, upon receipt of an affidavit
of the Holder or other evidence reasonably satisfactory to the Company of the
loss, theft or destruction of such Warrant or certificate.
13. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, sell or otherwise acquire or
4
<PAGE>
dispose of any shares of stock of any class or any other securities or property,
or to receive any other right;
(b) any reclassification of the capital stock of the Company, capital
reorganization of the Company, consolidation or merger involving the Company, or
sale or conveyance of all or substantially all of its assets;
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company; or
(d) the filing by the Company of a registration statement on Form S-1
under the Act for the initial firm commitment underwritten public offering of
the Common Stock,
then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof. Such notice shall be provided at least twenty
(20) business days (ten (10) business days in the case of subsection (d)) prior
to the date specified in such notice on which any such action is to be taken.
14. AMENDMENT. The terms of this Warrant may be amended or modified only
upon the written consent of the parties hereto.
15. NO IMPAIRMENT. The Company will not, by amendment of its Amended and
Restated Certificate of Incorporation or through any reclassification, capital
reorganization, consolidation, merger, sale or conveyance of assets,
dissolution, liquidation, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holders.
16. TRANSFERS AND EXCHANGES.
(a) This Warrant shall not be transferable in whole or in part unless
and until all conditions to transfer set forth in Section 3.7 of the Agreement
have been met.
(b) It shall be a further condition to each such transfer that the
transferor shall complete and execute the Notice of Assignment (attached hereto
--------------------
as Exhibit B) with respect thereto.
---------
(c) It shall be a further condition to each such transfer that the
transferee shall receive and accept a warrant, of like tenor and date, executed
by the Company.
(d) All new warrants issued in connection with permitted transfers or
exchanges shall be identical in form and provision to this Warrant except as to
the number of shares if less than the full amount of this Warrant is transferred
or exchanged.
17. RIGHTS AS STOCKHOLDERS. No holder of this Warrant, as such, shall be
entitled to vote or receive dividends or be deemed the holder of Common Stock,
or any other securities of
5
<PAGE>
the Company which may at any time be issuable on the exercise thereof for any
purpose, nor shall anything contained herein be construed to confer upon the
Holder, as such, any of the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until this Warrant shall
have been exercised and the Common Stock purchasable upon the exercise hereof
shall have become deliverable, as provided herein.
18. MARKET STAND-OFF AGREEMENT. The Holder hereby agrees that, during the
period of duration specified by the Company and an underwriter of common stock
or other securities of the Company, following the date of the first sale to the
public pursuant to a registration statement of the Company filed under the Act,
it shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
Registrable Securities (as defined in the Rights Agreement) held by it at any
time during such period except common stock included in such registration;
provided, however, that:
(a) such agreement shall be applicable only to the first registration
statement of the Company which covers common stock (or other securities) to be
sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company, all one percent (1%)
stockholders and all other persons with registration rights (whether or not
pursuant to the Rights Agreement) are subject to similar restrictions;
(c) such market stand-off time period shall not exceed one hundred and
eighty (180) days; and
(d) any discretionary waiver or termination of the restrictions of
such agreements by the Company or the representatives of the underwriters shall
apply to all persons subject to such agreements pro rata based on the number of
shares of Registrable Securities held by such persons.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 18 shall not apply to a registration relating solely to employee benefit
plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the
future, or a registration relating solely to a Commission Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.
6
<PAGE>
19. GOVERNING LAW. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the laws of the State of California
without regard to its conflicts of laws provisions.
20. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors and permitted assigns. Any assignment in violation of this Warrant
shall be void.
[The remainder of this page intentionally left blank]
7
<PAGE>
Dated: __________________
MPATH INTERACTIVE, INC.
By: /s/ Lynn Heublein
----------------------------
Name: Lynn Heublein
--------------------------
Title: COO
-------------------------
ACKNOWLEDGED AND AGREED:
PSINET INC.
By:____________________________
Name:__________________________
Title:_________________________
SIGNATURE PAGE TO WARRANT
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
To:_________________________
____________________________
____________________________
Attn:_______________________
1. The undersigned hereby elects to purchase __________ shares of Common
Stock of Mpath Interactive, Inc. pursuant to the terms of the attached Warrant,
and (please indicate either (a) or (b) below):
___ (a) tenders herewith payment of the purchase price of such shares in
full, or
___ (b) elects to effect such purchase through the Net Issue Exercise
provision set forth in Section 4 of the attached Warrant.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below
Name:________________________
Address:_____________________
_____________________
_____________________
3. The undersigned represents that the aforesaid shares being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.
_____________________________
(Signature)
<PAGE>
EXHIBIT B
---------
NOTICE OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto the person(s) listed below the right to purchase that number of shares of
Common Stock of Mpath Interactive, Inc. ("Shares") pursuant to the terms of the
------
attached Warrant, together with all right, title and interest therein, with full
power of substitution in the premises:
_______________________________________________________________________________
NAME(S) OF ASSIGNEE(S) ADDRESS OF ASSIGNEE(S) # OF SHARES ASSIGNED
- -------------------------------------------------------------------------------
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
And if said number of Shares shall not be all the Shares represented by the
attached Warrant, a new Warrant is to be issued in the name of the undersigned
for the balance remaining of the Shares registered by said Warrant.
Dated: ______________________________
Signature: ______________________________
Address: ______________________________
______________________________
______________________________
Notice: The signature to the foregoing Assignment must correspond to the
name as written upon the face of the attached Warrant in every particular,
without alteration or any change whatsoever; signature(s) must be guaranteed by
an eligible guarantor institution (banks, stock brokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program) pursuant to Securities and Exchange Commission Rule
17Ad-15.
<PAGE>
EXHIBIT 4.6
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE HEREUNDER HAS
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT").
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH WARRANT
OR SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER THE ACT.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS WARRANT HAS
NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA OR ANY OTHER STATE AND THE ISSUANCE OF SUCH SECURITIES OR THE
PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SUCH SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE OR SUCH PROVISIONS OF THE CORPORATIONS CODE OF
ANY SUCH OTHER STATE. THE RIGHTS OF THE HOLDER OF THIS WARRANT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
COMMON STOCK PURCHASE WARRANT
Warrant No. W-C30
MPATH INTERACTIVE, INC.
Issued February 12, 1999
- ------------------------
1. ISSUANCE. This Warrant ("Warrant") is issued to PSINet Inc., a New
-------
York corporation ("PSINet"), by Mpath Interactive, Inc., a Delaware corporation
(the "Company"), pursuant to that certain Warrant Purchase Agreement dated
-------
February 12, 1999, by and between the Company and PSINet (the "Agreement"). Any
---------
capitalized terms not defined herein shall have the meaning as set forth in the
Agreement.
2. PURCHASE PRICE; NUMBER OF SHARES. The registered holder of this
Warrant (the "Holder"), commencing on the date hereof, is entitled upon
------
surrender of this Warrant with the Notice of Exercise attached hereto as Exhibit
------------------ -------
A duly executed, at the principal office of the Company, to purchase from the
- -
Company at a price per share (the "Purchase Price") of $1.03, up
--------------
1
<PAGE>
to 108,000 fully paid and nonassessable shares of common stock, $0.00005 par
value, of the Company (the "Common Stock");
------------
Until such time as this Warrant is exercised in full or expires, the
Purchase Price and the Common Stock issuable upon exercise of this Warrant are
subject to adjustment as hereinafter provided. The person or persons on whose
name or names any certificate representing shares of Common Stock is issued
hereunder shall be deemed to have become the holder of record of the shares
represented thereby as at the close of business on the date this Warrant is
exercised with respect to such shares, whether or not the transfer books of the
Company shall be closed.
3. PAYMENT OF PURCHASE PRICE. The Purchase Price for this Warrant (or the
portion thereof being exercised) may be paid (i) in cash or by check, (ii) by
the surrender by the Holder to the Company of any promissory notes or other
obligations issued by the Company, with all such notes and obligations so
surrendered being credited against the Purchase Price in an amount equal to the
principal amount thereof plus accrued interest to the date of surrender, or
(iii) by any combination of the foregoing.
4. NET ISSUE EXERCISE. Following the closing of the initial firm
commitment underwritten public offering of the Common Stock pursuant to a
registration statement on Form S-1 under the Securities Act of 1933, as amended
(the "Act"), in lieu of remitting the Purchase Price for this Warrant as set
forth in Section 3 above, the Holder may elect to receive shares equal to the
value of this Warrant (or the portion thereof being exercised) less the
applicable Purchase Price, in which event the Company shall issue to the Holder
a number of shares of Common Stock computed using the following formula:
X = Y(A - B)
--------
A
Where X = The number of shares of Common Stock to be issued to the Holder.
Y = the number of shares of Common Stock purchasable under this
Warrant (or such portion as is being exercised).
A = the Fair Market Value (as defined in the Agreement) of one share
of such Common Stock.
B = the Purchase Price (as adjusted to the date of such calculation).
5. PARTIAL EXERCISE. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which this
Warrant shall not have been exercised.
6. FRACTIONAL SHARES. In no event shall any fractional share of Common
Stock be issued upon any exercise of the Warrants. In lieu of any fractional
share to which the Holder would otherwise be entitled, the Company will pay cash
equal to the product of such fraction
2
<PAGE>
multiplied by the Common Stock's Fair Market Value (as defined in the Agreement)
as of the date of exercise.
7. RESERVED SHARES; VALID ISSUANCE. The Company covenants that it will at
all times from and after the date hereof reserve and keep available such number
of its authorized shares of Common Stock, free from all preemptive or similar
rights therein, as will be sufficient to permit the exercise of this Warrant in
full. The Company further covenants that such shares as may be issued pursuant
to such exercise will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
8. EXPIRATION DATE. This Warrant shall expire upon termination of the
Agreement and shall be void thereafter.
9. STOCK SPLITS AND DIVIDENDS.
(a) Splits, Subdivisions or Combination of Shares. If the Company at
---------------------------------------------
any time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the Common Stock, the Purchase Price shall forthwith be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(b) Stock Dividends. If the Company at any time while this Warrant is
---------------
outstanding and unexpired shall issue additional shares of Common Stock in
payment of a stock dividend on the Common Stock or make any other distribution
with respect to the Common Stock (except any distribution specifically provided
for in Section 9 or 10 hereof), then the Purchase Price shall be adjusted, from
and after the date of determination of stockholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Purchase
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
(c) Adjustment of Number of Shares. Upon each adjustment of the
------------------------------
Purchase Price pursuant to Sections 9(a) or (b) or 10 hereof, the number of
shares of Common Stock purchasable hereunder shall be adjusted by multiplying
the number of shares purchasable immediately prior to such adjustment in the
Purchase Price by a fraction (i) the numerator of which shall be the Purchase
Price immediately prior to such adjustment and (ii) the denominator of which
shall be the Purchase Price immediately thereafter.
(d) Adjustment for Certain Issuances. If, at any time after the date
--------------------------------
hereof, pursuant to a transaction conducted for equity financing purposes, the
Company shall issue or sell any additional shares of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock for a
consideration per share or having a conversion price or exchange price, either
initially or after any subsequent adjustment to such price (not including
adjustments made in transactions referenced in subsections 9(a) and (b) of this
Warrant), less than the then-applicable Purchase Price, such Purchase Price
shall be reduced, as of the date of
3
<PAGE>
such issuance or sale, to a price equal to the consideration per share or
conversion price or exchange price, whichever is applicable.
10. MERGERS AND RECLASSIFICATIONS. If, after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Common Stock which might have been purchased by the Holder
immediately prior to such Reorganization, and in any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
to the end that the provisions hereof (including without limitation, provisions
for the adjustment of the Purchase Price and the number of shares issuable
hereunder) shall thereafter be applicable in relation to any shares of stock or
other securities and property thereafter deliverable upon exercise hereof. For
the purposes of this SECTION 10, the term "Reorganization" shall include without
--------------
limitation any reclassification, capital reorganization or change of the Common
Stock other than as a result of a subdivision, combination, stock dividend, or
other distribution provided for in SECTION 9 hereof), or any consolidation of
the Company with, or merger of the Company into, another corporation or other
business organization (other than a merger in which the Company is the surviving
corporation and which does not result in any reclassification or change of the
outstanding Common Stock), or any sale or conveyance of all or substantially all
of the assets of the Company.
11. CERTIFICATE OF ADJUSTMENT. Whenever the Purchase Price is adjusted as
provided herein, the Company shall promptly deliver to the Holder (by first
class mail, postage prepaid) a certificate of the Company's chief financial
officer setting forth the amount of the adjustment, the method by which such
adjustment was calculated, the Purchase Price after such adjustment, the number
of shares purchasable upon exercise of this Warrant subsequent to the adjustment
and a brief statement of the facts requiring such adjustment.
12. LOSS, THEFT OR DESTRUCTION OF SECURITIES. In case this Warrant, or any
certificate representing the shares of Common Stock issuable upon exercise
hereof, shall be mutilated, lost, stolen or destroyed, the Company, at its
expense, shall issue a new warrant or certificate of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant or certificate, or (ii) in lieu of any
Warrant or certificate lost, stolen or destroyed, upon receipt of an affidavit
of the Holder or other evidence reasonably satisfactory to the Company of the
loss, theft or destruction of such Warrant or certificate.
13. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, sell or otherwise acquire or
4
<PAGE>
dispose of any shares of stock of any class or any other securities or property,
or to receive any other right;
(b) any reclassification of the capital stock of the Company, capital
reorganization of the Company, consolidation or merger involving the Company, or
sale or conveyance of all or substantially all of its assets;
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company; or
(d) the filing by the Company of a registration statement on Form S-1
under the Act for the initial firm commitment underwritten public offering of
the Common Stock,
then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof. Such notice shall be provided at least twenty
(20) business days (ten (10) business days in the case of subsection (d)) prior
to the date specified in such notice on which any such action is to be taken.
14. AMENDMENT. The terms of this Warrant may be amended or modified only
upon the written consent of the parties hereto.
15. NO IMPAIRMENT. The Company will not, by amendment of its Amended and
Restated Certificate of Incorporation or through any reclassification, capital
reorganization, consolidation, merger, sale or conveyance of assets,
dissolution, liquidation, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holders.
16. TRANSFERS AND EXCHANGES.
(a) This Warrant shall not be transferable in whole or in part unless
and until all conditions to transfer set forth in Section 3.7 of the Agreement
have been met.
(b) It shall be a further condition to each such transfer that the
transferor shall complete and execute the Notice of Assignment (attached hereto
--------------------
as Exhibit B) with respect thereto.
---------
(c) It shall be a further condition to each such transfer that the
transferee shall receive and accept a warrant, of like tenor and date, executed
by the Company.
(d) All new warrants issued in connection with permitted transfers or
exchanges shall be identical in form and provision to this Warrant except as to
the number of shares if less than the full amount of this Warrant is transferred
or exchanged.
17. RIGHTS AS STOCKHOLDERS. No holder of this Warrant, as such, shall be
entitled to vote or receive dividends or be deemed the holder of Common Stock,
or any other securities of
5
<PAGE>
the Company which may at any time be issuable on the exercise thereof for any
purpose, nor shall anything contained herein be construed to confer upon the
Holder, as such, any of the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until this Warrant shall
have been exercised and the Common Stock purchasable upon the exercise hereof
shall have become deliverable, as provided herein.
18. MARKET STAND-OFF AGREEMENT. The Holder hereby agrees that, during the
period of duration specified by the Company and an underwriter of common stock
or other securities of the Company, following the date of the first sale to the
public pursuant to a registration statement of the Company filed under the Act,
it shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
Registrable Securities (as defined in the Rights Agreement) held by it at any
time during such period except common stock included in such registration;
provided, however, that:
(a) such agreement shall be applicable only to the first registration
statement of the Company which covers common stock (or other securities) to be
sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company, all one percent (1%)
stockholders and all other persons with registration rights (whether or not
pursuant to the Rights Agreement) are subject to similar restrictions;
(c) such market stand-off time period shall not exceed one hundred and
eighty (180) days; and
(d) any discretionary waiver or termination of the restrictions of
such agreements by the Company or the representatives of the underwriters shall
apply to all persons subject to such agreements pro rata based on the number of
shares of Registrable Securities held by such persons.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 18 shall not apply to a registration relating solely to employee benefit
plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the
future, or a registration relating solely to a Commission Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.
6
<PAGE>
19. GOVERNING LAW. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the laws of the State of California
without regard to its conflicts of laws provisions.
20. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors and permitted assigns. Any assignment in violation of this Warrant
shall be void.
[The remainder of this page intentionally left blank]
7
<PAGE>
Dated: __________________
MPATH INTERACTIVE, INC.
By: /s/ Lynn Heublein
---------------------------
Name: Lynn Heulbein
-------------------------
Title: COO
------------------------
ACKNOWLEDGED AND AGREED:
PSINET INC.
By:___________________________
Name:_________________________
Title:________________________
SIGNATURE PAGE TO WARRANT
8
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
To:___________________________
______________________________
______________________________
Attn:_________________________
1. The undersigned hereby elects to purchase __________ shares of Common
Stock of Mpath Interactive, Inc. pursuant to the terms of the attached Warrant,
and (please indicate either (a) or (b) below):
___ (a) tenders herewith payment of the purchase price of such shares in
full, or
___ (b) elects to effect such purchase through the Net Issue Exercise
provision set forth in Section 4 of the attached Warrant.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below
Name:___________________________
Address:________________________
________________________
_________________________
3. The undersigned represents that the aforesaid shares being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.
________________________________
(Signature)
9
<PAGE>
EXHIBIT B
---------
NOTICE OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto the person(s) listed below the right to purchase that number of shares of
Common Stock of Mpath Interactive, Inc. ("Shares") pursuant to the terms of the
------
attached Warrant, together with all right, title and interest therein, with full
power of substitution in the premises:
________________________________________________________________________________
NAME(S) OF ASSIGNEE(S) ADDRESS OF ASSIGNEE(S) # OF SHARES ASSIGNED
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
And if said number of Shares shall not be all the Shares represented by the
attached Warrant, a new Warrant is to be issued in the name of the undersigned
for the balance remaining of the Shares registered by said Warrant.
Dated: ______________________________
Signature: ______________________________
Address: ______________________________
______________________________
______________________________
Notice: The signature to the foregoing Assignment must correspond to the
name as written upon the face of the attached Warrant in every particular,
without alteration or any change whatsoever; signature(s) must be guaranteed by
an eligible guarantor institution (banks, stock brokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program) pursuant to Securities and Exchange Commission Rule
17Ad-15.
10
<PAGE>
EXHIBIT 4.7
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED AND HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933
AS AMENDED.
Warrant No. W-CS-1 Number of Shares: 192,000
Date of Issuance: February 11, 1999 (subject to adjustment)
MPATH INTERACTIVE, INC.
Common Stock Purchase Warrant
-----------------------------
Mpath Interactive, Inc. (the "Company"), for value received, hereby
-------
certifies that Yahoo! Inc., or its registered assigns (the "Registered Holder"),
-----------------
is entitled, subject to the terms set forth below, to purchase from the Company,
at any time after the date hereof and on or before the Expiration Date (as
defined in Section 6 below), up to 192,000 shares (as adjusted from time to time
pursuant to the provisions of this Warrant) of Common Stock of the Company, at a
purchase price of $10.29 per share. The shares purchasable upon exercise of
this Warrant and the purchase price per share, as adjusted from time to time
pursuant to the provisions of this Warrant, are sometimes hereinafter referred
to as the "Warrant Stock" and the "Purchase Price," respectively.
------------- --------------
This Warrant is issued pursuant to a Warrant Purchase Agreement dated
February 11, 1999 between the Company and the Registered Holder (the "Purchase
--------
Agreement") and is subject to the terms and conditions of the Purchase
- ---------
Agreement.
1. EXERCISE.
--------
(a) EXERCISABILITY
--------------
(i) This Warrant shall not become exercisable as to any of the
shares subject to this Warrant prior to [XXXXX] and thereafter only as provided
in this Section 1(a).
(ii) Subject to subsection (a)(i) of this Section 1, this
Warrant shall become exercisable as to [XXXXX] of the shares subject to this
Warrant upon renewal of the technology license and integration agreement
referenced in that certain Letter of Understanding between the Company and the
Registered Holder dated February 11, 1999 (the "LOU").
---
(iii) Subject to subsection (a)(i) of this Section 1, this
Warrant shall become exercisable as to [XXXXX] of the shares subject to this
Warrant upon [XXXXX].
(iv) Subject to subsection (a)(i) of this Section 1, this
Warrant shall become exercisable as to [XXXXX] of the shares subject to this
Warrant immediately following [XXXXX].
[XXXXX] CONFIDENTIAL TREATMENT REQUESTED
OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
(b) MANNER OF EXERCISE. This Warrant may be exercised by the
------------------
Registered Holder, in whole or in part, by surrendering this Warrant, with the
purchase form appended hereto as Exhibit A duly executed by such Registered
---------
Holder or by such Registered Holder's duly authorized attorney, at the principal
office of the Company, or at such other office or agency as the Company may
designate, accompanied by payment in full of the Purchase Price payable in
respect of the number of shares of Warrant Stock purchased upon such exercise.
The Purchase Price may be paid by cash, check, wire transfer or by the surrender
of promissory notes or other instruments representing indebtedness of the
Company to the Registered Holder.
(c) EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant shall
--------------------------
be deemed to have been effected immediately prior to the close of business on
the day on which this Warrant shall have been surrendered to the Company as
provided in Section 1(b) above. At such time, the person or persons in whose
name or names any certificates for Warrant Stock shall be issuable upon such
exercise as provided in Section 1(e) below shall be deemed to have become the
holder or holders of record of the Warrant Stock represented by such
certificates.
(d) NET ISSUE EXERCISE.
------------------
(i) In lieu of exercising this Warrant in the manner provided
above in Section 1(b), the Registered Holder may elect to receive shares equal
to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
notice of such election in which event the Company shall issue to holder a
number of shares of Common Stock computed using the following formula:
X = Y (A - B)
---------
A
Where X = The number of shares of Common Stock to be issued to the
Registered Holder.
Y = The number of shares of Common Stock purchasable under this
Warrant (at the date of such calculation).
A = The fair market value of one share of Common Stock (at the date of
such calculation).
B = The Purchase Price (as adjusted to the date of such calculation).
(ii) For purposes of this Section 1(d), the fair market value of
one share of Common Stock on the date of calculation shall mean:
(A) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
Securities and Exchange Commission, then the fair market value per share of
Common Stock shall be the initial "Price to Public" specified in the final
prospectus with respect to the offering;
2
[XXXXX] CONFIDENTIAL TREATMENT REQUESTED
OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
(B) if this Warrant is exercised after, and not in
connection with, the Company's initial public offering, and if the Company's
Common Stock is traded on a securities exchange or The Nasdaq Stock Market or
actively traded over-the-counter:
(1) if the Company's Common Stock is traded on a
securities exchange or The Nasdaq Stock Market, the fair market value shall be
deemed to be the average of the closing prices over a thirty (30) day period
ending three days before date of calculation; or
(2) if the Company's Common Stock is actively traded
over-the-counter, the fair market value shall be deemed to be the average of the
closing bid or sales price (whichever is applicable) over the thirty (30) day
period ending three days before the date of calculation; or
(C) if neither (A) nor (B) is applicable, the fair market
value shall be at the highest price per share which the Company could obtain on
the date of calculation from a willing buyer (not a current employee or
director) for shares of Common Stock sold by the Company, from authorized but
unissued shares, as determined in good faith by the Company's Board of
Directors, unless the Company is at such time subject to an acquisition as
described in Section 6(b) below, in which case the fair market value per share
of Common Stock shall be deemed to be the value of the consideration per share
received by the holders of such stock pursuant to such acquisition.
(e) DELIVERY TO HOLDER. As soon as practicable after the exercise of
------------------
this Warrant in whole or in part, and in any event within ten (10) days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of
Warrant Stock to which such Registered Holder shall be entitled, and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Warrant Stock equal (without
giving effect to any adjustment therein) to the number of such shares called for
on the face of this Warrant minus the number of such shares purchased by the
Registered Holder upon such exercise as provided in Section 1(b) above.
2. ADJUSTMENTS.
-----------
(a) STOCK SPLITS AND DIVIDENDS. If outstanding shares of the
--------------------------
Company's Common Stock shall be subdivided into a greater number of shares or a
dividend in Common Stock shall be paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
3
[XXXXX] CONFIDENTIAL TREATMENT REQUESTED
OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.
(b) RECLASSIFICATION, ETC. In case of any reclassification or change
----------------------
of the outstanding securities of the Company or of any reorganization of the
Company (or any other corporation the stock or securities of which are at the
time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change, reorganization, merger or
conveyance, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in Section 2(a); and in each such case, the terms of this Section 2
shall be applicable to the shares of stock or other securities properly
receivable upon the exercise of this Warrant after such consummation.
(c) ADJUSTMENT CERTIFICATE. When any adjustment is required to be
----------------------
made in the Warrant Stock or the Purchase Price pursuant to this Section 2, the
Company shall promptly mail to the Registered Holder a certificate setting forth
(i) a brief statement of the facts requiring such adjustment, (ii) the Purchase
Price after such adjustment and (iii) the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable after such
adjustment.
3. TRANSFERS.
---------
(a) UNREGISTERED SECURITY. Each holder of this Warrant acknowledges
---------------------
that this Warrant and the Warrant Stock have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and agrees not to
--------------
sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this
Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an
effective registration statement under the Act as to this Warrant or such
Warrant Stock and registration or qualification of this Warrant or such Warrant
Stock under any applicable U.S. federal or state securities law then in effect
or (ii) an opinion of counsel, satisfactory to the Company, that such
registration and qualification are not required. Each certificate or other
instrument for Warrant Stock issued upon the exercise of this Warrant shall bear
a legend substantially to the foregoing effect.
(b) TRANSFERABILITY. Subject to the provisions of Section 3(a) and
---------------
Section 4 hereof, this Warrant and all rights hereunder are transferable, in
whole or in part, upon surrender of the Warrant with a properly executed
assignment (in the form of Exhibit B hereto) at the
---------
4
[XXXXX] CONFIDENTIAL TREATMENT REQUESTED
OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
principal office of the Company provided, however, that this Warrant may not be
-------- -------
transferred unless the transferee acquires the right to purchase all shares of
Warrant Stock hereunder.
(c) WARRANT REGISTER. The Company will maintain a register
----------------
containing the names and addresses of the Registered Holders of this Warrant.
Until any transfer of this Warrant is made in the warrant register, the Company
may treat the Registered Holder of this Warrant as the absolute owner hereof for
all purposes; provided, however, that if this Warrant is properly assigned in
-------- -------
blank, the Company may (but shall not be required to) treat the bearer hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.
4. MARKET STANDOFF AGREEMENT. The Registered Holder hereby agrees that,
-------------------------
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the date of the first
sale to the public pursuant to a registration statement of the Company filed
under the Securities Act of 1933, as amended, it shall not, to the extent
requested by the Company and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of the Company held by it
at any time during such period except common stock included in such
registration; provided, however, that:
(a) such agreement shall be applicable only to the first registration
statement of the Company which covers common stock (or other securities) to be
sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company, all one percent (1%)
stockholders and all other persons with registration rights are subject to
similar restrictions;
(c) such market stand-off time period shall not exceed one hundred and
eighty (180) days; and
(d) any discretionary waiver or termination of the restrictions of
such agreements by the Company or the representatives of the underwriters shall
apply to all persons subject to such agreements pro rata based on the number of
shares subject to such agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Warrant Stock until the end of
such period.
Notwithstanding the foregoing, the obligations described in this
Section 4 shall not apply to a registration relating solely to employee benefit
plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the
future, or a registration relating solely to a Commission Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.
5
[XXXXX] CONFIDENTIAL TREATMENT REQUESTED
OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
5. NO IMPAIRMENT. The Company will not, by amendment of its charter or
-------------
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will (subject to Section 14 below) at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
6. TERMINATION. This Warrant (and the right to purchase securities upon
-----------
exercise hereof) shall terminate upon the earliest to occur of the following
(the "Expiration Date"): (a) [XXXXX], or (b) the sale, conveyance, disposal, or
---------------
encumbrance of all or substantially all of the Company's property or business or
the Company's merger into or consolidation with any other corporation (other
than a wholly-owned subsidiary corporation) or any other transaction or series
of related transactions in which more than fifty percent (50%) of the voting
power of the Company is disposed of; provided that this Section 6(b) shall not
--------
apply to a merger effected exclusively for the purpose of changing the domicile
of the Company, provided further, that notwithstanding the provisions regarding
----------------
the exercisability of this Warrant set forth in Section 1, this Warrant shall
become exercisable for [XXXXX] of the shares subject to this Warrant in the
event of a transaction referenced in this Section 6(b) that would result in the
termination of this Warrant being consummated prior to [XXXXX].
7. NOTICES OF CERTAIN TRANSACTIONS. In case:
-------------------------------
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right, to subscribe for or purchase any shares of stock of any class or any
other securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company,
any consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the surviving
entity), or any transfer of all or substantially all of the assets of the
Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon such
6
[XXXXX] CONFIDENTIAL TREATMENT REQUESTED
OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up) are to be determined. Such notice shall be mailed at
least ten (10) days prior to the record date or effective date for the event
specified in such notice.
8. RESERVATION OF STOCK. The Company will at all times reserve and keep
--------------------
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
9. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
--------------------
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 3
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
10. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
11. NOTICES. Any notice required or permitted by this Warrant shall be in
-------
writing and shall be deemed sufficient upon receipt, when delivered personally
or by courier, overnight delivery service or confirmed facsimile, or forty-eight
(48) hours after being deposited in the regular mail as certified or registered
mail (airmail if sent internationally) with postage prepaid, addressed (a) if to
the Registered Holder, to the address of the Registered Holder most recently
furnished in writing to the Company and (b) if to the Company, to the address
set forth below or subsequently modified by written notice to the Registered
Holder.
12. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
------------------------
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
13. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
--------------------
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
14. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
-------------------
waived only by an instrument in writing signed by the party against which
enforcement of the amendment or waiver is sought.
7
[XXXXX] CONFIDENTIAL TREATMENT REQUESTED
OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
15. HEADINGS. The headings in this Warrant are for purposes of reference
--------
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
16. GOVERNING LAW. This Warrant shall be governed, construed and
-------------
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law.
8
[XXXXX] CONFIDENTIAL TREATMENT REQUESTED
OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
MPATH INTERACTIVE, INC.
By: /s/ Lynn Heublein
--------------------------
Name: Lynn Heublein
------------------------
Title: COO
-----------------------
SIGNATURE PAGE TO WARRANT
9
[XXXXX] CONFIDENTIAL TREATMENT REQUESTED
OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
EXHIBIT A
---------
PURCHASE FORM
-------------
To: Mpath Interactive, Inc. Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant No. W-CS-1, hereby irrevocably elects to purchase _______ shares of the
Common Stock covered by such Warrant and herewith makes payment of $_________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant.
The undersigned acknowledges that it has reviewed the representations and
warranties contained in Section 3 of the Purchase Agreement (as defined in the
Warrant) and by its signature below hereby makes such representations and
warranties to the Company. Defined terms contained in such representations and
warranties shall have the meanings assigned to them in the Purchase Agreement,
provided that the term "Purchaser" shall refer to the undersigned and the term
- --------
"Securities" shall refer to the Warrant Stock.
Signature:________________________________
Name (print):_____________________________
Title (if applic.)________________________
Company (if applic.):_____________________
[XXXXX] CONFIDENTIAL TREATMENT REQUESTED
OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
EXHIBIT B
---------
NOTICE OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers unto
the person(s) listed below the right to purchase that number of shares of Common
Stock of Mpath Interactive, Inc. ("Shares") pursuant to the terms of the
------
attached Warrant, together with all right, title and interest therein, with full
power of substitution in the premises:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NAME(S) OF ASSIGNEE(S) ADDRESS OF ASSIGNEE(S) # OF SHARES ASSIGNED
- -------------------------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
And if said number of Shares shall not be all the Shares represented by the
attached Warrant, a new Warrant is to be issued in the name of the undersigned
for the balance remaining of the Shares registered by said Warrant.
Dated: ____________________________________________
Signature: ____________________________________________
Address: ____________________________________________
____________________________________________
____________________________________________
Notice: The signature to the foregoing Assignment must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or any change whatsoever.
[XXXXX] CONFIDENTIAL TREATMENT REQUESTED
OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
Exhibit 4.8
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS AVAILABLE WITH
RESPECT THERETO.
PREFERRED STOCK PURCHASE WARRANT
Warrant No. 1
-
MPATH INTERACTIVE, INC.
Void after September 30, 2002
1. Issuance. This Warrant is issued to Lighthouse Capital Partners, L.P.
by Mpath Interactive, Inc., a Delaware corporation (hereinafter with its
successors called the "Company").
2. Purchase Price; Number of Shares. The registered holder of this
Warrant (the "Holder"), commencing on the date hereof, is entitled upon
surrender of this Warrant with the subscription form annexed hereto duly
executed, at the principal office of the Company, to purchase from the
Company:
(a) at a price per share (the "Lot A Purchase Price") of $4.14, 9,058 fully
paid and nonassessable shares of Series B Preferred Stock, $.0001 par
value, of the Company (the "Lot A Preferred Stock");
(b) at a price per share equal to the Lot A Purchase Price. 5,434 fully
paid and nonassessable shares of Series B Preferred Stock, $.0001 par
value, of the Company (the "Lot B Preferred Stock"); provided. however,
that the right to purchase shares under this paragraph (b) shall not be
exercisable until on or after the date on which the Company delivers to
Holder a Notice of Election to increase the lease line amount to $800,000
under that certain Master Equipment Lease Agreement and the related Lease
Line Schedule, each dated as of September 29, 1995, by and between the
Company and Holder (the "Master Lease"), as contemplated by the Master
Lease;
(c) at a price per share equal to the then current fair market value per
share of Series B Preferred Stock, as determined in good faith by the
Company's board of directors (the "Lot C Purchase Price"), that number of
shares of fully paid and nonassessable shares of Series B Preferred Stock,
$.0001 par value, of the Company (the "Lot C Preferred Stock") equal to (i)
$30,000 divided by (ii) Lot C Purchase Price; provided, however, that the
right to purchase shares under this paragraph (c) shall not be exercisable
until on or after the date on which the Company delivers to Holder a Notice
of Election to increase the lease line amount to $1,200,000 under the
Master Lease, as contemplated by the Master Lease;
(The Lot A Purchase Price and the Lot C Purchase Price are sometimes referred to
herein collectively, as the "Purchase Price" and the Lot A Preferred Stock, Lot
B Preferred Stock and Lot C Preferred Stock are sometimes referred to herein
collectively, as the "Preferred Stock.") Until such time as this Warrant is
exercised in full or
1
<PAGE>
expires, the Purchase Price and the securities issuable upon exercise of this
Warrant are subject to adjustment as hereinafter provided. The person or persons
on whose name or names any certificate representing shares of Preferred Stock is
issued hereunder shall be deemed to have become the holder of record of the
shares represented thereby as at the close of business on the date this Warrant
is exercised with respect to such shares, whether or not the transfer books of
the Company shall be closed.
3. Payment of Purchase Price. The Purchase Price may be paid (i) in cash
or by check, (ii) by the surrender by the Holder to the Company of any
promissory notes or other obligations issued by the Company, with all such notes
and obligations so surrendered being credited against the Purchase Price in an
amount equal to the principal amount thereof plus accrued interest to the date
of surrender, or (iii) by any combination of the foregoing.
4. Net Issue Election. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares of Preferred Stock
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the principal office of the Company. Thereupon,
the Company shall issue to the Holder such number of fully paid and
nonassessable shares of Preferred Stock as is computed using the following
formula:
X= Y(A-B)
------
A
where: X = the number of shares of Preferred Stock to be issued to the
Holder pursuant to this Section 4.
Y = the number of shares of Preferred Stock covered by this Warrant
in respect of which the net issue election is made pursuant to
this Section 4.
A = the fair market value of one share of Preferred Stock, as
determined in good faith by the Board, as at the time the net
issue election is made pursuant to this Section 4.
B = the Purchase Price in effect under this Warrant at the time the
net issue election is made pursuant to this Section 4.
Subject to Section 7 hereof, the exercise of this Warrant pursuant to this
Section 4 may be made contingent upon the closing of the Company's public
offering of Common Stock. The fair market value of a share of Preferred Stock or
Common Stock (issued upon conversion thereof) as of a particular date means: (a)
if conversion is effective as of the closing of the Company's public offering of
any securities pursuant to a registration statement under the Securities Act,
the "price to public" specified for such shares in the final prospectus for such
public offering, (b) if the Company's stock is publicly traded, the closing sale
price of the Company's stock for the trading day immediately preceding the date
of exercise, and (c) otherwise, the price as determined in good faith by, the
Board of Directors of the Company.
5. Partial Exercise. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which
this Warrant shall not have been exercised.
6. Fractional Shares. In no event shall any fractional share of
Preferred Stock be issued upon any exercise of this Warrant. If, upon exercise
of this Warrant as an entirety, the Holder would, except as provided in this
Section 6, be entitled to receive a fractional share of Preferred Stock, then
the Company shall issue the next higher number of full shares of Preferred
Stock, issuing a full share with respect to such fractional share.
7. Expiration Date; Automatic Exercise. This Warrant shall expire at the
close of business on September 30, 2002, and shall be void thereafter.
Notwithstanding the foregoing, this Warrant shall automatically be deemed to be
exercised in full pursuant to the provisions of Section 4 hereof, without any
further action on
2
<PAGE>
behalf of the Holder, immediately prior to the time this Warrant would otherwise
expire pursuant to the preceding sentence.
8. Reserved Shares; Valid Issuance. The Company covenants that it will
at all times from and after the date hereof reserve and keep available such
number of its authorized shares of Preferred Stock and Common Stock, $.0001
par value, of the Company (the "Common Stock", free from all preemptive or
similar rights therein, as will be sufficient to permit, respectively, the
exercise of this Warrant in full and the conversion into shares of Common
Stock of all shares of Preferred Stock receivable upon such exercise. The
Company further covenants that such shares as may be issued pursuant to such
exercise and/or conversion will, upon issuance, be duly and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issuance thereof.
9. Stock Splits and Dividends. If after the date hereof the Company
shall subdivide the Preferred Stock, by split-up or otherwise, or combine the
Preferred Stock, or issue additional shares of Preferred Stock in payment of a
stock dividend on the Preferred Stock, the number of shares of Preferred Stock
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination, and the Purchase Price shall forthwith
be proportionately decreased in the case of a subdivision or stock dividend,
or proportionately increased in the case of a combination.
10. Mergers and Reclassifications. If after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Preferred Stock which might have been purchased by the
Holder immediately prior to such Reorganization, and in any such case
appropriate provisions shall be made with respect to the rights and interest
of the Holder to the end that the provisions hereof (including without
limitation, provisions for the adjustment of the Purchase Price and the number
of shares issuable hereunder) shall thereafter be applicable in relation to
any shares of stock or other securities and property thereafter deliverable
upon exercise hereof. For the purposes of this Section 10, the term
"Reorganization" shall include without limitation any reclassification,
capital reorganization or change of the Preferred Stock )other than as a
result of a subdivision, combination or stock dividend provided for in Section
9 hereof), or any consolidation of the Company with, or merger of the Company
into, another corporation or other business organization (other than a merger
in which the Company is the surviving corporation and which does not result in
any reclassification or change of the outstanding Preferred Stock), or any
sale or conveyance to another corporation or other business organization of
all or substantially all of the assets of the Company.
11. Certificate of Adjustment. Whenever the Purchase Price is adjusted,
as herein provided, the Company shall promptly deliver to the Holder a
certificate of the Company's chief financial officer setting forth the
Purchase Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
12. Notices of Record Date, Etc. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any
fight to subscribe for, purchase, sell or otherwise acquire or dispose of
any shares of stock of any class or any other securities or property, or
to receive any other right;
(b) any reclassification of the capital stock of the Company,
capital reorganization of the Company, consolidation or merger involving
the Company, or sale or conveyance of all or substantially all of its
assets; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
3
<PAGE>
then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof. Such notice shall be provided at least twenty
(20) business days prior to the date specified in such notice on which any such
action is to be taken.
13. Representations, Warranties and Covenants. This Warrant is issued
and delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
A. The Company has all necessary authority to issue, execute and
deliver this Warrant and to perform its obligations hereunder. This Warrant has
been duly authorized issued, executed and delivered by the Company and is the
valid and binding obligation of the Company, enforceable in accordance with its
terms.
B. The shares of Preferred Stock issuable upon the exercise of this
Warranty have been duly authorized and reserved for issuance by the Company and
when issued in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable.
C. The issuance, execution and delivery of this Warrant do not, and
the issuance of the shares of Preferred Stock upon the exercise of this Warrant
in accordance with the terms hereof will not, (i) violate or contravene the
Company's Amended and Restated Certificate of Incorporation or by-laws, or any
law, statute, regulation, role, judgment or order applicable to the Company,
(ii) violate, contravene or result in a breach or default under any contract,
agreement or instrument to which the Company is a party or by which the Company
or any of its assets are bound or (iii) require the consent or approval of or
the filing of any notice or registration with any person or entity.
D. As long as this Warrant is, or any shares of Preferred Stock
issued upon exercise of this Warrant or any shares of Common Stock issued upon
conversion of such shares of Preferred Stock are, issued and outstanding, the
Company will provide to the Holder the financial and other information described
in that certain Lease Line Schedule No. 01 to Master Equipment Lease Agreement
No. 116 between the Company and Lighthouse Capital Partners, L.P. dated as of
September 29, 1995.
E. The Company grants to the Holder the Registration Rights
contained in Section 1 of the Company's Amended and Restated Investors Rights
Agreement dated as of August 16, 1995 (the "Investors Rights Agreement"), so
that (i) the shares of Common Stock issuable upon conversion of the shares of
Preferred Stock issuable upon exercise of this Warrant shall be "Registrable
Securities," and (ii) the Holder shall be a "Holder", for all purposes of such
Investors Rights Agreement. Holder agrees to be bound by the terms of Section
1 of the Investors Rights Agreement.
14. Amendment. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Holder
l5. Notices, Transfers, Etc.
A. Any notice or written communication required or permitted to be
given to the Holder may be given by certified mail or delivered to the Holder at
the address most recently provided by the Holder to the Company.
B. Subject to compliance with applicable federal and state
securities laws, this Warrant may be transferred by the Holder with respect to
any or all of the shares purchasable hereunder. Upon surrender of this Warrant
to the Company, together with the assignment notice annexed hereto duly
executed, for transfer of this Warrant as an entirety by the Holder, the Company
shall issue a new warrant of the same denomination to the assignee. Upon
surrender of this Warrant to the Company, together with the assignment hereof
properly endorsed, by the Holder for transfer with respect to a portion of the
shares of Preferred Stock purchasable hereunder, the
4
<PAGE>
Company shall issue a new warrant to the assignee, in such denomination as shall
be requested by the Holder hereof, and shall issue to such Holder a new warrant
covering the number of shares in respect of which this Warrant shall not have
been transferred.
C. In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of an affidavit of the Holder or other
evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant
16. No Impairment. The Company will not, by amendment of its Amended and
Restated Certificate of Incorporation of through any reclassification, capital
reorganization, consolidation, merger, sale or conveyance of assets,
dissolution, liquidation, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance of performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holders.
17. Governing Law. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the State of
California.
18. Successors and Assigns. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
19. Business Days. If the last or appointed day for the taking of any
action required of the expiration of any rights granted herein shall be a
Saturday or Sunday or a legal holiday, in California, then such action may be
taken or right may be exercised on the next succeeding day which is not a
Saturday or Sunday or such a legal holiday.
20. Qualifying Public Offering. If the Company shall effect a firm
commitment underwritten public offering of shares of Common Stock which results
in the conversion of the Preferred Stock into Common Stock pursuant to the
Company's Amended and Restated Certificate of Incorporation in effect
immediately prior to such offering, or if all of the Company's Preferred Stock
is converted into Common Stock pursuant to the Company's Amended and Restated
Certificate of Incorporation, then, effective upon such conversion, this Warrant
shall change from the right to purchase shares of Preferred Stock to the right
to purchase shares of Common Stock and the Holder shall thereupon have the right
to purchased, at a total price equal to that payable upon the exercise of this
Warrant in full, the number of shares of Common Stock which would have been
receivable by the Holder upon the exercise of this Warrant for shares of
Preferred Stock immediately prior to such conversion of such shares of Preferred
Stock into shares of Common Stock, and in such event appropriate provisions
shall be made with respect to the rights and interest of the Holder to the end
that the provisions hereof (including, without limitation, provisions for the
adjustment of the Purchase Price and of the number of shares purchasable upon
exercise of this Warrant) shall thereafter be applicable to any shares of Common
Stock deliverable upon the exercise hereof.
21. Value. The Company and the Holder agree that the value of this
Warrant on the date of grant is $100.
Dated: 9/29, 1995 MPATH INTERACTIVE, INC.
----
[CORPORATE SEAL] By: Paul Matteucci
--------------
Title: President and CEO
-----------------
Attest: Jeffrey Y. Suto
---------------
Assistant Secretary
5
<PAGE>
Assignment
For value received _______________________________________________ hereby
sells, assigns and transfers unto ______________________________________________
________________________________________________________________________________
[Please print or typewrite name and address of Assignee]
________________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoint _________
__________________________________ its attorney to transfer the within Warrant
on the books of the within named Company with full power of substitution on the
premises.
Dated:_______________________
_____________________________________________
In the Presence of:
_____________________________
<PAGE>
Subscription
To:________________________________________ Date:________________________
The undersigned hereby subscribes for ______________ shares of Preferred
Stock covered by this Warrant. The certificate(s) for such shares shall be
issued in the name of the undersigned or as otherwise indicated below:
________________________________________________
Signature
________________________________________________
Name for Registration
________________________________________________
Mailing Address
Net Issue Election Notice
To:__________________________________________________ Date:__________________
The undersigned hereby elects under Section 4 to surrender the right to
purchase _____________ shares of Preferred Stock pursuant to this Warrant. The
certificate(s) for such shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below:
________________________________________________
Signature
________________________________________________
Name for Registration
________________________________________________
Mailing Address
<PAGE>
EXHIBIT 4.9
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
____________________
WARRANT TO PURCHASE STOCK
WARRANT TO PURCHASE 23,000 ISSUE DATE: JULY 29, 1998
SHARES OF THE SERIES D PREFERRED EXPIRATION DATE: JULY 30, 2003
STOCK OF MPATH INTERACTIVE, INC. INITIAL EXERCISE PRICE: $5.40 PER SHARE
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 for other good
and valuable consideration, GREYROCK BUSINESS CREDIT, A DIVISION OF
NATIONSCREDIT COMMERCIAL CORPORATION ("Holder") is entitled to purchase the
number of fully paid and non-assessable shares of the class of securities (the
"Shares") of the corporation (the "Company") at the initial exercise price per
Share (the "Warrant Price") all as set forth above and as adjusted pursuant to
Article 2 of this Warrant, subject to the provisions and upon the terms and
conditions set forth in this Warrant.
ARTICLE 1. EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise is substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 [DELETED]
1.4 FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public
-1-
<PAGE>
market, the Board of Director of the Company shall determine fair market value
in its reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstances, such fees and expenses shall be
paid by Holder.
1.5 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on deliver of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 REPURCHASE ON SALE, MERGER OR CONSOLIDATION OF THE COMPANY.
1.7.1 "ACQUISITION." For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2 ASSUMPTION OF WARRANT. If upon the closing of any Acquisition
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3 NONASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
1.7.4 [DELETED]
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 [RESERVED]
-2-
<PAGE>
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. Such an
event shall include any automatic conversion of the outstanding or issuable
securities of the Company of the same class or series as the Shares to common
stock pursuant to the terms of the Company's Articles of Incorporation upon the
closing of a registered public offering of the Company's common stock. The
Company or its successor shall promptly issue to Holder a new Warrant for such
new securities or other property. The new Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise
of the new Warrant. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 ADJUSTMENTS FOR DILUTING ISSUANCES. The number of shares of common
stock issuable upon conversion of the Shares, shall be subject to adjustment,
from time to time in the manner set forth on Exhibit A in the event of Diluting
Issuances (as defined on Exhibit A).
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a
-3-
<PAGE>
certificate of its Chief Financial Officer setting forth such adjustment and the
facts upon which such adjustment is based. The Company shall, upon written
request, furnish Holder a certificate setting forth the Warrant Price in effect
upon the date thereof and the series of adjustments leading to such Warrant
Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than (i) the price per share at which the Shares were
last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the Company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder such financial
statements as are required Section 5.2 of the Loan and Security Agreement of
even date herewith between Greyrock Business Credit and the Company.
-4-
<PAGE>
3.4 REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED. The Company
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
4.1 TERM: NOTICE OF EXPIRATION. This Warrant is exercisable, in whole or
in part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4.2 LEGENDS. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, if reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holders notice of
proposed sale.
4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.2, Holder
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
-5-
<PAGE>
4.5 NOTICES. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
which dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 GOVERNING LAW. This Warrants shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
MPATH INTERACTIVE, INC.
By: /s/ PAUL MATTEUCCI
---------------------------
Chairman of the Board,
President or Vice President
By: /s/ Jeffrey Suto
---------------------------
Secretary or Assistant Secretary
-6-
<PAGE>
APPENDIX 1
----------
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase __________ shares of the
Common/Series _____ Preferred [strike one] Stock of __________ pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to __________ of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
_________________________
(NAME)
_________________________
_________________________
(ADDRESS)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
__________________________
(Signature)
__________________________
(Date)
<PAGE>
APPENDIX 2
----------
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
--------------------------------------
_______________, ____
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear __________:
This is to advise you that the Warrant issued to you described below will
expire on __________, 19__.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
(Name of Issuer)
By:_____________________
Its:____________________
<PAGE>
EXHIBIT A
---------
ANTI-DILUTION PROVISIONS
As set forth in the Company's certificate of incorporation regarding Series
D Preferred Stock of the Company.
<PAGE>
EXHIBIT B
---------
REGISTRATION RIGHTS
The Shares (if common stock), or the common stock issuable upon conversion
of the Shares, shall be deemed "Registrable Securities" entitled to registration
rights in accordance with the Mpath Interactive, Inc. Third Amended and Restated
Investors' Rights Agreement dated July 18, 1997.
The Company represents and warrants that it has obtained all necessary
consents to the issuance of registration rights to the Holder under the
foregoing Agreement.
<PAGE>
EXHIBIT 4.10
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
- --------------------------------------------------------------------------------
Warrant No. 1 Number of Shares: 77,422
Date of Issuance: January 15, 1999 (subject to adjustment)
MPATH INTERACTIVE, INC.
SERIES E PREFERRED STOCK PURCHASE WARRANT
-----------------------------------------
Mpath Interactive, Inc. (the "Company"), for value received, hereby
-------
certifies that NationsBanc Montgomery Securities LLC, or its registered assigns
(the "Registered Holder"), is entitled, subject to the terms set forth below, to
-----------------
purchase from the Company, at any time after the date hereof and on or before
the Expiration Date (as defined in Section 5 below), up to 77,422 shares of
Series E Preferred Stock of the Company ("Preferred Stock"), at a purchase price
---------------
of $6.60 per share. The shares purchasable upon exercise of this Warrant and
the purchase price per share, as adjusted from time to time pursuant to the
provisions of this Warrant, are hereinafter referred to as the "Warrant Stock"
-------------
and the "Purchase Price," respectively.
--------------
1. EXERCISE.
--------
(a) MANNER OF EXERCISE. This Warrant may be exercised by the
------------------
Registered Holder, in whole or in part, by surrendering this Warrant, with the
purchase form appended hereto as Exhibit A duly executed by such Registered
---------
Holder or by such Registered Holder's duly authorized attorney, at the principal
office of the Company, or at such other office or agency as the Company may
designate, accompanied by payment in full of the Purchase Price payable in
respect of the number of shares of Warrant Stock purchased upon such exercise.
The Purchase Price may be paid by cash, check, wire transfer or by the surrender
of promissory notes or other instruments representing indebtedness of the
Company to the Registered Holder.
(b) EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant shall
--------------------------
be deemed to have been effected immediately prior to the close of business on
the day on which this Warrant shall have been surrendered to the Company as
provided in Section 1(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Stock shall be issuable upon such
exercise as provided in Section 1(d) below shall be deemed to have become the
holder or holders of record of the Warrant Stock represented by such
certificates.
(c) NET ISSUE EXERCISE.
------------------
<PAGE>
(i) In lieu of exercising this Warrant in the manner provided
above in Section 1(a), the Registered Holder may elect to receive shares equal
to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
notice of such election in which event the Company shall issue to such Holder a
number of shares of Warrant Stock computed using the following formula:
X = Y (A - B)
---------
A
Where X = The number of shares of Warrant Stock to be issued to the
Registered Holder.
Y = The number of shares of Warrant Stock purchasable under this
Warrant (at the date of such calculation).
A = The fair market value of one share of Warrant Stock (at the date
of such calculation).
B = The Purchase Price (as adjusted to the date of such calculation).
(ii) For purposes of this Section 1(c), the fair market value of
Warrant Stock on the date of calculation shall mean with respect to each share
of Warrant Stock:
(A) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
Securities and Exchange Commission, then the fair market value per share shall
be the product of (x) the initial "Price to Public" specified in the final
prospectus with respect to the offering and (y) the number of shares of Common
Stock into which each share of Warrant Stock is convertible at the date of
calculation;
(B) if (A) is not applicable, the fair market value of Warrant
Stock shall be at the highest price per share which the Company could obtain on
the date of calculation from a willing buyer (not a current employee or
director) for shares of Warrant Stock sold by the Company, from authorized but
unissued shares, as determined in good faith by the Board of Directors, unless
the Company is at such time subject to an acquisition as described in Section
5(b) below, in which case the fair market value of Warrant Stock shall be deemed
to be the value received by the holders of such stock pursuant to such
acquisition.
(d) DELIVERY TO HOLDER. As soon as practicable after the exercise of
------------------
this Warrant in whole or in part, and in any event within ten (10) days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of
Warrant Stock to which such Registered Holder shall be entitled, and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the
-2-
<PAGE>
number of shares of Warrant Stock equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face of this Warrant
minus the number of such shares purchased by the Registered Holder upon such
exercise as provided in Section 1(a) or 1(c) above.
2. ADJUSTMENTS.
-----------
(a) REDEMPTION OR CONVERSION OF PREFERRED STOCK. If all of the
-------------------------------------------
Preferred Stock is redeemed or converted into shares of Common Stock, then this
Warrant shall automatically become exercisable for that number of shares of
Common Stock equal to the number of shares of Common Stock that would have been
received if this Warrant had been exercised in full and the shares of Preferred
Stock received thereupon had been simultaneously converted into shares of Common
Stock immediately prior to such event, and the Exercise Price shall be
automatically adjusted to equal the number obtained by dividing (i) the
aggregate Purchase Price of the shares of Preferred Stock for which this Warrant
was exercisable immediately prior to such redemption or conversion, by (ii) the
number of shares of Common Stock for which this Warrant is exercisable
immediately after such redemption or conversion.
(b) STOCK SPLITS AND DIVIDENDS. If outstanding shares of the
--------------------------
Company's Preferred Stock shall be subdivided into a greater number of shares or
a dividend in Preferred Stock shall be paid in respect of Preferred Stock, the
Purchase Price in effect immediately prior to such subdivision or at the record
date of such dividend shall simultaneously with the effectiveness of such
subdivision or immediately after the record date of such dividend be
proportionately reduced. If outstanding shares of Preferred Stock shall be
combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the Purchase Price, the number of shares of
Warrant Stock purchasable upon the exercise of this Warrant shall be changed to
the number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such adjustment,
by (ii) the Purchase Price in effect immediately after such adjustment.
(c) RECLASSIFICATION, ETC. In case there occurs any reclassification
---------------------
or change of the outstanding securities of the Company or of any reorganization
of the Company (or any other corporation the stock or securities of which are at
the time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
Registered Holder, upon the exercise hereof at any time after the consummation
of such reclassification, change, or reorganization shall be entitled to
receive, in lieu of the stock or other securities and property receivable upon
the exercise hereof prior to such consummation, the stock or other securities or
property to which such Holder would have been entitled upon such consummation if
such Holder had exercised this Warrant immediately prior thereto, all subject to
further adjustment pursuant to the provisions of this Section 2.
(d) ADJUSTMENT CERTIFICATE. When any adjustment is required to be
----------------------
made in the Warrant Stock or the Purchase Price pursuant to this Section 2, the
Company shall promptly
-3-
<PAGE>
mail to the Registered Holder a certificate setting forth (i) a brief statement
of the facts requiring such adjustment, (ii) the Purchase Price after such
adjustment and (iii) the kind and amount of stock or other securities or
property into which this Warrant shall be exercisable after such adjustment.
(e) ACKNOWLEDGEMENT. In order to avoid doubt, it is acknowledged
---------------
that the holder of this Warrant shall be entitled to the benefit of all
adjustments in the number of shares of Common Stock of the Company issuable upon
conversion of the Preferred Stock of the Company which occur prior to the
exercise of this Warrant, including without limitation, any increase in the
number of shares of Common Stock issuable upon conversion as a result of a
dilutive issuance of capital stock.
3. TRANSFERS.
---------
(a) UNREGISTERED SECURITY. Each holder of this Warrant acknowledges
---------------------
that this Warrant, the Warrant Stock and the Common Stock of the Company have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and agrees not to sell, pledge, distribute, offer for sale,
--------------
transfer or otherwise dispose of this Warrant, any Warrant Stock issued upon its
exercise or any Common Stock issued upon conversion of the Warrant Stock in the
absence of (i) an effective registration statement under the Act as to this
Warrant, such Warrant Stock or such Common Stock and registration or
qualification of this Warrant, such Warrant Stock or such Common Stock under any
applicable U.S. federal or state securities law then in effect, or (ii) an
opinion of counsel, satisfactory to the Company, that such registration and
qualification are not required. Each certificate or other instrument for
Warrant Stock issued upon the exercise of this Warrant shall bear a legend
substantially to the foregoing effect.
(b) TRANSFERABILITY. Subject to the provisions of Section 3(a) hereof
---------------
and of Section 1.15 of the Fourth Amended and Restated Investors' Rights
Agreement dated January 15, 1999 among the Company and certain holders of the
Company's securities, this Warrant and all rights hereunder are transferable, in
whole or in part, upon surrender of the Warrant with a properly executed
assignment (in the form of Exhibit B hereto) at the principal office of the
---------
Company provided, however, that this Warrant may not be transferred in part
-------- -------
unless the transferee acquires the right to purchase at least 50,000 shares (as
adjusted pursuant to Section 2) of Warrant Stock hereunder.
(c) WARRANT REGISTER. The Company will maintain a register containing
----------------
the names and addresses of the Registered Holders of this Warrant. Until any
transfer of this Warrant is made in the warrant register, the Company may treat
the Registered Holder of this Warrant as the absolute owner hereof for all
purposes; provided, however, that if this Warrant is properly assigned in blank,
-------- -------
the Company may (but shall not be required to) treat the bearer hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.
-4-
<PAGE>
4. NO IMPAIRMENT. The Company will not, by amendment of its charter or
-------------
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will (subject to Section 13 below) at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
5. TERMINATION. This Warrant (and the right to purchase securities upon
-----------
exercise hereof) shall terminate upon the earliest to occur of the following
(the "Expiration Date"): (a) January 15, 2004, (b) the sale, conveyance,
---------------
disposal, or encumbrance of all or substantially all of the Company's property
or business or the Company's merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary corporation) or any other
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, provided that this
--------
Section 5(b) shall not apply to a merger effected exclusively for the purpose of
changing the domicile of the Company, or (c) the closing of a firm commitment
underwritten public offering pursuant to a registration statement under the
Securities Act.
6. NOTICES OF CERTAIN TRANSACTIONS. In case:
-------------------------------
(a) the Company shall take a record of the holders of its Preferred
Stock (or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or to receive any right to subscribe for or
purchase any shares of stock of any class or any other securities, or to receive
any other right, to subscribe for or purchase any shares of stock of any class
or any other securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company,
any consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the surviving
entity), or any transfer of all or substantially all of the assets of the
Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
(d) of any redemption of the Preferred Stock or mandatory conversion
of the Preferred Stock into Common Stock of the Company, or
(e) of the closing of a firm commitment underwritten public offering
pursuant to a registration statement under the Securities Act,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such
-5-
<PAGE>
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation, winding-up, redemption or conversion is to take place, and the
time, if any is to be fixed, as of which the holders of record of Preferred
Stock (or such other stock or securities at the time deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation, winding-up, redemption or conversion) are to be determined. Such
notice shall be mailed at least ten (10) days prior to the record date or
effective date for the event specified in such notice.
7. RESERVATION OF STOCK. The Company will at all times reserve and keep
--------------------
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
8. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
--------------------
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 3
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Preferred Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
9. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
10. MAILING OF NOTICES. Any notice required or permitted pursuant to this
------------------
Warrant shall be in writing and shall be deemed sufficient upon receipt, when
delivered personally or sent by courier, overnight delivery service or confirmed
facsimile, or forty-eight (48) hours after being deposited in the regular mail,
as certified or registered mail (airmail if sent internationally), with postage
prepaid, addressed (a) if to the Registered Holder, to the address of the
Registered Holder most recently furnished in writing to the Company and (b) if
to the Company, to the address set forth below or subsequently modified by
written notice to the Registered Holder.
11. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
------------------------
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
12. NO FRACTIONAL SHARES. No fractional shares of Preferred Stock will be
--------------------
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Preferred Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
-6-
<PAGE>
13. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or waived
-------------------
only by an instrument in writing signed by the party against which enforcement
of the amendment or waiver is sought.
14. HEADINGS. The headings in this Warrant are for purposes of reference
--------
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
15. GOVERNING LAW. This Warrant shall be governed, construed and
-------------
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law.
MPATH INTERACTIVE, INC.
By /s/ Paul Matteucci
------------------------------
Paul Matteucci, President
Address: 665 Clyde Avenue
Mountain View, CA 94943
Fax Number: (650) 429-3889
-7-
<PAGE>
EXHIBIT A
---------
PURCHASE FORM
-------------
To: Mpath Interactive, Inc. Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant No. ((WarrantNo)), hereby irrevocably elects to purchase _______ shares
of the Preferred Stock covered by such Warrant and herewith makes payment of
$_________, representing the full purchase price for such shares at the price
per share provided for in such Warrant.
The undersigned acknowledges that it has reviewed the representations and
warranties contained in Section 3 of the Series E Purchase Agreement, dated as
of January 15, 1999, among the Company and the investors party thereto and by
its signature below hereby makes such representations and warranties to the
Company. Defined terms contained in such representations and warranties shall
have the meanings assigned to them in the Purchase Agreement, provided that the
--------
term "Purchaser" shall refer to the undersigned and the term "Securities" shall
refer to the Warrant Stock and the Common Stock of the Company issuable upon
conversion of the Warrant Stock.
The undersigned further acknowledges that it has reviewed the market
standoff provisions set forth in Section 1.15 of the Fourth Amended Investors'
Rights Agreement dated January 15, 1999 among the Company and certain holders of
the Company's securities and agrees to be bound by such provisions.
Signature:_________________________________
Name (print):______________________________
Title (if applic.)_________________________
Company (if applic.):______________________
<PAGE>
EXHIBIT B
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, _________________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant with respect to the number of shares of Series A Preferred Stock covered
thereby set forth below, unto:
NAME OF ASSIGNEE ADDRESS/FAX NUMBER NO. OF SHARES
---------------- ------------------ -------------
Dated:_________________ Signature:______________________________
______________________________
Witness: _______________________________
<PAGE>
EXHIBIT 4.11
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
CONVERTIBLE SENIOR SUBORDINATED PROMISSORY NOTE
-----------------------------------------------
$1,864,000.00 November 18, 1996
Cupertino, California
For value received, Mpath Interactive, Inc., a Delaware corporation (the
"Company"), promises to pay to Viacom International Inc., a Delaware corporation
- --------
(the "Holder"), the principal sum of One Million Eight Hundred Sixty-Four
------
Thousand Dollars ($1,864,000.00). Interest shall accrue from the date of this
Note on the unpaid principal amount at the prime rate announced from time to
time by Citibank, compounded annually. Principal and accrued interest shall be
due and payable upon the fifth anniversary of the date hereof, subject to the
terms of Sections 2 and 4 hereof. This Note is referred to herein as the
"Note." This Note is subject to the following terms and conditions.
1. MATURITY. Unless converted as provided in Section 2, or unless it
--------
becomes due and payable earlier under Section 4, this Note will automatically
mature and be due and payable upon the fifth anniversary of the date hereof.
Interest shall accrue on this Note but shall not be due and payable until the
maturity date of this Note, as the same may be accelerated under Section 4.
Notwithstanding the foregoing, the entire unpaid principal sum of this Note,
together with accrued and unpaid interest thereon, shall become immediately due
and payable upon the insolvency of the Company, the commission of any act of
bankruptcy by the Company, the execution by the Company of a general assignment
for the benefit of creditors, the filing by or against the Company of a petition
in bankruptcy or any petition for relief under the federal bankruptcy act or the
continuation of such petition without dismissal for a period of thirty (30) days
or more, or the appointment of a receiver or trustee to take possession of the
property or assets of the Company.
2. CONVERSION.
----------
(a) INVESTMENT BY THE HOLDER. The entire (but not less than the
------------------------
entire) amount of unpaid principal and accrued but unpaid interest under this
Note may be converted, at the Holder's option, into shares of the Company's
Common Stock at any time on and after the earliest to occur of the following:
(i) the filing by the Company with the Securities and Exchange Commission or any
comparable or successor agency of a registration statement with respect to the
initial public offering of its Common Stock (the "IPO") or (ii) the execution of
a definitive agreement concerning a Sale Transaction. A "Sale Transaction" is
any transaction between the Company and/or its stockholders pursuant to which
(i) any one or more person or persons or
<PAGE>
other entities acquires all or substantially all of the Company's assets; or
(ii) the Company's stockholders of record as constituted immediately prior to
the closing of such transaction will, immediately after such transaction (by
virtue of securities issued as consideration for the Company's acquisition or
sale or otherwise) hold less than a majority of the voting power of the
surviving entity, in the case of either (i) or (ii) above, whether through a
merger, consolidation, acquisition, grant of irrevocable proxy or otherwise.
Notice thereof shall be delivered to the Holder by the Company promptly after
the date of filing with the Securities and Exchange Commission of the
registration statement associated with the IPO or the execution of a definitive
agreement with respect to such third-party acquisition. The number of shares of
Common Stock to be issued upon such conversion shall be equal to the quotient
obtained by dividing (i) the entire amount of unpaid principal and interest due
under this Note by (ii) (a) the price per share at which the Common Stock is
sold to the underwriters in the case of an IPO (i.e. the price to the public
less the underwriting discount) or (b) the consideration per share paid in an
acquisition of the Company, as determined in good faith by the Company's Board
of Directors, in each case rounded downwards to the nearest whole share. Such
conversion shall be conditioned upon the consummation of the IPO or the third
party acquisition, as the case may be, and requires at least five (5) days
notice to the Company.
(b) MECHANICS AND EFFECT OF CONVERSION. No fractional shares of the
----------------------------------
Company's capital stock will be issued upon conversion of this Note. In lieu of
any fractional share to which the Holder would otherwise be entitled, the
Company will pay to the Holder in cash the amount of the unconverted principal
and interest balance of this Note that would otherwise be converted into such
fractional share. Upon conversion of this Note pursuant to this Section 2, the
Holder shall surrender this Note, duly endorsed, at the principal offices of the
Company or any transfer agent of the Company. At its expense the Company will,
as soon as practicable thereafter and in no event later than three (3) business
days thereafter, issue and deliver to such Holder, at such principal office, a
certificate or certificates for the number of shares to which such Holder is
entitled upon such conversion, together with any other securities and property
to which the Holder is entitled upon such conversion under the terms of this
Note, including a check payable to the Holder for any cash amounts payable as
described herein. Subject to the foregoing, upon conversion of this Note, the
Company will be forever released from all of its obligations and liabilities
under this Note with regard to that portion of the principal amount and accrued
interest being converted including without limitation the obligation to pay such
portion of the principal amount and accrued interest.
3. PAYMENT. Both principal and interest hereunder are payable not later
-------
than 11:00 A.M. (New York City time) on the day for payment thereof in lawful
money of the United States of America to the Holder at 1515 Broadway, New York,
NY 10036 (or such other address as the Holder designates in writing), in same
day funds. Whenever any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest. "Business Day" means a day of the year on
which banks are not required or authorized to close in New York City and
California. The Company hereby authorizes the Holder and each of its affiliates
(the "Affiliates" or, each, an "Affiliate") that, as a single entity (a)
directly or indirectly owns 100% of the Holder, (b) directly or indirectly is
<PAGE>
owned 100% by the Holder or (c) directly or indirectly is under common control
with the Holder, at any time following an Event of Default as defined hereunder,
and to the fullest extent permitted by law, to set off any indebtedness at any
time owing by the Holder or such affiliate to or for the account of the Company
against any and all of the obligations of the Company now or hereafter existing
under this Note. Prepayment of this Note, in whole or in part, may be made at
any time without penalty upon at least 10 days notice to the Holder.
4. EVENTS OF DEFAULT. If any of the following events ( an "Event of
----------------- --------
Default") shall occur and be continuing:
- -------
(a) the Company shall fail to pay any principal of the Note when the same
becomes due and payable or the Company shall fail to pay any interest on the
Note in each case when the same becomes due and payable;
(b) the Company shall generally not pay its bonafide, undisputed debts as
such debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Company seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it) that is being diligently
contested by it in good faith, either such proceeding shall remain undismissed
or unstayed for a period of 30 days or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or any substantial part of its property) shall occur, or the
Company shall take any corporate action to authorize any of the actions set
forth above in this subsection (b);
(c) any final judgment or order no longer subject to appeal for the
payment of money in excess of $250,000 shall be rendered against the Company and
either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order and shall not have been stayed or (ii) there shall
be any period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect;
(d) any non-monetary final judgment or order no longer subject to appeal
shall be rendered against the Company that has a material adverse effect on (a)
the rights and remedies of the Holder under this Note and/or that certain
Security Agreement (the "Security Agreement") of even date hereof by and between
the Company and the Holder (collectively, this Note and the Security Agreement
are referred to as the "Loan Documents") or (b) the ability of the Company to
perform its obligations under the Loan Documents, and there shall be any period
of 30 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
<PAGE>
(e) The Company shall fail to perform or observe any material covenant,
negative covenant, condition or agreement to be performed or observed by the
Company in the Loan Documents, and such failure shall continue unremedied after
occurrence of such failure for a period of thirty days after the earlier of the
Company's actual knowledge of such failure or receipt of written notice thereof;
(f) The Company shall fail to perform or observe any material covenant,
negative covenant, condition or agreement to be performed or observed by the
Company in any agreement with respect to Senior Indebtedness (as defined below);
provided, however, that in the event such failure to perform or observe ("Senior
Event of Default") is waived by the holder of the Senior Indebtedness, or such
agreement with respect to Senior Indebtedness is amended so that such failure to
perform no longer is in effect, then there shall be no Senior Event of Default
and no Event of Default under this clause (f);
then, and in any such event, this Note, all interest thereon and all other
amounts payable under this Note shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Company.
No amendment or waiver of any provision of this Note, nor consent to any
departure by the Company herefrom, shall in any event be effective unless the
same shall be in writing and signed by the Holder and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. The Company agrees to pay on demand (i) all costs and
expenses of the Holder incurred after an Event of Default in connection with the
modification and amendment of the Loan Documents (including, without limitation,
the reasonable fees and expenses of counsel for the Holder with respect thereto,
with respect to advising the Holder as to its rights and responsibilities, or
the perfection, protection or preservation of rights or interests, under the
Loan Documents, with respect to negotiations with the Company or with other
creditors of the Company arising out of any Event of Default or any events or
circumstances that may give rise to an Event of Default and with respect to
presenting claims in or otherwise participating in or monitoring any bankruptcy,
insolvency or other similar proceeding involving creditors' rights generally and
any proceeding ancillary thereto, in an amount not to exceed $20,000 for all of
the foregoing costs and expenses collectively) and (ii) all costs and expenses
of the Holder in connection with the enforcement of the Loan Documents, whether
in any action, suit or litigation, any bankruptcy, insolvency or other similar
proceeding affecting creditors' rights generally (including, without limitation,
the reasonable fees and expenses of counsel for the Holder with respect thereto)
whether or not such costs or expenses are covered by clause (i), and without
regard to the limitations of clause (i). In addition, the Company shall pay any
and all stamp and other taxes payable or determined to be payable in connection
with the execution and delivery of this Note and the Security Agreement and
agrees to save the Holder harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or failure to pay such taxes.
5. SECURITY AGREEMENT. This Note is the Note referred to in, and is
------------------
entitled to the benefits of, the Security Agreement. The obligations of the
Company under this Note are secured by the Collateral as provided in the
Security Agreement.
<PAGE>
6. TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of this
--------------------------------
Note shall inure to the benefit of and be binding upon the respective successors
and assigns of the parties. Except for a transfer to an Affiliate of the
Holder, this Note may be transferred only upon surrender of the original Note
for registration of transfer, duly endorsed, or accompanied by a duly executed
written instrument of transfer in form reasonably satisfactory to the Company.
Thereupon, a new note for the same principal amount will be issued to, and
registered in the name of, the transferee. Principal is payable only to the
registered holder of this Note. In the event of transfer to an Affiliate, any
payment under this Note shall be made to the Holder unless the Company is
otherwise notified in writing.
7. GOVERNING LAW. This Note and all acts and transactions pursuant hereto
-------------
and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the state of New York,
without giving effect to the principles of conflicts of law.
8. JURISDICTION AND VENUE. Each of the parties hereto hereby irrevocably
-----------------------
and unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Note for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment in the manner required by those jurisdictions or in any other manner
provided by law. Nothing in this Note shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Note in the
courts of any jurisdiction.
9. WAIVER OF JURY TRIAL. The Company and the Holder hereby irrevocably
--------------------
waive all right to trial by jury in any action, proceeding or counterclaim
(whether based upon contract, tort or otherwise) arising out of or relating to
this Note or the actions of the Company or the Holder in the negotiation,
administration, performance or enforcement thereof.
10. NOTICES.
-------
(a) All notices and other communications required or permitted under
this Note shall be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, at any time other than during a
general discontinuance of postal service due to strike, lockout or otherwise,
shall be deemed to have been received on the earlier of the date shown on the
receipt or three (3) Business Days after the postmarked date thereof and, if
telecopied, shall be followed forthwith by letter and shall be deemed to have
been received on the next business day following dispatch and acknowledgment of
receipt by the recipient's telecopy machine. In addition, notices hereunder may
be delivered by hand or overnight courier, in which event the notice shall be
deemed effective when delivered. All notices and other communications under this
Note shall be given to the parties hereto at the following addresses: if to the
Company at its
<PAGE>
address at 10455-A Bandley Drive, Cupertino, California 95014, Attention: Chief
Executive Officer, telecopy number: (408) 342-8811 with a copy to Venture Law
Group, 2800 Sand Hill Road, Menlo Park, California 94025, Attention: Jeffrey Y.
Suto, Esq.; telecopy number: (415) 854-1121 and if to the Holder at its address
at 1515 Broadway, New York, New York 10036, Attention: Kevin L. Reymond, Senior
Vice President, Chief Financial Officer, Viacom Interactive Media, telecopy
number: (212) 258-7154 with a copy to: Lawrence Rubin, Vice President-
Counsel/Financial, telecopy number: (212) 846-1428.
(b) Any party hereto may change the address to which notices shall be
directed under this Section 9 by giving ten (10) days written notice of such
change to the other parties.
11. AMENDMENTS AND WAIVERS. Any term of this Note may be amended with the
----------------------
written consent of the Company and the Holder. Any amendment or waiver effected
in accordance with this Section 11 shall be binding upon the Company, the Holder
and each transferee of the Note.
12. SHAREHOLDERS, OFFICERS AND DIRECTORS NOT LIABLE. In no event shall
-----------------------------------------------
any shareholder, officer or director of the Company be liable for any amounts
due or payable pursuant to this Note.
13. SUBORDINATION.
-------------
(a) The indebtedness evidenced by this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full of all of the Company's Senior
Indebtedness. "Senior Indebtedness" shall mean the principal of, and unpaid
-------------------
interest and premium, if any, on (i) secured indebtedness of the Company for
money borrowed, whether presently outstanding or hereafter created, to banks,
savings and loan associations, insurance companies, Foothill Capital
Corporation, Congress Financial Corporation, CIT Corporation, General Electric
Capital Corporation or other asset-based lenders of comparable quality or other
similar lending institutions regularly engaged in the business of lending money
to commercial borrowers ("Qualified Institutions") in a transaction or series of
related transactions in which the primary purpose is to lend money to the
Company; (ii) any secured indebtedness of the Company to one or more Qualified
Institutions for a guarantee of the indebtedness for money borrowed by a wholly-
owned subsidiary of the Company which represents the secured indebtedness of
such subsidiary, whether presently outstanding or hereafter created; and (iii)
any deferrals, renewals or extensions of the secured indebtedness described in
(i) and (ii) above.
(b) (i) Upon any receivership, insolvency, assignment for the benefit
of creditors, bankruptcy, reorganization, or arrangement with creditors (whether
or not pursuant to bankruptcy or other insolvency laws), sale of all or
substantially all of the assets, dissolution, liquidation, or any other
marshaling of the assets and liabilities of the Company, (ii) in the event this
Note shall be declared due and payable as a result of an Event of Default under
Section 4, or (iii) in the event this Note matures under Section 1 and at the
time of such maturity a Senior Event of Default exists and is continuing, no
amount shall be paid by the Company, whether in
<PAGE>
cash or property in respect of the principal of or interest on this Note at the
time outstanding, unless and until the full amount of any Senior Indebtedness
then outstanding shall be paid in full, or in the case of clause (iii), until
such Senior Event of Default shall have been cured or waived or shall cease to
exist.
(c) If a Senior Event of Default has occurred (including without
limitation as a result of a cross-default provision) permitting the holder of
such Senior Indebtedness thereof to accelerate the maturity thereof, then (i)
unless and until such Senior Event of Default shall have been cured or waived or
shall have ceased to exist, or all Senior Indebtedness shall have been paid in
full, no payment shall be made in respect of the principal of or interest on
this Note; and (ii) the Holder agrees that it shall not take any enforcement
actions with respect to this Note and payments due hereunder for a period of
ninety (90) days following the occurrence of such Senior Event of Default.
(d) The security interest in certain assets of the Company granted by
the Company to the Holder pursuant to the Security Agreement to secure repayment
of this Note shall be and hereby is made subordinate to any security interest in
such collateral that is or shall be granted to the holder or holders of Senior
Indebtedness.
(e) Should any payment or distribution be received by the Holder in
derogation of the provisions of Section 13(b) or at a time there is a Senior
Event of Default which has not been cured, waived, or otherwise ceases to exist,
prior to the satisfaction of all Senior Indebtedness then outstanding, the
Holder shall receive and hold the same in trust, as trustee, for the benefit of
any and all holders of such Senior Indebtedness and shall forthwith deliver the
same to such holders of Senior Indebtedness in precisely the same form received
(except for the endorsement or assignment of the Holder where necessary) for
application on the Senior Indebtedness, due or not due, and until so delivered,
the same shall be held in trust by the Holder as the property of the holders of
outstanding Senior Indebtedness.
(f) The Holder hereby agrees to enter into such form of intercreditor
or subordination agreement as may reasonably be requested from time to time by
future holders of Senior Indebtedness in order to secure the rights and
priorities of such parties with respect to their claims against the Collateral,
provided that such agreements shall not place any greater obligations on the
Holder than are expressly set forth in Section 13 of this Note and shall not
affect the Holder's right or ability to collect and receive payment on and
enforce this Note in any manner other than as expressly provided in Section 13
of this Note.
(g) After all of the Senior Indebtedness has been paid in full and
until this Note has been paid in full, the Holder shall be subrogated to the
rights of any holder of Senior Indebtedness to receive payments and
distributions of assets with respect to the Senior Indebtedness, to the extent
that amounts distributed to the Holder have been paid over to the holder of
Senior Indebtedness pursuant to Section 13(e). As between the Company and the
Holder, a distribution applied to the payment of the Senior Indebtedness in
accordance with the provisions of this Note which otherwise would have been made
to the Holder shall not be deemed a payment by the Company on the Note, it being
understood that the subordination
<PAGE>
provisions of the Note are and are intended solely for the purpose of defining
the relative rights of the Holder, on the one hand, and the holders of Senior
Indebtedness, on the other hand. Notwithstanding anything to the contrary in
this Section 13 or any other provisions of this Note, nothing contained in this
Section 13 or any other provision of this Note shall impair, as between the
Company and the Holder, the obligation of the Company, which is absolute and
unconditional, to pay to the Holder hereof all indebtedness owing under this
Note as and when the same shall become due and payable, or shall prevent the
Holder (subject to Section 13(c)(ii)), upon default hereunder, from exercising
all rights, powers and remedies otherwise provided herein or by applicable law,
all subject to the rights, if any, of the holders of Senior Indebtedness under
the preceding paragraphs to receive cash or other properties otherwise payable
or deliverable to the Holder pursuant to this Note.
COMPANY:
MPATH INTERACTIVE, INC.
By: /s/ Paul Matteucci
------------------
Name: Paul Matteucci
----------------
(print)
Title: President and Chief Executive Officer
-------------------------------------
Address: 10455-A Bandley Drive
Cupertino, CA 95014
AGREED TO AND ACCEPTED:
VIACOM INTERNATIONAL INC.
By: /s/ Wayne D. Smith
----------------------
Name: Wayne D. Smith
---------------------
(print)
Title: Assistant Secretary
---------------------
Address: 1515 Broadway
New York, New York 10036
<PAGE>
EXHIBIT 5.1
March 16, 1999
Mpath Interactive, Inc.
665 Clyde Avenue
Mountain View, CA 94043
REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-72437)
-------------------------------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 (File No. 333-
72437) (the "Registration Statement") filed by you with the Securities and
Exchange Commission on February 16, 1999, in connection with the registration
under the Securities Act of 1933 of shares of your Common Stock (the "Shares").
As your legal counsel in connection with this transaction, we have examined the
proceedings taken and we are familiar with the proceedings proposed to be taken
by you in connection with the sale and issuance of the Shares.
It is our opinion that upon completion of the proceedings being taken in
order to permit such transactions to be carried out in accordance with the
securities laws of the various states where required, the Shares, when issued
and sold in the manner described in the Registration Statement, will be legally
and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever it appears in the
Registration Statement and in any amendment to it.
Sincerely,
VENTURE LAW GROUP
A Professional Corporation
/s/ VENTURE LAW GROUP
<PAGE>
EXHIBIT 10.1
MPATH INTERACTIVE, INC.
FORM OF INDEMNIFICATION AGREEMENT
---------------------------------
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of ___________,
199____ by and between Mpath Interactive, Inc., a Delaware corporation (the
"Company"), and Indemnitee ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited and is not currently available
to the Company;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers and
directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors of
the Company and to indemnify its officers and directors so as to provide them
with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
---------------
(a) Third Party Proceedings. The Company shall indemnify Indemnitee
-----------------------
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
<PAGE>
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that Indemnitee's
conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company or any subsidiary of the Company to procure a judgment in
its favor by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while an officer or director or
by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action or suit if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, except that no indemnification shall be made in respect of any
claim, issue or matter as to which Indemnitee shall have been adjudged to be
liable to the Company unless and only to the extent that the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
of the State of Delaware or such other court shall deem proper.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee has
-----------------------------
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Subsections (a) and (b) of this Section 1 or the
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith.
2. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referenced in
Section 1(a) or (b) hereof. Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
the Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to the
Indemnitee within twenty (20) days following delivery of a written request
therefor by Indemnitee to the Company.
<PAGE>
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to Mpath Interactive, Inc.
at the address as shown on the signature page of this Agreement (or such other
address as the Company shall designate in writing to Indemnitee). Notice shall
be deemed received on the third business day after the date postmarked if sent
by domestic certified or registered mail, properly addressed; otherwise notice
shall be deemed received when such notice shall actually be received by the
Company. In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) Procedure. Any indemnification and advances provided for in
---------
Section 1 and this Section 2 shall be made no later than forty-five (45) days
after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or Bylaws providing for indemnification, is not
paid in full by the Company within forty-five (45) days after a written request
for payment thereof has first been received by the Company, Indemnitee may, but
need not, at any time thereafter bring an action against the Company to recover
the unpaid amount of the claim and, subject to Section 12 of this Agreement,
Indemnitee shall also be entitled to be paid for the expenses (including
attorneys' fees) of bringing such action. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
connection with any action, suit or proceeding in advance of its final
disposition) that Indemnitee has not met the standards of conduct which make it
permissible under applicable law for the Company to indemnify Indemnitee for the
amount claimed, but the burden of proving such defense shall be on the Company
and Indemnitee shall be entitled to receive interim payments of expenses
pursuant to Subsection 2(a) unless and until such defense may be finally
adjudicated by court order or judgment from which no further right of appeal
exists. It is the parties' intention that if the Company contests Indemnitee's
right to indemnification, the question of Indemnitee's right to indemnification
shall be for the court to decide, and neither the failure of the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination that indemnification of Indemnitee is proper in the circumstances
because Indemnitee has met the applicable standard of conduct required by
applicable law, nor an actual determination by the Company (including its Board
of Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) that Indemnitee has not met such applicable
standard of conduct, shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
------------------
a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
<PAGE>
(e) Selection of Counsel. In the event the Company shall be obligated
--------------------
under Section 3(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, upon the delivery to
Indemnitee of written notice of its election so to do. After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such counsel
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ his counsel in any such proceeding at Indemnitee's expense; and
(ii) if (A) the employment of counsel by Indemnitee has been previously
authorized by the Company, (B) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of any such defense or (C) the Company shall not, in fact, have
employed counsel to assume the defense of such proceeding, then the fees and
expenses of Indemnitee's counsel shall be at the expense of the Company.
3. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
(a) Scope. Notwithstanding any other provision of this Agreement, the
-----
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be, ipso facto, within
the purview of Indemnitee's rights and Company's obligations, under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested Directors, the General Corporation Law of
the State of Delaware, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an Indemnified Capacity even
though he may have ceased to serve in an Indemnified Capacity at the time of any
action, suit or other covered proceeding.
4. Partial Indemnification. If Indemnitee is entitled under any provision
-----------------------
of this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred by him
in the investigation, defense, appeal or settlement of any civil or criminal
action, suit or proceeding, but not, however, for the total
<PAGE>
amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion of such expenses, judgments, fines or penalties to which Indemnitee is
entitled.
5. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise. For example, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission (the "SEC") has taken
the position that indemnification is not permissible for liabilities arising
under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the SEC to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
6. Officer and Director Liability Insurance. The Company shall, from time
----------------------------------------
to time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided
by such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
7. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 7. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
8. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
<PAGE>
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate; or
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;
(c) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.
(d) Claims under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
or the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
9. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to the "Company" 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
if Indemnitee 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, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company 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 if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have
<PAGE>
acted in a manner "not opposed to the best interests of the Company" as referred
to in this Agreement.
10. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
11. Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
12. Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
13. Notice. All notices, requests, demands and other communications under
------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by certified or registered mail with postage prepaid,
on the third business day after the date postmarked. Addresses for notice to
either party are as shown on the signature page of this Agreement, or as
subsequently modified by written notice.
14. Consent to Jurisdiction. The Company and the Indemnitee each hereby
-----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
15. Choice of Law. This Agreement shall be governed by and its provisions
-------------
construed in accordance with the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Mpath Interactive, Inc.
By:______________________
<PAGE>
Its:_____________________
Address: 665 Clyde Avenue
Mountain View, CA 94043
AGREED TO AND ACCEPTED:
INDEMNITEE:
_________________________________
Indemnitee
Address:_________________________
_________________________
_________________________
<PAGE>
EXHIBIT 10.2
MPATH INTERACTIVE, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
(As amended through October 19, 1995)
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan is intended to promote the
interests of Mpath Interactive, Inc., a Delaware corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two (2) separate equity programs:
(i) the Option Grant Program under which eligible persons may,
at the discretion of the Plan Administrator, be granted options to purchase
shares of Common Stock, and
(ii) the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common
Stock directly, either through the immediate purchase of such shares or as
a bonus for services rendered the Corporation (or any Parent or
Subsidiary).
B. The provisions of Articles One and Four shall apply to both equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.
<PAGE>
B. The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the Plan and any
outstanding options and stock issuances as it may deem necessary or advisable.
Decisions of the Plan Administrator shall be final and binding on all parties
who have an interest in the Plan or any option or stock issuance thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are as follows:
(i) Employees,
(ii) non-employee members of the Board or the non-employee
members of the board of directors of any Parent or Subsidiary, and
(iii) consultants who provide services to the Corporation
(or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to determine,
(i) with respect to the option grants under the Option Grant Program, which
eligible persons are to receive option grants, the time or times when such
option grants are to be made, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a Non-
Statutory Option, the time or times at which each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding, and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
to be paid by the Participant for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 661,500/1/
shares.
__________________
/1/This figure includes a 300,000 shares increase approved by the Board of
Directors on October 19, 1995 and a total number of shares initially approved by
the stockholders on April 13, 1995.
-2-
<PAGE>
B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. All shares issued under the Plan, whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan.
C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan and (ii) the number and/or class of securities and the exercise
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive. In no event shall
any such adjustments be made in connection with the conversion of one or more
outstanding shares of the Corporation's preferred stock into shares of Common
Stock.
-3-
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
--------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
--------
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The exercise price per share shall not be less than
eighty-five percent (85%) of the Fair Market Value per share of Common
Stock on the option grant date.
(ii) If the person to whom the option is granted is a 10%
Stockholder, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four and the documents evidencing the option, be payable in cash or
check made payable to the Corporation. Should the Common Stock be registered
under Section 12(g) of the 1934 Act at the time the option is exercised, then
the exercise price may also be paid as follows:
(i) in shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
(ii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable written instructions
(a) to a Corporation-designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes required to
be withheld by the Corporation by reason of such exercise and (b) to the
Corporation to deliver the certificates for the
-4-
<PAGE>
purchased shares directly to such brokerage firm in order to complete the
sale transaction.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
----------------------------
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option grant. However, no option shall have a term in excess of ten (10)
years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE. The following provisions shall
--------------------------------
govern the exercise of any options held by the Optionee at the time of cessation
of Service or death:
(i) Should the Optionee cease to remain in Service for any
reason other than Disability or death, then the Optionee shall have a
period of three (3) months following the date of such cessation of Service
during which to exercise each outstanding option held by such Optionee.
(ii) Should such Service terminate by reason of Disability,
then the Optionee shall have a period of six (6) months following the date
of such cessation of Service during which to exercise each outstanding
option held by such Optionee. However, should such Disability be deemed to
constitute Permanent Disability, then the period during which each
outstanding option held by the Optionee is to remain exercisable shall be
extended by an additional six (6) months so that the exercise period shall
be the twelve (12)-month period following the date of the Optionee's
cessation of Service by reason of such Permanent Disability.
(iii) Should the Optionee die while holding one or more
outstanding options, then the personal representative of the Optionee's
estate or the person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of descent and
distribution shall have a period of twelve (12) months following the date
of the Optionee's death during which to exercise each such option.
(iv) Under no circumstances, however, shall any such option
be exercisable after the specified expiration of the option term.
(v) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been
-5-
<PAGE>
exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding to the extent
it is not exercisable for vested shares on the date of such cessation of
Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
------------------
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares. In addition, the Plan Administrator
shall have the discretion to require that such record holder execute and deliver
to the Corporation a Voting Agreement in the form approved by the Plan
Administrator with respect to such purchased shares.
E. UNVESTED SHARES. The Plan Administrator shall have the discretion
---------------
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, all or (at the discretion of the Corporation and with the consent of the
Optionee) any of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right. The Plan Administrator may not impose a vesting schedule upon
any option grant or any shares of Common Stock subject to the option which is
more restrictive than twenty percent (20%) per year vesting, beginning one (1)
year after the option grant date. However, this minimum vesting requirement
shall not be applicable with respect to any option granted to a Highly-
Compensated Employee.
F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is
--------------------
first registered under Section 12(g) of the 1934 Act, the Corporation shall have
the right of first refusal with respect to any proposed disposition by the
Optionee (or any successor in interest) of any shares of Common Stock issued
under the Option Grant Program. Such right of first refusal shall be exercisable
in accordance with the terms established by the Plan Administrator and set forth
in the document evidencing such right.
G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
----------------------------------
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option may
be assigned in accordance with the terms of a Qualified Domestic Relations
Order. The assigned option may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to such Qualified Domestic
Relations Order. The terms applicable to the assigned option (or portion
thereof) shall be the same as those in effect for the option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
-6-
<PAGE>
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Four shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
shall not be subject to the terms specified in this Section II.
---
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
-----------
B. EXERCISE PRICE. The exercise price per share shall not be less
--------------
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
-----------------
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the option term shall not exceed five (5)
years measured from the option grant date.
III. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with such
Corporate Transaction. In addition, all outstanding repurchase rights shall
terminate automatically in the event of any Corporate Transaction, except to the
extent the repurchase rights are assigned to the successor corporation (or
parent thereof) in connection with such Corporate Transaction.
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in the consummation of such Corporate Transaction,
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
--------
securities shall remain the same.
-7-
<PAGE>
C. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Option Grant Program
and to grant in substitution therefor new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new option grant date.
V. ADDITIONAL AUTHORITY
The Plan Administrator shall have the discretion, exercisable either
at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service or death from the
limited period otherwise in effect for that option to such greater period
of time as the Plan Administrator shall deem appropriate; provided, that in
--------
no event shall such option be exercisable after the specified expiration of
the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of
the Optionee's cessation of Service or death but also with respect to one
or more additional installments in which the Optionee would have vested
under the option had the Optionee continued in Service.
-8-
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. PURCHASE PRICE.
--------------
1. The purchase price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The purchase price per share shall not be less than
eighty-five percent (85%) of the Fair Market Value per share of Common
Stock on the stock issuance date.
(ii) If the person to whom the stock issuance is made is a 10%
Stockholder, then the purchase price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the stock issuance date.
2. Subject to the provisions of Section I of Article Four,
shares of Common Stock may be issued under the Stock Issuance Program for one or
both of the following items of consideration which the Plan Administrator may
deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent
or Subsidiary).
B. VESTING PROVISIONS.
------------------
1. Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
-9-
<PAGE>
(i) the Service period to be completed by the Participant or
the performance objectives to be attained,
(ii) the number of installments in which the shares are to vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Disability or other event
designated by the Plan Administrator is to have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement. The Plan Administrator may not impose a vesting schedule
upon any stock issuance effected under the Stock Issuance Program which is more
restrictive than twenty percent (20%) per year vesting, beginning one (1) year
after the stock issuance date. However, this minimum vesting requirement shall
not be applicable to any stock issued to a Highly-Compensated Employee.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares. However, one or
more Participants may be required to execute and deliver to the Corporation a
Voting Agreement in the form approved by the Plan Administrator with respect to
such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the
-10-
<PAGE>
surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to such
surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the non-
completion of the vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
C. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is first
--------------------
registered under Section 12(g) of the 1934 Act, the Corporation shall have the
right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Common Stock issued
under the Stock Issuance Program. Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.
II. CORPORATE TRANSACTION
All of the outstanding repurchase rights under the Stock Issuance
Program shall terminate automatically in the event of any Corporate Transaction,
except to the extent the repurchase rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
-11-
<PAGE>
ARTICLE FOUR
MISCELLANEOUS
-------------
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price or the purchase price for shares issued to such person
under the Plan by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. Promissory notes may be authorized with or without security
or collateral. In all events, the maximum credit available to each Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or
---
purchase price payable for the purchased shares (less the par value of such
shares) plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
II. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective when adopted by the Board, but no
option granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's stockholders. If
such stockholder approval is not obtained within twelve (12) months after the
date of the Board's adoption of the Plan, then all options previously granted
under the Plan shall terminate and cease to be outstanding, and no further
options shall be granted and no shares shall be issued under the Plan. Subject
to such limitation, the Plan Administrator may grant options and issue shares
under the Plan at any time after the effective date of the Plan and before the
date fixed herein for termination of the Plan.
B. The Plan shall terminate upon the earliest of (i) the expiration
--------
of the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of options or the issuance of
shares (whether vested or unvested) under the Plan or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Upon such
Plan termination, all options and unvested stock issuances outstanding under the
Plan shall continue to have full force and effect in accordance with the
provisions of the documents evidencing such options or issuances.
III. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, the Board shall not, without the approval of the
-12-
<PAGE>
Corporation's stockholders, (i) increase the maximum number of shares issuable
under the Plan, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) materially modify the
eligibility requirements for Plan participation or (iii) materially increase the
benefits accruing to Plan participants.
B. Options to purchase shares of Common Stock may be granted under
the Plan and shares of Common Stock may be issued under the Plan that are in
each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under the Plan are
held in escrow until there is obtained stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short-Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
V. WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon
the exercise of any options or upon the issuance or vesting of any shares issued
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under the
Plan and the issuance of any shares of Common Stock (i) upon the exercise of any
option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the shares of Common Stock issued pursuant to it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining the Optionee or the
Participant) or of the Optionee or the Participant, which rights are hereby
-13-
<PAGE>
expressly reserved by each, to terminate the Service of the Optionee or the
Participant at any time for any reason, with or without cause.
VIII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income statement
at least annually to each individual holding an outstanding option under and
each Participant in the Plan, unless such individual is a key Employee whose
duties in connection with the Corporation (or any Parent or Subsidiary) assure
such individual access to equivalent information.
-14-
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
-----
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
C. COMMITTEE shall mean a committee of two (2) or more Board members
---------
appointed by the Board to exercise one or more administrative functions under
the Plan.
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean Mpath Interactive, Inc., a Delaware
-----------
corporation.
G. DISABILITY shall mean the inability of an individual to engage in any
----------
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.
H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
------------------------
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
I. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
<PAGE>
J. EXERCISE DATE shall mean the date on which the Corporation shall have
-------------
received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem appropriate.
L. HIGHLY-COMPENSATED EMPLOYEE shall mean an Employee whose earnings per
---------------------------
calendar year from the Corporation (or any Parent or Subsidiary) exceed Sixty
Thousand Dollars ($60,000) in the aggregate.
M. INCENTIVE OPTION shall mean an option which satisfies the requirements
----------------
of Code Section 422.
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
--------
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
P. OPTION GRANT PROGRAM shall mean the option grant program in effect
--------------------
under the Plan.
Q. OPTIONEE shall mean any person to whom an option is granted under the
--------
Option Grant Program.
<PAGE>
R. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
S. PARTICIPANT shall mean any person who is issued shares of Common Stock
-----------
under the Stock Issuance Program.
T. PLAN shall mean the Corporation's 1995 Stock Option/Stock Issuance
----
Plan, as set forth in this document.
U. PLAN ADMINISTRATOR shall mean either the Board or the Committee, to the
------------------
extent the Committee is at the time responsible for the administration of the
Plan.
V. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
----------------------------------
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
W. SERVICE shall mean the provision of services to the Corporation (or any
-------
Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant.
X. STOCK EXCHANGE shall mean either the American Stock Exchange or the New
--------------
York Stock Exchange.
Y. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
------------------------
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
Z. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
----------------------
under the Plan.
AA. SUBSIDIARY shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AB. 10% STOCKHOLDER shall mean the owner of stock (as determined under Code
---------------
Section 424(d)) possessing ten percent (10%) or more of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).
<PAGE>
AC. VOTING AGREEMENT shall mean the agreement, in form and substance
----------------
satisfactory to the Plan Administrator, which the Plan Administrator may require
the Optionee or Participant to execute and deliver to the Corporation at the
time of the option exercise or direct stock issuance. Under the Voting
Agreement, the voting parties agree to vote all of the acquired shares in the
election or removal of directors as provided in such agreement.
<PAGE>
EXHIBIT 10.3
MPATH INTERACTIVE, INC.
1999 STOCK INCENTIVE PLAN
-------------------------
ARTICLE 1. INTRODUCTION.
1.1 PURPOSES OF THE PLAN. The purpose of this Stock Incentive Plan is to
--------------------
promote the long-term success of the Company and the creation of shareowner
value by (a) encouraging the attraction and retention of the best available
personnel for positions of substantial responsibility, (b) linking Company
personnel directly to shareowner interests through increased stock ownership,
and (c) encouraging Company personnel to focus on critical long-range
objectives. The Plan seeks to achieve these purposes by providing awards in the
form of Stock Options (which may constitute Incentive Stock Options or
Nonstatutory Options) and Restricted Stock.
1.2 TERM OF THE PLAN. The Plan shall become effective upon the earlier to
----------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 10.2 of the Plan. It shall
continue in effect for a term of ten years unless sooner terminated under
Article 9 of the Plan.
ARTICLE 2. SHARES AVAILABLE FOR GRANTS.
2.1 MAXIMUM AGGREGATE SHARES SUBJECT TO THE PLAN. Subject to the provisions of
--------------------------------------------
Section 8.1 of the Plan, the maximum aggregate number of shares that may be
issued pursuant to the Plan is 2,500,000 Shares of Common Stock, plus an
automatic annual increase in such maximum number on the first day of each of the
Company's fiscal years beginning in 2000, 2001, 2002, 2003 and 2004 equal to the
lesser of (A) 750,000 Shares , (B) 3% of the Shares outstanding on the last day
of the immediately preceding fiscal year, or (C) such lesser number of Shares as
is determined by the Board. The Shares may be authorized, but unissued, or
reacquired Common Stock.
2.2 SHARES FORFEITED OR SUBJECT TO UNEXERCISED OPTIONS. If an Option should
--------------------------------------------------
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased Shares that were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan.
Shares of Common Stock that are retained by the Company upon exercise of an
Option or issuance of Restricted Stock in order to satisfy the exercise or
purchase price or any withholding taxes due with respect thereto shall be
treated as not issued and shall continue to be available under the Plan. If
Restricted Shares are forfeited before any dividends have been paid with respect
to such Restricted Shares, then such Restricted Shares shall again become
available for awards under the Plan other than Incentive Stock Options.
Notwithstanding any other provision of the Plan, shares issued under the Plan
and later repurchased by the Company pursuant to any repurchase right that the
Company may have shall not become available for future grant under the Plan.
<PAGE>
ARTICLE 3. ADMINISTRATION OF THE PLAN.
3.1 COMPOSITION OF ADMINISTRATOR. The Plan shall be administered by (a) the
----------------------------
Board, or (b) a Committee (or a subcommittee of the Committee) designated by the
Board, which Committee shall be constituted in such a manner as to satisfy
Applicable Laws. The Board may authorize one or more Officers to act as the
Administrator to grant Options or Restricted Stock with respect to Employees who
are not Officers and may limit such authority as the Board determines from time
to time.
3.2 MULTIPLE ADMINISTRATIVE BODIES. If permitted under Applicable Laws, the
------------------------------
Plan may (but need not) be administered by different bodies with respect to
Reporting Persons, Named Executives and other persons eligible to receive grants
under the Plan. With respect to grants of Options to Reporting Persons and
Named Executives, the Plan shall generally be administered by the Board or a
Committee as applicable so as to permit grants of Options to Reporting Persons
under the Plan to comply with Rule 16b-3 and to qualify grants of Options to
Named Executives as performance-based compensation under Section 162(m) of the
Code and otherwise so as to satisfy the Applicable Laws.
3.3 POWERS OF THE ADMINISTRATOR. Subject to Applicable Laws and the
---------------------------
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
(a) to determine the Fair Market Value of the Common Stock, in accordance
with the definition set forth in Article 11 of the Plan;
(b) to select the Employees, Directors and Consultants to whom Options
and/or Restricted Stock may from time to time be granted hereunder;
(c) to determine whether and to what extent Options and/or Restricted Stock
are granted hereunder;
(d) to determine the number of shares of Common Stock to be covered by an
Option or Restricted Stock grant hereunder;
(e) to approve forms of agreement for use under the Plan;
(f) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any grant hereunder (including, but not limited to, the Share
price for any Option and any restriction or limitation, or any vesting
acceleration or waiver of forfeiture restrictions regarding any grant and/or the
shares of Common Stock relating thereto, based in each case on such factors as
the Administrator shall determine, in its sole discretion);
(g) to reduce the exercise price of any Option to the then current Fair
Market Value if the Fair Market Value of the Common Stock covered by such Option
shall have declined since the date the Option was granted; and
<PAGE>
(h) to construe and interpret the terms of the Plan and Options granted
pursuant to the Plan.
3.4 EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations and
----------------------------------
interpretations of the Administrator shall be conclusive and binding on all
persons.
ARTICLE 4. ELIGIBILITY.
4.1 GENERAL RULE. Employees, Directors and Consultants are eligible to receive
------------
grants of Options or Restricted Stock under the Plan. An Employee, Director or
Consultant who has been granted an Option or Restricted Stock may, if he or she
is otherwise eligible, be granted an additional Option or Options or additional
Restricted Stock.
4.2 INCENTIVE STOCK OPTIONS. Only Employees of the Company or a Subsidiary
-----------------------
shall be eligible to receive grants of Incentive Stock Options. Employees of an
Affiliate, Directors who are not Employees of the Company or a Subsidiary and
Consultants shall not be eligible to receive Incentive Stock Options.
4.3 LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as provided in
---------------------------------
Section 8.1 of this Plan, the maximum number of Shares which may be subject to
Options granted to any one Employee under this Plan for any fiscal year of the
Company shall be 2,500,000 Shares.
4.4 NO EMPLOYMENT RIGHTS. Neither the Plan nor any grant pursuant to the Plan
--------------------
shall confer upon any recipient of an Option or Restricted Stock grant any right
with respect to continuation of his or her service as an Employee, Director or
Consultant, or in any way interfere with the right of the Company, or a Parent,
Subsidiary or Affiliate, as the case may be, to terminate his or her service as
an Employee, Director or Consultant at any time, with or without cause.
ARTICLE 5. STOCK OPTIONS.
5.1 SEPARATE PROGRAMS. The Administrator may establish one or more separate
-----------------
programs under the plan for purpose of issuing particular forms of Options to
one or more classes of Participants on such terms and conditions as determined
by the Administrator from time to time.
5.2 TYPE OF OPTION. As determined by the Administrator at the time of grant of
--------------
an Option and as designated in the written Option Agreement, Options granted
under the Plan may be either Incentive Stock Options or Nonstatutory Stock
Options. Notwithstanding such designations, the following rules shall apply to
Options designated as Incentive Stock Options:
(a) To the extent that the aggregate Fair Market Value of Shares with
respect to which Incentive Stock Options are exercisable for the first time by
an Optionee during any calendar year (under all plans of the Company or any
Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5.2(a), Incentive
Stock Options shall be taken into account in the order in which they were
granted, and the Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
<PAGE>
(b) In the event any Option designated an Incentive Stock Option fails to
meet the requirements set forth herein for an Incentive Stock Option or as
required to qualify as an incentive stock option within the meaning of Code
Section 422, such Option shall not be void but instead shall be deemed a
Nonstatutory Stock Option.
5.3 TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
(a) Term of Options. The term of each Option shall be the term stated in
---------------
the Option Agreement; provided, however, that the term shall be no more than ten
-------- -------
(10) years from the date of grant thereof, and in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be no more than five (5) years from the date of
grant thereof.
(b) Date of Option Grant. The date of grant of an Option shall for all
--------------------
purposes be the date on which the Administrator makes the determination to grant
such Option, or such other date as is determined by the Administrator; provided,
however, that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the commencement of the Optionee's
employment. Notice of the grant determination shall be given to each Employee,
Director or Consultant to whom an Option is granted within a reasonable time
after the date of the grant.
(c) Conditions of an Option. Subject to the terms of the Plan, the
-----------------------
Administrator shall determine the provisions, terms and conditions of each
Option including, but not limited to, the option vesting schedule (including any
performance criteria which must be satisfied in connection with vesting of the
Option), and the consideration to be paid for Shares upon exercise of the
Option.
(d) Nontransferability of Options. The Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred, made subject to any creditor's process,
whether voluntarily, involuntarily or by operation of law, or disposed of in any
manner other than by will or by the laws of descent or distribution, except as
otherwise determined by the Administrator in its discretion with respect to a
Nonstatutory Stock Option and provided in the applicable Option Agreement
specifying (i) the manner in which such Nonstatutory Option is transferable and
(ii) that any such transfer shall be subject to the Applicable Laws. The
designation of a beneficiary by an Optionee will not constitute a transfer. An
Option may be exercised, during the lifetime of the Optionee, only by the
Optionee or a transferee permitted by this Section 5.3(d).
5.4 OPTION EXERCISE PRICE; CONSIDERATION.
------------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be such price as is determined by
the Administrator and set forth in the applicable Option Agreement, but shall be
subject to the following:
<PAGE>
(i) In the case of an Incentive Stock Option that is granted to an
Employee who, at the time of the grant of such Incentive Stock Option, owns
stock representing more than 10% of the total combined voting power of all
classes of stock of the Company or any Parent or Subsidiary (an "10% Owner"),
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of grant.
(ii) In the case of an Incentive Stock Option that is granted to an
Employee other than a 10% Owner, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
(iii) In the case of a Nonstatutory Stock Option that is granted to a
10% Owner prior to the date, if any, on which the Common Stock becomes a Listed
Security, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.
(iv) In the case of a Nonstatutory Stock Option that is granted to a
Named Executive, the per Share exercise price shall generally be no less than
100% of the Fair Market Value per Share on the date of grant.
(b) Consideration. Subject to Applicable Laws, the consideration to be
-------------
paid for the Shares to be issued upon exercise of an Option, including the
method of payment, shall be determined by the Administrator (and, in the case of
an Incentive Stock Option, shall be determined at the time of grant) in its
discretion. In addition to any other types of consideration the Administrator
may determine, the Administrator is authorized to accept as consideration for
Shares issued under the Plan the following:
(i) cash;
(ii) check;
(iii) delivery of the Optionee's promissory note with such recourse,
interest, security and redemption provisions as the Administrator determines as
appropriate;
(iv) other Shares that (A) in the case of Shares acquired upon
exercise of an Option, have been owned by the Optionee for more than six months
on the date of surrender or such other period as may be required to avoid a
charge to the Company's earnings, and (B) have a Fair Market Value on the date
of surrender equal to the aggregate exercise price of the Shares as to which
such Option shall be exercised;
(v) authorization by the Optionee for the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised; or
(vi) any combination of the foregoing methods of payment.
<PAGE>
5.5 EXERCISE OF OPTION.
------------------
(a) VESTING. Any Option granted hereunder shall be exercisable at
-------
such times and under such conditions as determined by the Administrator,
including performance criteria with respect to the Company and/or the Optionee,
and as shall be permissible under the terms of the Plan and set forth in the
Option Agreement; provided however that, if required by the Applicable Laws, any
Option granted prior to the date, if any, upon which the Common Stock becomes a
Listed Security shall become exercisable at a rate of at least 20% per year over
five years from the date the Option is granted. In the event that any of the
Shares issued upon exercise of an Option (which exercise occurs prior to the
date, if any, upon which the Common Stock becomes a Listed Security) should be
subject to a right of repurchase in the Company's favor, such repurchase right
shall, if required by the Applicable Laws, lapse at the rate of at least 20% per
year over five years from the date the Option is granted. Notwithstanding the
above, in the case of an Option granted to an officer (including but not limited
to Officers), Director or Consultant, the Option may become exercisable, or a
repurchase right, if any, in favor of the Company shall lapse, at any time or
during any period established by the Administrator. The Administrator shall
have the discretion to determine whether and to what extent the vesting of
Options shall be tolled during any unpaid leave of absence; provided however
that in the absence of such determination, vesting of Options shall be tolled
during any such leave.
(b) PROCEDURE FOR EXERCISE. An Option may not be exercised for a fraction
----------------------
of a Share. An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 5.4(b) of the Plan.
Exercise of an Option in any manner shall result in a decrease in the number of
Shares that thereafter may be available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercise, including any Shares withheld to satisfy tax withholding obligations.
(c) RIGHTS AS A SHAREHOLDER. Until the issuance (as evidenced by the
-----------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares subject to an Option, notwithstanding the exercise of
the Option. The Company shall issue (or cause to be issued) such stock
certificate promptly upon exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 10 of the Plan.
(d) TERMINATION OF CONTINUOUS SERVICE. In the event of termination of an
---------------------------------
Optionee's Continuous Service, such Optionee's right to exercise the Option
shall cease and the Option shall forthwith become void and cease to have effect,
except as set forth specifically in the Option Agreement. In the event of an
Optionee's death, the Optionee's beneficiary or the
<PAGE>
administrator of his or her estate shall have such right to exercise the Option
as set forth in the Option Agreement.
ARTICLE 6. RESTRICTED STOCK.
6.1 RESTRICTED STOCK GRANTS. Shares of Common Stock may be granted under the
-----------------------
Plan subject to a Restricted Stock Agreement which complies with the terms
specified in this Article 6.
6.2 PAYMENT FOR RESTRICTED STOCK. No cash consideration shall be required of
----------------------------
the recipient of a Restricted Stock grant under this Article 6.
6.3 VESTING PROVISIONS. Restricted Stock granted under the Plan may, in the
------------------
discretion of the Administrator, be fully and immediately vested upon issuance
or may vest in one or more installments over the recipient's period of service
or upon attainment of specified performance objectives; provided however that,
if required by the Applicable Laws, any Restricted Stock granted prior to the
date, if any, upon which the Common Stock becomes a Listed Security, shall vest
at a rate of at least 20% per year over five years from the date the Restricted
Stock is granted. Notwithstanding the above, in the case of Restricted Stock
granted to an officer (including but not limited to Officers), Director or
Consultant, the Restricted Stock shall vest at any time or during any period
established by the Administrator.
(a) The elements of the vesting provisions applicable to any unvested
Shares of Common Stock issued under a Restricted Stock grant shall be specified
in the Restricted Stock Agreement, including but not limited to, any service
period required to be completed by the recipient or any performance objectives
to be obtained, the number of installments in which the shares are to vest, the
interval or intervals (if any) which are to lapse between installments, and the
effect which death, Disability or other event designated by the Administrator is
to have upon the vesting schedule.
(b) Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Restricted Stock grant recipient may have the right to receive with respect to
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.
6.4 VOTING AND DIVIDEND RIGHTS. The recipient of a Restricted Stock grant
--------------------------
shall have full stockholder rights with respect to any shares of Common Stock
issued to the recipient pursuant to the Restricted Stock grant, subject to the
limits on transferability set forth in the Restricted Stock Agreement, whether
or not the Participant's interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares.
<PAGE>
6.5 TRANSFERABILITY OF RESTRICTED STOCK. Until such time as all conditions and
-----------------------------------
restrictions with respect to Restricted Stock issued under the Plan have lapsed,
Restricted Stock issued under the Plan shall not be sold, pledged, assigned,
hypothecated, transferred, made subject to any creditor's process, whether
voluntarily, involuntarily or by operation of law, or disposed of in any manner
other than by will or by the laws of descent or distribution. Notwithstanding
the foregoing, if permitted in the Restricted Stock Agreement a Participant may
transfer or assign Restricted Shares to (i) a trustee of a trust that is
revocable by such Participant alone, both at the time of the transfer or
assignment and at all times thereafter prior to such Participant's death, or
(ii) the trustee of any other trust to the extent approved in advance by the
Administrator in writing. A transfer or assignment of Restricted Shares from
such trustee to any person other than such Participant shall be permitted only
to the extent approved in advance by the Committee in writing, and Restricted
Shares held by such trustee shall be subject to all of the conditions and
restrictions set forth in the Plan and in the applicable Restricted Stock
Agreement, as if such trustee were a party to such Agreement.
6.6 FORFEITURE OF RESTRICTED STOCK. Should the recipient of a Restricted Stock
------------------------------
grant cease to remain in Continuous Service while holding one or more unvested
shares of Common Stock issued under a Restricted Stock grant or should the
performance objectives not be attained with respect to one or more such unvested
shares of Common Stock, then those shares shall be immediately forfeited and
shall be surrendered to the Company for cancellation, and the recipient shall
have no further stockholder rights with respect to such forfeited shares.
6.7 WAIVER OF RESTRICTIONS. The Administrator may in its discretion waive the
-----------------------
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the non-
completion of the vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Continuous Service
or the attainment or non-attainment of the applicable performance objectives.
ARTICLE 7. TAX WITHHOLDING.
7.1 TAX WITHHOLDING. To the extent required by the Applicable Laws,
----------------
transactions under the Plan shall be subject to tax withholding by the Company,
and the Administrator may condition the delivery of any Shares under the Plan on
satisfaction of applicable withholding tax obligations. The Administrator, in
its discretion and subject to such requirements as the Administrator may impose
prior to the occurrence of such withholding, may permit or require tax
withholding obligations under the Plan to be satisfied by one or some
combination of the following methods:
(a) by cash or check payment,
(b) out of the Participant's current compensation,
<PAGE>
(c) if permitted by the Administrator, in its discretion, by surrendering
to the Company Shares that (i) in the case of Shares previously acquired from
the Company, have been owned by the Participant for more than six months on the
date of surrender, and (ii) have a Fair Market Value determined as of the
applicable Tax Date (as defined in Section 7.3 below) on the date of surrender
equal to the amount required to be withheld, or
(d) by electing to have the Company withhold, from the Shares to be issued
upon exercise of the Option or the Shares to be issued in connection with the
Restricted Stock grant, that number of Shares having a Fair Market Value
determined as of the applicable Tax Date equal to the amount required to be
withheld. This Section 7.1(d) shall apply only after the date, if any, upon
which the Common Stock becomes a Listed Security.
7.2 STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. In the event an
--------------------------------------------------------
Administrator allows a Participant to satisfy his or her tax withholding
obligations as provided for in Section 7.1(c) or (d) above, such satisfaction
must comply with the requirements of this Section 7.2 and the Applicable Laws.
Any surrender by a Reporting Person of previously owned Shares to satisfy tax
withholding obligations arising upon exercise of an Option or Stock Purchase
Right must comply with the applicable provisions of Rule 16b-3.
(a) All elections by a Participant to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to
the Administrator and shall be subject to the following restrictions:
(i) the election must be made on or prior to the applicable Tax
Date (as defined in Section 7.3 below);
(ii) once made, the election shall be irrevocable as to the
particular Shares of the Option or Stock Purchase Right as to which the election
is made; and
(iii) all elections shall be subject to the consent or disapproval of
the Administrator.
(b) In the event the election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Participant shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
7.3 TAX DATE. For purposes of this Article 7, the "Tax Date" shall be the
---------
date that the Participant is determined to have received income subject to
withholding tax under the Applicable Laws. The Fair Market Value of the Shares
to be withheld shall be determined as of the Tax Date.
<PAGE>
ARTICLE 8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; DISTRIBUTIONS;
LIQUIDATION; CORPORATE TRANSACTIONS.
8.1 ADJUSTMENTS TO NUMBER OR PRICE OF SHARES UPON CHANGE IN CAPITALIZATION.
----------------------------------------------------------------------
Subject to any required action by the shareholders of the Company, the number of
shares of Common Stock covered by each outstanding Option or Restricted Stock
award, the number of shares of Common Stock that have been authorized for
issuance under the Plan but as to which Options or Restricted Stock awards have
not yet been granted or which have been returned to the Plan upon cancellation
or expiration of an Option or forfeiture of Restricted Stock, the maximum number
of shares of Common Stock for which Options may be granted to any employee under
Section 4.3 of the Plan, the number of shares of Common Stock set forth in
Article 2 of the Plan, and the price per share of Common Stock covered by each
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock (including any such change in the number of shares of Common
Stock effected in connection with a change in domicile of the Company), or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Administrator, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no issuance
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an Option.
8.2 ADJUSTMENTS TO PRICE OF SHARES FOR CERTAIN DISTRIBUTIONS. In the event of
--------------------------------------------------------
any distribution to the Company's shareholders of securities of any other entity
or assets (other than dividends payable in cash or stock of the Company) without
receipt of consideration by the Company, the Administrator may, in its
discretion, appropriate adjust the price per Share of Common Stock covered by
each outstanding Option to reflect the effect of such distribution.
8.3 VOLUNTARY DISSOLUTION OR LIQUIDATION. In the event of the proposed
------------------------------------
dissolution or liquidation of the Company, unless otherwise provided by the
Administrator, each Option will terminate immediately prior to the consummation
of such proposed action, and all conditions and restrictions with respect to
Restricted Stock shall lapse immediately prior to the consummation of such
proposed action. The Administrator may, in the exercise of its sole discretion
in such instances, declare that any Option shall terminate as of a date fixed by
the Administrator and give each Optionee the right to exercise his or her Option
as to all or any portion of the Shares subject to the Option, including Shares
as to which the Option would not otherwise be exercisable.
8.4 CORPORATE TRANSACTIONS.
----------------------
(a) Corporate Transaction Not Constituting a Change of Control. In the
----------------------------------------------------------
event of a Corporate Transaction that does not constitute a Change of Control,
each outstanding Option shall be assumed or an equivalent Option shall be
substituted by the successor corporation or a
<PAGE>
Parent or Subsidiary of such successor corporation (such entity, the "Successor
Corporation") and all conditions and restrictions with respect to Restricted
Stock shall continue with such Successor Corporation substituted in the place of
the Company with respect to such conditions and restrictions. Notwithstanding
the foregoing, in the event such Successor Corporation does not agree to assume
all outstanding Options or to substitute equivalent options or to accept
assignment of the conditions and restrictions with respect to Restricted Stock,
such Options shall terminate upon the consummation of such Corporate Transaction
and all conditions or restrictions with respect to Restricted Stock shall lapse
upon the consummation of such Corporate Transaction.
(b) Change of Control. In the event of a Change of Control, the
-----------------
Administrator shall, as to outstanding Options, either (i) provide that such
Options shall be assumed by the Successor Corporation or that the Successor
Corporation shall substitute with respect to such Options equivalent options;
(ii) provide upon notice to Optionees that all Options, to the extent then
exercisable or to be exercisable as a result of the Change of Control, must be
exercised on or before a specified date (which date shall be at least five (5)
days from the date of the notice), after which the Options shall terminate; or
(iii) terminate each Option in its entirety in exchange for a payment of cash,
securities and/or other property equal to the excess of the Fair Market Value of
the Shares with respect to which the Option is vested and exercisable
immediately prior to the consummation of the transaction over the aggregate
exercise price thereof. In the event of a Change of Control, all conditions and
restrictions with respect to Restricted Shares shall lapse, except to the extent
such conditions and restrictions are assigned to the successor corporation (or
its Parent) in connection with the Change of Control.
(c) Determination of Assumption or Substitution. For purposes of this
-------------------------------------------
Section 8.4, an Option shall be considered assumed or substituted, without
limitation, if, at the time of issuance of the stock or other consideration upon
a Corporate Transaction or a Change of Control, as the case may be, each
Optionee would be entitled to receive upon exercise of an Option the same number
and kind of shares of stock or the same amount of property, cash or securities
as the Optionee would have been entitled to receive upon the occurrence of such
transaction if the Optionee had been, immediately prior to such transaction, the
holder of the number of Shares of Common Stock covered by the Option at such
time (after giving effect to any adjustments in the number of Shares covered by
the Option as provided for in Section 8.1 above) and provided all other terms of
the Option as assumed or substituted are substantially similar to the terms of
the Option; provided however that if the consideration received in the
transaction is not solely common stock of the Successor Corporation, the
Administrator may, with the consent of the Successor Corporation, provide for
the consideration to be received upon exercise of the Option to be solely common
stock of the Successor Corporation equal to the Fair Market Value of the per
Share consideration received by holders of Common Stock in the transaction.
ARTICLE 9. AMENDMENT AND TERMINATION OF THE PLAN.
9.1 AUTHORITY TO AMEND OR TERMINATE THE PLAN. The Board may at any time amend,
----------------------------------------
alter, suspend or terminate the Plan. To the extent necessary and desirable to
comply with Applicable
<PAGE>
Laws, the Company shall obtain shareholder approval of any Plan amendment in
such a manner and to such a degree as required.
9.2 EFFECT OF AMENDMENT OR TERMINATION. Except as provided in Article 8, no
----------------------------------
amendment, alteration, suspension or termination of the Plan shall materially
and adversely affect Options already granted and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Participant and the Company, which
agreement must be in writing and signed by the Optionee and the Company. Except
as provided in Article 8, no amendment, alteration, suspension or termination of
the Plan shall materially and adversely affect the rights of a recipient of
Restricted Stock under the Plan, unless mutually agreed otherwise between the
Participant and the Company, which agreement must be in writing and signed by
the Optionee and the Company.
ARTICLE 10. MISCELLANEOUS.
10.1 CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other provision
----------------------------------
of the Plan or any agreement entered into by the Company pursuant to the Plan,
the Company shall not be obligated, and shall have no liability for failure, to
issue or deliver Shares under the Plan unless such issuance or delivery would
comply with the Applicable Laws, with such compliance determined by the Company
in consultation with its legal counsel.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
10.2. RESERVATION OF SHARES. The Company, during the term of this Plan, will at
---------------------
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
10.3. SHAREHOLDER APPROVAL. If required by Applicable Laws, continuance of the
--------------------
Plan shall be subject to approval by the shareholders of the Company within
twelve (12) months before or after the date the Plan is adopted. Such
shareholder approval shall be obtained in the manner and to the degree required
under Applicable Laws.
10.4 INFORMATION AND DOCUMENTS TO OPTIONEES AND PURCHASERS. Prior to the date,
-----------------------------------------------------
if any, upon which the Common Stock becomes a Listed Security and if required by
the Applicable Laws, the Company shall provide financial statements at least
annually to each Optionee, to each Restricted Stock recipient and to each
individual who acquired Shares pursuant to the Plan, during the period such
Optionee, recipient or purchaser has one or more Options outstanding, and in the
case of an individual who acquired Shares pursuant to the Plan, during the
period such individual owns such Shares. The Company shall not be required to
provide such information if the issuance of Options under the Plan is limited to
key employees whose duties in connection with the Company assure their access to
equivalent information.
<PAGE>
ARTICLE 11. DEFINITIONS.
As used herein, the following definitions shall apply:
"ADMINISTRATOR" means the Board or any of its Committees appointed pursuant to
-------------
Section 5 of the Plan.
"AFFILIATE" means a corporation, partnership, joint venture or other business
---------
entity other than a Subsidiary (as defined below) in which the Company owns a
significant interest, directly or indirectly, as determined in the discretion of
the Committee.
"APPLICABLE LAWS" means the legal requirements relating to the administration of
---------------
stock option plans, if any, under applicable corporate and securities laws, the
Code and the rules of any applicable stock exchange or national market system.
"BOARD" means the Board of Directors of the Company.
-----
"CHANGE OF CONTROL" means a sale of all or substantially all of the Company's
-----------------
assets or any merger, consolidation or other capital reorganization of the
Company with or into another corporation, other than one in which the holders of
more than fifty percent (50%) of the shares of capital stock of the Company
outstanding immediately prior to such transaction continue to hold (either by
the voting securities remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the total
voting power represented by the voting securities of the Company, or such
surviving entity, outstanding immediately after such merger or consolidation.
"CODE" means the Internal Revenue Code of 1986, as amended. Reference to any
----
specific section of the Code shall include such section, any valid regulation
promulgated thereunder, and any comparable provision of any future legislation
amending, supplementing or superseding such section.
"COMMITTEE" means the Committee appointed by the Board of Directors in
---------
accordance with Section 5 of the Plan, if one is appointed. Once appointed, a
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee, all to the extent
permitted by the Applicable Laws.
"COMMON STOCK" means the Common Stock of the Company.
------------
"COMPANY" means Mpath Interactive, Inc., a Delaware corporation.
-------
<PAGE>
"CONSULTANT" means any person, including an advisor, who is engaged by the
----------
Company or any Parent, Subsidiary or Affiliate to render consulting or advisory
services as an independent contractor and is compensated for such services.
"CONTINUOUS SERVICE" means the absence of any interruption or termination of the
------------------
provision of services to the Company or a Parent, Subsidiary or Affiliate as an
Employee, Director or Consultant. Continuous Service as an Employee, Director
or Consultant shall not be considered interrupted in the case of: (A) any leave
of absence approved by the Administrator, provided that such leave is for a
period of not more than 90 days, unless reemployment upon expiration of such
leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; (B) transfers between
locations of the Company or between the Company, a Parent, Subsidiary or
Affiliate, or any successor, in any capacity of Employee, Director or
Consultant, or (C) any change in status as long as the individual remains in the
service of the Company, a Parent, Subsidiary or Affiliate in any capacity of
Employee, Director or Consultant (except as otherwise provided in an Option
Agreement). An approved leave of absence shall include sick leave, military
leave, or any other authorized personal leave.
"CORPORATE TRANSACTION" means a merger, consolidation, reorganization or other
---------------------
capital reorganization of the Company with or into another corporation. A
Corporate Transaction may or may not constitute a Change of Control, as defined
above.
"DIRECTOR" means a member of the Board.
--------
"EMPLOYEE" means any person (including any Named Executive, Officer or Director)
--------
employed by the Company or any Parent, Subsidiary or Affiliate of the Company.
The payment by the Company of a director's fee to a Director shall not be
sufficient to constitute "employment" of such Director by the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
------------
"FAIR MARKET VALUE" means, as of any date, the value of Common Stock determined
-----------------
as follows:
(a) If the Common Stock is listed on any established stock exchange or a
national market system including without limitation the National Market of the
National Association of Securities Dealers, Inc. Automated Quotation ("Nasdaq")
System, its Fair Market Value shall be the closing sales price for such stock
(or the closing bid, if no sales were reported), as quoted on such system or
exchange, or the exchange with the greatest volume of trading in Common Stock
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable; or
(b) If the Common Stock is quoted on the Nasdaq System (but not on the
National Market thereof) or regularly quoted by a recognized securities dealer
but selling prices are not reported, its Fair Market Value shall be the mean
between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
<PAGE>
(c) In the absence of an established market for the Common Stock, the Fair
Market Value thereof shall be determined in good faith by the Administrator in a
manner consistent with Applicable Laws.
"INCENTIVE STOCK OPTION" means an Option intended to qualify as an incentive
----------------------
stock option within the meaning of Section 422 of the Code, as designated in the
applicable written Option Agreement.
"LISTED SECURITY" means any security of the Company that is listed or approved
---------------
for listing on a national securities exchange or designated or approved for
designation as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.
"NAMED EXECUTIVE" means any individual who, on the last day of the Company's
---------------
fiscal year, is the chief executive officer of the Company (or is acting in such
capacity) or among the four highest compensated officers of the Company (other
than the chief executive officer). Such officer status shall be determined
pursuant to the executive compensation disclosure rules under the Exchange Act.
"NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as an
-------------------------
Incentive Stock Option, as designated in the applicable written Option
Agreement.
"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.
"OPTION" means an option to purchase Shares granted pursuant to the Plan, the
------
terms of which shall be set forth in the Option Agreement.
"OPTION AGREEMENT" means a written agreement between an Optionee and the Company
----------------
reflecting the terms of an Option granted under the Plan and any amendments
thereto, and includes any documents attached to such Option Agreement,
including, but not limited to, a notice of stock option grant and a form of
exercise notice.
"OPTIONEE" means an Employee, Director or Consultant who receives an Option.
--------
"PARENT" means a "parent corporation," whether now or hereafter existing, as
------
defined in Section 424(e) of the Code.
"PARTICIPANT" means an Employee, Director or Consultant who receives a grant of
an Option or of Restricted Stock under the Plan.
"PLAN" means this 1999 Stock Option Plan.
----
"REPORTING PERSON" means an Officer, Director or greater than 10% shareholder of
----------------
the Company within the meaning of Rule 16a-2 under the Exchange Act, who is
required to file reports pursuant to Rule 16a-3 under the Exchange Act.
<PAGE>
"RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act as the same may
----------
be amended from time to time, or any successor thereto.
"SHARE" means a share of the Common Stock, as adjusted in accordance with
-----
Section 10 of the Plan.
"SUBSIDIARY" means a "subsidiary corporation," whether now or hereafter
----------
existing, as defined in Section 424(f) of the Code.
<PAGE>
EXHIBIT 10.4
MPATH INTERACTIVE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
The following constitute the provisions of the Mpath Interactive, Inc. 1999
Employee Stock Purchase Plan.
1. PURPOSE. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the Common Stock of the Company.
------------
(d) "Company" means Mpath Interactive, Inc., a Delaware corporation.
-------
(e) "Compensation" means all regular straight time gross earnings and
------------
commissions, and shall not include payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Continuous Status as an Employee" means the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of (i) sick leave;
(ii) military leave; (iii) any other leave of absence approved by the Company,
provided that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute or unless provided otherwise pursuant to Company policy adopted from
time to time.
(g) "Contributions" means all amounts credited to the account of a
-------------
participant pursuant to the Plan.
(h) "Corporate Transaction" means a sale of all or substantially all
---------------------
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
(i) "Designated Subsidiary" means any Subsidiary which has been
---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
<PAGE>
(j) "Employee" means any person, including an Officer, who is
--------
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or a Designated Subsidiary.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined by the Board in its discretion based on the closing sales price
of the Common Stock for such date (or, in the event that the Common Stock is not
traded on such date, on the immediately preceding Trading Day), as reported by
the National Association of Securities Dealers Automated Quotation (Nasdaq)
National Market or, if such price is not reported, the mean of the bid and asked
prices per share of the Common Stock as reported by Nasdaq or, in the event the
Common Stock is listed on a stock exchange, the Fair Market Value per share
shall be the closing sales price on such exchange on such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
Trading Day), as reported in The Wall Street Journal. For purposes of the
Offering Date of the first Offering Period under the Plan, the Fair Market Value
shall be the initial price to the public as set forth in the final prospectus
included within the registration statement in Form S-1 filed with the Securities
and Exchange Commission pursuant to Rule 424 under the Securities Act of 1933,
as amended, for the initial public offering of the Company's Common Stock (the
"Registration Statement").
(m) "Offering Date" means the first Trading Day of each Offering
-------------
Period of the Plan.
(n) "Offering Period" means a period of approximately twenty-four (24)
---------------
months and not exceeding twenty-seven (27) months. The duration and timing of
the Offering Periods may be changed pursuant to Section 4 of the Plan.
(o) "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.
(p) "Plan" means this Mpath Interactive, Inc. 1999 Employee Stock
----
Purchase Plan.
(q) "Purchase Date" means the last Trading Day of each Purchase
-------------
Period.
(r) "Purchase Period" means a period of approximately six (6) months
---------------
within an Offering Period, except for the first Purchase Period as set forth in
Section 4(b). The duration and timing of the Purchase Periods may be changed
pursuant to Section 4 of the Plan.
(s) "Purchase Price" means with respect to a Purchase Period an amount
--------------
equal to 85% of the Fair Market Value (as defined in Section 2(l) above) of a
Share of Common Stock on the Offering Date or on the Purchase Date, whichever is
lower; provided, however, that in the event (i) there is any increase in the
number of Shares available for issuance under the Plan as a result of a
shareholder-approved amendment to the Plan, and (ii) all or a portion of such
-2-
<PAGE>
additional Shares are to be issued with respect to one or more Offering Periods
that are underway at the time of such increase ("Additional Shares"), and (iii)
-----------------
the Fair Market Value of a Share of Common Stock on the date of such increase is
higher than the Fair Market Value on the Offering Date for any such Offering
Period, then in such instance the Purchase Price with respect to such Additional
Shares shall be 85% of the Fair Market Value of a Share of Common Stock on the
date of such increase or the Fair Market Value of a Share of Common Stock on the
Purchase Date, whichever is lower.
(t) "Share" means a share of Common Stock, as adjusted in accordance
-----
with Section 20 of the Plan.
(u) "Subsidiary" means a corporation, domestic or foreign, of which
----------
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
(v) "Trading Day" means a day on which national stock exchanges and
-----------
the Nasdaq System are open for trading.
3. ELIGIBILITY.
-----------
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code; provided, however, that eligible
Employees may not participate in more than one Offering Period at a time.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase 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 Subsidiary, or
(ii) to the extent that his or her rights to purchase stock under all employee
stock purchase plans (described in Section 423 of the Code) of the Company and
its Subsidiaries accrues at a rate which exceeds twenty-five thousand dollars
($25,000) of the Fair Market Value (as defined in Section 2(l) above) of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. OFFERING PERIODS AND PURCHASE PERIODS.
-------------------------------------
(a) OFFERING PERIODS. The Plan shall be implemented by a series of
----------------
Offering Periods generally of twenty-four (24) months duration and not
exceeding twenty-seven (27) months duration, with new Offering Periods
commencing on May 1 and November 1 of each year, or at such other time or times
as may be determined by the Board of Directors. Offering Periods shall commence
on a continuing and overlapping basis until terminated in accordance with
Section 21 hereof. Notwithstanding the foregoing, the first Offering Period
under the Plan
-3-
<PAGE>
shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Company's Registration Statement
effective (the "IPO Date") and ending on the last Trading Day on or before April
--------
30, 2001. The Board of Directors of the Company shall have the power to change
the duration and/or the frequency of Offering Periods with respect to future
offerings without shareholder approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Offering Period to be
affected.
(b) PURCHASE PERIODS. Each Offering Period shall generally consist of
----------------
four (4) Purchase Periods of approximately six (6) months duration, the first
commencing on the Offering Date and ending on the October 31 or April 30 next
following, and each other Purchase Period in such Offering Period commencing on
the day after the last day of the preceding Purchase Period and ending on the
October 31 or April 30 next following; provided, however, that the first
Purchase Period shall commence on the IPO Date and shall end on October 31,
1999. The Board of Directors of the Company shall have the power to change the
duration and/or frequency of Purchase Periods with respect to future purchases
without shareholder approval if such change is announced at least five (5) days
prior to the otherwise scheduled beginning of the first Purchase Period to be
affected.
5. PARTICIPATION.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given Offering Period.
(b) The subscription agreement shall set forth the Employee's
participation election, either in the form of a designation of the percentage of
the Employee's Compensation the Employee elects to have deducted from his or her
pay on each pay day during the Offering Period and credited to his or her
account under the Plan to be used to purchase shares on the Purchase Date for
each of the relevant Purchase Periods, which percentage shall be not less than
one percent (1%) and not more than twenty percent (20%), or such greater
percentage as the Board may establish from time to time before an Offering Date,
or, if permitted by the Board, in the form of a designation of the number of
whole shares the Employee elects to purchase at the end of each Purchase Period
with respect to the Offering Period, up to such maximum number of shares as the
Board may establish from time to time before an Offering Date.
(c) A participant's subscription shall be effective for each
successive Offering Period in which he or she is eligible to participate, unless
the participant withdraws in accordance with Section 11(a).
(d) In addition to the limits on an Employee's participation in the
Plan set forth herein, the Board may establish limits on the number of shares an
Employee may elect to purchase with respect to any Offering Period if such limit
is announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected.
-4-
<PAGE>
6. GRANT OF OPTION. On the Offering Date of each Offering Period, each
---------------
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Purchase Date a number of Shares of the Company's
Common Stock determined by dividing such Employee's Contributions accumulated
prior to such Purchase Date and retained in the participant's account as of the
Purchase Date by the applicable Purchase Price, provided, however, that the
maximum number of Shares an Employee may purchase during each Purchase Period
shall be 2,000 Shares (subject to adjustment pursuant to Section 20 below), and
provided further that such purchase shall be subject to the limitations set
forth in Sections 3(b) and 9(b).
7. METHOD OF PAYMENT OF CONTRIBUTIONS.
----------------------------------
(a) PAYROLL DEDUCTIONS.
------------------
(i) If an Employee's participation election is in the form of an
election to contribute a percentage of his or her Compensation through payroll
deductions, or if an Employee otherwise elects to make contributions to the Plan
through payroll deductions of a specified percentage of his or her Compensation
as permitted by the Board with respect to an Employee's participation election
in the form of an election to purchase a designated number of shares at the end
of each Purchase Period, such payroll deductions shall commence on the first
payroll following the Offering Date and shall end on the last payroll paid in
the Offering Period to which such subscription agreement and payroll deduction
authorization is applicable, unless sooner terminated by the participant as
provided in Section 11. All payroll deductions made by a participant shall be
credited to his or her account under the Plan.
(ii) A participant may discontinue his or her participation in
the Plan as provided in Section 11, or to the extent permitted by the Board in
its discretion, may increase or decrease the rate of his or her payroll
deductions during the Offering Period by completing and filing with the Company
a new subscription agreement authorizing a change in payroll deduction rate. The
change in rate shall be effective as of the beginning of the next calendar month
commencing ten (10) or more business days after the date the new subscription is
filed.
(iii) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) herein, a
participant's payroll deductions may be decreased by the Company to zero percent
(0%) at any time during a Purchase Period. Payroll deductions shall re-commence
at the rate provided in such participant's subscription agreement at the
beginning of the first Purchase Period which is scheduled to end in the
following calendar year, unless terminated by the participant as provided in
Section 11.
(b) CASH OR STOCK CONTRIBUTIONS. To the extent permitted by the
---------------------------
Board, a participant may make contributions to the Plan for purchase of shares
in cash or by tendering Company stock or by election to receive shares
representing the difference between the Purchase Price and the Fair Market Value
of the shares, less applicable withholding. Any such cash or stock
contribution, or any election to receive net shares, must be received by the
Company in accordance with procedures and at such times as established by the
Board, and a participant's failure to make such contributions or such an
election within the time required, to the extent the aggregate Purchase Price of
the number of shares the participant has an option to purchase on the
-5-
<PAGE>
Purchase Date exceeds payroll deduction contributions made by the participant as
of the Purchase Date, shall be deemed a withdrawal from the Offering Period with
respect to shares subject to the option not purchased on the applicable Purchase
Date and with respect to all other Purchase Periods in such Offering Period.
8. WITHHOLDING TAX OBLIGATIONS. At the time the option is exercised, in
---------------------------
whole or in part, or at the time some or all of the Company's Common Stock
issued under the Plan is disposed of, the participant must make adequate
provision for payment to the Company of the Company's federal, state or other
tax withholding obligations, if any, which arise upon the exercise of the option
or the disposition of the Common Stock. At any time, the Company may, but shall
not be obligated to, withhold from the participant's compensation the amount
necessary for the Company to meet applicable withholding obligations, including
any withholding required to make available to the Company any tax deductions or
benefits attributable to the sale or early disposition of Common Stock by the
participant.
9. EXERCISE OF OPTION.
------------------
(a) Unless a participant withdraws from the Plan as provided in
Section 11, his or her option for the purchase of Shares will be exercised
automatically on each Purchase Date of an Offering Period, and the maximum
number of full Shares subject to the option will be purchased at the applicable
Purchase Price with the accumulated Contributions in his or her account. The
Shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the participant on the Purchase Date. During his or her
lifetime, a participant's option to purchase Shares hereunder is exercisable
only by him or her.
(b) If the Board determines that, on a given Purchase Date, the number
of Shares with respect to which options are to be exercised may exceed (i) the
number of Shares of Common Stock that were available on the Offering Date of the
applicable Offering Period (after deduction of all Shares for which options have
been exercised or are then outstanding), or (ii) the number of shares available
for sale under the Plan on such Purchase Date (after deduction of all Shares for
which options have been exercised or are then outstanding), the Board may, in
its sole discretion, provide that the Shares of Common Stock available for
purchase on such Offering Date or Purchase Date, as applicable, shall be
allocated pro rata, in as uniform a manner as shall be practicable and as it
shall determine in its sole discretion to be equitable among all participants
exercising options to purchase Common Stock on such Purchase Date and (x)
continue all Offering Periods then in effect or (y) pursuant to Section 21
below, terminate any or all Offering Periods then in effect. The Board may
direct that the Shares available on the Offering Date of any applicable Offering
Period pursuant to the preceding sentence be allocated pro rata, notwithstanding
any authorization of additional Shares for issuance under the Plan by the
Company's shareholders subsequent to such Offering Date.
(c) Any cash remaining to the credit of a participant's account under the
Plan after a purchase by him or her of Shares at the termination of each
Purchase Period which is insufficient to purchase a full Share shall be carried
over to the next Purchase Period if the Employee continues to participate in the
Plan, or if the Employee does not continue to participate, shall be
-6-
<PAGE>
returned to the participant. Any other amounts left over in a participant's
account after a Purchase Date shall be returned to the participant.
10. DELIVERY. As promptly as practicable after each Purchase Date of each
--------
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the Shares purchased upon exercise of
his or her option.
11. VOLUNTARY WITHDRAWAL.
--------------------
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current Offering Period will be automatically terminated, and no
further Contributions for the purchase of Shares will be made during and with
respect to such Offering Period.
(b) A participant's voluntary withdrawal from an offering will not
have any effect upon his or her eligibility to participate in a succeeding
Offering Period or in any similar plan which may hereafter be adopted by the
Company.
12. AUTOMATIC WITHDRAWAL.
--------------------
(a) REDUCTION OF HOURS. In the event an Employee fails to remain in
-------------------
Continuous Status as an Employee of the Company for at least twenty (20) hours
per week during the Offering Period in which the employee is a participant, he
or she will be deemed to have elected to withdraw from the Plan and the
Contributions credited to his or her account will be returned to him or her and
his or her option terminated.
(b) TERMINATION OF EMPLOYMENT. Upon termination of the participant's
-------------------------
Continuous Status as an Employee prior to the Purchase Date of an Offering
Period (other than on account of death), he or she will be automatically
withdrawn from the Plan effective as of the date of such termination of his or
her Continuous Status as an Employee, the Contributions credited to his or her
account will be returned to him or her, and his or her option will be
automatically terminated.
(c) DEATH OF PARTICIPANT. Upon the death of a participant prior to
--------------------
the Purchase Date of an Offering Period, he or she will be automatically
withdrawn from the Plan, the Contributions credited to his or her account will
be returned to the person or persons entitled thereto under Section 15, and his
or her option will be automatically terminated.
(d) REDUCTION IN FAIR MARKET VALUE. To the extent permitted by any
------------------------------
applicable laws, regulations or stock exchange rules, if the Fair Market Value
of the Shares on a Purchase Date of an Offering Period (other than the final
Purchase Date of such Offering Period) is less than the Fair Market Value of the
Shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close
-7-
<PAGE>
of such Purchase Date and after the acquisition of Shares for such Purchase
Period, and (ii) be enrolled in the Offering Period commencing on the first
business day subsequent to such Purchase Date. If the Fair Market Value of the
Shares on April 30, 1999 is less than the Fair Market Value of the Shares on the
IPO Date, each participant shall automatically be withdrawn as of April 30, 1999
from the Offering Period beginning on the IPO Date and re-enrolled in the
Offering Period beginning on May 1, 1999 unless such participant notifies the
Administrator prior to April 30, 1999 that he or she does not wish to be
withdrawn and re-enrolled. All payroll deductions accumulated in a participant's
account as of such withdrawal date shall be returned to the participant.
13. INTEREST. No interest shall accrue on the Contributions of a
--------
participant in the Plan.
14. STOCK.
-----
(a) The maximum number of Shares which shall be made available for
sale under the Plan shall be 750,000 Shares, plus an annual increase on the
first day of each of the Company's fiscal years beginning in 2000, 2001, 2002,
2003 and 2004, equal to the lesser of (A) 100,000 Shares, (B) 1% of the Shares
outstanding on the last day of the immediately preceding fiscal year, or (C)
such lesser number of Shares as is determined by the Board, subject to
adjustment upon changes in capitalization of the Company as provided in Section
20.
(b) The participant shall have no interest or voting right in Shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
15. ADMINISTRATION. The Board, or a committee named by the Board, shall
--------------
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. Every finding, decision and determination made by the Board or its
committee shall, to the full extent permitted by law, be final and binding upon
all parties.
16. DESIGNATION OF BENEFICIARY.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any Shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her of such Shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Purchase Date of an Offering Period.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective. Such
designation of beneficiary may be changed by the
-8-
<PAGE>
participant (with the consent of his or her spouse, if any) at any time by
written notice effective upon receipt by the Company of such notice.
(b) In the event of the death of a participant and in the absence of a
beneficiary validly designated in accordance with Section 16(a) who is living at
the time of such participant's death, the Company shall deliver such Shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such Shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
17. TRANSFERABILITY. Neither Contributions credited to a participant's
---------------
account nor any rights with regard to the exercise of an option or to receive
Shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way by the participant (other than by will, the laws of
descent and distribution, or as provided in Section 16). Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 11.
18. USE OF FUNDS. All Contributions received or held by the Company under
------------
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
19. REPORTS. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of Contributions,
the per Share Purchase Price, the number of Shares purchased and the remaining
cash balance, if any.
20. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
------------------------------------------------------------------
(a) ADJUSTMENT. Subject to any required action by the shareholders of
----------
the Company, the number of Shares covered by each option under the Plan which
has not yet been exercised and the number of Shares which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the maximum number of shares of
--------
Common Stock which may be purchased by a participant in a Purchase Period, the
number of shares of Common Stock set forth in Section 14(a) above, and the price
per Share of Common Stock covered by each option under the Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common Stock
(including any such change in the number of shares of Common Stock effected in
connection with a change in domicile of the Company), or any other increase or
decrease in the number of Shares effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
-9-
<PAGE>
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an option.
(b) CORPORATE TRANSACTIONS. In the event of a dissolution or
----------------------
liquidation of the Company, any Purchase Period and Offering Period then in
progress will terminate immediately prior to the consummation of such action,
unless otherwise provided by the Board. In the event of a Corporate Transaction,
each option outstanding under the Plan shall be assumed or an equivalent option
shall be substituted by the successor corporation or a Parent or Subsidiary of
such successor corporation. In the event that the successor corporation refuses
to assume or substitute for outstanding options, each Purchase Period and
Offering Period then in progress shall be shortened and a new Purchase Date
shall be set (the "New Purchase Date"), as of which date any Purchase Period and
-----------------
Offering Period then in progress will terminate. The New Purchase Date shall be
on or before the date of consummation of the transaction and the Board shall
notify each participant in writing, at least ten (10) days prior to the New
Purchase Date, that the Purchase Date for his or her option has been changed to
the New Purchase Date and that his or her option will be exercised automatically
on the New Purchase Date, unless prior to such date he or she has withdrawn from
the Offering Period as provided in Section 10. For purposes of this Section
20(b), an option granted under the Plan shall be deemed to be assumed, without
limitation, if, at the time of issuance of the stock or other consideration upon
a Corporate Transaction, each holder of an option under the Plan would be
entitled to receive upon exercise of the option the same number and kind of
shares of stock or the same amount of property, cash or securities as such
holder would have been entitled to receive upon the occurrence of the
transaction if the holder had been, immediately prior to the transaction, the
holder of the number of Shares of Common Stock covered by the option at such
time (after giving effect to any adjustments in the number of Shares covered by
the option as provided for in this Section 20(b); provided however that if the
consideration received in the transaction is not solely common stock of the
successor corporation or its parent (as defined in Section 424(e) of the Code),
the Board may, with the consent of the successor corporation, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in Fair Market Value to
the per Share consideration received by holders of Common Stock in the
transaction.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per Share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of Shares of its outstanding Common Stock, and
in the event of the Company's being consolidated with or merged into any other
corporation.
21. AMENDMENT AND TERMINATION.
-------------------------
(a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 20, no such termination of the Plan may
affect options previously granted, provided that the Plan or an Offering Period
may be terminated by the Board
-10-
<PAGE>
on a Purchase Date or by the Board's setting a new Purchase Date with respect to
an Offering Period and Purchase Period then in progress if the Board determines
that termination of the Plan and/or the Offering Period is in the best interests
of the Company and the shareholders or if continuation of the Plan and/or the
Offering Period would cause the Company to incur adverse accounting charges as a
result of a change after the effective date of the Plan in the generally
accepted accounting rules applicable to the Plan. Except as provided in Section
20 and this Section 21, no amendment to the Plan shall make any change in any
option previously granted which adversely affects the rights of any participant.
In addition, to the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law or regulation), the
Company shall obtain shareholder approval in such a manner and to such a degree
as so required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
from a participant's Compensation during an Offering Period, establish the
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's
Compensation, establish such other limitations or procedures as the Board (or
its committee) determines in its sole discretion advisable which are consistent
with the Plan.
22. NOTICES. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
23. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
-11-
<PAGE>
24. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon
----------------------------
the IPO Date. It shall continue in effect for a term of twenty (20) years
unless sooner terminated under Section 21.
25. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of
-------------------------------------
options granted hereunder to, and the purchase of Shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the Shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
-12-
<PAGE>
MPATH INTERACTIVE, inc.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
----------------------
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the Mpath
Interactive, Inc. 1999 Employee Stock Purchase Plan (the "Plan") commencing with
----
the Offering Period ______________, ____ to _______________, ____, and subscribe
to purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 20% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on each
Purchase Date of an Offering Period unless I otherwise withdraw from the
Offering Period prior to a Purchase Date by giving written notice to the Company
for such purpose.
4. I understand that I may decrease or increase the rate of my
Contributions on one occasion only with respect to an increase and one occasion
only with respect to a decrease during any Offering Period by completing and
filing a new Subscription Agreement with such increase or decrease taking effect
as of the beginning of the calendar month following the date of filing of the
new Subscription Agreement, if filed at least ten (10) business days prior to
the beginning of such month. I also understand that I may change the rate of
deductions for future Offering Periods by filing a new Subscription Agreement,
and any such change will be effective as of the beginning of the next Offering
Period commencing after the new Subscription Agreement is filed.
5. I understand that I may discontinue my participation in an Offering
Period at any time prior to the Purchase Date as provided in Section 11 of the
Plan, and that if I do so I will not be permitted to renew participation in such
Offering Period.
<PAGE>
I UNDERSTAND THAT UNLESS I DISCONTINUE MY PARTICIPATION IN AN OFFERING
PERIOD AS PROVIDED IN SECTION 11 OF THE PLAN OR CHANGE THE RATE OF DEDUCTIONS BY
FILING A NEW SUBSCRIPTION AGREEMENT, MY ELECTION WILL CONTINUE TO BE EFFECTIVE
FOR EACH SUCCESSIVE OFFERING PERIOD COMMENCING AFTER THE TERMINATION OF AN
OFFERING PERIOD IN WHICH I HAVE PARTICIPATED.
6. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "Mpath Interactive, Inc. 1999 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
7. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
____________________________________
____________________________________
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) ____________________________________
(First) (Middle) (Last)
_______________________ ____________________________________
(Relationship) (Address)
____________________________________
Summary of Tax Treatment on Sale of Shares
------------------------------------------
The following information regarding the federal tax treatment on sale of
------------------------------------------------------------------------
shares acquired under the Plan is only a summary and is subject to change, and
- ------------------------------------------------------------------------------
is not intended to represent or provide tax advice to the participant, his or
- -----------------------------------------------------------------------------
her spouse or beneficiaries. You should consult a tax advisor concerning the tax
- --------------------------------------------------------------------------------
implications of the purchase and sale of stock under the Plan.
- -------------------------------------------------------------
If any shares received pursuant to the Plan are sold or otherwise disposed
of within two (2) years after the Offering Date or within one (1) year after the
Purchase Date, the excess of the fair market value of the shares on the Purchase
Date over the price paid for the shares on such Purchase Date will be treated
for federal income tax purposes as ordinary compensation income at the time of
such disposition, regardless of the amount received on sale or other disposition
of the shares, even if such amount is less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
<PAGE>
If any shares received pursuant to the Plan are sold or otherwise disposed
of at any time after expiration of the 2-year and 1-year holding periods, the
lesser of 15% of the fair market value of the shares on the Offering Date or the
excess of the fair market value of the shares at the time of such sale or
disposition over the price paid for the shares on the Purchase Date will be
treated for federal income tax purposes as ordinary compensation income. The
remainder of the gain or loss, if any, recognized on such disposition will be
treated as capital gain or loss.
9. I hereby agree to notify the Company in writing within 30 days after
the date of any disposition of shares within two (2) years after the Offering
Date or within one (1) year after the Purchase Date, and I will make adequate
provision for federal, state or other tax withholding obligations, if any, which
arise upon the disposition of the Common Stock. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary to make
available to the Company any tax deductions or benefits attributable to the sale
or early disposition of Common Stock by me.
10. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Subscription Agreement is dependent upon my eligibility to participate
in the Plan.
SIGNATURE:_____________________________
SOCIAL SECURITY #:_____________________
DATE:__________________________________
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
_______________________________________
(Signature)
_______________________________________
(Print name)
<PAGE>
MPATH INTERACTIVE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
--------------------
I, __________________________, hereby elect to withdraw my participation in
the Mpath Interactive, Inc. 1999 Employee Stock Purchase Plan (the "Plan") for
----
the Offering Period _________. This withdrawal covers all Contributions
credited to my account and is effective on the date designated below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:___________________ ________________________________________
Signature of Employee
________________________________________
Social Security Number
<PAGE>
EXHIBIT 10.5
MPATH INTERACTIVE, INC.
1999 DIRECTORS' STOCK OPTION PLAN
---------------------------------
1. PURPOSES OF THE PLAN. The purposes of this Directors' Stock Option
--------------------
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
-----------
(a) "BOARD" means the Board of Directors of the Company.
-----
(b) "CHANGE OF CONTROL" means a sale of all or substantially all of
-----------------
the Company's assets, or any merger or consolidation of the Company with or into
another corporation other than a merger or consolidation in which the holders of
more than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company, or such surviving entity,
outstanding immediately after such transaction.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
----
(d) "COMMON STOCK" means the Common Stock of the Company.
------------
(e) "COMPANY" means Mpath Interactive, Inc., a Delaware corporation.
-------
(f) "CONTINUOUS STATUS AS A DIRECTOR" means the absence of any
-------------------------------
interruption or termination of service as a Director.
(g) "CORPORATE TRANSACTION" means a dissolution or liquidation of the
---------------------
Company, a sale of all or substantially all of the Company's assets, or a
merger, consolidation or other capital reorganization of the Company with or
into another corporation.
(h) "DIRECTOR" means a member of the Board.
--------
(i) "EMPLOYEE" means any person, including any officer or Director,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
------------
amended.
<PAGE>
(k) "OPTION" means a stock option granted pursuant to the Plan. All
------
options shall be nonstatutory stock options (i.e., options that are not intended
to qualify as incentive stock options under Section 422 of the Code).
(l) "OPTIONED STOCK" means the Common Stock subject to an Option.
--------------
(m) "OPTIONEE" means an Outside Director who receives an Option.
--------
(n) "OUTSIDE DIRECTOR" means a Director who is not an Employee.
----------------
(o) "PARENT" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(p) "PLAN" means this 1999 Directors' Stock Option Plan.
----
(q) "SHARE" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(r) "SUBSIDIARY" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 300,000 Shares of Common Stock (the "Pool"). The Shares may
----
be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan has been terminated, become available for future grant
under the Plan. In addition, any Shares of Common Stock that are retained by
the Company upon exercise of an Option in order to satisfy the exercise price
for such Option, or any withholding taxes due with respect to such exercise,
shall be treated as not issued and shall continue to be available under the
Plan. If Shares that were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not in any event be returned to
the Plan and shall not become available for future grant under the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
------------------------------------------------------
(a) ADMINISTRATOR. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.
(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall be
--------------------
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
<PAGE>
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director who becomes an Outside Director after
the effective date of this Plan shall be automatically granted an Option to
purchase 30,000 Shares (the "First Option") on the date on which such person
------------
first becomes an Outside Director, whether through election by the shareholders
of the Company or appointment by the Board to fill a vacancy.
(iii) Each Outside Director shall thereafter be automatically
granted an Option to purchase 7,500 Shares (a "Subsequent Option") on the date
-----------------
of each Annual Meeting of the Company's shareholders immediately following which
such Outside Director is serving on the Board, provided that, on such date, he
or she shall have served on the Board for at least six (6) months prior to the
date of such Annual Meeting.
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, in the event that a grant would cause the number of Shares subject
to outstanding Options plus the number of Shares previously purchased upon
exercise of Options to exceed the Pool, then each such automatic grant shall be
for that number of Shares determined by dividing the total number of Shares
remaining available for grant by the number of Outside Directors receiving an
Option on the automatic grant date. Any further grants shall then be deferred
until such time, if any, as additional Shares become available for grant under
the Plan through action of the shareholders to increase the number of Shares
which may be issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any grant of an Option made before the Company has obtained
shareholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 17 hereof.
(vi) The terms of each First Option granted hereunder shall be
as follows:
(1) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 below;
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the First Option, determined in
accordance with Section 8 hereof; and
(3) the First Option shall become exercisable in
installments cumulatively as to 25% of the Shares subject to the First Option on
each of the first, second, third and fourth anniversaries of the date of grant
of the Option.
<PAGE>
(vii) The terms of each Subsequent Option granted hereunder
shall be as follows:
(1) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Section 9 below;
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Subsequent Option, determined
in accordance with Section 8 hereof; and
(3) the Subsequent Option shall become exercisable as to
one hundred percent (100%) of the Shares subject to the Subsequent Option on the
day before the fourth anniversary of the date of grant of the Subsequent Option.
(c) POWERS OF THE BOARD. Subject to the provisions and restrictions
-------------------
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per Share of Options to be granted, which exercise price
shall be determined in accordance with Section 8 of the Plan; (iii) to interpret
the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to
the Plan; (v) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) SUSPENSION OR TERMINATION OF OPTION. If the Chief Executive
-----------------------------------
Officer or his or her designee reasonably believes that an Optionee has
committed an act of misconduct, such officer may suspend the Optionee's right to
exercise any option pending a determination by the Board (excluding the Outside
Director accused of such misconduct). If the Board (excluding the Outside
Director accused of such misconduct) determines an Optionee has committed an act
of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company rules
resulting in loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition, induces any Company
customer to breach a contract with the Company or induces any principal for whom
the Company acts as agent to terminate such agency relationship, neither the
Optionee nor his or her estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Board of Directors (excluding the
Outside Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on Optionee's behalf at a
hearing before the Board or a committee of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) above. An
<PAGE>
Outside Director who has been granted an Option may, if he or she is otherwise
eligible, be granted an additional Option or Options in accordance with such
provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective on the
----------------------------
effectiveness of the registration statement under the Securities Act of 1933, as
amended, relating to the Company's initial public offering of securities. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 13 of the Plan.
7. TERM OF OPTIONS. The term of each Option shall be ten (10) years from
---------------
the date of grant thereof unless an Option terminates sooner pursuant to Section
9 below.
8. EXERCISE PRICE AND CONSIDERATION.
--------------------------------
(a) EXERCISE PRICE. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be 100% of the fair market value
per Share on the date of grant of the Option.
(b) FAIR MARKET VALUE. The fair market value shall be determined by
-----------------
the Board; provided however that in the event the Common Stock is traded on the
Nasdaq National Market or listed on a stock exchange, the fair market value per
Share shall be the closing sales price on such system or exchange on the date of
grant of the Option (or, in the event that the Common Stock is not traded on
such date, on the immediately preceding trading date), as reported in The Wall
--------
Street Journal, or if there is a public market for the Common Stock but the
- --------------
Common Stock is not traded on the Nasdaq National Market or listed on a stock
exchange, the fair market value per Share shall be the mean of the bid and asked
prices of the Common Stock in the over-the-counter market on the date of grant,
as reported in The Wall Street Journal (or, if not so reported, as otherwise
------------------------
reported by the National Association of Securities Dealers Automated Quotation
("Nasdaq") System).
(c) FORM OF CONSIDERATION. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. EXERCISE OF OPTION.
------------------
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) above; provided
<PAGE>
however that no Options shall be exercisable prior to shareholder approval of
the Plan in accordance with Section 17 below has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued
to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. If an Outside
----------------------------------------------
Director ceases to serve as a Director, he or she may, but only within ninety
(90) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (to the extent
he or she was entitled to exercise) within the time specified above, the Option
shall terminate and the Shares underlying the unexercised portion of the Option
shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 9(b) above, in
----------------------
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he or she may, but only within twelve (12)
months from the date of such termination, exercise his or her Option to the
extent he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that he or she was not
entitled to exercise the Option at the date of termination, or if he or she does
not exercise such Option (to the extent he or she was entitled to exercise)
within the time specified above, the Option shall terminate and the Shares
underlying the unexercised portion of the Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:
-----------------
<PAGE>
(i) During the term of the Option who is, at the time of his or
her death, a Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the Option may be
exercised, at any time within twelve (12) months following the date of death, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that would have accrued had the Optionee continued living and remained
in Continuous Status as Director for six (6) months after the date of death.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired.
(ii) Within three (3) months after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within twelve
(12) months following the date of death, by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at the date of
termination. Notwithstanding the foregoing, in no event may the option be
exercised after its term set forth in Section 7 has expired.
To the extent that an Optionee was not entitled to exercise the Option
at the date of death or termination, as provided in Section 9(d)(i) or (ii)
above, or if he or she does not exercise such Option (to the extent he or she
was entitled to exercise) within the time specified above, the Option shall
terminate and the Shares underlying the unexercised portion of the Option shall
revert to the Plan.
10. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
------------------------------------------------------------------
(a) ADJUSTMENT. Subject to any required action by the shareholders of
----------
the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of Shares of Common Stock set forth in Sections 4(b)(ii) and
(iii) above, and the number of Shares of Common Stock which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock (including any such change in the number of Shares of Common
Stock effected in connection with a change in domicile of the Company) or any
other increase or decrease in the number of issued Shares of Common Stock
effected without receipt of consideration by the Company; provided however that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose
<PAGE>
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.
(b) CORPORATE TRANSACTIONS; CHANGE OF CONTROL. In the event of a
-----------------------------------------
Corporate Transaction, each outstanding Option shall be assumed or an equivalent
option shall be substituted by the successor corporation or a Parent or
Subsidiary of such successor corporation, unless the successor corporation does
not agree to assume the outstanding Options or to substitute equivalent options,
in which case the Options shall terminate upon the consummation of the
transaction; provided however that in the event of a Change of Control, each
Optionee shall have the right to exercise his or her Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable, immediately prior to the consummation of such transaction.
For purposes of this Section 11(b), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon such Corporate Transaction or Change of Control, each
Optionee would be entitled to receive upon exercise of an Option the same number
and kind of shares of stock or the same amount of property, cash or securities
as the Optionee would have been entitled to receive upon the occurrence of such
transaction if the Optionee had been, immediately prior to such transaction, the
holder of the number of Shares of Common Stock covered by the Option at such
time (after giving effect to any adjustments in the number of Shares covered by
the Option as provided for in this Section 11); provided however that if such
consideration received in the transaction was not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon
exercise of the Option to be solely common stock of the successor corporation or
its Parent equal to the Fair Market Value of the per Share consideration
received by holders of Common Stock in the transaction.
(c) CERTAIN DISTRIBUTIONS. In the event of any distribution to the
---------------------
Company's shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
-------------------------------------
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other
<PAGE>
applicable law or regulation), the Company shall obtain approval of the
shareholders of the Company to Plan amendments to the extent and in the manner
required by such law or regulation.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
----------------------------------
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the legal requirements relating to the administration
of stock option plans under applicable U.S. state corporate laws, U.S. federal
and applicable state securities laws, the Code, any stock exchange or Nasdaq
rules or regulations to which the Company may be subject and the applicable laws
of any other country or jurisdiction where Options are granted under the Plan,
as such laws, rules, regulations and requirements shall be in place from time to
time (the "Applicable Laws"). Such compliance shall be determined by the
---------------
Company in consultation with its legal counsel.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. OPTION AGREEMENT. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
17. SHAREHOLDER APPROVAL. If required by the Applicable Laws, continuance
--------------------
of the Plan shall be subject to approval by the shareholders of the Company.
Such shareholder approval shall be obtained in the manner and to the degree
required under the Applicable Laws.
<PAGE>
EXHIBIT 10.6
Distribution Agreement
----------------------
This Distribution Agreement (the "Agreement") is entered as of April 22, 1998
(the "Effective Date") by and between Mpath Interactive, Inc. ("Mpath"), a
Delaware corporation, through its Mplayer.com division, with its principal place
of business at 665 Clyde Avenue, Mountain View, California 94043 and Cox
Interactive Media, Inc. ("CIM"), a Delaware corporation, with its principal
place of business at 530 Means Street, N.W., Atlanta, GA 30318.
Recitals
--------
1. CIM owns and operates the websites listed on Exhibit C to this Agreement,
as such Exhibit may be amended by CIM from time to time (the "CIM Sites").
2. Mpath owns and operates a branded multi-player interactive game service on
the World Wide Web located at the url "www.mplayer.com." ("mplayer.com") based
on technology, including the mplayer.com Gizmo Software (as defined below), that
enables users to play multi-player games over the Internet including both third
party personal computer resident games and online only games; and
3. Mpath and CIM desire to create, on the World Wide Web, areas for CIM that
contain certain online, interactive computer games and to promote each other's
services as more fully set forth in this Agreement.
Agreement
---------
NOW THEREFORE, for and in consideration of the mutual terms and conditions set
forth herein, the parties agree as follows:
1. Definitions.
-----------
1.1 "CIM Games" mean all Java and Shockwave games owned by CIM on the Effective
Date.
1.2 "CIM Marks" means CIM's trademarks, trade names, service marks, service
names and logos specified in Exhibit A.
1.3 "Co-Branded Pages" mean World Wide Web pages on the CIM Sites that are co-
branded with CIM Marks and Mpath Marks and that provide instructions to
users regarding how to download the Gizmo Software and also contain the End
User License (as defined below in Section 2.1) provided by Mpath.
1.4 "Confidential Information" means: (i) business information of a party that
is not publicly known, including but not limited to, any information
relating to a party's product plans, product designs, product costs,
product prices, product names, finances, marketing plans,
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<PAGE>
business opportunities, personnel, research, development or know-how; (ii)
any information designated in writing by any party as "confidential" or
"proprietary" or which, under the circumstances taken as a whole, would
reasonably be deemed to be confidential; and (iii) the terms and conditions
of this Agreement. "Confidential Information" excludes information that:
(a) is or becomes known or available by publication, commercial use or
otherwise through no fault of the receiving party; (b) is known to the
receiving party at the time of disclosure without violation of any
confidentiality restriction and without any restriction on the receiving
party's further use or disclosure; or (c) is independently developed by the
receiving party without access or reference to Confidential Information of
the disclosing party.
1.5 "Game Channel" means an area on each CIM Site that hosts online,
interactive freeware and/or shareware computer games.
1.6 "Gizmo Software" means the client software, in object code form only, that
is used by customers to access mplayer.com and play games on mplayer.com.
1.7 "Mpath Marks" means Mpath's trademarks, trade names, service marks, service
names and logos specified in Exhibit B.
1.8 "Mplayer Plus" means the area on mplayer.com where users must pay a
subscription fee for game play. As of the Effective Date the Mplayer Plus
subscription fee is $39.95 per year.
1.9 "Renewal Term" means each successive, if any, [XXXXX] period for which the
Agreement has been renewed.
2. CIM's Game Channel and Tournaments.
----------------------------------
2.1 Gizmo Software. Mpath hereby grants CIM a non-exclusive, royalty-free,
--------------
worldwide license to: (i) distribute, display, perform and transmit the
Gizmo Software on the CIM Sites; (ii) permit users of the CIM Sites to
download the Gizmo Software from Co-Branded Pages; and (iii) allow users of
the CIM Sites to use (subject to Mpath's standard form end user license
agreement in effect from time-to-time the "End User License") the Gizmo
Software to play the games that are available on mplayer.com. The version
of the Gizmo Software that users may download under this Section 2.1 shall
be substantially in the form, and contain the same features, as the Gizmo
Software that users may download from mplayer.com on the Effective Date.
During the term of this Agreement, Mpath will promptly (but within ten
(10) business days of commercial release) provide CIM with revisions and
upgrades for the Gizmo Software. Mpath will provide CIM with the Gizmo
Software in an electronic format to be agreed upon by the parties and by
electronic transmission. If Mpath makes any revisions and/or upgrades for
the Gizmo Software that will materially affect the art files for the custom
Gizmo Software distributed by CIM, then Mpath must notify CIM of the effect
of such revisions and/or upgrades within ten
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<PAGE>
(10) business days of commercial release of such revisions and/or upgrades
and include a copy of such revisions and/or upgrades along with such
notice. CIM's use of any such revisions or upgrades is subject to the
license rights granted by Mpath to CIM with respect to the Gizmo Software
expressly stated in this Agreement.
2.2 After the First [XXXXX] Game Channels on CIM Sites. Once CIM has created a
--------------------------------------------------
Game Channel on [XXXXX] CIM Sites, Mpath will provide CIM with Mpath's
proprietary Web content creation tools that will enable CIM to create a
custom version of the Gizmo Software for each CIM Site so that the CIM
Mark(s) selected by CIM are displayed when a user is playing a game on
mplayer.com. Mpath will provide CIM with a commercially reasonable amount
of technical support to assist CIM with creating such custom versions of
the Gizmo Software. The CIM Mark(s) will provide a link from the web page
where the user is playing an Mplayer Game to the CIM Site from which the
user downloaded the Gizmo Software. The placement and appearance of the
CIM Marks on the Gizmo Software will be subject to Mpath's approval, such
approval not to be unreasonably withheld or delayed. If Mpath does not
object to the placement and appearance of the CIM Marks on the Gizmo
Software within ten (10) days from the date that CIM submits the placement
and appearance of the CIM Marks to Mpath for approval, Mpath will be deemed
to have approved such placement and appearance of the CIM Marks.
2.3 Co-Branded Pages. The parties must agree, in writing, upon the final
----------------
design of the Co-Branded Pages for commercial release. The Co-Branded
Pages will reside on the servers used by CIM for the CIM Sites, or such
other servers as CIM may designate from time-to-time. The Co-Branded
Pages will contain general descriptions of the games available on
mplayer.com, provide instructions to users regarding how to download the
Gizmo Software and will enable users to download the Gizmo Software. The
descriptions of the games available on mplayer.com and instructions
regarding how to download the Gizmo Software will be provided by Mpath, and
will be subject to CIM's prior written approval which may not be
unreasonably withheld or delayed. In addition, the Co-Branded Pages will
feature a conspicuous notice stating that all comments, questions and/or
complaints about the Gizmo Software or the games available on mplayer.com
should be addressed to Mpath and will provide a mailing address and an
electronic mail address to which such comments and complaints should be
directed. The CIM Sites will each offer users a download of the custom
versions of the Gizmo Software created by CIM under Section 2.2 of this
Agreement. The regular Gizmo Software may be downloaded from mplayer.com.
Users will not be charged a fee to download the Gizmo Software from the CIM
Sites.
2.4 Support. When a user who has downloaded the Gizmo Software from a CIM Site
-------
selects an mplayer.com compatible game to play, the user will be
transported to the server Mpath uses for mplayer.com. All games available
on mplayer.com will be played on such server. Mplayer will be responsible
for all aspects of the operation of the Gizmo Software and the mplayer.com,
including, but not limited to, handling problems and questions that users
may have. Mpath is responsible for providing customer support to
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OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
end-users with respect to the use of the mplayer.com and the games
available on mplayer.com. Customer support will include technical or
telephone support for both game play and issues relating to use of
mplayer.com. Mpath will respond to all user comments, questions and
complaints promptly and in a professional manner, consistent with industry
standards for such support.
2.5 Tournaments. Mpath will conduct checkers and backgammon co-branded
-----------
tournaments for users of the CIM Sites subject to mutual written agreement
of the parties on frequency and timing of these tournaments, minimum
advertising pre-commitments, the rules for the tournaments, the prizes
awarded (if any) and the manner in which these tournaments are conducted.
3. CIM Games on mplayer.com. CIM grants Mpath a worldwide, non-exclusive
------------------------
license to make available, distribute (subject to CIM's standard form end user
license agreement as CIM may provide to Mpath from time-to-time), copy, publicly
display, publicly perform, transmit and broadcast the CIM Games (and any
elements thereof) for online play on mplayer.com. CIM will provide the CIM
Games to Mpath in an electronic format to be agreed upon by the parties and by
electronic transmission. CIM agrees to exert commercially reasonable efforts to
help integrate the CIM Games on mplayer.com. Any grant of sublicense rights in
the CIM games by CIM to Mpath is subject to good faith negotiation and mutual
written agreement.
4. Consideration.
-------------
4.1 Advertising Revenue. Mplayer shall have the exclusive right to sell
-------------------
advertisements to be embedded in the Gizmo Software, each such
advertisement to be delivered to CIM on disk or by email or by FTP on the
fifteenth (15th) day of each calendar month during the term of this
Agreement and any Renewal Term. Mpath shall retain [XXXXX] revenues
generated from such sales. Mpath shall comply with CIM's written policies
with respect to the acceptability of advertising, as such policies are
promulgated from time-to-time by CIM for its own advertising sales on the
CIM Sites. CIM may reject any advertising which, as determined in CIM's
commercially reasonable discretion, does not conform with CIM's written
advertising policies. CIM shall have [XXXXX].
4.2 Mplayer Plus Bounty. Mpath agrees to pay CIM [XXXXX] for each user who
-------------------
originates from a CIM Site and purchases a [XXXXX] Mplayer Plus
subscription. Mpath will pay CIM [XXXXX] for each user who originates from
a CIM Site and purchases a [XXXXX] Mplayer Plus subscription. Subscribers
to Mplayer Plus who originate from the CIM Sites will be directed by CIM to
a a distinct web page (url) within Mpath's Internet domain dedicated to
Mplayer Plus registration for users that originate from a CIM Site.
Mpath's records from these Mplayer Plus registrations will be used to
determine the appropriate new subscriber bounty due to CIM from Mpath.
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OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
4.3 Payment Timing. Within thirty (30) days after the end of each calendar
--------------
quarter, Mpath will pay to CIM the total of all fees due to CIM under
Section 4 for that calendar quarter. In addition, within thirty (30) days
after the end of each calendar quarter, Mpath will provide CIM with a
written report which shall provide detailed information regarding how Mpath
calculated the payment made to CIM under this Agreement for that calendar
quarter, including, but not limited to, a listing of the number of Mplayer
Plus subscriptions purchased by users who originated from the CIM Sites
during the calendar quarter, the CIM Site from which each such user
originated and the duration of each subscription that was purchased. The
acceptance of a quarterly report by CIM will not be deemed an acceptance of
the accuracy of such report, nor as a waiver of any rights under this
Agreement .
4.4 Reports and Audits. Mpath shall keep reasonable books and records
------------------
accurately documenting the transactions contemplated by this Agreement
throughout the term of this Agreement and for a period of one (1) year
following the expiration or termination of this Agreement. CIM or its
authorized representative will have the right once during the initial term
of this Agreement, once during each Renewal Term and once during the first
twelve (12) months thereafter, at CIM's sole expense, to inspect, audit and
copy any such books and records kept by Mpath relevant to payments made by
Mpath to CIM under this Agreement at Mpath's offices, during normal
business hours, upon fourteen (14) days' prior written notice, to determine
the accuracy of Mpath's reports hereunder. CIM agrees to provide Mpath with
a copy of the audit report letter, if any, no later than twenty (20) days
after completion of the audit. If, as a result of an inspection or audit,
CIM discovers an underpayment of fees paid by Mpath to CIM, CIM shall have
the right to conduct an additional audit of Mpath's books and records
during the next twelve (12) months and Mpath shall promptly pay to CIM the
fees Mpath underpaid. If, as a result of an inspection or audit, CIM
discovers an underpayment of [XXXXX] or more during any given month,
Mpath will pay CIM the cost of such inspection or audit in addition to
the underpayment.
5. Ownership. Mpath will remain the sole and exclusive owner of all right,
---------
title and interest in mplayer.com, the Gizmo Software, and Mpath Marks and all
intellectual property rights, including derivative works, therein (except for
the CIM Games and any CIM Marks incorporated into mplayer.com or the Gizmo
Software). CIM will remain the sole and exclusive owner of all right, title and
interest in the CIM Marks, the CIM Games, CIM proprietary software, and all
intellectual property rights, including derivative works, therein. There are no
implied licenses granted under this Agreement. Neither party may reverse
engineer, reverse compile, reduce to human perceivable form, or disassemble any
software of the other party, except as expressly authorized in this Agreement.
6. Mpath Marks. Mpath hereby grants to CIM a non-exclusive license to use the
-----------
Mpath Marks in connection with CIM's performance of its obligations under this
Agreement and the marketing of the Game Channels, provided that Mpath will have
the right to approve such use in advance, which approval shall not be
unreasonably withheld or delayed. Mpath will be deemed
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<PAGE>
to have approved such use if CIM does not receive notice of disapproval from
Mpath within ten (10) business days after Mpath receives a request for approval
from CIM. When CIM uses an Mpath Mark under this Agreement, CIM must reference
the Mpath Mark as being owned by Mpath as specified in Exhibit B. Nothing in
this Agreement grants CIM ownership or any rights in or to the Mpath Marks,
except in accordance with this license, and any use of the Mpath Marks by CIM
under this Agreement is for and shall inure to the benefit of Mpath. The rights
granted to CIM in this license will terminate upon any termination of this
Agreement.
7. CIM Marks. CIM hereby grants to Mpath a non-exclusive license to use CIM
---------
Marks, in connection with Mpath's distribution and marketing of the availability
of the CIM Games on mplayer.com under this Agreement, provided that CIM must
approve such use in advance, which approval may not be unreasonably withheld or
delayed. CIM will be deemed to have approved such use if Mpath does not receive
notice of disapproval from CIM within ten (10) business days after CIM receives
a request for approval from Mpath. When Mpath uses a CIM Mark under this
Agreement, Mpath must reference the CIM Mark as being owned by CIM as specified
in Exhibit A. Nothing in this Agreement grants Mpath ownership or any rights
in or to the CIM Marks, except in accordance with this license, and any use of
the CIM Marks by Mpath under this Agreement shall inure to the benefit of CIM.
The rights granted to Mpath in this license will terminate upon any termination
of this Agreement.
8. Publicity. CIM and Mpath may each make press releases about the existence
---------
and contents of the Agreement (except with respect to specific financial terms)
with the prior approval of the other of the contents and timing of the press
release, which approval shall not be unreasonably withheld or delayed. If the
party from whom approval is sought does not approve or reject such press release
within five (5) business days of submission for approval, such press release
shall be deemed approved.
9. Warranties.
----------
9.1 By CIM. CIM represents and warrants that: (i) it is the owner or licensee
------
of the CIM Games, the CIM Marks and all intellectual property rights
therein; (ii) it has not granted any licenses or entered into any
agreements of any kind inconsistent with or contrary to this Agreement;
(iii) the use of the CIM Games and the CIM Marks will not violate or
infringe any intellectual property or other rights of any third party; and
(iv) it has sufficient right and authority to enter this Agreement and to
grant the licenses and rights granted under this Agreement.
9.2 By Mpath. Mpath represents and warrants that: (i) it is the owner or
--------
licensee of the Mpath Marks, mplayer.com, the games that can be played on
mplayer.com (other than Blood, Total Annihilation, Mechwarrior 2, and IPX
games), the Gizmo Software and all intellectual property rights therein;
(ii) it has not entered into any agreements of any kind inconsistent with
or contrary to this Agreement; (iii) the use of the Mpath Marks,
mplayer.com, and the Gizmo Software under this Agreement will not violate
or infringe any intellectual property or other rights of any third party,
(iv) the operation of
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OMITTED PORTIONS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
mplayer.com and the games that can be played on mplayer.com will be in
accordance with all applicable laws and regulations, and (v) it has
sufficient right and authority to enter into this Agreement and to grant
the licenses and rights granted under this Agreement.
9.3 Warranty Disclaimer. THE FOREGOING WARRANTY IN SECTIONS 9.1 AND 9.2 ARE IN
-------------------
LIEU OF ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION ANY WARRANTY OF NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR
PURPOSE.
9.4 Indemnification. Mpath will indemnify and hold CIM and its directors,
---------------
officers, agents, employees and affiliated companies harmless from and
against any and all claims, damages, liabilities, costs and expenses
(including all reasonable attorney's fees) arising out of:
(i) the breach of any warranty made by Mpath under this Agreement; and
(ii) any cause of action by any third party game publisher, game owner, or
game distributor arising from any game that can be played on
mplayer.com.
CIM will indemnify and hold Mpath and its directors, officers, agents,
employees and affiliated companies harmless from and against any and all
claims, damages, liabilities, costs and expenses (including all reasonable
attorney's fees) arising out of the breach of any warranty made by CIM
under this Agreement. The indemnifying party shall not be liable for any
claims, damages, liabilities, costs or expenses unless the party seeking
indemnification gives the indemnifying party prompt written notice of any
such claims, damages, liabilities, costs or expenses and cooperates fully
with the indemnifying party in the defense, compromise or settlement of any
claims.
10. Confidentiality.
---------------
10.1 Confidentiality Restrictions. Each party will take reasonable steps,
----------------------------
at least including the steps it takes to protect its own most valuable
proprietary information to prevent the duplication or disclosure of the
other party's Confidential Information, other than by or to its, or its
affiliates', employees or agents who must have access to the Confidential
Information to perform the party's obligations hereunder. However, each
party may disclose Confidential Information of the other party: (i)
pursuant to the order or requirement of a court, administrative agency or
other governmental body, provided that such party give reasonable notice to
the other party to contest such order or requirement; or (ii) on a
confidential basis to legal and financial advisors. In no event, without
Mpath's prior written consent, may;
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<PAGE>
(a) Mpath Confidential Information, or
(b) any Mpath proprietary code delivered by Mpath to CIM under this
Agreement; be used by CIM on any game playing service other than
mplayer.com or the Game Channels. Either party may disclose, subject
to written non-disclosure agreement, this Agreement to its lawyers,
accountants and in the course of investment or financing due
diligence.
10.2 Return of Confidential Information. No later than fifteen (15) business
----------------------------------
days after termination or expiration of this Agreement, the recipient of
Confidential Information will return all Confidential Information and all
copies thereof to the owner. With respect to documents or data storage
media containing Confidential Information of the other party, the recipient
may elect to delete therefrom all such Confidential Information, in which
event the recipient shall, upon written request from the owner, deliver to
the owner a certificate, signed by an authorized representative of the
recipient, to the effect that all Confidential Information of the owner has
been returned or deleted.
11. Term and Termination. This Agreement commences on the Effective Date and
--------------------
continues in full force and effect for an initial term of [XXXXX] after the
Effective Date, unless earlier terminated in accordance with this Section. This
Agreement will automatically renew for successive Renewal Terms unless notice of
non-renewal is given by either party at least sixty (60) days prior to the
expiration of the then-current term. Beginning [XXXXX] from the Effective Date,
either party may terminate this Agreement at any time by providing the other
party with [XXXXX] written notice. Either party may terminate this Agreement
immediately in the event of: (i) the other party's material breach of any
obligation under this Agreement, which breach is not remedied within fifteen
(15) calendar days of the defaulting party's receipt of written notice of the
breach; or (ii) the other party's petition for bankruptcy or reorganization, or
the assignment for the benefit of creditors of the other party. Sections 1, 5,
9, 10, 12, 13, 18, and 20 survive the expiration or termination of this
Agreement.
12. Limitation of Liability. REGARDLESS WHETHER ANY REMEDY SET FORTH IN THIS
-----------------------
AGREEMENT FAILS OF ITS ESSENTIAL PURPOSE OR OTHERWISE, UNDER NO CIRCUMSTANCES
WILL EITHER PARTY BE LIABLE TO THE OTHER UNDER ANY CONTRACT, STRICT LIABILITY,
NEGLIGENCE OR OTHER LEGAL THEORY, FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR LOST PROFITS OF THE OTHER PARTY IN CONNECTION WITH THE
SUBJECT MATTER OF THIS AGREEMENT EVEN IF THE PARTY HAS BEEN INFORMED IN ADVANCE
OF SUCH DAMAGES. THE LIMITATION OF LIABILITY IS REFLECTED IN THE CONSIDERATION
EXCHANGED IN THIS AGREEMENT.
13. Governing Law. This Agreement is governed, controlled, interpreted and
-------------
defined by and under the laws of the State of California and the United States,
without reference to California's the conflicts of laws rules.
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<PAGE>
14. Notices. All notices required or permitted under this Agreement will be in
-------
writing, will reference this Agreement, will be sent via U.S. express mail or
private express courier or by tele-facsimile (with receipt confirmed via
telephone) and will be effective upon receipt at the address stated below.
Notice will be addressed as follows, unless all parties to the Agreement are
notified in writing of a change of address, in which event notice will be sent
to the new address:
To CIM: Harold S. Lewis
Cox Interactive Media, Inc.
The Carriage Works
530 Means Street, Suite 1
Atlanta, Georgia 30318-5730
Phone: 404-572-1832
Fax: 404-572-1801
With a copy to: Andrew A. Merdek, Esq.
Cox Enterprises, Inc.
1400 Lake Hearn Drive
Atlanta, GA 30319
Phone: 404-843-5564
Fax: 404-843-5450
To Mpath: Tom Garland
Vice President, Business Development
Mpath Interactive, Inc.
665 Clyde Avenue
Mountain View, California 94043
Phone: (650) 429-3666
Fax: (650) 429-1954
15. Force Majeure. Neither party will be liable to the other under the terms
-------------
of this Agreement for any delays, preemptions or other failure to perform when
such delays, preemptions or failures are due to any cause beyond the control of
the party whose performance is so affected, including, without limitation, fire,
war, earthquake, strike, riot, labor dispute, or an act of God. In the event of
any such delay, preemption or failure, the affected performing party will
promptly notify the other party of the nature and anticipated length of
continuance of such force majeure, and during such period both parties will be
excused from performance hereunder. No such failure or delay constitutes a
material breach of this Agreement.
16. No Assignment. Neither party may assign its rights or obligations under
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this Agreement, by operation of law or otherwise, without the express written
consent of the other; except that a party may assign this Agreement to an
affiliate commonly owned and controlled by the party or to any other third party
in connection with the merger or acquisition of the party or sale of all or
substantially all of its assets used primarily in connection with this
Agreement. Each party agrees to provide no less than thirty (30) business days'
prior notification of any authorized
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assignment under this Agreement, including assignment to an affiliate or as part
of an asset sale. Any attempted assignment except as allowed by the immediately
preceding sentence is null and void. Subject to the foregoing, this Agreement
will benefit and bind the successors and assigns of the parties.
17. Independent Contractors. The parties to this Agreement are independent
-----------------------
contractors and nothing in this Agreement contained shall be deemed to create a
joint venture, partnership or agency relationship between the parties to this
Agreement. No party shall have any power to enter into any contracts or
commitments in the name of, or on behalf of, the other party, or to bind the
other party in any respect whatsoever. This Agreement is non-exclusive; either
party may entere into agreements with other online services to license the
computer games that that party owns.
18. Interpretation. Any headings contained in this Agreement are for
--------------
convenience only and shall not be employed in interpreting this Agreement. The
parties and their respective counsel have negotiated this Agreement. This
Agreement will be interpreted fairly in accordance with its terms and conditions
and without any strict construction in favor of or against either party.
19. Counterparts. This Agreement may be executed in one or more counterparts,
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each of which shall constitute an original and all of which taken together shall
constitute one and the same Agreement. The parties may sign facsimile copies of
this Agreement that shall each be deemed originals.
20. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties with respect to the subject matter to this Agreement, and supersedes
and replaces all prior or contemporaneous understandings or agreements, written
or oral, regarding such subject matter.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
COX INTERACTIVE MEDIA, INC. MPATH INTERACTIVE, INC.
By: /s/ Harold S. Lewis By: /s/ Brian A. Apgar
---------------------------- ----------------------------
Name: Harold S. Lewis Name: Brian A. Apgar
---------------------------- ----------------------------
Title: Business Development Manager Title: COO-GM
---------------------------- ----------------------------
Date: 4/23/98 Date: Date: 4/22/98
---------------------------- ----------------------------
Fax: 404-572-1984 Fax: Fax: (650) 429-1954
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EXHIBIT A
CIM MARKS
CIM
Cox Interactive Media
CIM may update this Exhibit, in writing, from time-to-time during the term of
the Agreement and Mpath agrees to implement any such changes in Mpath's use of
the CIM Marks within a reasonable period of time.
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EXHIBIT B
MPATH MARKS
1. Registered Trademarks
Mplayer(R)
ScribbleTalk(R)
Mplayer and Scribbletalk are registered trademarks of Mpath Interactive, Inc.
2. Trademarks
Gizmo Game Player(TM)
Mpath Interactive(TM)
The Mpath logo(TM)
The Mplayer logo(TM)
Mplay(TM)
Wanna Play?(TM)
Mpath Interactive, the Mpath logo, the Mplayer logo, Wanna Play?, Mplay, and
Gizmo Game Player are trademarks of Mpath Interactive, Inc.
Mpath may update this Exhibit, in writing, from time-to-time during the term of
the Agreement and CIM agrees to implement any such changes in its use of the
Mpath Marks within a reasonable period of time.
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EXHIBIT C
LIST OF CIM'S PLANNED WEB SITES AND RELEASE SCHEDULE
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EXHIBIT 10.7
CONTENT LICENSE AND CO-BRANDED AREA AGREEMENT
This content license and co-branded area agreement ("Agreement") is entered into
as of the 15th day of April, 1998 ("Effective Date"), by and between Excite,
Inc., a California corporation, located at 555 Broadway, Redwood City,
California 94063 ("Excite"), and Mpath Interactive, Inc. (the "Content
Provider"), a California corporation, located at 665 Clyde Avenue, Mountain
View, California 94043 ("Content Provider").
RECITALS
A. Excite maintains a site on the Internet at http://www.excite.com (the
---------------------
"Excite Site") and owns and/or manages related Web sites worldwide
(collectively, the "Excite Network") which, among other things, allow its
users to search for and access content and other sites on the Internet.
B. Content Provider owns and operates a branded multi-player interactive games
service on the Web located at http://www.mplayer.com ("Mplayer.com") based
on technology and the Mpath Interactive system that enables users to play
multi-player games over the Internet whether through third party personal
computer resident games or online only games.
C. Excite and Content Provider wish to create, on the World Wide Web, an area
for Excite that contains online, interactive computer games and to promote
each other's services as more fully set forth in this Agreement.
Therefore, the parties agree as follows:
1. THE CONTENT OF THE EXCITE SITE
a) Content Provider will create and design Web pages (the "Excite Co-
Branded Pages"). The Excite Co-Branded Pages will incorporate the
content outlined in Exhibit A (the "Co-Branded Content"). The Excite
Co-Branded Pages will display the name and/or brands of Content
Provider and Excite. Content Provider and Excite will collaborate on
the "look and feel" of the Excite Co-Branded Pages including, but not
limited to, the display, appearance and placement of the parties'
respective names and/or brands and of advertising displayed on the
Excite Co-Branded Pages. Excite will have final approval over the
"look and feel" of the Excite Co-Branded Pages, which approval will
not be unreasonably withheld or delayed.
b) The Excite Co-Branded Pages will reside completely on the Excite Site.
c) Content Provider agrees that the Excite Co-Banded Pages will at all
times (allowing for a commercially reasonable delay for
implementation) feature the full array of options and features
generally made available by Content Provider for web pages
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produced for other third-party mplayer.com content license and co-
branding relationships in similar circumstances, terms and conditions.
d) Excite will promote the Excite Co-Branded Pages through the Games
Channel on Excite.com. In the event that changes in Internet
technologies, Internet advertising markets or other factors lead to
the elimination of the channel structure from the Excite Network,
Excite and Content Provider will negotiate in good faith to adapt this
Agreement to such changes.
e) Excite, at its option, will have the right to promote Mplayer Plus
throughout the Excite Games Channel and/or Excite Co-Branded Pages.
"Mplayer Plus" means the area on Mplayer.com where users must pay a
subscription fee for game play.
f) Excite will have sole responsibility for providing, hosting and
maintaining, at its expense, Excite.com.
2. THE CO-BRANDED AREA OF MPLAYER.COM
a) Content Provider will create and design Web pages (the "Partner Co-
Branded Pages") outlined in Exhibit B. The Partner Co-Branded Pages
will display the name and/or brands of Content Provider and Excite.
Content Provider and Excite will collaborate on the "look and feel" of
the Excite Co-Branded Pages including, but not limited to, the
display, appearance and placement of the parties' respective names
and/or brands and of advertising displayed on the Partner Co-Branded
Pages. Excite will have final approval over the "look and feel" of the
Partner Co-Branded Pages, which approval will not be unreasonably
withheld or delayed.
b) Content Provider will incorporate a link to the Excite Games Channel
on the Content Provider's home page.
c) The launch button for the Co-Branded Gizmo client, outlined in Exhibit
B, will be co-branded and will link to a co-branded page on the
Content Provider's site.
d) The Partner Co-Branded Pages will reside completely on Mplayer.com.
e) Excite and Content Provider will work together to integrate the
registration data that is collected through this Agreement into
Excite's universal registration service once it is live on the Excite
Network.
f) Content Provider will be responsible for hosting the download of the
game client and the online game play.
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g) Content Provider will be responsible for providing and maintaining, at
its expense, Mplayer.com, the Partner Co-Branded Pages, the Excite Co-
Branded Content and all billing, consumer usage reporting, fulfillment
and customer support related thereto.
h) Excite and Content Provider agree to attend quarterly meetings to
review the burden of this responsibility and to make changes, in good
faith, as appropriate to preserve the performance integrity of
mplayer.com and the Excite Site based on costs of performance, and any
other relevant business considerations. If the parties are unable to
come to terms then either party may terminate the Agreement with a
thirty (30) day written notice.
3. ADVERTISING
a) Excite will be solely responsible for selling advertising on Excite
Co-Branded Pages and retain [XXXXX] of the revenue generated on their
URL.
b) Content Provider will be solely responsible for selling advertising on
Partner Co-Branded Pages and will retain [XXXXX] of the revenue
generated on their URL.
c) Content Provider will pay Excite a [XXXXX] bounty for each Excite user
to subscribe to Mplayer Plus provided that Excite maintains an Mplayer
Plus promotion page on the Excite Site.
d) Payments by Content Provider to Excite will be due within [XXXXX] of
the end of each calendar month.
e) With each payment, Content Provider will provide to Excite
documentation reasonably detailing the calculation of the payment.
f) Content Provider will maintain accurate gaap (generally accepted
accounting practice) records with respect to the calculation of all
payments due under this Agreement. Excite may, upon no less than
thirty (30) days prior written notice to Content Provider, cause an
independent Certified Public Accountant to inspect the records of
Content Provider reasonably related to the calculation of such
payments during Content Provider's normal business hours. The fees
charged by such Certified Public Accountant in connection with the
inspection will be paid by Excite unless the payments made to Excite
are determined to have been less than [XXXXX] of the payment owed to
Excite, in which case Content Provider will be responsible for the
payment of the reasonable fees for such inspection.
g) Neither party will make any public statement, press release or other
announcement relating to the terms of or existence of this Agreement
without the prior written approval of the other. Notwithstanding the
foregoing, the parties agree to issue an
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initial press release regarding the relationship between Excite and
Content Provider, the timing and wording of which will be mutually
agreed upon.
4. USER DATA
a) For the purposes of this Agreement, "User Data" means all user
registration information submitted by users hyperlinked to Mplayer.com
from the Excite Network during the term of the Agreement. The parties
acknowledge that any individual user of the Internet could be a user
of Excite and/or Content Provider through activities unrelated to this
Agreement and that user data gathered independent of this Agreement,
even from individuals who are users of both parties' services, will
not be deemed to be "User Data" for the purposes of this Agreement.
Expressly excluded from User Data is the Confidential Information (as
defined below in the section on confidentiality) of Content Provider's
developers and Mplayer.com usage data.
b) User Data will be deemed to be the joint property of the parties and,
subject to the limitations contained herein, both parties will retain
all rights to make use of any User Data obtained through this
Agreement.
c) Content Provider will provide to Excite all User Data collected by
Content Provider within thirty (30) days following the end of each
calendar month during the term of this Agreement in a mutually
determined electronic format.
d) Unless users select to be placed on mailing lists by an "opt-in"
election, Content Provider will not use User Data to directly or
indirectly solicit any Excite-only subset of Mplayer.com users either
individually or in the aggregate during the term of this Agreement and
for a period of [XXXXX] following the expiration or termination of
this Agreement.
e) Neither party will sell, disclose, transfer or rent any User data for
the purpose of identifying a specific named individual ("Individual
Data") to any third party nor will either party use Individual Data on
behalf of any third party without the express permission of the
individual user. Where user permission for dissemination of Individual
Data to third parties has been obtained, each party will use
commercially reasonable efforts to require the third party recipients
of Individual Data to provide an "unsubscribe" feature in any email
communications generated by, or on behalf of, the third party
recipients of Individual Data.
f) Notwithstanding the foregoing, each party may disclose Confidential
Information or User Data (i) to the extent required by a court of
competent jurisdiction or other governmental authority or otherwise as
required by law or (ii) on a "need-to-know" basis under an obligation
of confidentiality to its legal counsel, accountants, banks and other
financing sources and their advisors.
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5. USAGE REPORTS
a) Content Provider will provide to Excite via email or by World Wide Web
interface with usage reports containing the information set forth in
Exhibit C ("Usage Reports"). Each Usage Report will cover a calendar
month and will be delivered within fifteen (15) days following the end
of the applicable month. The parties may, by mutual written agreement,
alter the content of such Usage Reports.
b) Excite will provide to Content Provider via email or by World Wide Web
interface with usage reports containing the information set forth in
Exhibit C ("Usage Reports"). Each Usage Report will cover a calendar
month and will be delivered within fifteen (15) days following the end
of the applicable month. The parties may, by mutual written agreement,
alter the content of such Usage Reports.
c) BOTH PARTIES WILL USE REASONABLE EFFORTS TO ENSURE THE ACCURACY OF THE
USAGE REPORTS BUT NEITHER PARTY WARRANTS THAT THE USAGE REPORTS WILL
CONFORM TO ANY SPECIFICATIONS AT ANY GIVEN TIME. NEITHER PARTY WILL BE
HELD LIABLE FOR ANY CLAIMS AS THEY RELATE TO SUCH USAGE REPORTS,
EXCEPT TO THE EXTENT THAT SUCH USAGE REPORTS SERVE AS THE BASIS FOR
PAYMENTS UNDER THIS AGREEMENT.
6. CONTENT OWNERSHIP AND LICENSE
a) Content Provider will retain all right, title and interest in and to
the Co-Branded Content, Mplayer.com and the Co-Branded Pages worldwide
(including, but not limited to, ownership of all copyrights and other
intellectual property rights therein). Subject to the terms and
conditions of this Agreement, Content Provider hereby grants to Excite
a non-exclusive, worldwide license to use, reproduce, distribute,
transmit and publicly display the Co-Branded Content to Excite's
wholly-owned subsidiaries or to joint ventures in which Excite
participates for the sole purpose of using, reproducing, distributing,
transmitting and publicly displaying the Co-Branded Content in
accordance with this Agreement.
b) Excite will retain all right, title, and interest in and to the Excite
Network worldwide (including, but not limited to, ownership of all
copyrights, look and feel and other intellectual property rights
therein).
c) There are no implied licenses granted under this Agreement. Neither
party may reverse engineer, reverse compile, reduce to human
perceivable form, or disassemble any software of the other party,
except as expressly authorized in this Agreement.
7. TRADEMARK OWNERSHIP AND LICENSE
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a) Content Provider will retain all right, title and interest in and to
its trademarks, service marks and trade names worldwide, subject to
the limited license granted to Excite hereunder.
b) Excite will retain all right, title and interest in and to its
trademarks, service marks and trade names worldwide, subject to the
limited license granted to Content Provider hereunder.
c) Each party hereby grants to the other a non-exclusive, limited license
to use its trademarks, service marks or trade names only as
specifically described in this Agreement. All such use shall be in
accordance with each party's reasonable policies regarding
advertising, trademark prominence, dilution and abuse and usage as
established from time-to-time.
d) Upon the expiration or termination of this Agreement, each party will
cease using the trademarks, service marks and/or trade names of the
other except:
i) As the parties may agree in writing; or
ii) To the extent permitted by applicable law.
8. TERM
The term of this Agreement will begin on the Effective Date and
will end [XXXXX] thereafter. This Agreement will automatically
renew for additional terms of [XXXXX] each, unless either party
notifies the other in writing at least thirty (30) days prior to
automatic renewal that it does not wish to renew this Agreement.
9. TERMINATION
a) Either party may terminate this Agreement if the other party
materially breaches its obligations hereunder and such breach remains
uncured for thirty (30) days following the notice to the breaching
party of the breach, with the following exception:
i) In the event of [XXXXX] errors, failures or outages (beyond
the industry Internet norm for errors, failures or outages) of
the Co-Branded Content and/or Partner Co-Branded Pages in any
thirty (30) day period, Excite may elect to immediately terminate
this Agreement upon written notice to Content Provider and enter
into other arrangements for the acquisition of similar content.
b) All payments that have accrued prior to the termination or expiration
of this Agreement will be payable in full within thirty (30) days
thereof.
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c) The provisions of Section 10 (Confidentiality), Section 11 (Warranty
and Indemnity), Section 12 (Limitation of Liability) and Section 13
(Dispute Resolution) will survive any termination or expiration of
this Agreement.
10. CONFIDENTIALITY
a) For the purposes of this Agreement, "Confidential Information" means
information about the disclosing party's (or its suppliers') business
or activities that is proprietary and confidential, which shall
include all business, financial, technical and other information of a
party marked or designated by such party as "confidential or
"proprietary"; or information which, by the nature of the
circumstances surrounding the disclosure, ought in good faith to be
treated as confidential.
b) Confidential Information will not include information that (i) is in
or enters the public domain without breach of this Agreement, (ii) the
receiving party lawfully receives from a third party without
restriction on disclosure and without breach of a nondisclosure
obligation, or (iii) the receiving party knew prior to receiving such
information from the disclosing party or develops independently.
c) Each party agrees that it will: (i) not disclose to any third party or
use any Confidential Information disclosed to it by the other except
as expressly permitted in this Agreement and (ii) take all reasonable
measures to maintain the confidentiality of all Confidential
Information of the other party in its possession or control, which
will in no event be less than the measures it uses to maintain the
confidentiality of its own information of similar importance.
d) Notwithstanding the foregoing, each party may disclose Confidential
Information (i) to the extent required by a court of competent
jurisdiction or other governmental authority or otherwise as required
by law or (ii) on a "need-to-know" basis under an obligation of
confidentiality to its legal counsel, accountants, banks and other
financing sources and their advisors.
e) The information contained in the Usage Reports provided by the Content
Provider hereunder will be deemed to be the Confidential Information
of the disclosing party.
f) The terms and conditions of this Agreement will be deemed to be the
Confidential Information of each party and will not be disclosed
without the written consent of the other party.
11. WARRANTY AND INDEMNITY
a) Content Provider warrants that it owns, or has obtained the right to
distribute and make available as specified in this Agreement, any and
all content provided to Excite or made available to third parties in
connection with this Agreement.
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b) Content Provider will indemnify, defend and hold harmless Excite, its
affiliates, officers, directors, employees, consultants and agents
from any and all third party claims, liability, damages and/or costs
(including, but not limited to, attorneys fees) arising from:
i) The breach of Section 11(a);
ii) Any claim that the Co-Branded Content and/or Partner Co-
Branded Pages infringes or violates any third party's
copyright, patent, trade secret, trademark, right of publicity
or right of privacy or contains any defamatory content; or
iii) Any claim arising from content displayed on the Mplayer.com
other than the Co-Branded Content and/or Partner Co-branded
Pages.
a) Excite will promptly notify Content Provider of any and all such
claims and will reasonably cooperate with Content Provider with the
defense and/or settlement thereof; provided that, if any settlement
requires an affirmative obligation of, results in any ongoing
liability to or prejudices or detrimentally impacts Excite in any way
and such obligation, liability, prejudice or impact can reasonably be
expected to be material, then such settlement shall require Excite's
written consent (not to be unreasonably withheld or delayed) and
Excite may have its own counsel in attendance at all proceedings and
substantive negotiations relating to such claim.
b) EXCEPT AS SPECIFIED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
WARRANTY IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT AND
HEREBY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, INCLUDING ALL IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
REGARDING SUCH SUBJECT MATTER.
12. LIMITATION OF LIABILITY
EXCEPT UNDER SECTION 11(b), IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE
OTHER FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED
ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, WHETHER
OR NOT THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THE
LIABILITY OF EITHER PARTY FOR DAMAGES OR ALLEGED DAMAGES HEREUNDER,
WHETHER IN CONTRACT, TORT OR ANY OTHER LEGAL THEORY, IS LIMITED TO, AND
WILL NOT EXCEED, THE AMOUNTS ACTUALLY PAID BY CONTENT PROVIDER TO EXCITE
HEREUNDER.
13. DISPUTE RESOLUTION
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a) The parties agree that any breach of either of the parties'
obligations regarding the other party's intellectual property rights
and/or confidentiality may result in irreparable injury for which
there is no adequate remedy at law. Therefore, in the event of any
breach or threatened breach of a party's obligations regarding the
other party's intellectual property rights or confidentiality, the
aggrieved party will be entitled to seek equitable relief in addition
to its other available legal remedies in a court of competent
jurisdiction. For the purposes of this section only, the parties
consent to venue in either the state courts of the county in which
Excite has its principal place of business or the United States
District Court for the Northern District of California.
b) In the event of disputes between the parties arising from or
concerning in any manner the subject matter of this Agreement, other
than disputes arising from or concerning the other party's
intellectual property rights and/or confidentiality, the parties will
first attempt to resolve the dispute(s) through good faith
negotiation. In the event that the dispute(s) cannot be resolved
through good faith negotiation, the parties will refer the dispute(s)
to a mutually acceptable mediator for hearing in the county in which
Excite has its principal place of business.
c) In the event that disputes between the parties arising from or
concerning in any manner the subject matter of this Agreement, other
than disputes arising from or concerning the other party's
intellectual property rights and/or confidentiality, cannot be
resolved through good faith negotiation and mediation, the parties
will refer the dispute(s) to the JAMS End Dispute for resolution
through binding arbitration by a single arbitrator pursuant to the
JAMS End Dispute's rules applicable to commercial disputes. The JAMS
proceeding will be held in the county in which Excite has its
principal place of business.
14. GENERAL
a) Assignment. Neither party may assign this Agreement, in whole or in
----------
part, without the other party's written consent (which will not be
unreasonably withheld), except that no such consent will be required
in connection with a merger, reorganization or sale of all, or
substantially all, of such party's assets or equity. Any attempt to
assign this Agreement other than as permitted above will be null and
void.
b) Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of California, notwithstanding
the actual state or country of residence or incorporation of Content
Provider.
c) Notice. Any notice under this Agreement will be in writing and
------
delivered by personal delivery, express courier, confirmed facsimile,
confirmed email or certified or registered mail, return receipt
requested, and will be deemed given upon personal delivery, one (1)
day after deposit with express courier, upon confirmation of receipt
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of facsimile or email or five (5) days after deposit in the mail.
Notices will be sent to a party at its address set forth below or such
other addresses as that party may specify in writing pursuant to this
Section.
d) No Agency. The parties are independent contractors and will have no
---------
power or authority to assume or create any obligation or
responsibility on behalf of each other. This Agreement will not be
construed to create or imply any partnership, agency or joint venture.
e) Force Majeure. Any delay in or failure of performance by either party
-------------
under this Agreement will not be considered a breach of this Agreement
and will be excused to the extent caused by any occurrence beyond the
reasonable control of such party including, but not limited to, acts
of God, power outages and governmental restrictions.
f) Severability. In the event that any of the provisions of this
------------
Agreement are held by to be unenforceable by a court or arbitrator,
the remaining portions of the Agreement will remain in full force and
effect.
g) Entire Agreement. This Agreement is the complete and exclusive
----------------
agreement between the parties with respect to the subject matter
hereof, superseding any prior agreements and communications (both
written and oral) regarding such subject matter. This Agreement may
only be modified, or any rights under it waived, by a written document
executed by both parties.
Mpath Interactive, Inc. Excite, Inc.
By: /s/ Thomas Garland By: /s/ Robert Hood
----------------------- -------------------------
Name: Thomas Garland Name: Robert Hood
----------------------- -------------------------
Title: Vice President Title: EVP, CAO/CFO
----------------------- -------------------------
Date: 4/16/98 Date: 4/15/98
----------------------- -------------------------
665 Clyde Avenue 555 Broadway
Mountain View, CA 94043 Redwood City, California 94063
650-429-3900 (voice) 650.568.6000 (voice)
650-429-1954 (fax) 650.568.6030 (fax)
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EXHIBIT A
CO-BRANDED CONTENT DESCRIPTION
Content Provider will include the following Co-Branded Content on the Co-
Branded Pages:
1. Game Information Pages
(a) Main Game Page
(b) Game FAQ (when available)
(c) Game Quick Start (Read Me)
1. Mplayer.com Help Information
2. Mplayer.com Install Information
3. Mplayer.com PLUS Promotion Pages
4. Download Information Page
Links to Mplayer.com content on the Co-Branded Pages will include:
1. Mplayer.com Registration
2. Mplayer.com Support Pages
3. Intermediate Gizmo Launch Page
4. Other Game-related links
Channel Page, Game-Specific News, Rankings, Ladders, Teams, Events, Forum
BBs, and other Mplayer.com game-related links as appropriate.
See attached
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EXHIBIT B
PARTNER CO-BRANDED PAGES
Content Provider will co-brand the following Web pages and/or applications:
. Gizmo Client -- the Content Provider will customize pages within the Gizmo
client to highlight games specified by Excite
. Content Provider's home page for Excite desktop launch
. Partner Co-Branded Pages may link to non-co-branded Web pages on mplayer.com
See attached
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EXHIBIT C
DESCRIPTION AND FORMAT OF USAGE REPORTS
1. Content Provider will provide to Excite, on a monthly basis, usage reports
containing the following information:
a. Total number of advertising impressions on the Mplayer.com Gizmo client
software;
b. Number of hours Excite users play games;
c. Number of Excite subscribers to Mplayer Plus;
d. Conversion rate of Excite users to Mplayer Plus.
1. Excite will provide to Content Provider, on a monthly basis, usage reports
containing the following information:
a. Total number of page views on the Excite Co-Branded Pages.
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EXHIBIT 10.8
POP.X(TM) LICENSE AGREEMENT
---------------------------
This Pop.X License Agreement (the "Agreement") is made effective as of June 26,
1998 (the "Effective Date") by and between GTECH Corporation, a Delaware
corporation, with its principal place of business at 55 Technology Way, West
Greenwich, Rhode Island 02817 and Mpath Interactive, Inc. ("Mpath"), a Delaware
corporation, with its principal place of business at 665 Clyde Avenue, Mountain
View, CA 94043.
In consideration of the mutual covenants contained in this Agreement, the
parties agree as follows:
1.0 DEFINITIONS
Whenever used in this Agreement, the following terms have the respective
meanings ascribed to them.
1.1 "Alpha Testing" means the internal testing stage that follows installation
of the Pop.X software on GTECH's servers with the non-recurring engineering
support prescribed in Section 3.11.
1.2 "CMS" means the Mpath(TM) Customer Management System software.
1.3 "Confidential Information" means: (i) the Improved Source, the GTECH Code,
the GTECH Modifications, the Licensed Purpose, and any trade secrets related to
any of the foregoing, including but not limited to any information relating to
either party's product plans, product designs, product costs, product prices,
product names, finances, marketing plans, business opportunities, personnel,
research, development or know-how; (ii) any information designated by the
disclosing party as confidential in writing or, if disclosed orally, reduced to
writing and designated as confidential within thirty (30) days; and (iii) the
terms, conditions and existence of this Agreement. However, "Confidential
Information" excludes information that is: (a) or becomes known or available by
publication, commercial use or otherwise through no fault of the receiving
party; (b) known and has been reduced to tangible form by the receiving party at
the time of disclosure and is not subject to restriction; (c) independently
developed with no material reference to the Confidential Information or is
learned by the receiving party; (d) lawfully obtained from a third party who has
the right to make such disclosure; or (e) released, in writing, for public
disclosure by the owner of the Confidential Information.
1.4 "Designated Site" means the location or locations (up to a maximum of
[XXXXX]) set forth in Exhibit A.
1.5 "Developed Independently" means that subject to the other party's;
(i) intellectual property rights, and
(ii) Confidential Information,
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each party may develop information internally, by contract with third parties,
or receive information from third parties that may be similar to other party's
technology. Further, except as expressly restricted in this Agreement each party
may develop products, or have products developed for it, that, without violation
of this Agreement, compete with the products or systems contemplated by the
other party's technology.
1.6 "Documentation" means any manuals or other literature related to the
Improved Source that are provided by Mpath to GTECH under this Agreement.
1.7 "Error" means defects in software that cause it not to operate
substantially in conformance to the functional and performance specification as
outlined in the software manual, the Documentation, or as disclosed in any other
written communication between the parties.
1.8 "Evolved Works" means: (i) for Mpath's copyrightable or copyrighted
material in the Improved Source, any abridgment, annotation, condensation,
revision, elaboration, translation, or other form in which the Improved Source
may be recast, transformed or adapted; and (ii) for Mpath's patentable or
patented material related to the Improved Source, any continuation, or
improvement thereon, or any reissue thereof.
1.9 "GTECH" means GTECH Corporation, and any existing or future entity that,
directly or indirectly, controls, is under common control with, or is controlled
by GTECH Corporation.
1.10 "GTECH Code" means software source code written by GTECH employees, or
Third Party Contractors or Third Party Developers under contract to GTECH, which
is not a "GTECH Modification". Examples of GTECH Code are modules that: (i)
interface with the Improved Source, (ii) link to the Improved Source through
standard application programming interface (API) calls, or (iii) add additional
functionality to the Improved Source without being an Evolved Work.
1.11 "GTECH Modifications" mean software source code written by GTECH employees
or Third Party Contractors under contract to GTECH, which constitutes an Evolved
Work.
1.12 "GTECH Programs" means computer software programs developed by or for
GTECH that incorporate the GTECH Code and GTECH Modifications.
1.13 "Improved Source" means the Source and the Improvements.
1.14 "Improvements" means major, minor and maintenance releases of the Source
that are made by Mpath, including, without limitation, Software patches and
Error corrections pursuant to Section 3.10.
1.15 "Initial Term" means the period commencing on the Effective Date and ending
on the [XXXXX] anniversary of the Trigger Date.
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1.16 "Licensed Purpose" means the development, implementation, testing,
deployment, operation, and maintenance of Uwin(TM).
1.17 "Object Code" means the machine code generated by a source code language
processor such as an assembler or compiler. A file of object code may be
immediately executable or it may require linking with other object code files,
e.g. libraries, to produce a complete executable program.
1.18 "Pop.X" means Mpath's software licensed under the Pop.X trademark. The
Source for Pop.X is described in Exhibit A.
1.19 "Software Patches" means any software provided by Mpath intended to correct
errors or bugs in the Improved Source.
1.20 "Source" means Mpath's Pop.X software source code, which source code is
listed on the Source Code Description in Exhibit A, and provided to GTECH under
this Agreement, and any portion thereof. Source is provided in human readable
form and contains specific algorithms, instructions, plans, routines and the
like, for controlling the operation of a central processing unit, or otherwise
used by a central processing unit to do a particular job or solve a particular
problem. Source may be provided as printed listings of code, or on magnetic
media, and includes any documentation and information related to Source.
1.21 "Third Party Contractors" mean those third parties that have contracted,
in writing, with GTECH to provide services to GTECH in connection with the
Licensed Purpose and that require access to Improved Source.
1.22 Third Party Developers" mean third parties that have contracted, in
writing, with GTECH to provide services to GTECH in connection with the Licensed
Purpose and that do not require access to Improved Source other than such sample
Source as may be included in the Pop.X software developers kit from time-to-
time.
1.23 "Trigger Date" means the earlier of: (a) [XXXXX]; or (b) [XXXXX].
1.24 "UWin" means GTECH's network or on-line service known as Uwin, or such
other brand name, service mark or trademark as Uwin may be known. The GTECH UWin
system will use Pop.x to develop, deploy, and operate government-authorized mass
participation, entertainment content, lottery games and wagering games to
personal computers, over the Internet.
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2.0 LIMITED LICENSE
2.1 License Grant.
-------------
(i) In consideration of the payments set forth in Section 4 and the terms
and conditions of this Agreement, Mpath hereby grants to GTECH a
perpetual (terminable by Mpath only under Section 9.1(ii)),
worldwide, revocable (only under Section 9.1(ii)), non-exclusive,
non-transferable license to use, edit, format, modify, and create
derivative works of the Improved Source solely for the Licensed
Purpose at the Designated Site.
(ii) In consideration of the payments set forth in Section 4 and the terms
and conditions of this Agreement, GTECH may copy the Improved Source
solely for the Licensed Purpose and for archival or backup purposes,
provided that such copies are made in accordance with Section 5.3.
Improved Source or Documentation may not be distributed to a third
party except as expressly authorized in this Agreement.
(iii) In consideration of the payments set forth in Section 4 and the terms
and conditions of this Agreement, Mpath hereby grants to GTECH a
perpetual (terminable by Mpath only under Section 9.1(ii)),
worldwide, revocable (only under Section 9.1(ii)), non-exclusive,
non-transferable license to reproduce and distribute, and have
reproduced and/or distributed (as outlined in this Section 2.1(iii))
to and by third parties partial or complete Object Code versions of
Improved Source, as incorporated in one or more GTECH Programs,
solely for the Licensed Purpose. GTECH may distribute Object Code
versions of the Improved Source by: (a) written agreement signed by
the end user; or (b) agreement contained on the user screen whereby
the user must indicate acceptance of the terms of the license
agreement before being able to access the Object Code version of the
Improved Source. Such end user Object Code license agreement shall
contain, at a minimum, the provisions set forth in Exhibit B and no
provisions inconsistent therewith.
(iv) GTECH shall require each of its third party distributors authorized
to make copies of Object Code versions of the Improved Source to
enter into a written agreement with GTECH before such Object Code
version is furnished to such distributor. Such agreement shall
include provisions consistent with and containing the relevant
substance of Sections 2 and Section 5 and no provisions inconsistent
therewith.
(v) GTECH may grant Third Party Contractors access to the Improved Source
provided that: (a) each such Third Party Contractor is subject to a
written confidentiality agreement with GTECH that contains at a
minimum the confidentiality agreement provisions specified in Exhibit
C and no provisions inconsistent therewith; (b) each such Third Party
Contractor's use of the Improved
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Source is contractually restricted solely to delivering products and
services to GTECH for the Licensed Purpose; (c) GTECH remains
primarily responsible to Mpath for the performance of each such
Third Party Contractor's obligations under this Section; (d) GTECH
has a written agreement with each such Third Party Contractor that
expressly identifies Mpath as a third party beneficiary of the
agreement with GTECH and specifies that Mpath retains the right to
enforce the terms and conditions of the agreement directly against
the Third Party Contractor; (e) each such Third Party Contractor
agrees in writing to document and perfect Mpath's ownership, if any,
in the Improved Source and to quitclaim and waive in favor of Mpath
any and all rights to Evolved Works created by such Third Party
Contractor; and (f) GTECH may deliver a copy of its agreement with
the Third Party Contractor (with financial and material confidential
terms redacted) to Mpath, and will deliver a copy to Mpath upon
receipt of Mpath's written request. Upon written request from Mpath,
GTECH agrees to provide, within ten (10) business days, Mpath with a
written list of all such Third Party Contractors.
(vi) GTECH may grant Third Party Developers access to the Pop.X software
development kit, GTECH Modifications and GTECH Code provided that:
each such Third Party Developer executes the then-current Pop.X
software development kit license in effect; (b) GTECH shall not be
primarily responsible to Mpath for the performance of each such
Third Party Developer`s obligations under this Agreement; and (c)
GTECH shall not be obligated to expressly identify Mpath as a third
party beneficiary in any contract between GTECH and the Third Party
Developer.
(vii) Without Mpath's prior written consent, GTECH shall not grant to
third party licensees the right to sublicense the Improved Source or
any Evolved Works thereof.
(viii) GTECH may deposit the relevant portions of the Improved Source in
escrow where reasonably required as a condition of licensing Object
Code versions of the Improved Source. Upon release from any such
escrow use of the Improved Source must be limited to the Licensed
Purpose and within the scope of this Agreement. Upon written request
from Mpath, GTECH agrees to provide, within ten (10) business days,
Mpath with a written list of all such escrow arrangements.
(ix) GTECH, or Third Party Contractors may make derivative works as
authorized in Sections 2(i) and (v). GTECH shall not be obligated to
deliver to Mpath any GTECH Code or GTECH Modifications developed
solely by GTECH or Third Party Contractors. However, except as
specified in Section 3.8, Mpath is under no obligation to provide
technical support with respect to GTECH Code, or GTECH Modifications
developed by GTECH or Third Party Contractors. Mpath, as the owner
of the Improved Source, may make Evolved Works.
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(x) To the extent Mpath obtains patents and patent improvements on the
Improved Source, such Improved Source patents and patent improvements
are licensed to GTECH under the terms and conditions of this
Agreement.
2.2 Grant Restriction on Mpath. Mpath agrees that for [XXXXX] after the
--------------------------
Effective Date, Mpath will not directly or indirectly, solicit, initiate, or
encourage the submission of, any proposal for, or participate in any
negotiations or discussions concerning, or take any other action to facilitate,
a license of Pop.X, the Source or the Improved Source to: (i) [XXXXX], (ii)
[XXXXX], (iii) [XXXXX], (iv) [XXXXX], (v) [XXXXX]; or (vi) any entity known to
Mpath to be a successor, affiliate, or subsidiary of any of the foregoing.
2.3 Optional CMS License. Mpath agrees, upon receipt of written notice from
--------------------
GTECH at any time after the Effective Date, to negotiate in good faith
commercially reasonable license terms for CMS. The fee for a CMS license is
[XXXXX]. Any third party software required to run with CMS, such as software
from Portal Information Systems, Inc., is not included in the license fee and
GTECH must negotiate directly with such third party software owners.
2.4 No Implied Licenses. There are no implied licenses granted under this
-------------------
Agreement. Neither party may reverse engineer, reverse compile, reduce to human
perceivable form, or disassemble any software of the other party, except as
expressly authorized in this Agreement. GTECH may not modify or make Evolved
Works of the Improved Source except for the Licensed Purpose.
2.5 GTECH Holdings Corporation. Mpath acknowledges that GTECH Corporation is a
--------------------------
subsidiary of GTECH Holdings Corporation and that the Improved Source and the
licenses granted under this Agreement may also be used, subject to the terms and
conditions of this Agreement, by and for the benefit of any direct or indirect,
majority-owned subsidiary of GTECH Holdings Corporation.
3.0 SUPPORT
3.1 Support Costs. For the Initial Term of the Agreement, support under
-------------
Section 3 (except Section 3.5) will be provided by Mpath to GTECH at [XXXXX].
Thereafter, GTECH may contract with Mpath for support, as outlined in this
Section 3 (except Section 3.5), at the rate of [XXXXX].
3.2 Project Liaison. Both Mpath and GTECH shall appoint appropriate persons to
---------------
act as project liaison. These persons will oversee all activities required of a
party under this Agreement. Either may, upon reasonable written notice to the
other party, change the designation of their project liaison. Either party may,
upon reasonable written notice to the other party, unilaterally change the
designation of and contact information for their project liaison.
3.3 Training. Mpath will provide [XXXXX] training for platform and game
--------
development at Mpath's facilities in the Mountain View, California area,
operations training covering installation, maintenance of the Source for use in
UWin, administration of UWin using the
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Source, customization of certain elements of the Source in order to meet GTECH's
requirements, responding to system down-time, and various other matters. GTECH
also agrees to pay all reasonable travel and expenses for GTECH's personnel
associated with training. Reasonable, additional training is available to GTECH
from Mpath at the rate of [XXXXX] per Mpath employee assigned to provide
support.
3.4 Improvements. Any and all non-custom Improvements developed by Mpath which
------------
are made available to other Pop.X licensees during the term of this Agreement
shall be licensed, consistent with the license grant in Section 2, to GTECH at
[XXXXX]
3.5 FTE Engineering Support. GTECH has the option to obtain from Mpath [XXXXX]
-----------------------
full-time equivalent employee (consisting of not more than [XXXXX] employees
overall) for engineering support. Within [XXXXX] following the Effective Date
GTECH must elect whether or not to exercise this option. GTECH and Mpath will
negotiate in good faith the scope of the tasks to be performed, the timing of
the deliverables, and whether the deliverables will be considered Improved
Source, GTECH Code, or GTECH Modifications. Such employees will perform such
tasks as contractually required. The cost of such technical support services
will be as set forth in Section 4.1(iv).
3.6 Additional Engineering Support. Additional engineering support, remote or
------------------------------
on-site at GTECH's premises, is available to GTECH from Mpath at the rate of
[XXXXX] per Mpath employee assigned to provide such support plus payment to
Mpath of reasonable travel expenses (pre-approved in writing by GTECH).
3.7 Software Patches. Mpath will develop and provide to GTECH, at [XXXXX]
----------------
to GTECH, Software Patches relating to the Improved Source as Mpath commercially
releases such Software Patches. Mpath will make commercially reasonable efforts
to develop Software Patches based on their severity. Mpath will develop and
provide to GTECH Software Patches for substantial Errors as soon as commercially
practicable and Mpath will develop and provide Software Patches for less
substantial Errors within a reasonable period. Mpath will promptly notify GTECH
of any Errors which Mpath discovers in any software licensed to GTECH under this
Agreement.
3.8 Incorporation of Improvement and Software Patches. At GTECH's sole
-------------------------------------------------
discretion, GTECH may incorporate or distribute to, in accordance with Section
2.1(iii), end users any Improvements or Software Patches made available by
Mpath. If GTECH incorporates or distributes Improvements or Software Patches
supplied by Mpath, all obligations of Mpath to provide support to GTECH shall
extend to Improvements and Software Patches. If GTECH declines to incorporate
Improvements supplied by Mpath, then, after ninety (90) calendar days from the
date Mpath supplied such Improvements or Software Patches to GTECH, Mpath's
technical assistance obligations under Sections 3.7 and 3.10 lapse with respect
to that portion of the Improved Source to which such Improvements or Software
Patches relate and GTECH agrees to waive Mpath's obligations under Section 6
with respect to liability which would not have otherwise been incurred but for
GTECH's refusal to incorporate such Improvements or Software
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Patches.
3.9 Installation, Roll-Out and Launch. GTECH may, at GTECH's sole option,
---------------------------------
ship the UWin servers to Mpath for installation and testing, prior to deployment
of the servers by GTECH. Alternatively, GTECH may elect to install Pop.X on
servers located at GTECH's facilities. If GTECH requires Mpath personnel to be
on-site at GTECH to assist GTECH then GTECH agrees to reimburse Mpath for all
reasonable travel expenses associated with such on-site support.
3.10 Error Support. Mpath agrees to make available on [XXXXX] means of reporting
-------------
to Mpath Errors in the Improved Source, such as electronic mail, voicemail,
telefax, or telephonic recording capability. Mpath agrees to promptly notify
GTECH if Mpath is unable to duplicate the reported Error. GTECH agrees to report
Errors and promptly follow-up with documentation. For the purpose of calculating
response time, any Error reported after 5:00 p.m. Pacific time is deemed to have
been reported on the next business day. GTECH agrees to classify and prioritize
Errors, in accordance with the following table. The action required by Mpath is
as follows:
Acknowledgment: Acknowledgment of receipt of Error report by written
confirmation delivered to GTECH and oral or electronic assignment of Error log
number. As part of the response Mpath will classify the Error and respond as
appropriate. Mpath will provide such acknowledgment within [XXXXX], if received
during [XXXXX]; otherwise times commence on the next business day.
Response Time: Temporary fix in the form of a patch. For Errors in the Improved
Source, Mpath agrees to endeavor to provide an earlier interim patch or work
around which may be communicated by telephone, electronic mail or other means.
Mpath agrees to provide interim documentation if reasonably requested by GTECH.
All Error correction patches provided by Mpath to GTECH will be deemed to be
commercially released. The Error classifications and corresponding response
times are shown in the following table:
<TABLE>
<CAPTION>
Classification Criteria Response Time
- --------------------------------------------------------------------------------
<S> <C>
X: Fatal, no useful work can be performed [XXXXX]*
A: Major functions disabled [XXXXX]
B: Degraded operations: only certain minor [XXXXX]
functions disabled or impaired
C: Minimal Impact: all other Errors [XXXXX]
</TABLE>
*[XXXXX] means work performed [XXXXX].
Mpath agrees to correct all Class X, A, B and C Errors in the Improved Source
that are identified, classified and reported to Mpath by GTECH.
3.11 Non-Recurring Engineering Support. In consideration of the payment under
---------------------------------
Section
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4.1(ii), Mpath agrees to provide GTECH with engineering support during the
period from [XXXXX] to [XXXXX]. GTECH and Mpath will each use commercially
reasonable efforts to develop a mutually satisfactory project plan for such
engineering within thirty (30) days following the Effective Date.
4.0 FEES, PAYMENT AND DELIVERY
4.1 Fees. In consideration of the licenses granted by Mpath and the services
----
to be performed by Mpath under this Agreement, GTECH agrees to pay Mpath:
(i) [XXXXX] on the later of: (a) [XXXXX]; or (b) [XXXXX];
(ii) [XXXXX] as a non-recurring engineering expenses start-up fee, payable
in [XXXXX] equal installments of [XXXXX] each, payable upon [XXXXX];
(iii) [XXXXX] license fee due upon [XXXXX];
(iv) If GTECH elects to request Mpath technical support services under
Section 3.5, such services will be billed at the rate of [XXXXX],
billed monthly with the first payment due within thirty (30) days
after GTECH's exercise of the Section 3.5 option for Mpath technical
support services, and continuing for [XXXXX] thereafter;
(v) [XXXXX], paid quarterly in arrears, starting [XXXXX], for [XXXXX] of
the Agreement; and
(vi) [XXXXX], paid quarterly in arrears, starting [XXXXX], for [XXXXX] of
the Agreement.
4.2 Taxes and Delivery. GTECH agrees to pay or reimburse Mpath for any use
------------------
taxes that may arise with respect to this Agreement, except for taxes on Mpath's
income, capital, or property. Promptly upon execution of this Agreement and
receipt of the Section 4.1(i) payment Mpath agrees to deliver the Source to
GTECH. If possible without affecting the integrity of the files or disclosing
the Improved Source to a third party, Mpath agrees to electronically transfer
the Improved Source to the GTECH. Risk of loss and/or damage passes to GTECH
upon receipt of the Improved Source.
4.3 Wire Transfer. GTECH agrees to pay Mpath all amounts due to Mpath under
-------------
this Agreement by wire transfer to [XXXXX], or to such other account as may be
designated in writing by Mpath from time-to-time.
4.4 Payment Terms. GTECH shall pay any amounts due to Mpath under this
-------------
Agreement within [XXXXX] of the date when due. If payment is not made by GTECH
within such [XXXXX] period (or such extended period of time as to which the
parties may agree for payment from time to time), then, GTECH will also pay
interest to Mpath at the rate of
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[XXXXX] per annum from the date the payment was originally scheduled to be made
(or such longer period as to which the parties may have agreed) until the date
the payment is made. However, if payment is delayed beyond [XXXXX],other than in
the instance of a payment dispute between the parties, then GTECH will be in
breach of its payments obligations and Mpath may pursue all available remedies.
4.5 Payment Requirement. GTECH must pay Mpath the license fees specified in
-------------------
Sections 4.1 whether or not GTECH uses the Pop.x Source and/or Object Code for
the Initial Term; provided, however, that if GTECH terminates this Agreement
pursuant to Section 9.3, then GTECH will be obligated to pay to Mpath only the
fees in [XXXXX], the fees in [XXXXX] only to the extent incurred through the
date of termination, and the fees in [XXXXX] only for [XXXXX].
5.0 CONFIDENTIAL INFORMATION AND OWNERSHIP
5.1 Nondisclosure. Each party acknowledges that Confidential Information of the
-------------
other party constitutes the other party's valuable asset and contains the other
party's valuable trade secrets. Each party will treat Confidential Information
of the other party with at least a reasonable degree of care but in no event
less care than it would employ to safeguard its own software source code and
other valuable trade secrets. Each party will refrain from using the other
party's Confidential Information except as contemplated in this Agreement and
from disclosing such Confidential Information to any third party except to
employees (or subcontractors), legal advisors, financial advisors and in the
course of due diligence as is reasonably required in connection with the
exercise of its rights and obligations under this Agreement (and only subject to
binding use and disclosure restrictions at least as protective as those set
forth in this Agreement executed in writing by such employees or
subcontractors). The parties will each exert all reasonable measures to store
and protect the other party's Confidential Information from unauthorized access.
However, each party may disclose Confidential Information of another party: (i)
pursuant to the order or requirement of a court, administrative agency or other
governmental body, provided that such party give reasonable notice to the other
party to contest such order or requirement; (ii) pursuant to the rules of
requirements of any stock exchange; or (iii) on a confidential basis to legal
and financial advisors. In no event, without Mpath's prior written consent, may;
(a) Mpath Confidential Information, or
(b) any Mpath proprietary code delivered by Mpath to GTECH under this
Agreement;
be used on any game playing service other than UWin.
5.2 Ownership Rights. No right of ownership or title to any Improved Source,
----------------
copies of Improved Source, Evolved Works, in any portion of Improved Source,
GTECH Modifications, or Mpath Confidential Information is transferred to GTECH
under or pursuant to this Agreement, or as a result of GTECH's use of Improved
Source, or possession of the Improved Source under any circumstances whatsoever.
Mpath owns and will own any and all Improved Source, copies of
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Improved Source, Evolved Works, or Mpath Confidential Information. GTECH will
own all GTECH Code and all other work product which is Developed Independently
by GTECH and its contractors except for the GTECH Modifications. GTECH does not
have any obligations to deliver, and Mpath hereby waives any and all right to
request, copies of the source code or Object Code of GTECH Code or GTECH
Modifications except as may be compelled by litigation procedure undertaken by
Mpath for breach of this Agreement.
5.3 Intellectual Property Rights. GTECH acknowledges that Improved Source and
----------------------------
Documentation are protected by Mpath's intellectual property rights. GTECH
agrees to maintain, duplicate and respect the copyright and other proprietary
rights notices in the Improved Source, Improved Source Evolved Works,
Documentation and copies of any of the foregoing in connection with any activity
contemplated under this Agreement, including, but not limited to, the making of
archival copies of Improved Source and Object Code versions of Improved Source.
The trademarks and trade names under which Mpath markets its products are the
exclusive property of Mpath or its suppliers and GTECH acknowledges that this
Agreement gives GTECH no rights therein. Any copyright notice used in connection
with Improved Source shall not be deemed to imply that any part of Improved
Source has been published, has been placed in the public domain, or has removed
the obligation to hold Improved Source in confidence pursuant to this Section 5.
5.4 Disposition of Media. Prior to disposing of any media or storage apparatus,
--------------------
GTECH will exert all commercially reasonable efforts to ensure that any Improved
Source contained by such media or stored in such apparatus has been completely
erased or otherwise destroyed.
5.5 Survival. The obligations of GTECH and its employees under this Section
--------
survive and continue after any termination of this Agreement or termination of
any license or rights under this Agreement.
5.6 Press Release. Subject to Section 5.1, GTECH and Mpath may each make press
-------------
releases about the existence and contents of the Agreement (except with respect
to specific financial terms) with the prior approval of the other of the
contents and timing of the press release, which approval shall not be
unreasonably withheld or delayed. If the party from whom approval is sought
does not approve or reject such press release within five (5) business days of
submission for approval, such press release shall be deemed approved.
5.7 Insurance. If Mpath obtains insurance for patent infringement or other
---------
intellectual property matters during the term of this Agreement, (including, but
not limited to, insurance that would cover the types of matters discussed in
Section 6.4), then Mpath shall arrange with its insurance carrier to name GTECH
as an additional insured on all applicable insurance policies and will deliver
copies of such policies to GTECH.
6.0 REPRESENTATIONS AND WARRANTIES
6.1 By Mpath. Mpath represents and warrants that: (i) it is and will be the
--------
sole and exclusive owner of all right and title, or has license to, the Improved
Source and related documentation and
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all intellectual property rights therein; (ii) it has not entered into any
agreements of any kind inconsistent with or contrary to this Agreement; (iii) to
the best of Mpath's knowledge, information and belief, the use by GTECH of
Improved Source for the Licensed Purpose does not violate or infringe, and will
not violate or infringe, any intellectual property or other proprietary rights
of any third party, (iv) it has sufficient right and authority to enter this
Agreement; (v) for a period of [XXXXX], the Improved Source shall conform
substantially to the features and specifications in Mpath's published literature
provided by Mpath to GTECH at the time of delivery of the Improve Source; (vi)
the Improved Source (including any Improvements or corrections) does not contain
any encoded or embedded serial number, time-out or any similar or other type of
disabling device or characteristic; (vii) Error corrections and Software Patches
shall not materially degrade the performance of the Improved Source, cause or
result in a breach of any of the warranties set forth in this Section 6.1 or
require GTECH to acquire any additional, material software or hardware; (viii)
the Improved Source and related Documentation are free of all liens, claims and
encumbrances; (ix) all of the Improved Source, disk media, tapes, and any other
electronic media or file transmissions delivered by Mpath to GTECH by any means
will be free from known viruses and other invasive program code; (x) the
Improved Source will recognize annual periods subsequent to 1999 and that use of
the Improved Source will not adversely affect its performance with respect to
date dependent data, computations, output, or other functions (including,
without limitation, calculating, comparing and sequencing) and that the Improved
Source will create, store, process and output information related to or
including dates on or after January 1, 2000; (xi) the Source has been, and the
Improved Source will be, independently developed by Mpath by employees of Mpath
or by others who have validly assigned their intellectual property rights in
their respective contributions in the Source or Improved Source to Mpath; (xii)
to the best of Mpath's knowledge, none of the intellectual property rights in
the Source is being infringed by any other person; and (xii) no proceedings to
which Mpath is a party have been commenced which challenge the rights of Mpath
in respect of the intellectual property rights relating to the Source or charge
Mpath with infringement of any other person's rights in intellectual property in
the Source; and Mpath is not aware of any facts that could provide the basis for
any such challenge or charge relating to the Source.
6.2 By GTECH. GTECH represents and warrants that: (i) it has not entered into
--------
any agreements of any kind inconsistent with or contrary to this Agreement; and
(ii) it has sufficient right and authority to enter this Agreement.
6.3 Warranty Disclaimer. THE FOREGOING WARRANTIES IN SECTIONS 6.1 AND 6.2 ARE
-------------------
IN LIEU OF ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION ANY WARRANTY OF MERCHANTIBILITY, NON-INFRINGEMENT, OR FITNESS FOR A
PARTICULAR PURPOSE.
6.4 Indemnification by Mpath. Mpath agrees to indemnify GTECH against, and hold
------------------------
GTECH free and harmless from, any and all loss, damage, settlement or expense
(including legal expenses), as incurred, resulting from or arising out of any
claims which allege that the Improved Source or the use, display, reproduction,
performance, transmission or distribution thereof infringe upon any patents,
copyrights, trademarks, trade secret rights or other proprietary rights of
persons, firms or entities who are not parties to this Agreement; provided that
GTECH notifies
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Mpath, in writing, of any notice or claim of such alleged infringement involving
the Improved Source of which it becomes aware, and permits Mpath to control, at
Mpath's expense and in a manner not adverse to GTECH, the defense, settlement,
adjustment or compromise of any such claim using counsel reasonably acceptable
to GTECH. GTECH may employ counsel, at GTECH's own expense (provided that if
such counsel is necessary because of a conflict of Mpath or its counsel or
because Mpath does not assume control, then Mpath will bear such expense), to
assist it with respect to any such claim. If this indemnity is triggered, Mpath
may, at its option, either:
(i) procure for GTECH the right to continue using the Improved Source and
the right to continued enjoyment of the licenses granted under this
Agreement; or
(ii) replace or modify the subject the Improved Source, in whole or in
part, so that it becomes non-infringing but provides equivalent
functionality and performance.
If the use of the Improved Source is enjoined, Mpath shall use its best efforts
to procure, at Mpath's expense, the right for GTECH to continue using the
Improved Source, or replace or modify the Improved Source, in whole or in part,
so that it becomes non-infringing but provides equivalent functionality and
performance. If neither of those actions is achievable despite Mpath's best
efforts within [XXXXX], then Mpath agrees to [XXXXX]. Mpath's indemnity under
this Section 6.4 applies during the Initial Term and survives beyond the Initial
Term with respect to any infringement that occurred during the Initial Term by
the Improved Source or the use, display, reproduction, performance, transmission
or distribution thereof upon any patents, copyrights, trademarks, trade secret
rights or other proprietary rights of persons, firms or entities who are not
parties to this Agreement.
7.0 LIMITATION OF LIABILITY REGARDLESS WHETHER ANY REMEDY SET FORTH IN THIS
AGREEMENT FAILS OF ITS ESSENTIAL PURPOSE OR OTHERWISE, UNDER NO CIRCUMSTANCES
WILL EITHER PARTY BE LIABLE TO THE OTHER UNDER ANY CONTRACT, STRICT LIABILITY,
NEGLIGENCE OR OTHER LEGAL THEORY, FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR LOST PROFITS IN CONNECTION WITH THE SUBJECT MATTER OF
THIS AGREEMENT EVEN IF THE PARTY HAS BEEN INFORMED IN ADVANCE OF SUCH DAMAGES.
THE TOTAL CUMULATIVE AMOUNT RECOVERABLE UNDER THIS AGREEMENT IS HEREBY CAPPED AT
AN AMOUNT EQUAL TO [XXXXX]. THE FOREGOING ALLOCATION OF RISK IS REFLECTED IN THE
AMOUNT OF THE COMPENSATION CONTEMPLATED IN THIS AGREEMENT.
8.0 TERM OF LICENSE
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This Agreement commences on the Effective Date and expires on [XXXXX]. However,
this Agreement may also be terminated earlier as provided below.
9.0 DEFAULT AND TERMINATION
9.1 Termination For Cause.
---------------------
(i) GTECH may terminate this Agreement if Mpath breaches a material
provision of this Agreement and fails to cure such breach within
thirty (30) days following receipt of written notice.
(ii) Mpath may terminate this Agreement if Gtech breaches a material
provision of this Agreement and fails to cure such breach within
thirty (30) days following receipt of written notice.
9.2 Return of Improved Source. Upon the termination of this Agreement GTECH
-------------------------
agrees, within thirty (30) business days of such termination, to return to Mpath
all Documentation and Improved Source in GTECH's direct or indirect control.
With respect to documents or data storage media containing Confidential
Information of the other party, the recipient may elect to delete therefrom all
such Confidential Information, in which event the recipient shall, upon written
request from the owner, deliver to the owner a certificate, signed by an
authorized representative of the recipient, to the effect that all Confidential
Information of the owner has been returned or deleted. Also upon termination or
expiration of this Agreement, the recipient of Confidential Information agrees
not to use and to delete, in accordance with the recipient's backup and archive
procedures, all copies of the Confidential Information stored in backup and
archive. GTECH shall not be obligated, as a result of termination or expiration
of this Agreement, to deliver to Mpath any GTECH Code or GTECH Modifications
developed solely by GTECH or Third Party Contractors
9.3 Termination by GTECH. If GTECH is prevented by law or regulation or
--------------------
administrative order from supplying the GTECH Program to [XXXXX] of the entities
that comprise GTECH's then-current customer base, and GTECH elects to exit the
business of providing on-line or Internet capability to all of its customers for
the Licensed Purpose and ceases to use Pop.X, then GTECH may terminate this
Agreement by giving written notice thereof to Mpath and by paying all sums due
to mpath under [XXXXX].
9.4 No Damages. NEITHER PARTY IS LIABLE FOR DAMAGES OF ANY KIND, INCLUDING
----------
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, ARISING OUT OF OR
RELATED TO TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS.
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10.0 GENERAL
10.1 Controlling Law and Disputes. This Agreement is governed, controlled,
----------------------------
interpreted and defined by and under the laws of the State of California and the
United States, without regard to the conflicts of laws provisions thereof. Any
litigation arising under this Agreement brought by Mpath will be brought in the
federal or state courts of Rhode Island. Any litigation arising under this
Agreement brought by GTECH will be brought in the federal or state courts of the
Northern District of California.
10.2 Equitable Relief. GTECH acknowledges and agrees that if unauthorized use,
----------------
reproduction, distribution or disclosure of Improved Source occurs dues to some
act or omission of GTECH, or of GTECH's employees, agents or contractors, Mpath
may not have an adequate remedy at law, and, therefore, injunctive or other
equitable relief may be appropriate to restrain such use, reproduction,
distribution or disclosure, threatened or actual.
10.3 Waiver and Modification. Failure by any party to enforce any provision of
-----------------------
this Agreement will not be deemed a waiver of future enforcement of that or any
other provision. Any waiver, amendment or other modification of any provision
of this Agreement will be effective only if in writing and signed by GTECH and
Mpath.
10.4 Severability. If for any reason a court of competent jurisdiction finds
------------
any provision or portion of this Agreement to be unenforceable, that provision
of the Agreement will be enforced to the maximum extent permissible so as to
effect the intent of the parties, and the remainder of this Agreement will
continue in full force and effect.
10.5 Notices. All notices required or permitted under this Agreement will be
-------
in writing, will reference this Agreement and will be deemed given: (i) when
sent by facsimile to the facsimile number set forth below each party's signature
below and confirmed by registered or certified mail; (ii) five (5) working days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; (iii) one (1) working day after deposit with a
commercial overnight carrier, with written verification of receipt; or (iv)
confirmed electronic mail. All communications will be sent to the addresses set
forth in the opening paragraph above or to such other address as may be
designated by a party by giving written notice to the other parties pursuant to
this Section.
10.6 Delays Beyond Control. No party is liable to the other parties for any
---------------------
failure or delay in performance caused by reasons beyond such party's reasonable
control, and such failure or delay will not constitute a material breach of this
Agreement. However if such failure or delay continues for sixty (60) days of
more then either party may terminate this Agreement effective immediately upon
delivery of the notice to the other party.
10.7 Assignment. Neither party may assign its rights or obligations under this
----------
Agreement, by operation of law or otherwise, without the express written consent
of the others; except that a party may assign this Agreement to an affiliate
directly or indirectly commonly owned and controlled by or with the party or to
any other third party in connection with the merger or acquisition of the party
or sale of all or substantially all of its assets used primarily in connection
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with this Agreement. Each party agrees to provide no less than three (3)
business days' prior notification of any authorized assignment under this
Agreement, except for an assignment to an affiliate and then notice shall be
delivered within a reasonable time after completion of such assignment. Any
attempted assignment except as allowed by the immediately preceding sentence is
null and void. Subject to the foregoing, this Agreement will benefit and bind
the successors and assigns of the parties.
10.8 Relationship of Parties. The parties to this Agreement are independent
-----------------------
contractors and nothing in this Agreement contained shall be deemed to create a
joint venture, partnership or agency relationship between the parties in this
Agreement. No party shall have any power to enter into any contracts or
commitments in the name of, or on behalf of, the other parties, or to bind the
other parties in any respect whatsoever.
10.9 Survival of Contents. Notwithstanding anything else in this Agreement to
--------------------
the contrary, the parties agree that Sections 1, 2.1, 2.4, 2.5, 4.4, 5 (except
5.6 and 5.7), 6.4, 7, 9.1(ii), 10, and accrued rights to payments under this
Agreement survive the expiration or termination of this Agreement.
10.10 Interpretation. Any headings contained in this Agreement are for
--------------
convenience only and shall not be employed in interpreting this Agreement. The
parties and their respective counsel have negotiated this Agreement. This
Agreement will be interpreted fairly in accordance with its terms and conditions
and without any strict construction in favor of or against either party.
10.11 Execution. This Agreement may be executed in several counterparts, each
---------
of which will be deemed to be an original, and each of which alone and all of
which together, shall constitute one (1) and the same instrument, but in making
proof of this Agreement it shall not be necessary to produce or account for each
copy of any counterpart other than the counterpart signed by the party against
whom this Agreement is to be enforced. This Agreement may be transmitted by
facsimile. The parties may close the Agreement by exchanging fax signatures.
However, each party agrees to promptly exchange, by courier, duplicate originals
signed by both parties.
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10.12 Entire Agreement. This Agreement, including Exhibits A, B, C and D,
----------------
constitute the entire agreement between the parties with respect to the subject
matter to this Agreement, and supersedes and replaces all prior or
contemporaneous understandings or agreements, written or oral, regarding such
subject matter. This Agreement includes Agreement Exhibit A-Source Code
Description and Exhibit B-End User License Provisions, which are incorporated
into, and made a part of this Agreement. It is expressly understood and agreed
that, because there are no expectations to the contrary between the parties
hereto, no usage of trade or other regular practice or method of dealing, either
within the computer industry, the software industry or between the parties to
this Agreement shall be used to modify, interpret, supplement or alter in any
manner the express terms of this Agreement or any part of this Agreement.
MPATH INTERACTIVE, INC. GTECH CORPORATION
By: /s/ Lynn Heublein By: /s/ Steven P. Nowick
------------------ ---------------------
Lynn Heublein Steven P. Nowick
- ---------------------- -------------------------
NAME (PRINT OR TYPE) NAME (PRINT OR TYPE)
VP and General Manager Chief Operating Officer
- ---------------------- --------------------------
TITLE TITLE
6-26-98 06/26/98
- ---------------------- --------------------------
DATE DATE
Mpath and Pop.X are trademarks of Mpath Interactive, Inc.
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EXHIBIT A
SOURCE CODE DESCRIPTION
A. Source Description:
------------------
(C) Mpath Interactive, Inc. 1997-98. All rights reserved. Unpublished work.
File list Attached.
Source files include:
{PLACEHOLDER->Mpath to provide.}
B. Designated Site:
---------------
A maximum of [XXXXX] sites are authorized, at any location owned or leased by
GTECH or by a Third Party Contractor.
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EXHIBIT B
END USER LICENSE AGREEMENT PROVISIONS
{SUBJECT TO IMPROVEMENTS RECOMMENDED BY GTECH'S COUNSEL TO REFLECT LOCAL LAW AND
LOCALIZATION TO COUNTRY-SPECIFIC LANGUAGES.}
INTELLECTUAL PROPERTY RIGHTS: GTECH and/or GTECH's licensors shall retain all
right, title and interest, including all intellectual property rights, in and to
the Software. You acknowledge that international copyright laws and
international treaty provisions protect the Software and agree not to remove any
copyright or other proprietary or product identification notices contained
thereon. You acknowledge and agree that the Software may have been developed by
and may include software licensed by third party licensors named in the
copyright notice(s) included with the Software, who shall be authorized to hold
you responsible for any copyright infringement or violation of this Agreement.
You may not remove, destroy, alter, obscure or modify any intellectual property
notices included in the Software.
RESTRICTIONS: You may not sublicense, rent or lease the Software. You may not
reverse engineer, reverse compile, modify, reduce to human perceivable form, or
disassemble the Software.
DISCLAIMER OF WARRANTIES: LICENSEE AND ITS LICENSORS DISCLAIM ALL WARRANTIES OR
CONDITIONS, EITHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED
WARRANTIES OR CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OF THIRD PARTY RIGHTS, AND THOSE ARISING FROM A COURSE OF
DEALING OR USAGE OF TRADE, WITH RESPECT TO THE SOFTWARE. IN PARTICULAR,
LICENSEE OR ITS LICENSORS DO NOT WARRANT THAT USE OF THE SOFTWARE WILL BE
UNINTERRUPTED OR ERROR-FREE.
LIMITATION OF LIABILITY: IN NO EVENT IS LICENSEE OR ITS LICENSOR(S) LIABLE FOR
ANY DAMAGES, INCLUDING ANY LOST REVENUE, LOST SAVINGS OR OTHER INDIRECT,
INCIDENTAL, SPECIAL, EXEMPLARY, OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT
LIMITATION, DAMAGES OR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF
BUSINESS INFORMATION, OR ANY OTHER PECUNIARY LOSS) ARISING OUT OF THE USE OR
INABILITY TO USE THE SOFTWARE EVEN IF MPATH HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
U.S. GOVERNMENT RESTRICTED RIGHTS: Use, duplication or disclosure by the
Government is subject to restrictions set forth in subparagraphs (a) through
(d), excluding subparagraph (c)(2)(iv), of FAR 52.227-19 when applicable, or in
DFARS 227.7202-3, and in similar clauses in the NASA FAR Supplement.
Contractor/manufacturer is Mpath Interactive, Inc., 665 Clyde Avenue, Mountain
View, CA 94043.
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EXHIBIT C
CONFIDENTIALITY PROVISIONS
{SUBJECT TO IMPROVEMENTS RECOMMENDED BY GTECH'S COUNSEL TO REFLECT LOCAL LAW AND
LOCALIZATION TO COUNTRY-SPECIFIC LANGUAGES.}
1. "Confidential Information" means: (i) the information which provides either
party to this Agreement with competitive advantage, including but not limited to
trade secrets, ideas, processes, formulas, computer software, algorithms, data
and know-how, copyrightable material, improvements, inventions (whether
patentable or not), techniques, marketing plans, strategies, business and
product development plans, timetables, forecasts and customer lists all as
related to the products and services (current and prospective) of each of the
parties, (ii) the business or technical information of a party, including but
not limited to any information relating to a party's product plans, product
designs, product costs, product prices, product names, finances, marketing
plans, business opportunities, Mpath source code, personnel, research,
development or know-how; and (iii) any information designated by any party as
"confidential" or "proprietary" or which, under the circumstances taken as a
whole, would reasonably be deemed to be confidential; and (iv) the terms and
conditions of this Agreement. "Confidential Information" excludes information
that is: (a) in the public domain at the time of disclosure to Receiver; (b) or
becomes generally known or available by publication, commercial use or otherwise
through no fault of the Receiver; (c) known to the Receiver at the time of
disclosure without violation of any confidentiality restriction and without any
restriction on the receiving party's further use or disclosure; (d)
independently developed by the Receiver without access or reference to
Confidential Information of the Transmitter; (e) rightfully disclosed to
Receiver by another person not in violation of the proprietary or other rights
of Transmitter or any other person or entity; (f) rightfully in the Receiver's
possession prior to disclosure; or (g) is approved for release by written
authorization of Transmitter.
2. "Use of Confidential Information. Each party will use Confidential
-------------------------------
Information of the other only for the purpose of supporting GTECH in the
development, operation and maintenance of UWin.
3. Ownership and Use. The parties agree that all Confidential Information is
-----------------
and remains the sole property of Transmitter transmitting such Confidential
Information to the Receiver, that Transmitter is the sole owner of all patents,
copyrights and other proprietary rights in connection therewith and that no
license is granted to Receiver thereby. Receiver agrees to hold in confidence
and trust and to maintain as confidential all Confidential Information of
Transmitter. Receiver agrees not to disclose any Confidential Information of
Transmitter or any information derived therefrom to any third person, and to use
the same degree of care to avoid publication or dissemination of such
information as Receiver employs with respect to its own information which does
not desire to have published or disseminated, including any affiliates,
fiduciaries and employees of Receiver, except such affiliates, fiduciaries and
employees of Receiver to whom disclosure is necessary in order to permit
Receiver to evaluate the Confidential Information of Transmitter for the
purpose(s) set forth in Section 2
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and who have agreed in writing to hold such Confidential Information in
confidence and not to use it for their own purposes. Receiver further agrees not
to export any Confidential Information of Transmitter without Transmitter's
written consent.
4. Return of Confidential Information. Immediately upon the accomplishment of
----------------------------------
the purpose(s) set forth in Section 2, upon Transmitter's request, Receiver will
return to Transmitter all Confidential Information of Transmitter and all copies
thereof. With respect to documents or data storage media containing
Confidential Information of Transmitter, Receiver may elect to delete therefrom
all such Confidential Information, in which event Receiver shall, upon
Transmitter's request, deliver to Transmitter a certificate, signed by an
authorized representative of Receiver, to the effect that all Confidential
Information of Transmitter has been so deleted. Also upon accomplishment of the
purpose(s) set forth in Section 2, Receiver agrees to not use and to delete, in
accordance with Receiver's backup and archive procedures, all copies of the
Confidential Information stored in backup and archive.
5. Term and Termination. This Agreement commences on the Effective Date and
--------------------
continues in full force and effect for as long as the Confidential Information
remains confidential.
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EXHIBIT 10.9
Application Development Agreement
This application development agreement ("Agreement") by and between Intel
Corporation, a Delaware corporation having a place of business at 2200 Mission
College Blvd., Santa Clara, CA 95052 ("Intel") and Mpath Interactive, Inc.
("Developer"), a corporation having a place of business at 665 Clyde Avenue,
Mountain View, CA 94043 is effective November 19, 1998 (the "Effective Date").
BACKGROUND
A. Intel is in the business of developing and marketing microprocessors
and associated chipsets. In connection with the anticipated introduction of
Intel's [XXXXX] and the capabilities enabled by [XXXXX], Intel desires to have
certain Applications available for use in connection with its marketing efforts.
B. In exchange for certain marketing rights described in this Agreement,
Intel is willing to sponsor Developer's creation of an application which will
use and demonstrate the advantages of Intel's [XXXXX] and [XXXXX] features, all
as described below.
AGREEMENT
Intel and Developer agree as follows:
1. DEVELOPER'S EFFORTS
1.1 DEFINITIONS:
1.1.1 THE APPLICATION. The title of the application is MPLAYER.COM.
In this Agreement it is referred to as the "Application." A description of the
Application is appended as Attachment A.
1.1.2 "[XXXXX] LAUNCH" means the day on which Intel formally
announces and Original Equipment Manufacturers make available for sale, personal
computer systems based on the [XXXXX]. The target date for the [XXXXX] Launch
is [XXXXX].
1.2 DEVELOPMENT EFFORTS. Developer shall use commercially reasonable
efforts to meet the Target Delivery Dates set out below and shall report to
Intel on the progress of the Application's development at least biweekly. Intel
may call periodic detailed design review meetings with Developer at reasonable
intervals. Intel shall maintain Developer's confidential disclosures in
confidence pursuant to CNDA #75561. The development plan is set out with
greater detail in Attachment B.
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<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
MILESTONE TARGET DELIVERY
DATE
----------------------------------------------------------------------------------------------
<S> <C>
Execution of the Agreement [XXXXX]
----------------------------------------------------------------------------------------------
Functional and demonstrable incorporation of [XXXXX]* [XXXXX]
(Problem button cut into client)
----------------------------------------------------------------------------------------------
Functional and demonstrable incorporation of [XXXXX] into mplayer.com* [XXXXX]
----------------------------------------------------------------------------------------------
[XXXXX]-Only Protected Room incorporation live on mplayer.com [XXXXX]
----------------------------------------------------------------------------------------------
</TABLE>
* Must be functional with [XXXXX] references in the mplayer.com QA lab but
no publicly visible [XXXXX] references may be made.
1.3 PRE-EXISTING WORKS AND LICENSES. Developer shall identify on
Attachment A any preexisting works upon which the Application is based.
Developer need not identify standard development tools which do not affect the
right to distribute titles based on their use. Developer shall also identify
any contractual or other known limitations on its rights to distribute or
demonstrate the Application publicly or to license Intel or its licensees to do
so.
1.4 PLATFORM DEPENDENCIES. The dates set out herein are based on certain
anticipated introduction dates of certain Intel products. If such dates are
extended by Intel in its sole discretion then Intel shall notify Developer of
such extensions and the Target Delivery Dates and other dates related to them
shall be extended by a like period.
1.5 APPLICATION OBLIGATIONS. Developer will offer users of its
mplayer.com game service the Application for a period of at least [XXXXX] from
initial [XXXXX] launch. Developer shall perform measurement as described in
Attachment D.
2. TECHNICAL ASSISTANCE FROM INTEL
2.1 INTEL TECHNOLOGY. Intel shall provide Developer with the information,
development software, and loaner hardware/systems identified on Attachment C
("Intel's Technical Assistance"), and may provide other similar items to
Developer, (collectively "Intel Technology"). Intel Technology remains Intel's
property and is deemed confidential information delivered under CNDA #75561
executed by and between the parties as of March 8, 1996.
2.2. INTEL CONSULTING. Depending on Developer's interest and needs and
availability of Intel staff, Intel may provide consultation to Developer on
methods to improve the Application to take advantage of [XXXXX], the [XXXXX],
and on technical problems encountered in developing the Application.
2.3 AS IS. The Intel Technology, and any Intel consulting, is provided
"AS IS" with no warranties.
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3. MARKETING RIGHTS; SPONSORSHIP PAYMENTS
3.1 DEMONSTRATION AND MARKETING RIGHTS. Unless and until Intel's rights
are terminated under the terms of this Agreement, Intel shall have the following
worldwide rights and licenses:
3.1.1 Intel may use and display the Application publicly and
privately in displays, performances, and broadcasts for promotional purposes,
including at trade shows, in customer visits, in advertisements, and by means of
video or other electronic transmission of sounds, text and images. Intel may
license other parties to exercise such rights in connection with the promotion
and marketing of Intel products, but shall not license or distribute copies of
the Application for end-user distribution except as expressly permitted in
writing.
3.1.2 Intel may include copies of the sounds, text and images
included in the Application (including software screen displays) in Intel's
printed and digital publications for promotional purposes. This includes use in
annual reports, corporate web site, advertising, and point-of-sale displays, all
of which may be reproduced and distributed.
3.1.3 Except as provided in the following section, Developer may not,
without prior written approval from Intel, display, perform publicly, or in any
other way show the [XXXXX] to a third party until the [XXXXX] Launch. The
parties agree to negotiate, in good faith, a written, mutually acceptable
arrangement to use Developer's elite beta testing group to test the Application.
3.1.4 The Developer shall not use Intel's name, logos, or trademarks
for marketing purposes without Intel's written permission.
3.15 Developer will designate Application-enabled game rooms with
text or pictorials subject to Intel approval.
3.1.6 Intel may copy the Application as reasonably necessary to
exercise the rights granted hereunder, provided that any copies of the
Application provided to third parties permitted hereunder shall be under a
commercially reasonable "shrink-wrap," "click-wrap," or similar license terms
which prohibit reverse engineering, reverse compiling, reducing to human
perceivable form, disassembling, copying and distribution not permitted
hereunder.
3.2 SPONSORSHIP PAYMENTS. Intel shall make a first sponsorship fee
payment of [XXXXX] upon execution hereof. Thereafter, within thirty days of
Developer's completion and delivery of each of the following milestones
(including as they may be further defined in this Agreement), Intel shall either
notify Developer that it will pay Developer the sponsorship fee set out below or
decline to do so. If Intel declines to pay the sponsorship fee, then Intel's
license under Section 3.1 shall terminate, Intel must [XXXXX] and Intel shall
discontinue all activities thereunder within sixty days from such delivery,
otherwise, Intel shall pay the appropriate fee as set out below.
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<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
MILESTONE DATE SPONSORSHIP
FEE
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Execution of this Agreement [XXXXX] [XXXXX]
-------------------------------------------------------------------------------------------------
Functional and demonstrable incorporation of [XXXXX] [XXXXX] [XXXXX]
(Problem button cut into client)*
-------------------------------------------------------------------------------------------------
Functional and demonstrable incorporation of [XXXXX] [XXXXX] [XXXXX]
into mplayer.com*
-------------------------------------------------------------------------------------------------
[XXXXX]-Only Room incorporation live on mplayer.com** [XXXXX] [XXXXX]
-------------------------------------------------------------------------------------------------
TOTAL [XXXXX]
-------------------------------------------------------------------------------------------------
</TABLE>
* Must be functional with [XXXXX] references in the mplayer.com QA lab but
no publicly visible [XXXXX] references may be made.
** Production release with publicly visible [XXXXX] references.
3.3 MANNER OF PAYMENT. All payments shall be made in US dollars, and
shall be sent to the address specified in this Agreement.
3.4 DISCRETIONARY EXERCISE. Intel's exercise of its rights hereunder will
be at Intel's sole discretion, and Intel is not hereby committing to use the
Application in any activities or to refrain from using any other product in any
activities.
4. TERM AND TERMINATION
4.1 TERM. This Agreement expires on [XXXXX], unless earlier terminated
pursuant to its terms.
4.2 TERMINATION. Before payment of the final sponsorship fee hereunder,
either party may terminate this Agreement at any time with or without cause by
giving the other written notice of termination. After such payment, a party may
terminate this Agreement by written notice if the other party is in material
breach of any of its terms and fails to cure such breach within thirty (30) days
after receipt of written notice of such breach.
4.3 EFFECT OF TERMINATION. If Intel terminates the Agreement other than
for breach, Developer [XXXXX] and Intel agrees [XXXXX]. The parties agree that
in no event will the payment made by Intel for termination for convenience
exceed the amount of the next milestone payment. If however Developer terminates
the Agreement other than for breach, it shall refund [XXXXX] fees received from
Intel hereunder. Regardless of the reason for termination, Developer shall
retain full title to its own work in the Application, but Developer shall on
Intel's written request, return all materials that Intel provided hereunder.
5. DEVELOPER SUPPORT AND WARRANTY
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5.1 SUPPORT. Developer shall provide technical support for the
Application consistent with standard commercial practices.
5.2 RIGHTS. Developer warrants and represents that it has or shall obtain
all rights necessary to undertake the activities described in this Agreement and
to grant the licenses described herein. Developer shall promptly notify Intel
of any charge or claim of infringement of any third party's right relating to
development, distribution, or display of the Application.
5.3 SUITS BASED ON APPLICATION. Developer shall defend, indemnify, and
hold Intel harmless from and against any suit or proceeding brought against
Intel, its subsidiaries or customers, based upon Intel's use, as authorized in
this Agreement, of the Application, including any claim that the Application
infringes any third-party intellectual property right (a "Claim"). Developer's
indemnity will include all damages and costs awarded, including reasonable
attorneys' fees, and settlement costs, provided that Intel shall not settle any
claim without Developer's consent.
5.3.1 Intel shall promptly notify Developer of any Claim and will
provide information, assistance, and cooperation in defending against it (at
Developer's expense).
5.3.2 Intel will have the right to participate in the defense of any
Claim, at its own expense.
5.3.3 If there appears, in Intel's opinion, to be a reasonable
likelihood that distribution of any portion of the Application may be found to
infringe the rights of any third party, then Intel may terminate this Agreement.
5.3.4 This indemnity shall not apply to portions of the Application
prepared or provided by Intel.
6. GENERAL PROVISIONS
6.1 CONFIDENTIAL TERMS. The parties may disclose, subject to written
confidentiality agreement, this Agreement to their lawyers, accountants and in
the course of due diligence for investment or financing. Intel and Developer
may each make press releases about the existence and contents of the Agreement
(except with respect to specific financial terms) with the prior approval of the
other of the contents of the press release, which approval shall not be
unreasonably withheld or delayed. In no event will any press release be made
prior to [XXXXX] launch without mutual written consent.
6.2 TITLE. Except for the licenses expressly provided here, no licenses
are granted by either party, either expressly or by implication, to any
intellectual property of the other.
6.3 RELATIONSHIP OF PARTIES. The parties are not partners or joint
venturers, or liable for the obligations, acts, or activities of the other.
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6.4 AMENDMENTS AND ASSIGNMENTS. Any change, modification or waiver to
this Agreement must be in writing and signed by an authorized representative of
each party. Neither party may assign its rights or obligations under this
Agreement, by operation of law or otherwise, without the express written consent
of the other party; except that either party may assign this Agreement to an
affiliate commonly owned and controlled by or with the party or to any other
third party in connection with the merger or acquisition of the party or sale of
all or substantially all of its assets used primarily in connection with this
Agreement. Each party agrees to provide no less than three (3) business days'
prior notification of any authorized assignment under this Agreement, including
assignment to an affiliate or as part of an asset sale. Any attempted
assignment except as allowed by the immediately preceding sentence is null and
void. Subject to the foregoing, this Agreement will benefit and bind the
successors and permitted assigns of the parties.
6.5 MERGER AND WAIVER. This Agreement is the entire agreement between the
parties with respect to the development and distribution of the Application, and
it supersedes any prior or contemporaneous agreements and negotiations relating
thereto. No waiver of any breach or default shall constitute a waiver of any
subsequent breach or default.
6.6 LIMITED LIABILITY. Neither party shall be liable to the other for
lost profits, expected revenues, or development or support costs arising from
any termination of this Agreement. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR LOSS OF PROFITS, REVENUE, DATA, OR USE OR ANY INDIRECT, SPECIAL,
CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED, EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE. THE PARTIES ACKNOWLEDGE THAT THESE LIMITATIONS ON
POTENTIAL LIABILITIES WERE AN ESSENTIAL ELEMENT IN SETTING CONSIDERATION UNDER
THIS AGREEMENT. THE TOTAL CUMULATIVE AMOUNT RECOVERABLE UNDER THIS AGREEMENT IS
HEREBY CAPPED AT AN AMOUNT EQUAL TO [XXXXX]. THE FOREGOING ALLOCATION OF RISK
IS REFLECTED IN THE AMOUNT OF THE COMPENSATION CONTEMPLATED IN THIS AGREEMENT.
6.7 NOTICES AND REQUESTS. All notices and requests under this Agreement
must be in writing and shall be personally delivered, sent by certified or
registered mail, or overnight courier to the addresses below:
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- --------------------------------------------------------------------------------
TO INTEL TO DEVELOPER
Intel Corporation
2200 Mission College Blvd. Mpath Interactive, Inc.
Santa Clara, CA 95052 665 Clyde Avenue
ATTN: GENERAL COUNSEL Mountain View, CA 94043
Attn: General Counsel
COPY TO:
Intel Corporation
5200 Elam Young Parkway
Hillsboro, OR 97124
Attn: Bob Rossi
Mailstop JF3-216
- --------------------------------------------------------------------------------
6.8 CHOICE OF LAW. This Agreement is governed, controlled, interpreted
and defined by and under the laws of the State of California, without regard to
the conflicts of laws provisions thereof, and the United States. Any litigation
arising under this Agreement will be brought in the federal or state courts of
the Northern District of California. If any litigation or proceeding is brought
by either party against the other in connection with this Agreement, the
prevailing party in such litigation or other proceeding shall be entitled to
recover from the other party all costs, reasonable attorneys' fees and other
expenses incurred by such prevailing party.
IN WITNESS OF THEIR AGREEMENT, the parties have caused the Agreement to be
executed below by their authorized representatives.
INTEL CORPORATION MPATH INTERACTIVE, INC. (DEVELOPER)
By: /s/ Ronald J. Whittier By: /s/ Thomas C. Garland, Jr.
----------------------------------- -----------------------------------
Name: Ronald Whittier Name: Thomas C. Garland, Jr.
---------------------------------
General Manager, Content Group Title: Vice President
--------------------------------
Date: 11/24/98 Date: 11/20/98
--------------------------------- ---------------------------------
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ATTACHMENT A
------------
APPLICATION SPECIFICATIONS
GENERAL DESCRIPTION: WITHIN THE MPLAYER.COM WEB-BASED GAME SERVICE,
[XXXXX] USERS WILL BE ABLE TO CREATE GAME ROOMS EXCLUSIVE TO THOSE WHO HAVE
ENABLED THE [XXXXX] FEATURE ON THEIR [XXXXX]-BASED PERSONAL COMPUTERS.
PRE-EXISTING WORKS, RIGHTS: (Identify any titles, or parts of titles that
the Application is based on or incorporates. Specify any contractual or other
limitations which may impact distribution of demonstration of the Application.)
MPLAYER.COM CLIENT SOFTWARE AS IT HAS EVOLVED SINCE 1995.
INTERNET USAGE (DOES THE SW INCLUDE MULTIPLAYER, DOWNLOAD, UPLOAD, CHAT,
ETC.)? [XXXXX]
WILL THE APPLICATION RUN UNDER:
Microsoft Windows 95 & 98? [XXXXX] _____ Windows NT?_[XXXXX] _____
CONTRACTUAL LIMITATIONS
Certain screen shots may contain proprietary third party material such as
game content, trademarks and/or text. In such instances, Developer will have to
seek authorization from such third parties before Intel can exercise certain of
its rights under this Agreement.
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ATTACHMENT B
------------
Development Schedule and Plan
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
MILESTONE TARGET DELIVERY
DATE
--------------------------------------------------------------------------------------
<S> <C>
Initial application specification Execution of the Agreement [XXXXX]
--------------------------------------------------------------------------------------
Functional and demonstrable incorporation of [XXXXX] [XXXXX]
(The addition to the mplayer.com client interface the
"Report a Problem" feature. This feature will enable
members with the push of a button to send an incident
report to mplayer.com customer support. This report will
contain the name of the reporter, space for a claim, and
pass some portion of the recent chat text as applicable.
If a [XXXXX] user is the banned, their mplayer.com ID is
suspended, and the [XXXXX] machine they most recently
logged in from is similarly banned.) The "Report a
Problem" Feature will launch for non-[XXXXX] users first
and is required for [XXXXX] users at launch.
--------------------------------------------------------------------------------------
Functional and demonstrable incorporation of [XXXXX] into [XXXXX]
mplayer.com
--------------------------------------------------------------------------------------
[XXXXX]-Only Room incorporation live on mplayer.com (Room [XXXXX]
Intercept Filter/Room Access Filter: Any mplayer.com
member using a [XXXXX] system will be given the option at
the time of room creation to only admit other members with
the [XXXXX] feature turned on and who are not banished)
--------------------------------------------------------------------------------------
</TABLE>
The "Live" [XXXXX]-only Room application will be commercially available on
the Internet and require [XXXXX] to operate.
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ATTACHMENT C
------------
INTEL'S TECHNICAL ASSISTANCE INFORMATION
- --------------------------------------------------------------------------------
ITEMS
- --------------------------------------------------------------------------------
INFORMATION
- --------------------------------------------------------------------------------
? General information regarding [XXXXX] New Instructions, [XXXXX]
? Access to Intel's secure web site relating to the technology
? Documentation, such as programming manuals
? Technical assistance in the use of the development tools, simulator and
development systems.
- --------------------------------------------------------------------------------
DEVELOPMENT SOFTWARE
- --------------------------------------------------------------------------------
? [XXXXX] Reference Implementation
- --------------------------------------------------------------------------------
HARDWARE/SYSTEMS
- --------------------------------------------------------------------------------
? [XXXXX] development systems based on a silicon implementation of the [XXXXX]
in ___/___/___ ("Critical")
- --------------------------------------------------------------------------------
THIRD-PARTY CODE
- --------------------------------------------------------------------------------
?
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
?
- --------------------------------------------------------------------------------
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ATTACHMENT D
------------
Dl. INITIAL MEASUREMENT REQUIREMENTS: Developer will offer users of its
mplayer.com game service the application for a period of at least [XXXXX] from
initial [XXXXX] launch. During this initial [XXXXX] period, the Developer shall
measure the effectiveness of the application using the following monthly
indices:
D1.1. Total number of users who create game rooms within each
individual game offered on the mplayer.com service.
Dl.2. Total number of users who play a game (sorted by genre and not
specific game titles) offered on the mplayer.com service.
Dl.3. Total number of [XXXXX]-only rooms created within each game
genre offered on the mplayer.com service.
Dl.4. Total number of users who play a [XXXXX]-only game offered on
the mplayer.com service.
Dl.5 Due Date: within [XXXXX] after the first day of each month.
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EXHIBIT 10.10
TECHNOLOGY LICENSE AGREEMENT
THIS AGREEMENT is made and entered into this 15th day of April, 1996 (the
"Effective Date"), by and between:
MPATH INTERACTIVE, INC., a corporation organized and existing under the
laws of Delaware, with its principal place of business at 10455-A
Bandley Drive, Cupertino, California 95014 ("Mpath"), and
SEGASOFT, INC., a corporation organized and existing under the laws of
Delaware, with its principal place of business at 255 Shoreline Drive,
Suite 510, Redwood City, California 94066 ("SegaSoft").
W I T N E S S E T H
WHEREAS, Mpath has developed certain proprietary information and
technology to establish an Internet-based software platform that provides
real-time system response and interactive speech in an on-line,
multi-participant environment capable of hosting a variety of interactive
applications;
WHEREAS, Mpath is willing to grant to SegaSoft, and SegaSoft wishes to
acquire, a license to utilize such proprietary information and technology to
support multi-participant interactive applications under the terms and
conditions set forth below; and
WHEREAS, the parties believe that mutual cooperation and coordination
of development efforts with respect to the proprietary information and
technology will serve their mutual interests;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and conditions provided for below, the parties mutually agree as
follows:
1 Definitions
-----------
1.1 "Additional Technology" shall mean and include the MCAP Protocol
and all other data, information, software, or other technology as
specified in Attachment A hereto, and all Improvements thereto
developed by Mpath during the term of this Agreement, as well as
all related Technical Documents.
1.2 "Affiliate" shall mean and include any entity or association
controlled by, controlling, or under common control with a party
to this Agreement. For the purposes of this definition, the term
"control" shall mean the ownership of
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voting stock or other equity interest entitling the owner to
exercise at least [XXXXX] of the voting rights of the entity or
association.
1.3 "Client Software" shall mean the source code and object code of
Mpath's Client Software as specified in Attachment A hereto, and
all Improvements thereto developed by Mpath during the term of
this Agreement, including all versions of Mpath's Client Software
for any platform which is either (i) made generally commercially
available by Mpath or (ii) developed and ported by Mpath, at the
specific request of SegaSoft, to a platform not otherwise made
generally commercially available by Mpath, as well as all related
Technical Documents.
1.4 "Confidential Information" shall mean and include any and all
data and information not in the public domain, including, without
limitation, know-how and trade secrets, relating to, contained
in, or embodied in: (i) the Licensed Technology or (ii) the
products, services, business, and/or affairs of either Mpath or
SegaSoft. Confidential Information may be communicated orally,
visually, in writing, or in any other recorded or tangible form.
All data and information shall be considered to be Confidential
Information hereunder (a) if either party has marked them as
such, (b) if either party, orally or in writing, has advised the
other party of their confidential nature, or (c) if, due to their
character or nature, a reasonable person in a like position and
under like circumstances would treat them as confidential.
1.5 "Improvements" shall mean and include any modifications,
upgrades, improvements, extensions, including, without
limitation, major, minor and maintenance releases, to or for the
Licensed Technology which are made generally commercially
available during the term of this Agreement, as well as all
related Technical Documents. To the extent such Improvements are
made by third parties with the rights to such Improvements being
granted to Mpath or SegaSoft, such Improvements will only be
considered Improvements for purposes of this Agreement if they
can be sublicensed by the party on whose behalf such Improvements
were developed.
1.6 "Licensed Purpose" shall mean the development and operation of
wide area information processing networks for interactive multi-
player games incorporating the Licensed Technology. Subject to
negotiation of mutually acceptable royalty schedules, interactive
multi-user applications for "edutainment" purposes shall also be
included in the Licensed Purpose. The Licensed Purpose shall
likewise include any additional fields of use which are agreed to
by the parties pursuant to Article 5.5.
1.7 "Licensed Technology" shall mean the Client Software, Server
Software, and Additional Technology as specified in Attachment A
hereto.
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1.8 "SegaSoft Developers" shall mean those third parties who have
independently contracted with SegaSoft to develop or port
software and related technology for the exclusive use of
SegaSoft, and who have entered into a binding written agreement
prohibiting them from (i) disclosing any Confidential Information
to any other party, (ii) using any Confidential Information for
the development or porting of software and related technology for
any purposes other than the Licensed Purpose; and (iii)
sublicensing the Licensed Technology.
1.9 "Server Software" shall mean the source code and object code of
Mpath's Game Server Software and Central Server Software as
specified in Attachment A hereto, and all Improvements thereto
developed by Mpath during the term of this Agreement, including
all versions of Mpath's Game Server Software and Central Server
Software for any platform which is either (i) made generally
commercially available by Mpath, or (ii) developed and ported by
Mpath, at the specific request of SegaSoft, to a platform not
otherwise made generally commercially available by Mpath, as well
as all related Technical Documents.
1.10 "Technical Assistance" shall mean and include that technical
assistance to be provided by Mpath to SegaSoft as more fully
described under Article 4.
1.11 "Technical Documents" shall mean Mpath's technical information in
any form, documentary, electronic or otherwise, including
technical specifications, which are generally used by Mpath
personnel internally in connection with the Licensed Technology
and the Improvements thereto.
2 Grant and Scope of License
--------------------------
2.1 Mpath grants to SegaSoft, and SegaSoft accepts from Mpath, a
worldwide, non-exclusive, royalty-bearing license to use, copy,
distribute, sell, market, develop, modify, sublicense, localize,
and incorporate into other software products, the Licensed
Technology solely for the Licensed Purpose, subject to the
following terms and restrictions:
2.1.1 The Licensed Technology shall be distributed in object
code form only, provided that SegaSoft shall have the
right to distribute, deploy, and load the object code of
the Server Software onto servers owned, leased, or
otherwise controlled by SegaSoft, and as otherwise
specifically provided for in this Article 2.
2.1.2 The source code of the Licensed Technology may not be
made available to any person, firm, or entity without the
prior written consent of Mpath, provided that
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(a) SegaSoft employees shall have full access to the
source code of the Licensed Technology for internal
use;
(b) SegaSoft Developers who are porting the Licensed
Technology to a platform not made generally
commercially available by Mpath shall have access
to the source code of the Licensed Technology
solely for the purpose of such porting for the
Licensed Purpose; and
(c) SegaSoft Developers who are developing games shall
only have access to those source code portions of
the Licensed Technology which are contained in the
then-current Mpath Software Development Kit and
relating to the Licensed Technology for the
Licensed Purpose.
2.1.3 SegaSoft shall not distribute or sublicense the object
code or source code of the Server Software to any third
party which owns or operates an on-line Internet-based
multi-player gaming service. SegaSoft shall include
contractual prohibitions, in agreements with third
parties relating to the Licensed Technology, which
likewise restrict such third party from distributing or
sublicensing the object code or source code of the Server
Software to any third party which owns or operates an on-
line Internet-based multi-player gaming service.
2.2 The rights granted to SegaSoft are non-assignable and non-
transferrable provided that SegaSoft may freely transfer or
assign any and all rights and obligations under this Agreement to
any of its Affiliates, without the prior written consent of Mpath
so long as (i) such Affiliate(s) agrees in writing to be bound by
this Agreement, and (ii) SegaSoft or the Affiliate(s) gives Mpath
notice of any such assignment or transfer. In the event of such
assignment or transfer pursuant to this Article 2.2, SegaSoft
agrees to guarantee the performance by such Affiliate(s) of its
obligations under this Agreement.
2.3 Except as specifically provided for pursuant to this Article 2,
SegaSoft shall have no rights to sublicense the Licensed
Technology.
2.4 At any time after thirty (30) calendar days after the Effective
Date, within ten (10) business days after receiving written
notice from SegaSoft (such notice may be given as early as twenty
(20) calendar days after the Effective Date), Mpath shall deliver
to SegaSoft the Licensed Technology by remote telecommunications,
unless not commercially practicable, to a place of business
specified by SegaSoft provided that Improvements developed by
Mpath shall be delivered promptly as developed by Mpath. Mpath
shall assist SegaSoft as reasonably necessary in installing the
Licensed Technology onto SegaSoft's
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computer system. Installation and delivery shall be complete only
after SegaSoft has completed all applicable diagnostic tests and
determined to its sole satisfaction that the Licensed Technology
and any Improvements is functioning properly on its computer
system. SegaSoft shall not acquire a copy of the Licensed
Technology or any Improvement in any tangible form from Mpath
subject to the foregoing.
3 Royalties
---------
3.1 With regard to royalties payable to Mpath by SegaSoft, there
shall be [XXXXX] per copy royalty or other per copy charge,
[XXXXX] lump-sum advance payment requirement, and [XXXXX]
guaranteed minimum royalty payment.
3.2 With regard to use of the Licensed Technology for the operation
of an on-line game service:
SegaSoft shall pay Mpath a royalty calculated as a percentage of
Net Revenue where the royalty rate, as set forth in Attachment B,
hereto shall apply as determined by [XXXXX]. A single royalty
rate, as determined under Attachment B, shall apply to the total
Net Revenue for purposes of determining the royalties payable for
the applicable reporting period.
3.2.1 For purposes of this Article 3.2, "Net Revenue" shall be
calculated as Includable Revenue less Includable
Expenses. Net Revenue shall not include (i) [XXXXX] or
(ii) [XXXXX].
(a) "Includable Revenue" shall mean and include the
amounts invoiced to the following sources:
(i) [XXXXX]
(ii) [XXXXX]
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(iii) [XXXXX]
(b) "Includable Expenses" shall mean and include all of
the following amounts:
(i) [XXXXX]
(ii) [XXXXX]
3.2.2 The parties agree that the royalty rates in Attachment B
are based on a business model that assumes [XXXXX]
("Standard Business Model") as set forth in Attachment C.
The Standard Business Model is [XXXXX]
(a) If, at its discretion, SegaSoft deviates from the
Standard Business Model described above and such
deviation results in a reduction of Net Revenue in
any particular calendar quarter such that the
percentage of Net Revenue drops more than [XXXXX]
as compared with the projected Net Revenue for such
quarter under the Standard Business Model, then
SegaSoft agrees to adjust the royalty rates for the
applicable reporting period so that the royalties
payable to Mpath for such reporting period do not
fall below [XXXXX] of the royalties which would
have been payable to Mpath had SegaSoft continued
using the Standard Business Model.
(b) Notwithstanding Article 3.2.2(a) above, if SegaSoft
implements a material change in its business model
that materially deviates from the Standard Business
Model, and such change is made in response to a
material change in the business model of Mpath,
then, at SegaSoft's sole discretion, the parties
shall, within thirty (30) calendar days, negotiate,
in good faith, mutually acceptable royalty rates
which shall apply under such new business model
and, after agreement upon new royalty rates,
SegaSoft shall not be obligated to adjust royalty
rates under Article 3.2.2(a) above.
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3.2.3 If, [XXXXX], SegaSoft [XXXXX], then SegaSoft shall adjust
the royalty rates in Attachment B for the applicable
royalty period so that the royalties payable by SegaSoft
to Mpath are equivalent to the royalties which would have
been paid by SegaSoft to Mpath [XXXXX] provided that,
[XXXXX], SegaSoft may [XXXXX]
(a) Notwithstanding Article 3.2.3 above, SegaSoft shall
not be obligated to adjust the royalty rates or Net
Revenue [XXXXX]. Such [XXXXX] may, at SegaSoft's
sole discretion, be [XXXXX] (i) [XXXXX], or
(ii) [XXXXX].
3.3 The terms, conditions, and amount of royalties payable by
SegaSoft to Mpath pursuant to this Article 3 shall be no less
favorable than the terms, conditions, and amounts of royalties
pursuant to any agreement concluded between Mpath and any third
party for the Licensed Technology, any portion thereof, or
reasonably similar technology provided that Mpath is granting to
a third party rights to the Licensed Technology for the purpose
of developing and operating wide area information processing
networks for interactive multi-player games incorporating the
Licensed Technology or for any other Licensed Purpose.
3.4 All royalties payable by SegaSoft to Mpath pursuant to this
Article 3 shall be paid on a quarterly basis within [XXXXX] after
the close of the calendar quarter to which such royalties relate.
3.4.1 SegaSoft shall provide a report stating (i) the Net
Revenue received by SegaSoft during the quarter, broken
down by the categories of Includable Revenue and
Includable Expenses; (ii) the number of subscribers at
the beginning of the quarter and the end of the quarter;
and (iii) such other information as is reasonably
necessary to explain the calculation of the royalty
payment for the quarter. SegaSoft shall deliver this
report to Mpath with the actual payment of royalties
pursuant to this Article 3.
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3.4.2 SegaSoft shall keep and maintain detailed and accurate
books and records with regard to the royalties payable
under this Agreement and the calculation thereof. Mpath,
or upon the request of Mpath, its certified public
accountants (who shall be reasonably acceptable to
SegaSoft), shall be entitled to review and audit such
books and records and/or compliance with this Article 3.4
during normal business hours upon reasonable notice to
SegaSoft and at Mpath's expense; provided that (i) Mpath
or, if Mpath requests, its certified public accountants,
shall collectively have such right only once per
calendar year for the calendar year in which the request
is made and for the immediately preceding calendar year;
(ii) such books and records as well as any and all
information resulting from such review or audit is
Confidential Information subject to Article 10 below;
(iii) SegaSoft shall bear the reasonable expenses of such
audit or review if such audit or review shows that
SegaSoft has made an underpayment of greater than ten
percent (10%)of royalties for the applicable audit
period; and (iv) SegaSoft may schedule such review and
audit at a mutually convenient time, but in no event more
than 45 days following receipt of the notice from Mpath
or its certified public accountants.
4 Technical Assistance
--------------------
4.1 Mpath will provide the following technical assistance to SegaSoft
for use of the Licensed Technology relating to the operation of
an on-line game service:
4.1.1 Mpath will develop and provide to SegaSoft, [XXXXX], bug-
fixes relating to the Licensed Technology. Mpath will
make commercially reasonable efforts to develop such bug-
fixes based on their severity. Mpath will develop and
provide to SegaSoft bug-fixes for substantial bugs as
soon as commercially practicable and Mpath will develop
and provide bug-fixes for less substantial bugs within a
reasonable period.
(a) SegaSoft shall be under no obligation to
incorporate any bug-fixes provided by Mpath
pursuant to this Article 4.1.1.
(b) At SegaSoft's sole discretion, SegaSoft shall use
commercial reasonable efforts to incorporate for
the general use of its subscribers any bug-fixes,
provided by Mpath pursuant to this Article 4.1.1,
as soon as possible after receipt from Mpath, but
in any event such bug-fixes shall be incorporated
within [XXXXX] after receipt thereof.
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(c) If SegaSoft does not so incorporate any bug-fixes
within the period specified in article 4.1.1(b)
above, then SegaSoft agrees to waive Mpath's
obligations under Article 12 with respect to
liability arising from any defect of or computer
virus embedded within the Licensed Technology which
would not have otherwise been incurred but for
SegaSoft's refusal to incorporate such bug-fix.
Except as expressly set forth above, such limited
waiver shall not affect Mpath's continuing
indemnity obligations under Article 12.
4.1.2 Upon prior approval by the management of both Mpath and
SegaSoft, (i) Mpath will provide on a fee basis other
technical assistance such as set-up, installation and
operation of the Licensed Technology, and (ii) SegaSoft
shall compensate Mpath for these services at the rate of
[XXXXX].
4.1.3 At the request of SegaSoft, Mpath will port the Licensed
Technology to any platform identified by SegaSoft,
subject to (i) availability of resources of Mpath and
SegaSoft, (ii) such porting being in the mutual
beneficial interest of the parties, and (iii) payment by
SegaSoft of fair and reasonable compensation to be
negotiated in good faith among the parties.
(a) If Mpath ports the Licensed Technology to the
platform identified by SegaSoft[XXXXX], then such
ported version shall be considered Improvements
developed by Mpath and shall be subject to the
provisions of Article 6.3 below.
(b) If SegaSoft pays [XXXXX] for such porting, then
such ported version of the Licensed Technology
shall be considered Improvements developed by
SegaSoft and shall be subject to the provisions of
Article 6.4 below. Mpath shall have no right to use
such ported version of the Licensed Technology
until and unless SegaSoft grants Mpath such rights
under Article 6.4.
(c) If Mpath and SegaSoft [XXXXX] of such porting, then
the parties shall negotiate in good faith the
respective rights and interests in such ported
version, and any royalty rates payable by Mpath to
SegaSoft for use thereof, if any.
4.2 Mpath is not obligated to provide technical assistance for uses
of the Licensed Technology which are unrelated to the operation
of an on-line game service unless the parties negotiate mutually
agreeable terms for such technical assistance.
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4.3 Mpath is under no obligation to provide technical assistance with
respect to Improvements which are developed by SegaSoft.
4.4 If SegaSoft declines to incorporate Improvements supplied by
Mpath, then, after [XXXXX] from the date Mpath supplied such
Improvements to SegaSoft, Mpath's technical assistance
obligations under this Article 4 shall lapse with respect to that
portion of the Licensed Technology to which such Improvements
relate and SegaSoft agrees to waive Mpath's obligations under
Article 12 with respect to liability arising from the Licensed
Technology which would not have otherwise been incurred but for
SegaSoft's refusal to incorporate such Improvements.
5 Quarterly Coordination Meetings
-------------------------------
5.1 The parties agree that it is beneficial to hold meetings between
senior technical and business personnel of Mpath and SegaSoft to
review the technical and business status of the Licensed
Technology and any Improvements thereto and to resolve any issues
which have arisen in connection therewith ("Quarterly
Coordination Meetings").
5.2 Both Mpath and SegaSoft shall appoint appropriate persons to act
as Business Liaison and Engineering Liaison. These persons,
together with any other employees of either party whose presence,
in the opinion of the employing party, is deemed necessary or
beneficial, shall be present at the Quarterly Coordination
Meetings.
5.3 Quarterly Coordination Meetings shall be held between thirty (30)
and sixty (60) days after the close of each calendar quarter, or
at such other time as the parties shall agree. The Quarterly
Coordination Meetings shall be held, on an alternating basis, at
Mpath's headquarters and SegaSoft's headquarters, or at such
other place as the parties shall agree.
5.4 The representatives of the parties shall discuss at the Quarterly
Coordination Meeting the technical status and business status of
the Licensed Technology and Improvements. The parties shall
review the technical status of on-going Improvements, projected
development activities relating to the Licensed Technology, and
any technology interchange issues. The parties shall discuss ways
in which the parties may market and develop the Licensed
Technology in a manner of mutual benefit to the parties.
5.5 The representatives of the parties agree to discuss the expansion
of the Licensed Purpose to include additional fields of use not
otherwise covered under the
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Licensed Purpose and, if the parties agree it is in their mutual
interest, the parties shall commence negotiation of the terms,
conditions, and royalty rates for such expansion provided that
the parties shall not be obligated to agree to any such
expansion.
5.6 The representatives of the parties shall discuss at the Quarterly
Coordination Meeting ways to exploit the Licensed Technology in
[XXXXX]. The parties shall negotiate mutually acceptable terms
and conditions under which SegaSoft, or SegaSoft in cooperation
with Mpath, will exploit the Licensed Technology in [XXXXX], such
exploitation to include the rights to (i) distribute the source
code of the Licensed Technology to a third party if necessary for
the purpose of localization for the [XXXXX] market and (ii)
sublicense the right to distribute, deploy and load the object
code of the Server Software to a third party, provided that such
third party has entered into a binding written agreement
prohibiting them from (a) disclosing any Confidential Information
to any other party, and (b) sublicensing the Licensed Technology.
5.7 Although the parties agree to consider the ideas of the other,
each party shall retain sole and exclusive control over its
business and technical development.
5.8 The parties agree that all communications and materials disclosed
during the Quarterly Coordination Meetings constitute
Confidential Information. The parties shall take reasonable steps
to document the Confidential Information disclosed during such
Meetings to assist in the protection and enforcement of the
proprietary interest of the disclosing party in such Confidential
Information.
5.9 The representative of Mpath shall certify in writing at each
Quarterly Coordination Meeting that Mpath has complied with all
its obligations under Article 6.3 below.
6 Improvements
------------
6.1 Both Mpath and SegaSoft may make, or SegaSoft may cause to be
made by SegaSoft Developers, Improvements to the Licensed
Technology during the term of this Agreement.
6.2 When reasonable and practicable, any Improvements developed by
SegaSoft directly, or which SegaSoft has caused to be developed
by SegaSoft Developers, will be maintained in source files
separate from Mpath source files, so that separate source trees
and build environments can be maintained to the maximum extent
reasonably possible.
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6.3 Any and all Improvements developed by Mpath which are intended
for general commercial use or release shall be made available to
SegaSoft [XXXXX].
6.3.1 At the Quarterly Coordination Meeting pursuant to Article
5 above, Mpath shall deliver to SegaSoft those
Improvements intended for general commercial use or
release.
(a) Mpath shall provide such Improvements in the then-
current version to SegaSoft at least [XXXXX] prior
to its expected commercial use or release of such
Improvements or the commercial use or release of
products which incorporate such Improvements.
(b) If the period between conception of such
Improvements and the date of expected general
commercial use or release of such Improvements is
less than [XXXXX], then Mpath shall provide such
Improvements to SegaSoft at the earliest
practicable time after conception of such
Improvements. Mpath shall indicate for all
delivered versions the stage of development,
projected completion date, and date of expected
general commercial use or release. Notwithstanding
that versions of developments are supplied to
SegaSoft pursuant to this Article 6.3.1, Mpath
shall in any case provide the final version of all
Improvements to SegaSoft in a reasonably prompt
manner.
6.3.2 Thereafter, all such Improvements shall be deemed to be
included in the Licensed Technology and SegaSoft's use
thereof shall be governed by the terms and conditions of
this Agreement.
6.3.3 Mpath shall provide SegaSoft with reasonable Technical
Assistance in the use of such Improvements pursuant to
Article 4 at [XXXXX] charge provided that pre-commercial
release or use versions of Improvements referenced in
Article 6.3.1 above shall not be eligible for Technical
Assistance except as determined by Mpath at its sole
discretion.
6.4 SegaSoft shall notify Mpath of any Improvements which are
developed by SegaSoft, or which SegaSoft causes to be developed,
which constitute a significant new feature not earlier included
in the Licensed Technology. SegaSoft agrees to enter into
negotiations to offer the right to use such Improvements to Mpath
under a license agreement.
6.4.1 Mpath shall have no obligation to acquire the rights to
any SegaSoft Improvements. If Mpath desires to license
the SegaSoft Improvements, the parties shall negotiate in
good faith the terms and conditions for such
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license. SegaSoft may limit the license of the SegaSoft
Improvements to the Licensed Purpose. In consideration
for these rights to the SegaSoft Improvements, Mpath will
pay to SegaSoft [XXXXX].
6.4.2 Upon request of the other party, each party will execute
and deliver to the other party such additional agreements
or instruments as may be necessary or appropriate to
document the rights and obligations of the parties with
respect to any SegaSoft Improvements licensed to SegaSoft
pursuant to this Article 6.4.
6.4.3 To the extent that (i) SegaSoft develops non-significant
features relating to the Licensed Technology and (ii)
discloses such features to Mpath, then SegaSoft shall
grant Mpath an option to acquire all rights and interests
in such features from SegaSoft to Mpath at [XXXXX]
charge. If Mpath exercises such option, then such
features shall be considered Improvements developed by
Mpath and shall be deemed to be included in the Licensed
Technology.
7 Display of Logo
---------------
7.1 Mpath agrees to place the SegaSoft on-line service logo supplied
by SegaSoft on the following media when such media is used to
promote the Mpath platform: (i) print advertising, and (ii) Web
sites.
7.2 SegaSoft shall place the following logos supplied by Mpath on the
following media when such media is used to promote the following
products:
<TABLE>
<CAPTION>
========================================================================================================
PRODUCT LOGO MEDIA
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sega on-line service Mpath platform logo print advertising and
Web sites
- --------------------------------------------------------------------------------------------------------
Games developed by or for SegaSoft that are Mplayer logo print advertising and
offered on the Mpath on-line service retail packaging of such
games
=========================================================================================================
</TABLE>
7.3 The above logo placements shall be at no charge to the party
whose logo is being displayed. The displaying party shall display
such logo(s) in accordance with such party's logo use practices
and in a size and placement which is reasonable and consistent
with general customary practice.
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8 Game Development
----------------
SegaSoft will develop, or have developed, at least [XXXXX] games in
each [XXXXX] period commencing [XXXXX]. Such games shall be based on or
incorporate the Licensed Technology and shall be of a quality which is
reasonably commensurate with SegaSoft's other games which are based on
or incorporate the Licensed Technology. SegaSoft shall provide the
[XXXXX] games required under this Article 8 no later than [XXXXX].
SegaSoft shall grant Mpath a license to such games for use on the Mpath
on-line Internet game service upon conclusion of a royalty-bearing
license agreement, the terms and conditions of which shall be similar
to Mpath's then-standard content developer license agreement for games
based on or incorporating the Licensed Technology.
9 Sale of Licensed Technology
---------------------------
9.1 If Mpath desires to sell the proprietary rights to any portion of
the Licensed Technology, Mpath shall give notice to SegaSoft of
such proposed sale provided that this Article 9 shall not apply
where the sale of the Licensed Technology is in conjunction with
the sale of substantially all the assets of Mpath for which
shareholder approval is required. Such notice shall specifically
list the items of Licensed Technology which Mpath desires to sell
("Listed Licensed Technology"). Mpath shall deliver such notice
to SegaSoft at the time of commencing any discussions or
negotiations with any third party. If a third party instigates
discussions concerning the purchase of any portion of the
Licensed Technology, Mpath shall promptly notify SegaSoft of such
specific portions of the Licensed Technology being discussed.
9.2 SegaSoft shall, within [XXXXX] of the notice given by Mpath
pursuant to Article 9.1 above, notify Mpath whether it is
interested in purchasing any or all of the Listed Licensed
Technology.
9.3 If SegaSoft indicates to Mpath that it desires to purchase any or
all of the Listed Licensed Technology, the parties shall
negotiate in good faith the terms and conditions of such purchase
and sale. Senior executives of each party shall participate in
the negotiations and these negotiations shall continue for a
period no shorter than[XXXXX] unless an agreement can be reached
sooner.
9.4 If the parties fail to reach agreement on the terms and
conditions of a purchase and sale agreement for the Listed
Licensed Technology, then at any time in the [XXXXX] following
the conclusion of the negotiations between Mpath and SegaSoft,
Mpath may sell the Listed Licensed Technology to any third party,
provided that all of the Listed Licensed Technology is sold.
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9.5 If, after [XXXXX] from the conclusion of negotiations between
Mpath and SegaSoft pursuant to Article 9.4 above, (i) Mpath has
not executed a purchase and sale agreement for the Listed
Licensed Technology pursuant to Article 9.4 above and (ii) Mpath
subsequently desires to sell the Listed Licensed Technology, then
Mpath shall notify SegaSoft in the same manner as if Mpath were
proposing to sell such Listed Licensed Technology under Article
9.1 and the process described in this Article 9 shall apply.
9.6 The parties agree that any sale to any third party of the
Licensed Technology, or portion thereof, shall be subject to the
rights granted to SegaSoft pursuant to this Agreement.
10 Confidential Information
------------------------
10.1 Each party acknowledges the proprietary nature of the
Confidential Information and the business advantage and
opportunity provided thereby. Accordingly, each party agrees that
the Confidential Information it receives from the other will be
disclosed only to such of its employees (and independent
contractors, if permitted under the terms of this Agreement) who
have a need to know such particular information in furtherance of
their duties and are bound to an enforceable written agreement
prohibiting them from disclosing any such information to any
other party. Except as specifically provided for under this
Agreement, neither party shall disclose any Confidential
Information to any third party without the prior written consent
of the other party.
10.2 The provisions of this Article 10 shall not apply to data or
information disclosed by either party, if such information:
10.2.1 is in the possession of the receiving party as of the
Effective Date, independent of any disclosure by the
disclosing party, as evidenced by written documents in
existence prior to the date of any disclosure of such
information to the receiving party by the disclosing
party. Notwithstanding the foregoing sentence or any
provisions in this Agreement to the contrary, the Non-
Disclosure Agreement dated January 22, 1996 between the
parties hereto shall remain in full force and effect
after the Effective Date.
10.2.2 is or becomes available to the public, separate and apart
from any disclosures by the receiving party;
10.2.3 is required to be disclosed under applicable laws,
regulations, or orders of any governmental authority
(including, without limitation,
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the rules and regulations of the Securities and
Exchange Commission relating to the filing of exhibits
to filings required under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as
amended);
10.2.4 is learned by the receiving party from a third party
entitled to disclose such information, provided the
receiving party complies with any restrictions imposed
by the third party; or
10.2.5 is independently developed by the receiving party.
10.3 The parties shall (i) cooperate with each other prior to
releasing information concerning this Agreement and the
transactions contemplated hereby, (ii) furnish to the other
drafts of all press releases or other public announcements
relating thereto prior to publication, and (iii) obtain the
consent of the other party prior to the issuance of such press
releases or the release of any other public announcements
relating thereto. Notwithstanding the foregoing, either party may
disclose information concerning this Agreement and the
transactions contemplated hereby, including providing a copy of
this Agreement, in connection with the due diligence review of a
party by potential business partners, investors, or investment
bankers, to such entities and to their employees, agents,
attorneys and auditors, subject to appropriate confidentiality
restrictions.
11 Representations and Warranties
------------------------------
11.1 Mpath hereby represents and warrants that:
11.1.1 Mpath has developed certain trade secrets and other
intellectual property rights and know-how with respect
to the Licensed Technology and has taken all
commercially reasonable steps to protect its
inventions, including the filing and prosecution of
applications and registrations, patent and otherwise,
with appropriate governmental agencies, and the
safeguarding of its trade secrets.
11.1.2 Mpath owns or has all necessary right, title and interest
to the Licensed Technology to be provided by Mpath to
SegaSoft under this Agreement;
11.1.3 The grant of the licenses hereunder will not violate any
obligation of Mpath to any third party, and Mpath has
all requisite legal and corporate power to execute and
deliver this Agreement and to grant SegaSoft licenses
to the Licensed Technology;
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11.1.4 The Licensed Technology enables the operation of wide area
information processing networks for various
interactive, multi-user applications and the
performance and characteristics of the Licensed
Technology will substantially conform to the
specifications, if any, set forth in the Technical
Documents.
11.1.5 The Licensed Technology and Technical Documents and any
other such rights, materials, data and information made
available by Mpath to SegaSoft will be complete and
current versions which are in the possession of or
available to Mpath. The items transferred to SegaSoft
will in all material respects be identical to the
Licensed Technology and Technical Documents and other
such data, information and materials used by Mpath in
its utilization of the Licensed Technology;
11.1.6 The use by SegaSoft of the Licensed Technology for the
Licensed Purpose will not infringe the intellectual
property rights of any third party. Mpath does not make
any representations or warranties as to any
Improvements developed by SegaSoft or software made
available by SegaSoft.
11.2 SegaSoft hereby represents and warrants that SegaSoft has all
requisite legal and corporate power to execute and deliver this
Agreement.
12 Indemnity
---------
Subject to the limitation of liability in Article 13 below, Mpath shall
defend, indemnify and hold SegaSoft harmless against any and all
claims, demands, suits, proceedings, losses, liabilities, damages,
costs and expenses (including reasonable attorneys' fees) (collectively
"Liabilities") which are attributable to (a) any allegation that
SegaSoft's use, marketing or distribution of the Licensed Technology
pursuant to this Agreement infringes any other person's, firm's, or
entity's patent, copyright, trademark, trade secret or other
proprietary right, existing under the laws of any jurisdiction
worldwide, or (b) any defect of or computer virus embedded within the
Licensed Technology. Mpath shall further pay any costs and damages
finally awarded against SegaSoft which are attributable to any such
claim. Mpath's indemnification obligation is subject to the conditions
that (i) SegaSoft shall promptly have notified Mpath in writing of any
such claim; (ii) Mpath shall have had the ability to control the
defense and any settlement negotiations; and (iii) SegaSoft shall have
provided Mpath with all cooperation reasonably requested by Mpath.
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Furthermore, Mpath's indemnification obligation solely with respect to
subpoint (a) above shall be subject to the conditions that (i) Mpath
shall have the right to obtain a license on behalf of SegaSoft with
regard to the alleged infringement, or (ii) Mpath may design and
SegaSoft agrees to implement reasonable workarounds to avoid any
alleged infringement so long as such workarounds do not materially
effect the functionality or features of the Licensed Technology.
13 Limitation of Liability
-----------------------
13.1 EXCEPT AS EXPRESSLY PROVIDED IN ARTICLE 11 ABOVE, NEITHER PARTY
GRANTS TO THE OTHER PARTY ANY WARRANTIES, EITHER EXPRESS OR
IMPLIED, AS TO THE LICENSED TECHNOLOGY, TECHNICAL DOCUMENTS,
IMPROVEMENTS, OR ANY OTHER MATERIALS, DATA OR SERVICES PROVIDED
HEREUNDER, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.
13.2 EXCEPT FOR A BREACH OF ARTICLES 11 OR 12, ABOVE, NEITHER PARTY
SHALL BE LIABLE UNDER ANY CONTRACT, STRICT LIABILITY, NEGLIGENCE
OR OTHER LEGAL OR EQUITABLE THEORY (EXCEPT THOSE BASED ON
INTENTIONAL OR GROSSLY NEGLIGENT TORTS) FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, LOST PROFITS, LOST
DATA OR COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR
SERVICES. NEITHER PARTY SHALL BE ENTITLED TO INJUNCTIVE RELIEF
EXCEPT IN CASES OF BREACH OF THE CONFIDENTIALITY OBLIGATIONS
UNDER ARTICLE 10.
13.3 MPATH'S TOTAL LIABILITY UNDER THIS AGREEMENT SHALL NOT EXCEED
[XXXXX] PLUS THE TOTAL AGGREGATE AMOUNT OF ALL ROYALTIES ACTUALLY
PAID BY SEGASOFT TO MPATH PURSUANT TO ARTICLE 3 ABOVE.
14 Term and Termination
--------------------
14.1 This Agreement shall become effective on the Effective Date and
shall remain in force until terminated pursuant to this Article
14.
14.2 After [XXXXX] from the Effective Date, Mpath shall have the right
to terminate its obligations to provide Technical Assistance
under Article 4 of this Agreement, upon [XXXXX] written notice to
SegaSoft. Mpath may give notice of termination to SegaSoft
beginning [XXXXX] after the Effective Date.
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14.3 After [XXXXX] from the Effective Date, SegaSoft shall have the
right to terminate, upon [XXXXX] written notice of termination to
Mpath, all rights and obligations under this Agreement. SegaSoft
may give notice of termination to Mpath beginning [XXXXX] after
the Effective Date.
14.4 SegaSoft shall notify Mpath of its intent to discontinue use of
the Licensed Technology [XXXXX] prior to the intended date of
discontinuance. SegaSoft may not give notice of termination to
Mpath until at least [XXXXX] after the Effective Date.
14.5 Material breach or default of the terms of this Agreement by
either party shall be an Event of Default and shall have the
consequences described in Article 14.6 below. The non-breaching
party shall, by written notice, specify the cause in detail of
the material breach or default, provided that if the offending
party shall during the thirty (30) days immediately following its
receipt of written notice of the breach or default, remedy the
breach or default upon which the notice is based, then the notice
shall not become effective, and this Agreement shall remain in
full force and effect. Notwithstanding the above, in the event
either party materially breaches its obligations under Article 10
above, this shall constitute an immediate Event of Default and
the non-breaching party shall be entitled to those remedies as
set forth in Article 14.6 below.
14.6 Upon an Event of Default under this Article 14, the following
shall occur:
14.6.1 in the event of termination by Mpath of its Technical
Assistance obligations under Article 14.2 above, all
restrictions on SegaSoft's use of the Licensed
Technology under this Agreement shall lapse and
SegaSoft shall have the right to use the Licensed
Technology for the Licensed Purpose in perpetuity on a
royalty-free basis notwithstanding any provisions in
Articles 2 or 3 to the contrary.
14.6.2 in the Event of Default for SegaSoft's material breach or
default of this Agreement, Mpath's grant of the
licensed rights to SegaSoft thereof, shall remain in
full force and effect provided that, in the event that,
pursuant to Article 17.3 below, the arbitrator renders
a final decision which determines that SegaSoft has
materially breached a provision of this Agreement,
SegaSoft shall pay to Mpath any monetary judgement
within thirty (30) days of receiving notice thereof. In
the event SegaSoft does not pay to Mpath the full
amount of such monetary judgement within thirty (30)
days of receiving notice thereof, this Agreement, and
the license granted hereunder, shall immediately
terminate and
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SegaSoft shall perform the obligations required under
Article 14.6.3.
(a) Notwithstanding Article 14.6.2, in the Event of
Default by SegaSoft for material breach or default
of (i) Article 10 relating to Confidential
Information or (ii) SegaSoft's obligation to
restrict its use of the Licensed Technology to the
Licensed Purpose, this Agreement, including,
without limitation, Mpath's grant of the licensed
rights to SegaSoft thereof, shall remain in full
force and effect provided that Mpath shall be
entitled to injunctive relief pursuant to Article
17.4 below prior to the arbitrator's final
determination under Article 17.3, in addition to
other remedies at law or equity which do not
conflict with the provisions of this Agreement. In
the event that, pursuant to Article 17.3 below,
the arbitrator renders a final decision which
determines that SegaSoft has materially breached
(i) its obligations under Article 10 relating to
Confidential Information or (ii) its obligation to
restrict its use of the Licensed Technology to the
Licensed Purpose, then this Agreement, and the
license granted hereunder, shall immediately
terminate and SegaSoft shall perform the
obligations required under Article 14.6.3.
14.6.3 in the event of termination by SegaSoft of this Agreement
pursuant to Article 14.3, the license granted by Mpath
to SegaSoft under this Agreement shall immediately
terminate and SegaSoft shall (a) immediately cease all
use, distribution, selling, reproduction, development,
marketing, and sublicensing of the Licensed Technology
and shall cease all use of the Confidential Information
relating to, or embodied in, the Licensed Technology;
(b) within fifteen (15) calendar days of termination,
deliver to Mpath the master copy and any and all other
copies of the Licensed Technology and the Confidential
Information which are in written, recorded, or other
tangible form, then in SegaSoft's possession; and (c)
notwithstanding the above, SegaSoft shall retain all
right and interest in Improvements developed by
SegaSoft which have not been acquired by Mpath pursuant
to Article 6.4.3 above.
14.6.4 in the Event of Default for Mpath's material breach or
default, this Agreement, including, without limitation,
Mpath's grant of the licensed rights to SegaSoft
thereof, shall remain in full force and effect provided
that SegaSoft shall be entitled to injunctive relief
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pursuant to [XXXXX] below prior to the arbitrator's
final determination under [XXXXX], in addition to any
other remedies at law or equity which do not conflict
with the provisions of this Agreement.
14.7 Notwithstanding any provision of this Article 14, Article 10
shall survive the termination of this Agreement.
15 Compliance With Laws
--------------------
15.1 Each party shall at all times and at its own expense strictly
comply with all applicable laws, rules, regulations, and
governmental orders, now or hereafter in effect, relating to the
performance of this Agreement.
15.2 Without limiting the generality of Article 15.1, each party
specifically acknowledges that the Licensed Technology and
certain Confidential Information are subject to United States
export controls, pursuant to the Export Administration
Regulations, 15 C.F.R. Parts 768-799. Each party agrees to
strictly comply with all requirements of the Export
Administration Regulations with respect to the Licensed
Technology and Confidential Information. Without limiting the
generality of the foregoing obligation, each party expressly
agrees that, without prior written authorization of the United
States Commerce Department, it will not, and will cause its
representatives, employees, agents, contractors, and customers to
agree to not, (a) export, reexport, divert or transfer any
Licensed Technology or Confidential Information, or any direct
product thereof, to any destination, company, entity, or person
prohibited by the Export Administration Regulations, including
the Table of Denial Orders, or (b) disclose any Licensed
Technology or Confidential Information to any national of any
country when such disclosure is prohibited by the Export
Administration Regulations.
16 Notices
-------
All notices, reports, and other communications pursuant to this
Agreement shall be made in writing and sent by certified or registered
first-class mail, return receipt requested and postage prepaid, or by
courier, hand-delivery, or facsimile. Notices shall be sent to a party
at the address shown at the beginning of this Agreement or to such
other address of which the party has given prior notice to the sending
party.
17 Governing Law and Dispute Resolution
------------------------------------
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17.1 This Agreement shall be governed by the laws of the State of
California without regard to the conflicts of laws provisions thereof.
17.2 No arbitration with respect to any claim, dispute or controversy
arising out of or in connection with or relating to this Agreement, or
the breach or alleged breach thereof shall arise until the following
procedures have been satisfied. Representatives from each party will
meet within two (2) business days after receipt of notice from either
party to review any dispute with respect to the interpretation of any
provision of this Agreement or with respect to the performance of
either party under this Agreement. In the event a disagreement or
dispute under this Agreement is not resolved by the designated
representatives of each party by mutual agreement within three (3)
business days after the initial meeting to discuss the disagreement,
which resolutions shall be evidenced by a document signed by both
parties, either party may within two (2) business days thereafter
provide the other written notice specifying the terms of such
disagreement in reasonable detail and the time sensitivity of such
issue. Upon receipt of such notice, the Chief Executive Officer of
each party shall meet at a mutually agreed upon time, but no later
than three (3) business days after receipt of such notice, and
location for the purpose of resolving such disagreement. They will
discuss the problems and/or negotiate in an effort to resolve the
disagreement or negotiate an acceptable interpretation or revision of
the applicable portion of this Agreement mutually agreeable to both
parties, without the necessity of formal procedures relating thereto.
During the course of such negotiation, the parties will reasonably
cooperate and provide information so that each of the parties may be
fully informed with respect to the issues in dispute. The institution
of arbitration to resolve the disagreement may occur only after the
earlier of: (a) the Chief Executive Officers mutually agree that
resolution of the disagreement through continued negotiation is not
likely to occur, or (b) five (5) business days after such initial
meeting between such officers.
17.3 Subject to Article 17.2, any claim, dispute or controversy arising out
of or in connection with or relating to this Agreement or the breach
or alleged breach thereof shall be submitted by the parties to
arbitration in San Mateo County, California in accordance with the
then-current commercial arbitration rules of the American Arbitration
Association ("AAA") except as otherwise provided herein. All
proceedings shall be held in English and a transcribed record prepared
in English. The parties shall choose, by mutual agreement, one (1)
arbitrator within five (5) business days of receipt of notice of the
intent to arbitrate. If no arbitrator is appointed within the times
herein provided or any extension of time which is mutually agreed
upon, the AAA shall make such appointment within five (5) business
days of such failure. Such arbitration shall be concluded, including
the receipt by the parties of a final decision, no later
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than thirty (30) calendar days after the date of appointment, and such
arbitration shall be binding on all parties and shall constitute the
final resolution of such dispute. No party shall commence any action
against another to resolve such dispute in any court except to confirm
and enforce such an arbitrator's award. The arbitrator (i) shall
interpret and construe this Agreement in accordance with, and shall be
bound by, the laws of the State of California (except that this
Section shall be governed by the Federal Arbitration Act); (ii) shall
establish and enforce appropriate rules to ensure that the
proceedings, including the decision, be kept confidential and that all
confidential information of the parties be kept confidential and be
used for no purpose other than the arbitration and (iii) shall have
the power to issue an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this
Agreement and the terms and conditions hereof in addition to any other
remedies at law or in equity not contrary to the provisions of this
Agreement. The judgment rendered by the arbitrator may include costs
of arbitration, reasonable attorneys' fees and reasonable costs for
expert and other witnesses. Any judgment on such award may be entered
in any court having jurisdiction thereof. If the issues in dispute
involve technical matters, any arbitrator chosen hereunder shall have
educational training and/or experience sufficient to demonstrate a
reasonable level of relevant technical knowledge.
17.4 Each party acknowledges and agrees that due to the unique nature of
Confidential Information and the Licensed Technology, there can be no
adequate remedy at law for any breach of (i) the obligations regarding
Confidential Information, (ii) the prohibition of using the Licensed
Technology outside the Licensed Purpose, or (iii) the obligation of
Mpath to provide SegaSoft with Improvements, that any such breach may
allow the breaching party or third parties to unfairly compete with
the non-breaching party resulting in irreparable harm to the non-
breaching party, and therefore, that upon any such alleged breach, and
prior to the arbitrator's final decisions under Article 17.3 above,
the non-breaching party shall be entitled to appropriate equitable
relief in addition to whatever remedies it might have at law.
18 General Provisions
------------------
18.1 The headings and subheadings in this Agreement are provided for
convenience only and shall not control the interpretation of the
Agreement.
18.2 In the event that any provision hereof is found invalid or
unenforceable pursuant to a final judicial decree or decision, the
remainder of this Agreement will remain valid and enforceable
according to its terms.
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18.3 The parties specifically acknowledge and agree that, in the exercise
of their rights and the performance of their duties under this
Agreement, they are and shall be independent contractors. Neither
party shall bind or attempt to bind the other party to any contract or
other obligation, and neither party shall represent to any third party
that it is authorized to act on behalf of, or bind, the other party.
18.4 Except as specifically provided in this Agreement, neither party may
assign or transfer its rights or obligations under this Agreement
without the other party's prior written consent, except in connection
with a merger, reorganization, or sale of substantially all the assets
of such party and in such event the surviving corporation shall
succeed to the rights and obligations under this Agreement. Any
proposed assignment made without the requisite consent shall be null
and void.
18.5 The failure of either party to assert any of its rights under this
Agreement shall not be deemed to constitute a waiver of that party's
right thereafter to enforce each and every provision of this Agreement
in accordance with its terms.
18.6 Notwithstanding anything in this Agreement to the contrary, neither
party shall be liable to the other party for any failure to perform or
delay in the performance of any obligation pursuant to this Agreement
when such failure to perform or delay in performance is caused by an
event of force majeure; provided, however, that the party whose
performance is prevented or delayed by such event of force majeure
shall give prompt notice thereof to the other party. For purposes of
this Article 18.6, the term "force majeure" shall include war,
rebellion, civil disturbance, earthquake, fire, flood, strike,
lockout, labor unrest, acts of governmental authorities, shortages of
materials, acts of God, acts of the public enemy and, in general, any
other causes or conditions beyond the reasonable control of the
parties.
18.7 This Agreement constitutes the entire agreement between the parties
and supersedes all prior agreements, understandings and other
communications with respect to the subject matter hereof. No
modification or amendment of the Agreement shall be effective unless
in writing and executed by a duly authorized representative of each
party.
18.8 The parties agree that this Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of
which together constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Technology License Agreement effective as of the
Effective Date.
MPATH INTERACTIVE, INC.
By: /s/ Paul Matteucci
-------------------
Name: Paul Matteucci
Title: President and Chief Executive Officer
SEGASOFT, INC.
By:/s/ Gary Griffiths 4/15/96
--------------------------------
Name: Gary Griffiths
------------------------------
Title: Executive Vice President and
-----------------------------
Chief Operating Officer
-----------------------------
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ATTACHMENT A
Licensed Technology
-------------------
Licensed Technology:
- -------------------
This is a complete list of all software that Mpath has developed by the
Effective Date:
1. Server Software
---------------
A. Central Server Software
-----------------------
[XXXXX]
B. Game Server Software
--------------------
[XXXXX]
2. Client Software
---------------
A. Application Software
--------------------
[XXXXX]
B. Libraries and Components
------------------------
[XXXXX]
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[XXXXX]
3. Additional Technology
---------------------
A. Protocol Software ("MCAP")
--------------------------
[XXXXX]
B. Software Development Kit
------------------------
[XXXXX]
C. Test Software
-------------
[XXXXX]
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ATTACHMENT B
Royalty Rates
-------------
<TABLE>
<CAPTION>
============================================================================
[XXXXX] Percentage of Net
Revenue
- ----------------------------------------------------------------------------
<S> <C>
[XXXXX] [XXXXX]
- ----------------------------------------------------------------------------
[XXXXX] [XXXXX]
- ----------------------------------------------------------------------------
[XXXXX] [XXXXX]
- ----------------------------------------------------------------------------
[XXXXX] [XXXXX]
- ----------------------------------------------------------------------------
[XXXXX] [XXXXX]
============================================================================
</TABLE>
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ATTACHMENT C
Standard Business Model
-----------------------
<TABLE>
<CAPTION>
==================================================================================================
[XXXXX] Minimum Mpath Revenue [XXXXX] Threshold for
[XXXXX] Expected Triggering Terms of Article
Per Quarter ($) 3.2.2 ($)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
[XXXXX] [XXXXX] [XXXXX]
[XXXXX] [XXXXX] [XXXXX]
[XXXXX] [XXXXX] [XXXXX]
[XXXXX] [XXXXX] [XXXXX]
[XXXXX] [XXXXX] [XXXXX]
==================================================================================================
</TABLE>
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EXHIBIT 10.11
AMENDMENT #1
TO
TECHNOLOGY LICENSE AGREEMENT
THIS AMENDMENT #1 to Technology License Agreement is made and entered into this
27th day of November, 1996, by and between
SEGASOFT, INC., a Delaware corporation, ("SegaSoft"),
MPATH INTERACTIVE, INC., a Delaware corporation ("Mpath"), and
CATAPULT ENTERTAINMENT, INC., a California corporation ("Catapult")
with reference to the following facts:
SegaSoft and Mpath entered into a Technology License Agreement on April 15, 1996
(the "Agreement") to which reference is hereto made. The parties now wish to
amend the Agreement to include certain technology of Catapult, a wholly owned
subsidiary of Mpath. SegaSoft, Mpath and Catapult intend that Catapult shall
become a party to the Agreement and that Catapult shall jointly and severally
assume the obligations of Mpath under the Agreement and that both Mpath and
Catapult shall be jointly and severally liable for performance of the
obligations hereunder.
The parties now agree as follows:
1. Articles 1.1, 1.3, 1.4, 1.5, 1.7, 1.9, 1.10, and 1.11 of the Agreement
are amended to read as follows:
1.1 "Additional Technology" shall mean and include the MCAP
Protocol and all other data, information, software, or other
technology of Mpath and Catapult as specified in Attachment A
hereto, and all Improvements thereto developed by Mpath or
Catapult during the term of this Agreement, as well as all
related Technical Documents.
1.3 "Client Software" shall mean the source code and object code
of Mpath's Client Software as specified in Attachment A
hereto, and all Improvements thereto developed by Mpath during
the term of this Agreement, including all versions of Mpath's
Client Software for any platform which is either (i) made
generally commercially available by Mpath or (ii) developed
and ported by Mpath, at the specific request of SegaSoft, to a
platform not otherwise made generally commercially available
by Mpath, as well as all related Technical Documents. Further,
"Client Software" shall mean and include the source code and
object code of Catapult's Client Software as specified in
Attachment A hereto, and all
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Improvements thereto developed by Catapult or Mpath during the
term of this Agreement, including all versions of Catapult's
Client Software for any platform which is either (i) made
generally commercially available by Catapult or Mpath or (ii)
developed and ported by Catapult or Mpath, at the specific
request of SegaSoft, to a platform not otherwise made
generally commercially available by Catapult or Mpath, as well
as all related Technical Documents.
1.4 "Confidential Information" shall mean and include any and all
data and information not in the public domain, including,
without limitation, know-how and trade secrets, relating to,
contained in, or embodied in: (i) the Licensed Technology or
(ii) the products, services, business, and/or affairs of
either Catapult or Mpath or SegaSoft. Confidential Information
may be communicated orally, visually, in writing, or in any
other recorded or tangible form. All data and information
shall be considered to be Confidential Information hereunder
(a) if either party has marked them as such, (b) if either
party, orally or in writing, has advised the other party of
their confidential nature, or (c) if, due to their character
or nature, a reasonable person in a like position and under
like circumstances would treat them as confidential.
1.5 "Improvements" shall mean and include any modifications,
upgrades, improvements, extensions, including, without
limitation, major, minor and maintenance releases, to or for
the Licensed Technology which are made generally commercially
available during the term of this Agreement, as well as all
related Technical Documents. To the extent such Improvements
are made by third parties with the rights to such Improvements
being granted to Catapult or Mpath or SegaSoft, such
Improvements will only be considered Improvements for purposes
of this Agreement if they can be sublicensed by the party on
whose behalf such Improvements were developed.
1.7 "Licensed Technology" shall mean the Client Software, Server
Software, Catapult Hardware, and Additional Technology as
specified in Attachment A hereto.
1.9 "Server Software" shall mean the source code and object code
of Mpath's Game Server Software and Central Server Software as
specified in Attachment A hereto, and all Improvements thereto
developed by Mpath during the term of this Agreement,
including all versions of Mpath's Game Server Software and
Central Server Software for any platform which is either (i)
made generally commercially available by Mpath, or (ii)
developed and ported by Mpath, at the specific request of
SegaSoft, to a platform not otherwise made generally
commercially available by Mpath, as well as all related
Technical Documents. Furthermore, "Server Software" shall mean
and include the source code and object code of Catapult's
Server Software as specified in Attachment A hereto, and all
Improvements thereto developed by Catapult or Mpath during the
term of this Agreement, including all versions of Catapult's
Server Software for any platform which is
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either (i) made generally commercially available by Catapult
or Mpath, or (ii) developed and ported by Catapult or Mpath,
at the specific request of SegaSoft, to a platform not
otherwise made generally commercially available by Catapult or
Mpath, as well as all related Technical Documents.
1.10 "Technical Assistance" shall mean and include that technical
assistance to be provided by Catapult or Mpath to SegaSoft as
more fully described under Article 4
1.11 "Technical Documents" shall mean Catapult's or Mpath's
technical information in any form, documentary, electronic or
otherwise, including technical specifications, which are
generally used by Catapult or Mpath personnel internally in
connection with the Licensed Technology and the Improvements
thereto.
2. Article 1 is amended to include the following:
1.12 "Catapult Hardware" shall mean and include Catapult's Hardware
as specified in Attachment A hereto, and all Improvements thereto
developed by Catapult or Mpath during the term of this Agreement,
including all versions of Catapult's Hardware for any platform which is
either (i) made generally commercially available by Catapult or Mpath,
or (ii) developed and ported by Catapult or Mpath, at the specific
request of SegaSoft, to a platform not otherwise made generally
commercially available by Catapult or Mpath, as well as all related
Technical Documents.
1.13 "Intellectual Property Rights" shall mean and include all
patents, copyrights, designs, drawings, trademarks, service marks,
trade names and other proprietary rights, and all applications and
registrations therefor, which pertain to the Licensed Technology.
3. Articles 2.1 and 2.2 are amended as follows:
2.1 Mpath grants to SegaSoft on a [XXXXX] basis, and Catapult
grants to SegaSoft on a [XXXXX] basis, and SegaSoft accepts
from Mpath and Catapult, a worldwide, non-exclusive license to
use, copy, distribute, sell, market, develop, modify,
sublicense, localize, and incorporate into other software
products, the Licensed Technology, and the Intellectual
Property Rights embodied therein, solely for the Licensed
Purpose, subject to the following terms and restrictions:
2.1.1 The Licensed Technology (not including the Catapult
Hardware) shall be distributed in object code form
only, provided that SegaSoft shall have the right to
distribute, deploy, and load the object code of the
Server Software onto servers owned, leased, or
otherwise controlled by SegaSoft, and as otherwise
specifically provided for in this Article 2.
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2.1.2 The source code of the Licensed Technology may not be
made available to any person, firm, or entity without
the prior written consent of Mpath, provided that
(a) SegaSoft employees shall have full access to
the source code of the Licensed Technology
for internal use;
(b) SegaSoft Developers who are porting the
Licensed Technology to a platform not made
generally commercially available by Mpath
shall have access to the source code of the
Licensed Technology solely for the purpose
of such porting for the Licensed Purpose;
(c) SegaSoft Developers who are developing games
shall only have access to those source code
portions of the Licensed Technology which
are contained in the then-current Mpath
Software Development Kit and relating to the
Licensed Technology for the Licensed
Purpose; and
(d) This Article 2.1.2 shall not apply to the
Catapult Hardware.
2.1.3 SegaSoft shall not distribute or sublicense the
object code or source code of the Server Software to
any third party which owns or operates an on-line
Internet-based multi-player gaming service. SegaSoft
shall include contractual prohibitions, in agreements
with third parties relating to the Licensed
Technology, which likewise restrict such third party
from distributing or sublicensing the object code or
source code of the Server Software to any third party
which owns or operates an on-line Internet-based
multi-player gaming service.
2.2 The rights granted to SegaSoft are non-assignable and
non-transferable provided that (a) SegaSoft may freely
transfer or assign any and all rights and obligations under
this Agreement to any of its Affiliates, without the prior
written consent of Mpath so long as (i) such Affiliate(s)
agrees in writing to be bound by this Agreement, and (ii)
SegaSoft or the Affiliate(s) gives Mpath notice of any such
assignment or transfer; in the event of such assignment or
transfer pursuant to this Article 2.2, SegaSoft agrees to
guarantee the performance by such Affiliate(s) of its
obligations under this Agreement; (b) Catapult may delegate
the performance of its obligations to Mpath without the prior
written consent of SegaSoft. Catapult and Mpath shall be
jointly and severally liable to SegaSoft for the performance
of this Agreement.
4. Article 13.3 is amended to read as follows:
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13.3 MPATH AND CATAPULT'S TOTAL LIABILITY IN THE AGGREGATE UNDER
THIS AGREEMENT SHALL NOT EXCEED [XXXXX] PLUS THE TOTAL
AGGREGATE AMOUNT OF ALL ROYALTIES ACTUALLY PAID BY SEGASOFT TO
MPATH PURSUANT TO ARTICLE 3 ABOVE.
5. The rights and obligations of Mpath under Articles 4, 6, 9, 10, 11.1,
12, 13, 14, 15, 16, 17 and 18 of the Agreement shall apply in the same
manner to Catapult.
6. Attachment A to the Agreement is amended to read as set forth in
Attachment A attached hereto.
7. The parties acknowledge and agree that Mpath and Catapult may merge
with and into each other and that such merger does not require the
prior consent of SegaSoft. In the event that Mpath is the surviving
corporation, then all rights and obligations of Catapult pursuant to
the Agreement, as amended, shall become those of Mpath. In the event
that Catapult is the surviving corporation, then all rights and
obligations of Mpath (including, without limitation, the right to
receive royalties from SegaSoft) shall become those of Catapult. The
parties agree that, if appropriate, they shall in good faith execute an
amendment to the Agreement to accomplish the foregoing.
8. Except as specifically amended hereby, the Agreement is ratified and
confirmed.
9. The parties agree that this Amendment may be executed in two or more
counterparts, each of which will be deemed an original, but which
together constitute one and the same instrument.
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The parties have caused their duly authorized representatives to execute this
Amendment #1 to Technology License Agreement as of the date first written above.
SEGASOFT, INC.
By: /s/ Gary Griffiths
-----------------------
Name: Gary Griffiths
Title: President
MPATH INTERACTIVE, INC.
By: /s/ Brian A. Apgar
-----------------------
Name: Brian A. Apgar
Title: Exec. VP
CATAPULT ENTERTAINMENT, INC.
By: /s/ Brian A. Apgar
-----------------------
Name: Brian A. Apgar
Title: Exec. VP
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ATTACHMENT A
Licensed Technology
-------------------
I. MPATH TECHNOLOGY
This is a complete list of all software that Mpath has developed by the
Effective Date or subsequently acquired:
1. Server Software
---------------
A. Central Server Software
-----------------------
[XXXXX]
B. Game Server Software
--------------------
[XXXXX]
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2. Client Software
---------------
A. Application Software
--------------------
[XXXXX]
B. Libraries and Components
------------------------
[XXXXX]
3. Additional Technology
---------------------
A. Protocol Software ("MCAP")
--------------------------
[XXXXX]
B. Software Development Kit
------------------------
[XXXXX]
C. Test Software
-------------
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[XXXXX]
II. CATAPULT TECHNOLOGY
This is a complete list of all software and hardware that Catapult has
developed by the Effective Date or subsequently acquired:
1. SERVER SOFTWARE
---------------
A. SERVER SOFTWARE, 16 BIT
1. Switcher - connection multiplexor with load balancing
2. ANI extraction and integration (SunSega)
- Local POP finder
- Client phone number
3. Front end process that manages client communication
- Mail upload, download and restore
- Game results logging and ranking modification
- User authentication
- Box restore capability
- Player list management and update
- Credit tracking
- interface to all other processes
4. Binlogger: realtime binary logs for detail record keeping
- dbmux: multiplex multi-process results to single database
- binlog loader: loads logs into Oracle for data extraction
5. rpc.segad: high performance database for user accounts, game
patches, and phone database
6. stitcher: realtime stitching of Oracle database to/from rpc.segad
based on change records
7. ranking system: Elo based ranking system to accurately rank
players based on their win/loss game results against other ranked
players
8. game results engine: results of all games are logged and analyzed
- top ten rankings weekly on wins, ranking with cheat filters
- tournament event parser with cheat detection
- phone analysis and pattern tracking for problem resolution
9. Matcher - Automatic game matching based on
- local calling area
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- current calling plan (local, Nationwide, long distance)
- skill level
- tournament modes
- playing history
- wait time
- user options
10. Catapult Event Monitor ("CEM")
- proactive service analysis package with scaled response (page,
email)
11. ASCII logs
- text logs with multiprocess multiplexing for realtime event
analysis in distributed system
12. XBAND Nationwide: Complex system for providing private, long
distance service through MCI calling card infrastructure
- account creation and phone number registration
- authorization code rotation
- estimated call duration tracking for billing limits
- capped billing plan with maximum credit incremental billing
13. billing engine: conducts transactions with electronic billing
agency
- credit card debit, crediting, forcing
- direct account debiting, crediting
- paper checks
- term billing
14. Japan billing: conditional smart card debiting based on
transaction success
15. News server
- delivers daily versions of news files to SunSega
B. SERVER SOFTWARE, XBAND PC
1. FE-client connection manager
- Message based realtime process
- Client versioning and patching
- Game variants and configuration arbitration
- Personification manager
- Multi-player and H2H game support
2. Multiplayer Matcher
- Multi-variable optimized opponent selection
- Static latency maps of internet providers define matching pools
- Skill level matching
- Variable number of users
3. Game Options
- Game options and configuration database
- Automatic configuration selection and download
4. XDB-High speed account database with multiprocess multiplexor
5. Chat Server
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6. Locater - User and process tracking for location and error recovery
7. Ticker tape - Dynamic time based downloads of "ticker tape"
information
8. Game results logging and player ranking
2. CLIENT SOFTWARE
---------------
A. CLIENT SOFTWARE XBAND PC
1. Windows 95 client application featuring
- personification editor
- chat
- page
- game version and support files
- versioning
- game options
- game results
2. Direct Play support
B. CLIENT SOFTWARE 16-BIT
1. Phone line management system including
- Call waiting detection/handling
- Error detection communication protocol
- multi-level error recovery
2. Patented system for patching games with HW support
3. Client versioning system
- OS patch version
- multiple prioritized game patches
4. Fully dispatched operating system ("XOS1")
- ROM based OS
- Database model for all data
- UNICODE support
- Easily localized (ported to Kanji, Spanish)
- Dispatcher based code model
- Field upgrades via server downloads
- Automatic recovery from memory loss
5. Smart card interface drivers
6. Patches for twenty five games
C. CLIENT SOFTWARE SATURN
1. Flash memory system driver-rotating database with usage balance
and bad block analysis
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2. Multitasking Operating System ("XOS2")
- CD ROM based
- multitasking
- Easily localized
3. TCP/IP stack
- full IP protocol implementation, supports PPP, PAP, CHAP,
UDP, TCP
4. Head-to-head game library
- Synchronous model for extremely low latency
- Minimal game modifications
- Multi-level error recovery with call waiting detection
5. Multiplayer game library ("XMP")
D. CLIENT TOOLS
1. Macintosh based console simulators
- Sega Genesis
- Super Nintendo
- Super Famicon
- Sega Saturn
2. Custom tool for creating news
3. Tools and scripts for crashlog analysis
4. Tools for pulling data from an existing modem and analyzing it
5. Photoshop filters for graphics creation
6. Tool for antialiasing fonts
3. ADDITIONAL TECHNOLOGY
---------------------
A. CUSTOMER SERVICE, 16 BIT
1. Mail processing & database: complete mail help desk facility with
- problem tracking database
- one button response for common issues
2. interface screens to XBAND Oracle database
3. IVR system
- Visual Basic based
- Fully integrated with Oracle database
- Customers can modify account view touch tones
- Full auto call dispatch functionality
- Statistics tracking including que size, hold time, call
time, etc.
B. SEGA CHANNEL
Complete functional prototype system that securely downloads games
over cable infrastructure that can be subsequently played over XBAND network.
Includes complete
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authorization and encryption system based on secure micro-controller. System has
been demonstrated in real cable plant in Sunnyvale, CA.
TECHNOLOGIES
1. Realtime authorization server for PC based head end with on the
fly key insertion, enable, disable, with multiple user access
levels
2. *Real time interleaver and data streamer for 2mbit datastream
3. *2 mbit QPSK modulator
4. Non-realtime data preparation tool that encodes and compresses
game data for later transmission with error correction.
5. *QPSK receiver/demodulator for 2mbit data stream
6. "Boris" ASIC (Verilog, Synopsys, Test vectors)
- data stream de-interleave with autolock
- secure micro interface for authorization and decryption
- DMA based data storage of decrypted data stream
- Complete "Fred" ASIC compatibility
7. Client software for realtime error correction on 68K
8. Integrated client software for managing software download from
cable modem
9. Flash programming software engine for realtime flash programming
10. Data interleave scheme for multi-channel download with error
correction
11. Embedded secure controller for all authorization functions
- 6805 based DES decryption code
- 6805 realtime communication protocol and SW with ASIC
12. Data files
- schematics for prototype board
- GERBERs, data files, and film for board fabrication
- CAD files for plastic case
*items must be licensed from ANTEC before use
4. HARDWARE
--------
A. HARDWARE
1. Verilog, Synopsys and Test Vectors for "Fred" ASIC incorporating
patented ROM patching technology
2. Sega Genesis Modem
- schematics
- layout, GERBERs, film for board fabrication
- CAD files for plastic case
3. Schematics for Super Nintendo Modem
- schematics
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- layout, GERBERs, film for board fabrication
- CAD files for plastic case
4. Japan Super Nintendo Modem
- schematics
- layout, GERBERs, film for board fabrication
- CAD files for plastic case
5. Functional Tester board and software
- Macintosh based function tester with test heads and software
for
- Sega Genesis Modem
- Super Nintendo Modem
- Super Famicon Modem
- Complete schematics and film for all boards
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EXHIBIT 10.12
AMENDMENT #2 TO TECHNOLOGY LICENSE AGREEMENT
This Amendment #2 to the Technology License Agreement ("Amendment #2") dated as
of March 28, 1997 (the "Effective Date"), SegaSoft, Inc. ("SegaSoft"), a
Delaware corporation, with its principal place of business at 255 Shoreline
Drive, Suite 510, Redwood City, California 94066 and Mpath Interactive, Inc.
("Mpath"), a Delaware corporation, with its principal place of business at
10455-A Bandley Drive, Cupertino, California 95014 hereby agree to further amend
their April 15, 1996 Technology License Agreement as already amended by their
November 27, 1996 Amendment #1 to the Technology License Agreement.
RECITALS
1. The parties executed a Technology License Agreement dated as of April 15,
1996 (the "Agreement").
2. The parties executed Amendment #1 to Technology License Agreement dated as
of November 27, 1996 ("Amendment #1").
3. The parties have agreed to collaborate on the implementation of an
Internet-based multiplayer game service based upon the Licensed Technology
and wish for Mpath to provide SegaSoft with certain assistance, as
described in Section 4.1.2 of the Agreement, for the set-up, installation
and operation of the Licensed Technology.
4. Mpath and SegaSoft desire to set forth the terms and conditions upon which;
(a) Mpath, from time-to-time, will purchase and cause to be installed
certain computer servers and install such computer servers in certain
Internet communications switching regions, (b) Mpath will sub-rent such
equipment to SegaSoft, and (c) Mpath or Mpath's renter(s) will be
responsible for all hardware maintenance of such equipment.
AGREEMENT
1. DEFINITIONS
-----------
All capitalized terms used in this Amendment #2 which are defined in the
Agreement and Amendment #1 have the respective meanings ascribed to them in the
Agreement and in Amendment #1. In addition, the following terms have the
respective meanings ascribed to them.
1.1 "Acceptance Certificate" means the acceptance form attached as Exhibit A.
1.2 "Acceptance Date" means the date on which installation of a Server pursuant
to Section 2.3 is completed and SegaSoft has accepted such installation.
1.3 "Central Server" means the computer server, located at SegaSoft's facility,
as described in the Installation Plan. Upon reasonable written notice to
Mpath, SegaSoft may from time-to-time, change the location of the Central
Server.
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1.4 "Forecast" means SegaSoft's twelve (12) month rolling for Server
installation. Each such forecast must include:
(a) the location of each Server to be installed in each month,
(b) the number of new Servers to be installed in each location in each
month, and
(c) the model and configuration of each new Server to be installed.
1.5 "Game Servers" mean the computer servers described in the Installation
Plan.
1.6 "Installation Certificate" means the installation completion form attached
as Exhibit B.
1.7 "Installation Plan" means the installation plan attached as Exhibit C.
1.8 "Mpath Internet Service" means the Internet service offered by Mpath to
individuals, currently on the PSINet Internet backbone. Upon written notice
to SegaSoft, Mpath may from time-to-time, change the name of its Internet
service.
1.9 "Mplayer" means Mpath's online game service known by the Mplayer trademark.
1.10 "Network Region" means the Internet communications switching regions
described in Exhibit D.
1.11 "Operations Plan" means the operations plan attached as Exhibit E.
1.12 "PSINet" means PSINet Inc. a New York corporation having a principal place
of business at 510 Huntmar Park Drive, Herndon, Virginia 20170-5100.
1.13 "SegaSoft Service" means the online service or services offered by SegaSoft
using the Licensed technology or any component thereof.
1.14 "Server Term" means the time period commencing on the Acceptance Date and
ending [XXXXX] later. The Server Term may not be terminated by SegaSoft
unless otherwise expressly provided in this Amendment #2.
1.15 "Servers" mean both the Central Server(s) and the Game Servers.
2. SERVERS
-------
2.1 Installation Plan Servers and Installation. Mpath agrees to have
------------------------------------------
the PSINet Internet backbone, the Game Servers as outlined in the
Installation Plan. Mpath may install Servers on any backbone or Internet
service provider other than PSINet upon SegaSoft's prior written consent
which may not be unreasonably withheld or delayed.
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2.2 Post Installation Plan Servers. Monthly no later than the tenth (10th)
------------------------------
each month, SegaSoft agrees to provide Mpath with a Forecast. SegaSoft may
not change its Forecast ninety (90) days prior to the scheduled
installation of a Server. Within such ninety (90) day period both Mpath
and SegaSoft are committed, within the terms and conditions of this
Amendment #2, to execution of the Forecast. Any changes to the Forecast
within such ninety (90) day period are subject to the mutual written
agreement of the parties. Mpath further agrees, in accordance with such
Forecast and the terms and conditions of this Amendment #2, to have
installed Servers subsequent to completion of the Installation Plan. Mpath
agrees to exert all commercially reasonable efforts to improve upon the
ninety (90) day lead time specified in this Section and to accommodate any
changes requested by SegaSoft to the schedule for implementation of the
Servers.
2.3 Installation Acceptance Procedure. Mpath will install the Servers, within
---------------------------------
the Network Region, as requested by SegaSoft in the Installation Plan and
the Forecasts, and shall promptly notify SegaSoft of completion of such
installation by delivery to SegaSoft of an Installation Certificate.
SegaSoft must either accept the installation of such Servers within fifteen
(15) business days of installation, or reject it within such period. If
SegaSoft fails to provide written rejection within such period, then
SegaSoft is deemed to have accepted the installation. If SegaSoft rejects
the installation, Mpath and SegaSoft shall work together, in good faith, to
modify the installation appropriately. However, if Mpath, despite
commercially reasonable efforts to do so, is unable to install a Server,
Mpath will notify SegaSoft thereof and of the reasons therefor, and
thereafter, SegaSoft, in consultation with Mpath, may, at SegaSoft's
option, either have Mpath install a substitute Server, as mutually agreed
upon, until the requested Server is installed or have no substitute Server
installed.
2.4 Server Installation Locations. The Central Server will be installed at
-----------------------------
SegaSoft's facility. Installation of the Game Servers is limited to those
locations where Mpath has servers located for Mplayer. The locations, as
of the Effective Date, are limited to the Network Regions. SegaSoft agrees
that any and all Game Servers requested from Mpath must be installed in a
Network Region.
2.5 Progress Reports. Upon reasonable notice, SegaSoft may, at any time during
----------------
Mpath's performance of the Installation Plan and during normal business
hours, meet with Mpath to discuss and evaluate the status of the
installation of the Servers. In such meetings Mpath agrees to provide
SegaSoft with progress reports, oral or written, as reasonably requested by
SegaSoft, starting [XXXXX] after the Effective Date and ending on the date
of successful completion of the Installation Plan. Each report will
include:
(a) status of progress to current scheduled Installation Plan
milestone(s);
(b) short description of problems in meeting any such Installation Plan
milestone;
(c) proposed recovery method to meet next Installation Plan milestone if
needed;
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(d) probability of meeting next Installation Plan milestone; and
(e) any other information related to the Installation Plan reasonably
requested by SegaSoft.
2.6 Delivery of Acceptance Certificate. On the Acceptance Date, SegaSoft
----------------------------------
agrees to execute and deliver to Mpath an Acceptance Certificate in the
form attached as Exhibit AC.
2.7 Server Upgrades. On mutual written agreement, SegaSoft and Mpath can
---------------
change the configuration, and model of the Servers.
2.8 Server Maintenance. Mpath agrees to maintain the Game Servers, installed
------------------
in accordance with Section 2.3, in good condition and working order and
shall promptly make or cause to be made all necessary adjustments, repairs
and replacements to the hardware components of the Game Servers. Mpath
shall not make any alterations, additions or improvements to the Game
Servers, except as requested by SegaSoft or as may be required pursuant to
the preceding sentence. Mpath will, in accordance with the Operations Plan,
install server software, perform operating system maintenance, and perform
software maintenance for Game Servers. SegaSoft will, in accordance with
the Operations Plan, install server software, perform operating system
maintenance, and perform software maintenance for the Central Server.
2.9 Servers, General Management. SegaSoft and Mpath agree that Mpath will,
---------------------------
for the Servers, manage all virtual circuits, latency performance, and all
contact with PSINet concerning the Servers.
2.10 Government Compliance. Mpath and SegaSoft agree to comply with all
---------------------
applicable governmental laws, rules and regulations in connection with
their respective obligations in regard to the use, operation, maintenance,
installation, service and repair of the Servers.
3. SOFTWARE
--------
3.1 Game Server Software. SegaSoft accepts all responsibility to provide all
--------------------
software necessary for operation of the Game Servers. Such software must be
based on the Licensed Technology but may include other features and
functions. All use of the Licensed Technology is subject to the terms and
conditions of the Agreement, including the royalty provisions.
3.2 Central Server Software. Third party and SegaSoft software may be used on
-----------------------
the Central Server provided that SegaSoft is also solely responsible for
the integration of third party and SegaSoft software into the software
necessary to run the Central Server.
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3.3 Licensed Technology Upgrades. Mpath agrees, in accordance with the
----------------------------
Agreement, to provide SegaSoft with upgrades to the Licensed Technology.
SegaSoft is solely responsible for integrating feature and functionality
upgrades to the Licensed Technology into SegaSoft's code for the Game
Servers.
3.4 Mplayer Game Enablers. No license is granted by Mpath to SegaSoft for
---------------------
Mpath's proprietary software enablers for games running on Mplayer.
4. ADMINISTRATION AND SUPPORT
--------------------------
4.1 SegaSoft Service. SegaSoft is solely responsible for billing subscribers
----------------
to the SegaSoft Service, obtaining the merchant account for the SegaSoft
Service, customer support for the SegaSoft Service and all other
operational and administrative functions related to the SegaSoft Service
except as specifically delegated to Mpath under the Agreement, Amendment #1
and Amendment #2.
4.2 Section 4.1.2 Support. In accordance with Section 4.1.2 of the Agreement
---------------------
and in addition to the Mpath employee support from the Network Operations
Engineer and Product Manager provided to SegaSoft by Mpath under Section
5.1, Mpath agrees to provide the full-time services of one (1) engineer to
SegaSoft at the rate of [XXXXX]. Reasonable, additional support from other
Mpath personnel is available to SegaSoft on an as-needed basis. Such
additional support may not exceed [XXXXX] in every [XXXXX] period. SegaSoft
agrees that if the full-time time engineer assigned to providing support to
SegaSoft is not fully-occupied, such engineer may perform work for Mpath.
Mpath agrees to invoice SegaSoft monthly for all amounts due under this
Section. SegaSoft agrees to pay such invoice amount, subject correction for
any error in calculation, net thirty (30) days.
4.3 SegaSoft Service Support. SegaSoft agrees to provide, at SegaSoft's
------------------------
expense, the telephone, electronic mail and bulletin board support for
inquiries by SegaSoft Service subscribers with respect to the use of the
SegaSoft Service. Customer support includes technical or telephone support
for both game play and issues relating to use of the SegaSoft Service. As
specified in Section 4.1.1 of the Agreement, bug fixes for the Licensed
Technology will be provided by Mpath to SegaSoft [XXXXX]. Bug fixes are
available to SegaSoft from Mpath in accordance with the response time and
schedule prescribed in the Operations Plan. Mpath is under no further
obligation to provide support directly to SegaSoft Service subscribers,
although Mpath agrees to provide, [XXXXX] to SegaSoft, reasonable
escalation support to SegaSoft for technical problems related to the
Licensed Technology, the Servers, and the SegaSoft Service. Any support
performed by Mpath at SegaSoft's request which is primarily attributable
to;
(a) third party software,
(b) SegaSoft's software,
(c) SegaSoft's modifications to the Licensed Technology, or
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is not related to;
(i) Mpath's operation of the Servers as prescribed by this Agreement, or
(ii) bug fixes to the Licensed Technology;
is subject to a charge to SegaSoft of [XXXXX] per Mpath employee assigned
to provide such support.
4.4 SegaSoft Service Customer Database. SegaSoft alone will own the contents
----------------------------------
of the SegaSoft subscriber databases and usage information and Mpath has no
right, title or interest thereto.
5. PAYMENTS
--------
5.1 Operations and Server Payments. In consideration of Mpath's roles and
------------------------------
responsibilities under this Amendment #2 SegaSoft agrees to make the
following payments on a monthly basis to Mpath during the term of this
Amendment #2:
(a) [XXXXX] for network administration and Server operations; and
(b) [XXXXX] per Server for the duration of the corresponding Server Term.
The payment under Section 5.1(a) includes the on-demand services, in
accordance with the Operations Plan, of one (1) Mpath Network Operations
Engineer and one (1) Product Manager. If any payment due from Mpath to
SegaSoft is not paid within thirty (30) days after the due date thereof,
SegaSoft agrees to pay, on demand, a late charge on such overdue amount at
a monthly rate equal to [XXXXX]. All rental and other payments due and
payable under this Amendment #2 must be made to Mpath at its address shown
above or at such other address as Mpath may designate from time-to-time and
shall be due and payable whether or not SegaSoft has received any notice
that such payment is due. Mpath agrees to invoice SegaSoft for all amounts
due under this Amendment #2. SegaSoft agrees to pay such invoice amount,
subject correction for any error in calculation, net thirty (30) days.
There is [XXXXX] charge by Mpath to SegaSoft under this Amendment #2 for
text, audio or game packets on the SegaSoft Service.
5.2 Section 5.1(b) Server Rate Adjustment. After the Servers identified in the
-------------------------------------
Installation Plan have been installed, the fee charged in Section 5.1(b)
per Server is subject to adjustment, by decrease or increase, depending on
the rates charged to Mpath by Mpath's Internet service provider. The amount
of the decrease or increase charged by Mpath to SegaSoft under this Section
may be no greater than the amount of the decrease or increase charged to
Mpath by Mpath's Internet service provider. Mpath agrees to provide
SegaSoft with prompt notice of any change in the Section 5.1(b) Server rate
effective after completion of the Installation Plan. For any decrease in
the Section 5.1(b) Server rate, such decrease will be credited to SegaSoft
effective as of the date Mpath is subject to the decreased Server rate from
Mpath's Internet service providers whether or not Mpath has provided
SegaSoft with written notice of the decrease. Mpath will provide SegaSoft
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with reasonable documentation substantiating any such change in the Section
5.1(b) Server rate.
5.3 Taxes. SegaSoft agrees to pay when due, and on a net after-tax basis
-----
shall indemnify and defend Mpath against, all fees, taxes and governmental
charges (including without limitation interest and penalties) of any nature
which may now or hereafter be imposed or levied by any federal, provincial,
state or local authority upon Mpath or the Servers (including, without
limitation, the purchase, ownership, transportation, delivery,
installation, leasing and possession of the Servers), excluding, however,
all taxes on or measured by Mpath's net income.
5.4 Tax Benefits. SegaSoft acknowledges that Mpath and/or its renter(s) are
------------
entitled to all tax benefits of ownership with respect to the Servers (the
"Tax Benefits"). SegaSoft agrees to take no action inconsistent with the
foregoing or any action which would result in the loss, disallowance or
unavailability to Mpath of all or any part of the Tax Benefits. SegaSoft
hereby indemnifies and holds harmless Mpath and its renters from and
against; (a) the loss, disallowance, unavailability or recapture of all or
any part of the Tax Benefits resulting from any action, statement,
misrepresentation or breach of warranty or covenant by SegaSoft of any
nature whatsoever including but not limited to the breach of any
representations, warranties or covenants contained in this Section, plus
(b) all interest, penalties, fines or additions to tax resulting from such
loss, disallowance, unavailability or recapture, plus (c) all taxes
required to be paid by Mpath upon receipt of the indemnity set forth in
this Section.
5.5 Development and Third Party Licenses. SegaSoft is solely responsible for
------------------------------------
payment of third party development and licenses required for the
development, implementation and operation of the SegaSoft Service.
5.6 Mpath Internet Service Bounty. Mpath agrees to pay SegaSoft for each Mpath
-----------------------------
Internet Service subscriber that:
(a) maintains a Mpath Internet Service subscription for at least [XXXXX];
and
(b) originates his or her subscription to the Mpath Internet Service:
(i) from a SegaSoft CD-ROMs containing Mpath Internet Service
account creation software;
(ii) after April 30, 1997 from a hyperlink from the SegaSoft Service
to the Mpath Internet Service website; or
(iii) after April 30, 1997, from a 1-800 number (to be provided by
Mpath to SegaSoft no later than April 29, 1997) for signing on
to the Mpath Internet Service.
Mpath will pay SegaSoft [XXXXX] for the first [XXXXX] such subscribers and
[XXXXX] for every Mpath Internet Service subscriber thereafter.
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5.7 Bounty Tracking. SegaSoft generated subscribers to the Mpath Internet
---------------
Service will be tracked using:
(a) for Section 5.5(b)(i), promotion codes that will be incorporated into
versions of the CD-ROMs distributed by SegaSoft;
(b) for Section 5.5(b)(ii), after April 30, 1997, a distinct hyperlink
from the SegaSoft Service and traced to its origin when received by
the Mpath Internet Service website; and
(c) for Section 5.5(b)(ii), after April 30, 1997, a distinct 1-800 number
for signing on to the Mpath Internet Service.
These records will be used to determine the appropriate bounty due to
SegaSoft from Mpath. Mpath agrees to pay amounts due to SegaSoft under this
Section within thirty (30) days after the end of each calendar month.
5.8 Audit by SegaSoft. A nationally-recognized independent certified public
-----------------
accountant (not hired on a contingent-fee basis) selected and paid for by
SegaSoft and reasonably approved by Mpath may, upon reasonable prior notice
and during normal business hours, inspect the records of Mpath to confirm
compliance with this Agreement no more than [XXXXX] per calendar year,
unless the prior audit revealed an overcharge by Mpath to SegaSoft, and
[XXXXX] within [XXXXX] after termination of this Amendment #2. The results
of such audit are Confidential Information and may only be reported to
SegaSoft to the extent required to substantiate a discrepancy in charges
made by Mpath to SegaSoft. SegaSoft agrees to provide Mpath with a copy of
the audit report letter, no later than twenty (20) days after completion of
the audit. If, upon performing such audit, it is determined that Mpath has
over-invoiced SegaSoft for payments due under this Amendment #2, Mpath will
pay SegaSoft the amount of the over-invoice within thirty (30) days of
completion of the audit. If, upon performing such audit, Mpath has under-
invoiced SegaSoft, Mpath may invoice SegaSoft for such under-invoiced
amount and SegaSoft agrees to pay such invoice within thirty (30) days.
Notwithstanding the first sentence of this Section, if such over-invoice
exceeds [XXXXX] of the amounts due SegaSoft in the period being audited,
Mpath will bear all reasonable expenses and costs of such audit up to the
amount of the underpayment. Any outstanding balances owing under this
Section are subject to an interest payment of [XXXXX].
6. MARKETING
---------
6.1 SegaSoft Markets the SegaSoft Service. SegaSoft is solely responsible for
-------------------------------------
all creative input and branding for the SegaSoft Service and for SegaSoft
Service website design, structure, and content. Mpath is under no
obligation to provide World Wide Web design, games and other content for
the SegaSoft Service. SegaSoft alone is responsible for the design and
control of content for the SegaSoft Service. SegaSoft must obtain and
clear all third party rights necessary to enable SegaSoft to reproduce,
display or perform content on the SegaSoft Service, including but not
limited to: (a) written authorization from the owners of the copyrights in
any copyrighted materials to be reproduced,
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display or perform content on the SegaSoft Service, including but not
limited to: (a) written authorization from the owners of the copyrights in
any copyrighted materials to be reproduced, displayed or performed on the
SegaSoft Service; (b) permission from any persons or entities whose name,
voice, image or likeness, portrayal, impersonation, or performance will
appear on the SegaSoft Service; and (c) written authorization from the
owners of any trademarks or service marks that will appear on the SegaSoft
Service.
6.2 Powered by Mpath. Further to Section 7.2 of the Technology License
----------------
Agreement, SegaSoft agrees to display, no smaller than ten (10) point font,
"Powered by Mpath Interactive" in the following SegaSoft service areas: in
the about box on the SegaSoft Service itself, in the credit area in
SegaSoft Service documentation, and in press releases about the SegaSoft
Service.
7. TERM AND AMENDMENT #2 TERMINATION. This Amendment #2 commences on the
---------------------------------
Effective Date and continues in effect thereafter for [XXXXX] or so long as
any Server Term remains in effect. SegaSoft may terminate this Amendment
#2, without cause, on ninety (90) days prior written notice to Mpath,
however under any such termination for convenience each Server Term
survives and SegaSoft must pay Mpath all amounts associated therewith as
specified in Section 5.1(b). If SegaSoft breaches this Amendment #2, Mpath
may, on thirty (30) days notice to SegaSoft, render the Servers unusable by
SegaSoft. If SegaSoft cures any such breach during the thirty (30) day cure
period, Mpath may not render the Servers unusable by SegaSoft. All monies
due and payable to Mpath from SegaSoft, including the balance of payments
remaining of all Server Terms are due and payable no later than thirty (30)
days after the date of termination. However, until SegaSoft cures the
breach Mpath is under no obligation to perform its responsibilities under
this Amendment #2. Sections 1, 5.1(b), 5.2, 5.3, 7, 8, 9 and 12 survive the
expiration or termination of this Amendment #2.
8. OWNERSHIP. SegaSoft acknowledges that certain or all of the Servers may be
---------
leased or rented by Mpath. SegaSoft and Mpath confirm their intent that
physical possession of the Game Servers remains exclusively with Mpath
and/or, as appropriate, Mpath's renter(s). SegaSoft hereby acknowledges
and confirms that SegaSoft shall have no right of physical access to the
Game Servers or to the installation site of such Game Servers within any
Network Region, without the express consent of Mpath. Upon the expiration
or earlier termination of each Server Term, SegaSoft shall surrender all
rights of use of the Servers to Mpath and/or, as appropriate, Mpath's
renter(s).
9. DISCLAIMER OF WARRANTIES. THE SERVERS ARE INSTALLED "AS IS", AND NEITHER
------------------------
MPATH OR ITS RENTERS MAKES ANY WARRANTIES, EXPRESS OR IMPLIED, CONCERNING
THE SERVERS, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE OR OF MERCHANTABILITY. SEGASOFT HEREBY WAIVES ANY CLAIM
(INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT) THAT IT
MAY HAVE AGAINST MPATH OR ITS RENTERS FOR ANY LOSS, DAMAGE (INCLUDING LOSS
OF PROFITS, LOSS OF DATA OR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR
EXPENSE CAUSED BY THE SERVERS, EVEN IF MPATH HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES).
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SEGASOFT ACKNOWLEDGES THAT MPATH DID NOT SELECT, MANUFACTURE OR DISTRIBUTE
THE SERVERS AND THAT SEGASOFT HAS MADE THE SELECTION OF THE SERVERS BASED
UPON ITS OWN JUDGMENT AND EXPRESSLY DISCLAIMS ANY RELIANCE ON STATEMENTS
MADE BY MPATH OR ITS AGENTS.
10. RISK OF LOSS. Mpath or its renters shall at all times before, during and
------------
after the term of each Server Term bear the entire risk of loss, damage,
theft, or destruction of the Game Servers or any part thereof, from any
and every cause whatsoever. In the event of such loss, damage, theft or
destruction SegaSoft shall be relieved of its obligation to pay for the,
to the extent such loss, damage, theft or destruction deprives SegaSoft of
the use of the Game Servers.
11. INSURANCE. Mpath or its renters shall at all times carry and maintain, at
---------
its expense, physical damage insurance providing "all risks" coverage for
the Game Servers and public liability and property damage insurance in
amounts and with insurance companies consistent with its risk management
practices.
12. GENERAL
-------
12.1 Force Majeure. An event of force majeure also includes the act of a
-------------
third party, such as PSINet, if reasonably beyond the control of a party
to this Amendment #2.
12.2 Further Assurances. SegaSoft shall, at its expense, promptly execute and
------------------
deliver such further documents and take any and all other action
reasonably requested by Mpath from time-to-time, for the purpose of
protecting the interests of Mpath, and its renter(s). SegaSoft, at the
request of Mpath and at SegaSoft's expense, agrees to execute and deliver
to Mpath any financing statements or other instruments necessary for
perfecting the interests and title of Mpath and its renter(s) the Servers.
12.3 New Internet Service Providers. If Mpath contracts with Internet service
------------------------------
providers other than PSINet, Mpath agrees to negotiate, in good faith,
with SegaSoft to install servers for the SegaSoft Service with such other
Internet service providers. Based on the terms and conditions of Mpath's
agreement with Internet service providers other than PSINet, the
installation of servers for the SegaSoft Service with Internet service
providers other than PSINet may differ from the terms and conditions of
this Amendment #2.
12.4 Effect on the Agreement. Except as amended by this Amendment #2, the
------------------------
Agreement remains in effect pursuant to its terms. If a conflict arises
between the terms of the Agreement, Amendment #1, and this Amendment #2;
the terms of this Amendment #2 prevail and control.
SEGASOFT, INC. MPATH INTERACTIVE, INC.
By: /s/ Gary Griffiths By: /s/ Lynn Heublein
------------------ -----------------------
Name: Gary Griffiths Name: Lynn Heublein
------------------ -----------------------
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Title: CEO Title: G.M. Foundation
------------------ -----------------------
Date: 3/25/97 Date: 3/21/97
------------------ -----------------------
Fax: _________________ Fax (408) 342-6925
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EXHIBIT A
ACCEPTANCE CERTIFICATE
(All capitalized terms not otherwise defined herein have the meanings given to
such terms in the April 15, 1996 Technology License Agreement, the November 27,
1996 Amendment #1, and the {date} Amendment #2 between Mpath and SegaSoft.)
SegaSoft acknowledges acceptance of the installation of the Server listed below
and agrees that the Server has been installed and is ready for use under the
terms of the above-mentioned Technology License Agreement, Amendment #1, and
Amendment #2, the terms and conditions of which are incorporated herein,
including, without limitation, the obligation to make rental payments.
Server Quantity Location
- ------ -------- --------
Acceptance Date: ________________________
IN WITNESS WHEREOF, the SegaSoft hereto has caused this Acceptance Certificate
to be duly executed by its authorized representative as of the Acceptance Date
written above.
SEGASOFT, INC.
By:________________________
Name:_______________________
Title:_________________________
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EXHIBIT B
INSTALLATION CERTIFICATE
(All capitalized terms not otherwise defined herein have the meanings given to
such terms in the April 15, 1996 Technology License Agreement, the November 27,
1996 Amendment #1, and the {date} Amendment #2 between Mpath and SegaSoft.)
The following is a formal notification by Mpath to SegaSoft that the Server
listed below has been installed in the Network Region, as requested and selected
by SegaSoft, as of the Install Complete Date, specified below.
1. Server Name: __________________________________
2. Network Region: _________________________________________
3. Install Complete Date: ________________________
IN WITNESS WHEREOF, the Mpath hereto has caused this Installation Certificate to
be duly executed by its authorized representative as of the Install Complete
Date written above.
MPATH INTERACTIVE, INC.
By:__________________________
Name:________________________
Title:_________________________
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EXHIBIT C
INSTALLATION PLAN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
EQUIPMENT NAME DESCRIPTION/CONFIGURATION Fee
- --------------------------------------------------------------------------------
<S> <C> <C>
Ultra I (256) Server: UltraSPARC-170 processor (or See Section 5.
equivalent)
Memory (RAM): 256MBytes
Disk Capacity: 2 - 2.1GByte drives
- --------------------------------------------------------------------------------
</TABLE>
CENTRAL SERVER
- --------------
1 Web server Ultra
1 MCP Ultra
1 Matchmaker Ultra
1 database Sun Enterprise 3000 (used to house third party software (such as
Portal and Oracle) with another Sun Enterprise 3000 as the data warehouse which
is not critical for the service but facilitates the gathering and use of
reporting/marketing information).
<TABLE>
<CAPTION>
Installed on or Before
Location Order Installed Effective Date 4/30/97 5/31/97
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[XXXXX] [XXXXX] [XXXXX] [XXXXX] [XXXXX]
[XXXXX] [XXXXX] [XXXXX] [XXXXX] [XXXXX]
[XXXXX] [XXXXX] [XXXXX] [XXXXX] [XXXXX]
- -----------------------------------------------------------------------------
Totals [XXXXX] [XXXXX] [XXXXX] [XXXXX]
</TABLE>
[XXXXX]
[XXXXX]
[XXXXX]
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EXHIBIT D
NETWORK REGIONS
<TABLE>
<CAPTION>
--------------------------------------------------------------------
NETWORK REGION UNITED STATES REGION
--------------------------------------------------------------------
<S> <C>
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
[XXXXX] [XXXXX]
--------------------------------------------------------------------
</TABLE>
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EXHIBIT E
OPERATIONS PLAN
This Operations Plan may be amended from time-to-time by written agreement of
the Operation Managers from SegaSoft and Mpath. The intention of the exhibit is
to outline those services specific to this Amendment #2 and are meant to be
additive to those already established in the Agreement.
SegaSoft will maintain a first level customer service organization to field
customer service calls. This will be done through on-line as well as telephone
support. SegaSoft will also maintain a second level support staff for technical
problem resolution for all SegaSoft technologies and systems. Each customer
service shift will have a shift lead. SegaSoft will monitor all network system
for real-time up-time and performance.
Mpath will provide second level support commensurate with those services
outlined in this Amendment #2. This area of responsibility should include the
distributed software systems, the distributed hardware systems, the PSINet
network, and the Mplayer ISP accounts. SegaSoft will request this support from
MPATH through the SegaSoft on-duty customer service shift lead. Mpath will
provide system and network visibility to SegaSoft to help in problem
determination.
Mpath will provide a "Main Contact Person" for resolving all on-going issues and
to manage the relationship between the two companies. In addition, MPATH will
provide contact information for the Mpath "Front Line" support group in the form
of email, telephone, and pager. Also, Mpath will provide the contact
information for the on-call 7x24 system administrator in the form of email,
telephone, and pager. All problem requests will be returned within one hour
to the SegaSoft Shift Lead. Resolution to problems occurring in Mpath area of
responsibility will be on a "reasonable effort" basis and tracked by the "Main
Contact Person".
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EXHIBIT 10.13
AMENDMENT #3 TO TECHNOLOGY LICENSE AGREEMENT
By this Amendment #3 to the Technology License Agreement ("Amendment #3") dated
as of October 27, 1997 (the "TA Effective Date") SegaSoft Networks, Inc.
("SegaSoft"), a Delaware corporation, with its principal place of business at
150 Shoreline Drive, Suite 510, Redwood City, California 94066 and Mpath
Interactive, Inc. ("Mpath"), a Delaware corporation, with its principal place of
business at 665 Clyde Avenue, Mountain View, CA 94043 hereby agree to further
amend their April 15, 1996 Technology License Agreement (the "Agreement") as
already amended by their November 27, 1996 Amendment #1 to the Technology
License Agreement and their March 28, 1997 Amendment #2 to the Technology
License Agreement.
AGREEMENT
TA-1. DEFINITIONS
-----------
All capitalized terms used in this Amendment #3 which are defined in the
Agreement have the respective meanings ascribed to them in the Agreement.
TA-2. AMENDMENT TO AGREEMENT SECTION 3, "ROYALTIES"
--------------------------------------------
2.1 1997 Calendar Q3 Payment. For the 1997 third calendar quarter payment due
- -------------------------------
from SegaSoft to Mpath under the Agreement, SegaSoft agrees to pay and Mpath
agrees to accept as payment in full for each month during the quarter the
monthly amount of [XXXXX], for a total payment to Mpath for the quarter of
[XXXXX].
2.2 1997-1998 Minimum Monthly Payment. For each of the 1997 fourth calendar
- ----------------------------------------
quarter and the 1998 first and second calendar quarters, SegaSoft agrees that
the minimum monthly amount that must be paid by SegaSoft to Mpath under Sections
TA-3 and TA-5 below, in consideration of the licenses granted by Mpath to
SegaSoft under the Agreement, is [XXXXX], for a total minimum payment to Mpath
for each such quarter of [XXXXX].
2.3 1998-1999 Minimum Monthly Payment. For each of the 1998 third and fourth
- ----------------------------------------
calendar quarters and the 1999 first and second calendar quarters, SegaSoft
agrees that the minimum monthly amount that must be paid by SegaSoft to Mpath
under Sections TA-3 and TA-5 below, in consideration of the licenses granted by
Mpath to SegaSoft under the Agreement, is[XXXXX], for a total minimum payment to
Mpath for each such quarter of [XXXXX].
TA-3. AMENDMENT TO SECTION 3.2
------------------------
The parties hereby agree to delete Section 3.2 (including Sections 3.2.2 and
3.2.3, but not including Section 3.2.1, which shall remain in effect for
purposes of defining Net Revenue as used in this Section TA-3) and replace it
with: "With regard to the use of the Licensed Technology for the operation of an
on-line game service:
SegaSoft shall pay Mpath a royalty calculated as a percentage of Net Revenue
where the royalty rate, as set forth in Attachment B hereto, shall apply as
determined by the Net Revenue tiers
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generated by SegaSoft's on-line game service during the applicable reporting
period. The Net Revenue for the reporting period shall be calculated on the
first day of the applicable reporting period plus the Net Revenue received by
SegaSoft on the last day of the reporting period. A single royalty rate, as
determined under Attachment B, shall apply to the total Net Revenue for purposes
of determining the royalties payable for the applicable reporting period.".
TA-4 AMENDMENT TO ATTACHMENT B
-------------------------
Attachment B is hereby deleted and replaced with the Attachment B-TA to this
Amendment #3.
TA-5. Amendment to Retail Revenue
---------------------------
SegaSoft agrees to pay Mpath [XXXXX] of Gross Revenue actually received by
SegaSoft from all retail sales of SegaSoft-published and/or distributed products
sold by SegaSoft with a HEAT (or such other name or names as SegaSoft may employ
from time-to-time) enabler. The calculation of such Gross Revenue shall: (i)
[XXXXX]; and (ii) [XXXXX]. However, the amount of payments to Mpath under this
Section is capped at [XXXXX]. Payments to Mpath by SegaSoft under this Section
do not apply to the minimum payment specified in Sections TA 2.2. and 2.3. Any
updated version of a SegaSoft product providing revisions, minor enhancements,
editorial revisions, bug fixes or patches (but not other derivative works,
such as sequels, major releases, abridgments, annotations, art reproductions,
condensations, elaborations, fictionalizations, musical arrangements and/or
translations) that are developed by or for SegaSoft during the term of this
Agreement shall be deemed to be the same product. For example, a major release
of a SegaSoft game which is not merely a revision or a bug fix release but
which contains substantial changes (e.g., an overhaul of the interface, new
game premise, new title, etc.) is not the same product. For example, a major
release is typically numbered as X.0; for example, WordPerfect 6.0 is a major
release, significantly different from any previous version; whereas
WordPerfect 6.1 has only minor changes, and is, thus, only a revision and
would be considered to be the same product. For purposes of clarification,
Royalties due under this Section shall in no event be owed on revenues for
which royalties are due under Section TA-3 herein, and vice-versa.
TA-6. TERM
----
This Amendment #3 is effective as of the TA Effective Date and continues in
effect until [XXXXX]. No later than [XXXXX] the parties agree to negotiate in
good faith a compensation plan to take effect after [XXXXX] for the balance of
the term of the Agreement. After the expiration of the term specified in this
Section, the minimum monthly payment then in effect, as specified in Section TA
2.3, continues in effect unless and until SegaSoft and Mpath mutually agree in
writing upon a different arrangement.
2
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SEGASOFT NETWORKS, INC. MPATH INTERACTIVE, INC.
By: /s/ Gary Griffiths By: /s/ Lynn Heublein
------------------ -----------------
Name: Gary Griffiths Name: Lynn Heublein
------------------ -----------------
Title: Pres./CEO Title: GM
------------------ -----------------
Date: 10/29/97 Date: -----------------
----------------
Fax: (650) - 650-2954 Fax: (650) 429-1954
3
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<PAGE>
ATTACHMENT B-TA
ROYALTY RATES
REPORTING PERIOD NET REVENUE TIERS PERCENTAGE OF NET REVENUE
- -------------------------------------------------------------------
[XXXXX] [XXXXX]
[XXXXX] [XXXXX]
[XXXXX] [XXXXX]
[XXXXX] [XXXXX]
[XXXXX] [XXXXX]
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EXHIBIT 10.14
Content Provider Agreement
This Content Provider Agreement (the "Agreement") is entered as of December 23,
1998 (the "Effective Date") by and between Infoseek Corporation ("Infoseek"), a
California corporation, with its principal place of business at 1399 Moffett
Park Drive, Sunnyvale, CA 94089 and Mpath Interactive, Inc. ("Mpath"), a
Delaware corporation, through its mplayer.com division, with its principal place
of business at 665 Clyde Avenue, Mountain View, California 94043.
Recitals
A. Infoseek and its affiliates maintain Web sites on the Internet, including
http://www.Infoseek.com, http://www.go.com, and such other URLs as may be
----------------------- -----------------
designated by Infoseek as successor, replacement, additional or alternative
sites ("Go Network").
B. Mpath owns and operates a branded multi-player interactive game service on
the World Wide Web located at the URL www.mplayer.com and www.hearme.com
--------------- --------------
(and such other URLs as may be designated by Mpath as successor,
replacement, additional or alternative sites) ("mplayer.com") based on
technology, including the Client Software (as defined below), that enables
users to play multi-player games over the Internet including both third
party personal computer resident games and online only games (collectively
such game service is referred to herein as the "Service"); and
C. Mpath and Infoseek desire to create, on Go Network, Co-Branded Pages that
contain a customized version of the Service, including certain online,
interactive computer games and to promote each other's services as more
fully set forth in this Agreement.
Agreement
NOW, THEREFORE, for good and valuable consideration, and in consideration of the
mutual covenants and conditions herein set forth, and with the intent to be
legally bound thereby, Infoseek and Mpath hereby agree as follows:
1. Definitions.
-----------
1.1 "Affiliate" means a corporation or other legal entity in which Infoseek
has and maintains directly or indirectly at least a twenty percent (20%)
ownership interest or a corporation or other legal entity that has or
maintains at least a twenty percent (20%) interest in Infoseek.
1.2 "Client Software" means the client software owned by Mpath, in object code
form only, which is used by customers to access the Service and play games
on the Service. For the purpose of clarity and the avoidance of doubt,
Client Software does not include Mpath's POP.X software.
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1.3 "Co-Branded Pages" mean World Wide Web pages on Go Network that are co-
branded with Infoseek Marks and Mpath Marks and that provide instructions
to Users regarding how to download the Co-Branded Software and also contain
or link to the End User License Agreement (as defined in Section 2.1)
provided by Mpath. The Co-Branded Pages shall be hosted on Mpath servers.
The URL for the Co-Branded Pages will be designated by Infoseek but will
reside on URL "www.mplayer.go.com", as may be changed from time to time in
------------------
accordance with Section 2.3.
1.4 "Co-Branded Software" means a version of the Client Software branded
equally prominently with both Infoseek Marks and Mpath Marks.
1.5 "Commerce Partner" means the third party, selected by Infoseek, who shall
be responsible for processing e-commerce transactions initiated on the Co-
Branded Pages or through the Co-Branded Software.
1.6 "Commerce Partner's Share" means that portion of the Gross Revenue retained
by the Commerce Partner. For purpose of calculating Net Revenue the
revenues received by Infoseek from the Commerce Partner may not be less
than [XXXXX] of Gross Revenue.
1.7 "Confidential Information" means: (i) business information of a party that
is not publicly known, including but not limited to, any information
relating to a party's product plans, product designs, product costs,
product prices, product names, finances, marketing plans, business
opportunities, personnel, research, development or know-how; (ii) any
information designated in writing by any party as "confidential" or
"proprietary" or which, under the circumstances taken as a whole, would
reasonably be deemed to be confidential; and (iii) the terms and conditions
of this Agreement. "Confidential Information" excludes information that:
(a) is or becomes known or available by publication, commercial use or
otherwise through no fault of the receiving party; (b) is known to the
receiving party at the time of disclosure without violation of any
confidentiality restriction and without any restriction on the receiving
party's further use or disclosure; or (c) is independently developed by the
receiving party without access or reference to Confidential Information of
the disclosing party.
1.8 "Go Chrome" means the common header utilized on Go Network, as further
described on Exhibit E. The Go Chrome may be changed from time to time by
Infoseek.
1.9 "Go Network Games Center" means an area on Go Network that displays and
provides access to retail, online, interactive freeware and/or shareware
computer games.
1.10 "Go Network Games Center Home Page" means the front Web page for the Go
Network Games Center on Go Network.
1.11 "Go Network Home Page" means the front Web page for Go Network.
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1.12 "Gross Revenue" means the total amount of revenue actually received by the
Commerce Partner from sales of products to Users who make such purchases
through the "Buy" button or equivalent mechanism on the Co-Branded Pages or
Co-Branded Software. Gross Revenue does not include any revenues generated
from the sale of any products or services from other locations on the Go
Network and Infoseek Web sites other than the Co-Branded Pages.
1.13 "Gross Revenue (Mpath)" means the total amount of revenue actually
received by the Commerce Partner from sales of products to Users who make
such purchases through the "Store" button or equivalent mechanism on the
Co-Branded Pages or Co-Branded Software. Gross Revenue does not include
any revenues generated from the sale of any products or services from other
locations on mplayer.com.
1.14 "Infoseek Marks" means Infoseek's trademarks, trade names, service marks,
service names and logos specified in Exhibit A.
1.15 "Mpath Marks" means Mpath's trademarks, trade names, service marks,
service names and logos specified in Exhibit B.
1.16 "Net Revenue" means the amount paid to Infoseek and calculated as Gross
Revenue less the Commerce Partner's Share reduced by documented write-offs
for actual bad debt, fraud, refunds, returns, sales or excise taxes, and
shipping and handling charges, if any.
1.17 "Net Revenue (Mpath)" means the amount paid to Mpath and calculated as
Gross Revenue (Mpath) less the Commerce Partner's Share (i.e. Chips & Bits,
in this instance with all changes to points of detail to make such defined
term apply to Chips & Bits) reduced by documented write-offs for actual bad
debt, fraud, refunds, returns, sales or excise taxes, and shipping and
handling charges, if any.
1.18 "Retail Game" means a personal computer, Windows 95 or 98 operating system
compatible game sold through traditional retail stores (in addition to
other channels). Retail Games are offered for sale in packages with the
game software stored on compact disc, floppy disc or some other media. On
the Service the Retail Games are found in the Sports Community and the
Gamers community. A few Retail Games such as Scrabble, Risk and Battleship
are also found in the Classics/Casino community.
1.19 "Users" are individuals who access the Co-Branded Pages or use the Co-
Branded Software.
2. Co-Branded Pages
----------------
2.1 Co-Branded Software Distribution License. Mpath hereby grants to Infoseek
----------------------------------------
and its Affiliates a non-exclusive, royalty-free, worldwide right and
license to: (i) distribute,
-3-
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display, perform and transmit Co-Branded Software on Go Network; (ii)
permit users of Go Network to download the Co-Branded Software from Co-
Branded Pages; and (iii) allow users of Go Network to use (subject to
Mpath's standard form end user license agreement ("End User License
Agreement") as attached to this Agreement as Exhibit F, which Mpath has
designed such that users must consent on-line thereto prior to playing the
games) the Co-Branded Software to play the games that are available on the
Service. Mpath may revise the click-wrap end user license agreement
attached hereto as Exhibit F from time to time and such revisions are
subject to Infoseek's prior written approval which may not be unreasonably
withheld or delayed. The version of the Co-Branded Software that Users may
download under this Section 2.1 shall be substantially in the form, and
contain the same features, as the Client Software that Users may download
from mplayer.com on the Effective Date. During the term of this Agreement,
Mpath will promptly (but within [XXXXX] of commercial release) provide
Infoseek with all revisions and upgrades for the Co-Branded Software that
are available to Mpath's other customers. Mpath agrees that a Go Chrome
will be included on the Co-Branded Software. The Co-Branded Software will
conform to the functionality and features described in Exhibit J.
2.2 Customized Co-Branded Software. Mpath will: (i) create, subject to
------------------------------
Infoseek's reasonable approval, Co-Branded Software, which shall be
customized for Go Network based on the Client Software; (ii) provide
Infoseek with the Co-Branded Software in an electronic format to be agreed
upon by the parties and by electronic transmission; (iii) include in Co-
Branded Software the ability to launch Co-Branded Software from a desktop
co-branded game icon, which, except for Mpath Marks thereon, shall be owned
by Infoseek. If Mpath makes any revisions and/or upgrades for the Co-
Branded Software that will materially affect the art files for the Co-
Branded Software distributed by Infoseek, then Mpath agrees to notify
Infoseek of the effect of such revisions and/or upgrades within [XXXXX]
prior to commercial release of such revisions and/or upgrades and include a
copy of such revisions and/or upgrades along with such notice. Infoseek's
use of any such revisions or upgrades is subject to the license rights
granted by Mpath to Infoseek with respect to the Co-Branded Software
expressly stated in this Agreement. On the Co-Branded Pages Infoseek will
offer Users a download of the Co-Branded Software. The Client Software may
be downloaded from the Service on mplayer.com. Users will not be charged a
fee to download the Co-Branded Software from the Co-Branded Pages. The Co-
Branded Software will be provided to Infoseek pursuant to this Section and
available for public use no later than [XXXXX].
2.3 Co-Branded Pages. Mpath will redesign, in compliance with Go Network
----------------
design standards, approximately [XXXXX] game-related pages from the Service
for the Co-Branded Pages, based on templates provided by Infoseek. The
[XXXXX] will be displayed in substantially the form attached as Exhibit D,
[XXXXX] as demonstrated on Exhibit D, on the Co-Branded Pages. The parties
must mutually agree, in writing, upon the final design of the Co-Branded
Pages for commercial release. The Co-Branded Pages
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will reside on Mpath servers, or such other servers as Infoseek may
designate from time to time. It is currently anticipated that the Co-
Branded Pages will have the URL "www.mplayer.go.com", which URL may be
------------------
changed from time to time by Infoseek provided that "mplayer" remains as an
element of the URL. The Co-Branded Pages will contain general descriptions
of the games playable with the Co-Branded Software, provide instructions to
Users regarding how to download the Co-Branded Software and will enable
Users to download the Co-Branded Software. The descriptions of the games
playable with the Co-Branded Software and instructions regarding how to
download the Co-Branded Software will be provided by Mpath, and will be
subject to Infoseek's prior written approval which may not be unreasonably
withheld or delayed. In addition, the Co-Branded Pages will feature a
conspicuous notice stating that all comments, questions and/or complaints
about the Co-Branded Software or the games playable with the Co-Branded
Software should be addressed to Mpath and will provide a mailing address
and an electronic mail address to which such comments and complaints should
be directed. Mpath agrees to exercise commercially reasonable efforts to
(i) respond to all such comments and complaints in a timely and
professional manner; and (ii) update the Co-Branded Pages as necessary to
keep them current with equivalent content on mplayer.com. In no event may
Mpath make any representations or statements on behalf of Infoseek without
Infoseek's prior written approval. Mpath will exercise best efforts to
produce and complete the Co-Branded Pages on or before [XXXXX], and, in any
event, will produce and complete the Co-Branded Pages not later than
[XXXXX].
2.4 Operations and Content. Mpath will provide [XXXXX]. Mpath will be [XXXXX].
----------------------
All content on the Co-Branded Pages shall be subject to Infoseek's
reasonable approval; Infoseek may request the deletion of any content that
does not meet its reasonable approval. Infoseek's content guidelines are
attached as Exhibit G and Mpath agrees to follow such content guidelines in
the production and creation of the Co-Branded Pages and the Co-Branded
Software. During the term of the Agreement, the Service shall be [XXXXX].
However, the foregoing shall [XXXXX]:
(a) within the Go Network Games Center, if such game content or
functionality is:
(i) not available from Mpath; or
(ii) available from Mpath, but it does not meet the performance,
quality or delivery deadlines required by Infoseek;
or
(b) in any area of Go Network outside of the Go Network Games Center
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Under Section 2.4(b)(i) a game is deemed to be not available from Mpath if
Infoseek gives Mpath written notice of Infoseek's requirement to have such
game content available on the Co-Branded Pages and on the Service and after
such notice Mpath within [xxxxx] after such notice, (A) fails to respond or
responds that it declines to obtain the rights to make such game content
available under this Agreement on the Co-Branded Pages at no additional
charge or (B) indicates in writing that it will obtain such rights and
fails to make the game content available within the [xxxxx] period after
Mpath's response. If Mpath indicates that Mpath will obtain the necessary
rights, Mpath shall then have [xxxxx] from the date of Mpath's response to
make such games available on the Co-Branded Pages. This Section shall in no
way restrict infoseek's ability to include (a) advertising or other
promotional material or information from Mpath's competitors, game
retailers, or other parties within any area of the Go Network, including
the Go Network Games Center, and/or (b) any game related content in any
location outside of Go Network Games Center.
2.5 Mpath Support. When a user who has downloaded the Co-Branded Software from
-------------
the Co-Branded Pages selects a game compatible with the Service to play,
the user will be transported via Internet to one of Web or Service servers.
All games available from the Co-Branded Pages will be played on the Mpath's
Web or Service servers. Mplayer will: (i) be responsible to all Users of
the Co-Branded Pages for all aspects of the operation of the Client
Software, Co-Branded Software, and the content on the Co-Branded Pages,
including, but not limited to, handling problems and questions; (ii) be
responsible for providing customer support to Users of the Co-Branded Pages
with respect to the use of the Co-Branded Pages and the games the playable
with the Co-Branded Software; and (iii) respond to all user comments,
questions and complaints promptly and in a professional manner, consistent
with industry standards for such support. Customer support will include
technical or telephone support for both game play and issues relating to
use of the Co-Branded Pages. The customer support provided by Mpath will
be consistent with industry standards. As of the Effective Date Mpath
offers customer support for billing issues [XXXXX], and customer support
for technical problems [XXXXX]. Mpath's standard online mplayer.com
support is available to users at no charge.
2.6 Uptime Performance. Mpath agrees maintain a [XXXXX] uptime for the Co-
------------------
Branded Pages within each [XXXXX] period of this Agreement (with the
exception of any scheduled maintenance performed by Mpath) as measured by
HTML requests from Infoseek at [XXXXX] intervals with [XXXXX] time-outs
("Uptime Performance"). If service for the Co-Branded Pages fails to meet
such Uptime Performance standards and is not corrected within [XXXXX] from
written notification to Mpath by Infoseek, Infoseek may immediately
terminate this Agreement upon written notice. Uptime Performance means a
User is able to link to the Co-Branded Pages. Such Uptime Performance
shall be measured by multiple independent third party ISPs.
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2.7 Functional Performance. Service for the Co-Branded Pages shall function
----------------------
[XXXXX] of the time within each [XXXXX] period (with the exception of any
scheduled maintenance performed by Mpath) as measured by HTML requests from
Infoseek at [XXXXX] intervals with [XXXXX] time-outs. If service for the
Co-Branded Pages fails to meet such Functional Performance (as defined
below) standards for a period of [XXXXX] after written notification by
Infoseek, Infoseek may immediately terminate the Agreement upon written
notice. Functional Service means a User can access information and activate
hyperlinks on the Co-Branded Pages. Such Functional Performance shall be
measured by multiple independent third party ISPs.
3. Revenue and Advertising.
-----------------------
3.1 Sales Responsibility. Infoseek shall have the exclusive right to sell all
--------------------
advertising on the Co-Branded Pages and [XXXXX] revenues generated by such
advertising sales shall belong solely to Infoseek. Mpath shall be
responsible for displaying and serving all such advertising. Mpath shall
have the exclusive right to sell advertisements to be embedded in the Co-
Branded Software, and interstitial ads that are embedded within the Co-
Branded Software, and [XXXXX] revenues generated by such advertising sales
shall belong solely to Mpath.
3.2 Advertising Responsibility. Mpath shall comply with Infoseek's written
--------------------------
advertising guidelines for advertising served by Mpath and embedded in the
Co-Branded Software, as such advertising guidelines are promulgated from
time to time by Infoseek for its own advertising sales on the Go Network.
Infoseek may reject any advertising embedded in the Co-Branded Software
which, as determined in Infoseek's commercially reasonable discretion, does
not conform with Infoseek's written advertising guidelines which are
generally provided to Infoseek's other content providers as revised by
Infoseek from time to time. Infoseek's advertising guidelines which are
generally provided to Infoseek's other content providers are attached as
Exhibit H and Mpath agrees to follow such advertising guidelines in the
production and creation of the advertising for the Co-Branded Software.
Mpath will display all such advertising banners sold by Infoseek on the Co-
Branded Pages, as reasonably requested by Infoseek.
3.3 Revenue Allocation. Infoseek will retain [XXXXX] of the revenue earned by
------------------
Infoseek for all advertising sold for display on the Co-Branded Pages and
sold by or for the Infoseek sales organization. Mpath will retain [XXXXX]
of the revenue earned by Mpath for advertisements to be embedded in the Co-
Branded Software.
3.4 NRE Costs. Mpath will exert commercially reasonable efforts to confirm
---------
the non-recurring engineering costs of integrating Infoseek's e-commerce
partner as the e-commerce pathway from the Co-Branded Software "store"
button. If such non-recurring engineering costs exceed [XXXXX] then and
subject to Infoseek's prior written approval, Infoseek will be responsible
for reimbursing Mpath for all reasonable non-recurring engineering costs
incurred in performing such integration. If Infoseek does not agree to
reimburse Mpath for the costs of the integration, then Mpath will be under
no obligation
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to perform such integration.
3.5 E-commerce Revenue Split. Beginning [XXXXX] Infoseek agrees to pay Mpath
[XXXXX] Subject to [XXXXX], Infoseek will pay to Mpath all amounts due
and payable to Mpath under this Section within [XXXXX] after [XXXXX]
based on [XXXXX]. [XXXXX] after [XXXXX], Infoseek will deliver to Mpath
a report which will provide all information reasonably necessary for
computation and confirmation of payments due, payable and creditable to
Mpath from Infoseek under this Section, if any, for such [XXXXX]
period.
4.1.1 Interim E-Commerce Arrangement. Until Infoseek appoints its Commerce
------------------------------
Partner, the parties agree to use Chips & Bits a corporation with its
principal office in Burlington, Vermont ("Chips & Bits") as the Commerce
Partner to process e-commerce transactions for certain computer products
on the Co-Branded Pages and collect Gross Revenues (Mpath), pursuant to
its existing agreement with Mpath. Mpath will work with Chips & Bits to
implement and maintain a tracking system that will enable Mpath to record
and report Gross Revenue ("Mpath"). While Chips & Bits is acting as the
Commerce Partner, all payment and reporting obligations set forth in
Section 3.5 shall be the obligations of Mpath. Mpath shall pay to
Infoseek [XXXXX] of the Net Revenues (Mpath) paid to Mpath by Chips &
Bits. Mpath has advised Infoseek that under the agreement between Mpath
and Chips & Bits, Chips & Bits can and will (subject to Section 14)
perform the services described in this Section 3.5.1.
3.6 Audit. For [XXXXX] after receipt of Net Revenue by Infoseek, Infoseek
-----
will maintain records and books, in accordance with generally accepted
accounting principles, regarding Net Revenue. A nationally-recognized
independent certified public accountant (not hired on a contingent-fee
basis) selected and paid for by Mpath may, subject to the confidentiality
provisions of this Agreement, upon reasonable prior notice and during
normal business hours, inspect the records of Infoseek on which such
reports are based no more than [XXXXX] per calendar year and [XXXXX]
within [XXXXX] after termination of this Agreement. If, upon performing
such audit, it is determined that Infoseek has underpaid Mpath, Infoseek
will pay to Mpath the amount of the underpayment within thirty (30) days
of completion of the audit. If, upon performing such audit, Infoseek has
overpaid Mpath, Infoseek may offset the amount of any such overpayment
against any balance owing from Infoseek to Mpath. If such offset is not
commercially reasonable, Infoseek may invoice Mpath for such amount and
Mpath agrees to pay such invoice within thirty (30) days. Notwithstanding
the requirement that Mpath pay for the audit, if such underpayment
exceeds [XXXXX] of the amounts due Mpath in the period being audited,
Infoseek will bear all reasonable expenses and costs of such audit up to
the amount of the underpayment. Infoseek shall have all of the rights to
audit granted to Mpath in this Section 3.6 with respect to Gross Revenues
(Mpath) collected by Chips & Bits and paid to Mpath pursuant to Section
3.5.1.
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4. Ownership and User Data.
-----------------------
4.1 Infoseek IP Rights. Infoseek will remain the sole and exclusive owner of
------------------
all right, title and interest in the Infoseek Marks, Infoseek proprietary
software, Go Network, Go Chrome, and all intellectual property rights,
including derivative works, therein.
4.2 Mpath IP Rights. Mpath will remain the sole and exclusive owner of all
---------------
right, title and interest in the Service, the Client Software, the Co-
Branded Software, and Mpath Marks and all intellectual property rights,
including derivative works, therein (except for any Infoseek Marks
incorporated into the Co-Branded Pages or the Co-Branded Software).
4.3 No Implied Licenses. There are no implied licenses granted under this
-------------------
Agreement. Neither party may reverse engineer, reverse compile, reduce to
human perceivable form, or disassemble any software of the other party,
except as expressly authorized in this Agreement.
4.4 Use of Reports. The User data and related usage statistics reported by
--------------
Mpath to Infoseek under Section 7.1(iii) will be owned by Infoseek and
considered Infoseek's Confidential Information. Mpath acknowledges and
agrees that [XXXXX]; provided, however, Mpath may [XXXXX] provided [XXXXX].
4.5 User Data Ownership and Use. When it is generally available to all content
---------------------------
providers, all Users will register for the Co-Branded Pages through
Infoseek's [XXXXX], referred to in Section 7.5. The [XXXXX] functionality
will exclude use of the Service by children under 18. Infoseek will
exclusively own all data, collected by or for Infoseek, concerning Users.
Such User information [XXXXX]. The parties acknowledge that if Users do not
consent to the transmission to Mpath of their User registration data for
the Service, that such Users will not have access to the Service. Subject
to the restrictions expressed in this Section, Infoseek agrees to provide
Mpath with the User data specified in Exhibit K. Notwithstanding the
foregoing, Infoseek [XXXXX]. For example, to the extent [XXXXX] Mpath may
[XXXXX]. Under no circumstances shall the parties use any User data to
solicit children under the age of 13.
5. Mpath Marks. Mpath hereby grants to Infoseek a non-exclusive license to use
-----------
the Mpath Marks in connection with Infoseek's performance of its obligations
under this Agreement and the
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marketing of Go Network Games Center, provided that Mpath will have the right to
approve such use in advance, in writing, which approval shall not be
unreasonably withheld or delayed. Mpath will be deemed to have approved such use
if Infoseek does not receive notice of disapproval from Mpath within ten (10)
business days after Mpath receives a request for approval from Infoseek. When
Infoseek uses an Mpath Mark under this Agreement, Infoseek must reference the
Mpath Mark as being owned by Mpath as specified in Exhibit B. Nothing in this
Agreement grants Infoseek ownership or any rights in or to the Mpath Marks,
except in accordance with this license, and any use of the Mpath Marks by
Infoseek under this Agreement is for and shall inure to the benefit of Mpath.
The rights granted to Infoseek in this license will terminate upon any
termination of this Agreement.
6. Infoseek Marks. Infoseek hereby grants to Mpath a non-exclusive license to
--------------
use Infoseek Marks, in connection with Mpath's distribution and marketing of the
availability of Go Network Games Center on the Service under this Agreement,
provided that Infoseek must approve such use in advance, in writing, which
approval may not be unreasonably withheld or delayed. Infoseek will be deemed
to have approved such use if Mpath does not receive notice of disapproval from
Infoseek within ten (10) business days after Infoseek receives a request for
approval from Mpath. When Mpath uses a Infoseek Mark under this Agreement,
Mpath must reference the Infoseek Mark as being owned by Infoseek as specified
in Exhibit A. Nothing in this Agreement grants Mpath ownership or any rights
in or to the Infoseek Marks, except in accordance with this license, and any use
of the Infoseek Marks by Mpath under this Agreement shall inure to the benefit
of Infoseek. The rights granted to Mpath in this license will terminate upon
any termination of this Agreement.
7. Marketing.
---------
7.1 Mpath Marketing. Mpath will provide Infoseek with: (i) reasonably
---------------
detailed registration data relating to Users who play games on the Service;
(ii) [XXXXX] advertising impressions to be displayed on the Service
(subject to availability, only advertising space not sold by Mpath or
otherwise committed to other partners shall be available for such
promotions subject to reasonable efforts by Mpath to fairly allocate
advertising space to Infoseek on a pro rata basis with Mpath's other non-
cash advertising commitments) per quarter to direct the Users to Go
Network. Mpath agrees to provide Infoseek, in a manner consistent with
Mpath's standard advertising reporting procedures, with a reasonably
detailed report on the monthly advertising impressions run for Infoseek;
and (iii) all User data and related usage statistics for the Co-Branded
Pages, including for example and without limitation:
(a) specific usage data for games on the Service played by Users;
(b) Service sign-up rates from Co-Branded Software distribution or from
Users;
(c) merchandising response rates;
(d) tournament and event response rates;
(e) online life cycle analysis;
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(f) customer feedback;
(g) market research and demographic profiles;
(h) page views on Co-Branded Pages;
(i) reasonably detailed information on available advertising inventory on
Co-Branded Pages; and
(j) any other information as Infoseek may from time to time reasonably
request from Mpath related to usage of the Co-Branded Pages and Co-
Branded Software.
Mpath agrees to provide reasonable training for Infoseek's sales force on
selling advertising for Go Network Games Center Web pages on Go Network.
----------
7.2 Infoseek Marketing. Infoseek agrees to:
------------------
(i) promote the Co-Branded Software on all Co-Branded Pages with both
(a) a co-branded logo button, and (b) an active hypertext
mplayer.com logo that links to mplayer.com. A mock-up of a sample
Co-Branded Page is included as Exhibit D;
(ii) promote the Co-Branded Pages by utilizing a minimum (subject to
availability, only advertising space not sold by Infoseek or
otherwise committed to other content partners shall be available for
such promotions subject to reasonable efforts by Infoseek to fairly
allocate standard advertising banner space to Mpath on a pro rata
basis with Infoseek's other non-cash advertising commitments) of
[XXXXX] advertising banner impressions per quarter outside of the Go
Network Games Center on Go Network to direct users of Go Network to
----------
the Co-Branded Pages. Such advertising banners shall include some
mplayer.com logo attribution to the Service. Infoseek agrees to
provide, in a manner consistent with Infoseek's standard advertising
banner reporting procedures, Mpath with a reasonably detailed report
on the monthly advertising impressions run for Mpath;
(iii) display approved active hyperlinks from within the Co-Branded Pages
to locations that display selected news, rankings, ladders, forums,
teams, events, and bulletin board services from the Service, all
subject to Infoseek's approval. Mpath agrees to, at Infoseek's
discretion, do one of the following: (a) include active hyperlinks
to the Go Network from the aforementioned locations; or (b) reformat
copies of the aforementioned locations activated by the hyperlink to
comply with the Infoseek template for Go Network Web pages. The
resulting product of Sections 7.2((iii)(a) or (b) will be subject to
Infoseek's reasonable prior written approval for compliance with the
Go Network Web page template;
(iv) include an active hyperlink text reference to the Service in an
attribution line at the bottom of each of the following pages: the
Go Network Games Center Home
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Page and each Co-Branded Page;
(v) maintain on the Go Network Games Center Home Page at all times
during the term of the Agreement a content box which references the
Service and highlights the activities on the Co-Branded Pages and
Co-Branded Software;
(vi) maintain one (1) hypertext link within the events box on the Go
Games Network Games Center Home Page that will link to events
featured in the Co-Branded Pages; and
(vii) grant Mpath a [XXXXX] CPM rate for run-of-site banner Web
advertising on Go Network to promote Mpath services to the Infoseek
and Go Network communities (subject to Infoseek's standard
advertising agreement); target areas and key words are not included.
Such [XXXXX] CPM rate will be subject to an equivalent percentage
increase if Infoseek's standard advertising rates increase. (Thus,
by way of example only, if Infoseek's standard advertising rates
increase by 30%, such [XXXXX] CPM will be increased by 30% to
[XXXXX])
Mpath will not have a logo on Go Network Games Center Home Page. However,
if and to the extent Infoseek's policies with respect to non-Infoseek and
non-Affiliate logos (other than those currently on the page) change to
uniformly accept placement of third party logos on the Go Network Games
Center Home Page or the Go Network Home Page, then Infoseek agrees, at a
minimum, to include the mplayer.com logo as a hyperlink on the Go Network
-------------------------------
Games Center Home Page or the Go Network Home Page, as appropriate, subject
to Mpath's written acceptance of logo placement on similar terms and
conditions as those required of the third parties placing logos on the Go
Network Games Center Home Page or the Go Network Home Page. It shall be
Mpath's responsibility to notify Infoseek if Mpath observes third party
logos on the Go Network Games Center Home Page or the Go Network Home Page
and request a proposal for similar placement subject to similar terms and
conditions.
7.3 Mutual Reach Activities. Mpath agrees to provide a direct html link on the
-----------------------
Co-Branded Software to direct Users back to Go Network after playing games
----------
on the Service. The text and block diagram representing the user
experience flow from the Go Network Games Center to the Service are
included as Exhibit C and this is the model for traffic flow that the
parties agree to follow. If the Web monitoring services, such as Media
Metrics, do not recognize Mpath's reach as outlined in Exhibit C, then the
parties agree to exercise commercially reasonable efforts to redesign the
traffic flow so that Mpath's proportional reach is measured and recognized.
7.4 Publicity. Infoseek and Mpath may each make press releases about the
---------
existence and contents of the Agreement (except with respect to specific
financial terms) with the prior written (including confirmed email)
approval of the other of the contents and timing of the press release,
which approval shall not be unreasonably withheld or delayed. If the
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party from whom approval is sought does not approve or reject such press
release within five (5) business days of submission for approval, such
press release shall be deemed approved. Also, the parties agree to
negotiate in good faith a combined Go Network release with mplayer.com
mentioned in the heading of the release; provided that any such press
release copy shall be subject to mutual written consent, the timing of such
press release shall be determined by launch of the Go Network Games Center,
and no financial details of the agreement will be disclosed.
7.5 [XXXXX]. Mpath agrees to exert commercially reasonable efforts to
-------
integrate Go Network Games Center and the Co-Branded Software so that they
work with Infoseek's [XXXXX] once the [XXXXX] is commercially launched. If
such integration costs exceed [XXXXX], Infoseek may either (i) [XXXXX]; or
(ii) [XXXXX]. Mpath will provide Infoseek with reasonable documentation
concerning all such costs.
8. Warranties.
----------
8.1 BY INFOSEEK. INFOSEEK REPRESENTS AND WARRANTS THAT: (I) [XXXXX] (II)
-----------
[XXXXX] (III) [XXXX] AND (IV) [XXXXX]
8.2 BY MPATH. MPATH REPRESENTS AND WARRANTS THAT: (I) IT IS THE OWNER OR
--------
LICENSEE OF THE MPATH MARKS, THE SERVICE, AND THE GAMES THAT CAN BE PLAYED
ON THE SERVICE (EXCEPT AS IDENTIFIED IN EXHIBIT I) AND THE CO-BRANDED PAGES
(OTHER THAN INFOSEEK MARKS THEREON), THE CLIENT SOFTWARE, THE CO-BRANDED
SOFTWARE (EXCEPT FOR THE INFOSEEK MARKS), AND ALL INTELLECTUAL PROPERTY
RIGHTS THEREIN; (II) IT HAS NOT ENTERED INTO ANY AGREEMENTS OF ANY KIND
INCONSISTENT WITH OR CONTRARY TO THIS AGREEMENT; (III) THE USE OF THE MPATH
MARKS, THE SERVICE, THE CO-BRANDED PAGES, THE CO-BRANDED SOFTWARE, AND THE
CLIENT SOFTWARE UNDER THIS AGREEMENT WILL NOT VIOLATE OR INFRINGE ANY
COPYRIGHT, TRADEMARK, TRADE SECRET OR OTHER RIGHTS (OTHER THAN PATENT) OF
ANY THIRD PARTY; (IV) THE USE OF THE MPATH MARKS, THE SERVICE, THE CO-
BRANDED PAGES, THE CO-BRANDED SOFTWARE, AND THE CLIENT SOFTWARE UNDER THIS
AGREEMENT WILL NOT, TO THE BEST OF MPATH'S KNOWLEDGE, VIOLATE OR INFRINGE
ANY PATENT RIGHT OF ANY THIRD PARTY; (V) THE OPERATION OF THE CO-BRANDED
PAGES AND THE GAMES THAT CAN BE PLAYED THEREON WILL BE IN ACCORDANCE WITH
ALL APPLICABLE LAWS AND REGULATIONS; (VI) IT HAS SUFFICIENT RIGHT AND
AUTHORITY TO ENTER INTO THIS AGREEMENT AND TO GRANT THE LICENSES AND RIGHTS
GRANTED UNDER THIS AGREEMENT; (VII) THE CO-BRANDED SOFTWARE WILL BE
DISTRIBUTED TO USERS IN GOOD WORKING ORDER, FREE OF MATERIAL PROGRAMMING
DEFECTS, AND TO THE BEST OF MPATH'S KNOWLEDGE ALSO FREE OF VIRUSES, WORMS,
OR DISABLING DEVICES AND THAT MPATH EXERCISES COMMERCIALLY REASONABLE
PRECAUTIONS TO SCAN AND
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ELIMINATE FOR VIRUSES, WORMS, OR DISABLING DEVICES; (VIII) THE CONTENT
DISPLAYED ON THE CO-BRANDED PAGES AND THE GAMES THAT CAN BE PLAYED ON THE
SERVICE, TO THE BEST OF MPATH'S KNOWLEDGE AND BASED ON REPRESENTATIONS AND
WARRANTIES RECEIVED BY MPATH FROM ITS LICENSORS, WILL NOT VIOLATE ANY LAWS
OR ANY RIGHTS OF ANY THIRD PARTIES, INCLUDING, BUT NOT LIMITED TO, SUCH
VIOLATIONS AS INFRINGEMENT OR MISAPPROPRIATION OF ANY COPYRIGHT, PATENT,
TRADEMARK, TRADE DRESS, TRADE SECRET, MUSIC, IMAGE, OR OTHER PROPRIETARY OR
PROPERTY RIGHT, FALSE ADVERTISING, UNFAIR COMPETITION, DEFAMATION, INVASION
OF PRIVACY OR PUBLICITY RIGHTS, MORAL OR OTHERWISE, OR RIGHTS OF CELEBRITY,
VIOLATION OF ANY ANTI-DISCRIMINATION LAW OR REGULATION, OR ANY OTHER RIGHT
OF ANY PERSON OR ENTITY; (IX) THE CONTENT DISPLAYED ON THE CO-BRANDED PAGES
BY MPATH WILL NOT CONTAIN ANY MATERIAL THAT IS: UNLAWFUL, FRAUDULENT,
THREATENING, ABUSIVE, HARASSING, DEFAMATORY, VULGAR, OBSCENE (WITHIN
STATUTORY OR COMMON LAW DEFINITION), PROFANE, HATEFUL, RACIALLY,
ETHNICALLY, OR OTHERWISE ACTIONABLE AT LAW, INCLUDING, WITHOUT LIMITATION,
ANY MATERIAL THAT SUPPORTS, PROMOTES OR OTHERWISE ENCOURAGES WRONGFUL
CONDUCT THAT WOULD CONSTITUTE A CRIMINAL OFFENSE, GIVE RISE TO CIVIL
LIABILITY, OR OTHERWISE VIOLATE ANY APPLICABLE LOCAL, STATE, NATIONAL OR
INTERNATIONAL LAWS; AND (X) WITH RESPECT TO THE CLIENT SOFTWARE AND CO-
BRANDED SOFTWARE, THE OCCURRENCE IN OR USE BY THE SOFTWARE OF DATES BEFORE,
ON OR AFTER JANUARY 1, 2000 WILL NOT ADVERSELY AFFECT THE PERFORMANCE OF
THE SOFTWARE WITH RESPECT TO DATE-DEPENDENT DATA, COMPUTATIONS, OUTPUT, OR
OTHER FUNCTIONS.
8.3 WARRANTY DISCLAIMER. THE FOREGOING WARRANTIES IN SECTIONS 8.1 AND 8.2 ARE
IN LIEU OF ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION ANY WARRANTY OF NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR
PURPOSE. EXCEPT AS SET FORTH IN SECTIONS 8.1 AND 8.2, NEITHER PARTY MAKES
ANY, AND EACH PARTY ACKNOWLEDGES THAT THE OTHER HAS NOT MADE ANY, AND
HEREBY SPECIFICALLY DISCLAIMS ANY, REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, REGARDING THE GO NETWORK, THE SERVICE, THE SOFTWARE, THE CO-
BRANDED PAGES, THE GO NETWORK GAMES CENTER, THE CO-BRANDED SOFTWARE, OR ANY
OTHER SERVICES OR TECHNOLOGIES TO BE PROVIDED HEREUNDER.
8.4 Indemnification. Mpath will defend, indemnify and hold Infoseek and its
---------------
directors, officers, agents, employees and Affiliates (within the scope of
Affiliates rights as expressly stated in this Agreement) harmless from and
against any and all claims, damages, liabilities, costs and expenses
(including all reasonable attorney's fees) arising out of:
(i) the breach or alleged breach of any warranty made by Mpath under this
Agreement; or
(ii) any patent infringement claim against the Service, the Co-Branded
Software, and/or the Client Software; and
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(iii) any cause of action by any third party game publisher, game owner,
or game distributor arising from any game that can be played on the
Service.
Infoseek will [XXXXX] Mpath and its directors, officers, agents, employees
and affiliated companies [XXXXX]. The indemnifying party shall not be
liable for any claims, damages, liabilities, costs or expenses unless the
party seeking indemnification gives the indemnifying party prompt written
notice of any such claims, damages, liabilities, costs or expenses and
cooperates fully with the indemnifying party at the indemnifying party's
expense in the defense, compromise or settlement of any claims.
9. Confidentiality.
---------------
9.1 Confidentiality Restrictions. Each party will take reasonable steps, at
----------------------------
least including the steps it takes to protect its own most valuable
proprietary information to prevent the duplication or disclosure of the
other party's Confidential Information, other than by or to its, or its
affiliates', employees or agents who must have access to the Confidential
Information to perform the party's obligations hereunder. However, each
party may disclose Confidential Information of the other party: (i)
pursuant to the order or requirement of a court, administrative agency or
other governmental body, provided that such party give reasonable notice to
the other party to contest such order or requirement; or (ii) on a
confidential basis to legal and financial advisors, and in the course of
investment or financing due diligence subject to reasonable written
confidentiality restrictions. In no event, without Mpath's prior written
consent, may;
(A) MPATH CONFIDENTIAL INFORMATION, OR
(B) ANY MPATH PROPRIETARY CODE DELIVERED BY MPATH TO INFOSEEK UNDER THIS
AGREEMENT;
be used by Infoseek on any game playing service other than the Service or
the Go Network Games Center.
9.2 Return of Confidential Information. No later than fifteen (15) business
----------------------------------
days after termination or expiration of this Agreement, the recipient of
Confidential Information will return all Confidential Information and all
copies thereof to the owner. With respect to documents or data storage
media containing Confidential Information of the other party, the recipient
may elect to delete therefrom all such Confidential Information, in which
event the recipient shall, upon written request from the owner, deliver to
the owner a certificate, signed by an authorized representative of the
recipient, to the effect that all Confidential Information of the owner has
been returned or deleted.
10. Term and Termination. This Agreement commences on the Effective Date and
--------------------
continues
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in full force and effect for an initial term of [XXXXX] after commercial
launch (excluding public alpha and beta testing) of the Co-Branded Pages on
the Go Network Games Center, unless earlier terminated in accordance with
this Section. Either party may terminate this Agreement immediately in the
event of: (i) the other party's material breach of any obligation under
this Agreement, which breach is not remedied within fifteen (15) calendar
days of the defaulting party's receipt of written notice of the breach; or
(ii) the other party's petition for bankruptcy or reorganization, or the
assignment for the benefit of creditors of the other party. Sections 1,
3.3, 3.6, 4, 8.3, 8.4, 9, 11, 12, 13, 14, 16, 17, 19, and 20 survive the
expiration or termination of this Agreement. Upon termination of this
Agreement, Mpath shall immediately remove the Infoseek Marks from the Co-
Branded Software download site.
11. Limitation of Liability. REGARDLESS WHETHER ANY REMEDY SET FORTH IN THIS
-----------------------
AGREEMENT FAILS OF ITS ESSENTIAL PURPOSE OR OTHERWISE, UNDER NO
CIRCUMSTANCES WILL EITHER PARTY BE LIABLE TO THE OTHER UNDER ANY CONTRACT,
STRICT LIABILITY, NEGLIGENCE OR OTHER LEGAL THEORY, FOR ANY INDIRECT,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS OR REVENUE OF
THE OTHER PARTY IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT
EVEN IF THE PARTY SHALL HAVE BEEN INFORMED IN ADVANCE OF SUCH DAMAGES. THE
LIMITATION OF LIABILITY IS REFLECTED IN THE CONSIDERATION EXCHANGED IN THIS
AGREEMENT. The limitation in this Section shall not apply to either party's
obligations of indemnity pursuant to Section 8.4.
12. Governing Law. This Agreement is governed, controlled, interpreted and
-------------
defined by and under the laws of the State of California and the United
States, without reference to California's the conflicts of laws rules. Each
party irrevocably consents to the exclusive jurisdiction of any state or
federal court for or within Santa Clara County, California over any action
or proceeding arising out of or related to this Agreement, and waives any
objection to venue or inconvenience of the forum in any such court. If any
litigation or proceeding is brought by either party against the other in
connection with this Agreement, the prevailing party in such litigation or
other proceeding shall be entitled to recover from the other party all
reasonable costs, attorneys' fees and other expenses incurred by such
prevailing party.
13. Notices. All notices required or permitted under this Agreement will be in
-------
writing, will reference this Agreement, will be sent via U.S. express mail
or private express courier or by tele-facsimile (with receipt confirmed via
telephone) and will be effective upon receipt at the address stated below.
Notice will be addressed as follows, unless all parties to the Agreement
are notified in writing of a change of address, in which event notice will
be sent to the new address:
To Infoseek: Infoseek Corporation
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Attention: Legal Department
1399 Moffett Park Drive
Sunnyvale, CA 94089
Phone: (408) 543-6000
Fax: (408) 734-9358
With a copy to:
To Mpath: Murray Vince
Director of Legal Services
Mpath Interactive, Inc.
665 Clyde Avenue
Mountain View, California 94043
Phone: (650) 429-3611
Fax: (650) 429-1954
14. Force Majeure. Neither party will be liable to the other under the terms
-------------
of this Agreement for any delays, preemptions or other failure to perform
when such delays, preemptions or failures are due to any cause beyond the
control of the party whose performance is so affected, including, without
limitation, fire, war, earthquake, strike, riot, labor dispute, or an act
of God. In the event of any such delay, preemption or failure, the
affected performing party will promptly notify the other party of the
nature and anticipated length of continuance of such force majeure, and
during such period both parties will be excused from performance hereunder.
No such failure or delay constitutes a material breach of this Agreement.
15. No Assignment. Neither party may assign its rights or obligations under
-------------
this Agreement, by operation of law or otherwise, without the express
written consent of the other; except that a party may assign this Agreement
to an affiliate commonly owned and controlled by the party or to any other
third party in connection with the merger or acquisition of the party or
sale of all or substantially all of its assets used primarily in connection
with this Agreement. [XXXXX]; [XXXXX], [XXXXX], [XXXXX], [XXXXX], [XXXXX],
[XXXXX], and [XXXXX]. Each party agrees to provide no less than thirty (30)
business days' prior notification of any authorized assignment under this
Agreement, including assignment to an affiliate or as part of an asset
sale. Any attempted assignment except as allowed by the immediately
preceding sentence is null and void. Subject to the foregoing, this
Agreement will benefit and bind the successors and assigns of the parties.
16. Independent Contractors. The parties to this Agreement are independent
-----------------------
contractors and nothing in this Agreement contained shall be deemed to
create a joint venture, partnership or agency relationship between the
parties to this Agreement. No party shall have any
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power to enter into any contracts or commitments in the name of, or on
behalf of, the other party, or to bind the other party in any respect
whatsoever.
17. Interpretation. Any headings contained in this Agreement are for
--------------
convenience only and shall not be employed in interpreting this Agreement.
The parties and their respective counsel have negotiated this Agreement.
This Agreement will be interpreted fairly in accordance with its terms and
conditions and without any strict construction in favor of or against
either party.
18. Counterparts. This Agreement may be executed in one or more counterparts,
------------
each of which shall constitute an original and all of which taken together
shall constitute one and the same Agreement. The parties may sign
facsimile copies of this Agreement that shall each be deemed originals.
19. Waiver. The failure of either party to insist upon or enforce strict
------
performance by the other party of any provision of this Agreement or to
exercise any right under this Agreement shall not be construed as a waiver
or relinquishment to any extent of such party's right to assert or rely
upon any such provision or right in that or any other instance; rather the
same shall be and remain in full force and effect.
20. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties with respect to the subject matter to this Agreement, and
supersedes and replaces all prior or contemporaneous understandings or
agreements, written or oral, regarding such subject matter.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
Mpath Interactive, Inc. Infoseek Corporation
By: /s/ Thomas C. Garland, Jr. By: /s/ Andrew Newton
-------------------------- -----------------
Authorized Signature Authorized Signature
Name: Thomas C. Garland, Jr. Name: Andrew E. Newton
-------------------------- --------------------------
Title: Vice President Title: VP & General Counsel
-------------------------- --------------------------
Date: 1/11/99 Date: December 18, 1998
-------------------------- --------------------------
Address: 665 Clyde Ave. Address: 1399 Moffett Park Drive
Mountain View, CA 94043 Sunnyvale, CA 94089-1134
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EXHIBIT A
INFOSEEK MARKS
Infoseek to provide:
[XXXXX]
[XXXXX]
[XXXXX]
[XXXXX]
[XXXXX]
[XXXXX]
[XXXXX]
[XXXXX]
[XXXXX]
Infoseek may update this Exhibit, in writing, from time to time during the term
of the Agreement and Mpath agrees to implement any such changes in Mpath's use
of the Infoseek Marks within a reasonable period of time.
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EXHIBIT B
MPATH MARKS
1. Registered Trademarks
Mpath Interactive(R)
Mplayer(R)
ScribbleTalk(R)
Wanna Play?(R)
Mpath Interactive, Mplayer, Scribbletalk, and Wanna Play? are registered
trademarks of Mpath Interactive, Inc.
2. Trademarks
Active Chat(TM)
Active Communications(TM)
Active Communities(TM)
It's About People(TM)
Earth's Free Multiplayer Game Service(TM)
Gizmo Game Player(TM)
Hearme(TM)
Mpath(TM)
The Mpath logo(TM)
The Mplayer logo(TM)
mplayer.com(TM)
Mplay(TM)
Active Chat, Active Communications, Active Communities, It's About People,
Earth's Free Multiplayer Game Service, Gizmo Game Player, Hearme, Mpath, the
Mpath logo, the Mplayer logo, mplayer.com, and Mplay are trademarks of Mpath
Interactive, Inc.
Mpath may update this Exhibit from time to time during the term of the Agreement
and Developer agrees to implement any such changes within a reasonable period of
time.
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EXHIBIT C
USER EXPERIENCE FLOW
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EXHIBIT D
SECTION 7.2(I) CO-BRANDED PAGE MOCK-UP
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EXHIBIT E
MOCK UP OF GO CHROME
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EXHIBIT F
END USER LICENSE AGREEMENT
Mplayer.com Agreement
Welcome to mplayer.com. Mpath Interactive, Inc. ("Mpath") provides the
mplayer.com game service ("mplayer.com") to you ("you"), subject to the terms of
this agreement. Mplayer.com provides free unlimited access to a wide variety of
games. As part of mplayer.com, Mpath maintains a World Wide Web site,
www.mplayer.com (the "Web Site"). The following are the terms and conditions for
use of mplayer.com and the Web Site, along with any amendments thereto, and any
operating rules or policies that may be published from time to time by
mplayer.com (collectively, the "Mplayer.com Agreement" or "MA"). Please read
them carefully. The term "Member" in this MA refers to any person or entity that
has entered into this MA with Mpath.
There is an optional premium service available called mplayer.com Plus, but you
will not be charged for it unless you actively sign up for it and enter your
credit card information. The premium service areas and special pay-to-play
events are clearly defined, and will provide you with a complete explanation and
description of costs and services before you are allowed to purchase them. You
will not be obligated to any charges if you press cancel any time prior to
accepting a charge.
You must be at least 18 years of age to accept this MA. Minors should access
mplayer.com only by having an adult register for them and open an account that
the adult authorizes the minor to use. Mpath will at times require that the
registrant provide sufficient information to indicate that the registrant is an
adult. BY COMPLETING THE REGISTRATION PROCESS, DOWNLOADING THE SOFTWARE, AND
CLICKING THE "I ACCEPT" BUTTON, YOU ARE STATING THAT YOU ARE AT LEAST 18 YEARS
OF AGE OR A MINOR WITH PARENTAL CONSENT TO USE MPLAYER.COM, AND THAT YOU AGREE
TO BE BOUND BY ALL OF THE TERMS AND CONDITIONS OF THIS MA.
Mpath may elect at its sole discretion to monitor some, all or none of the areas
of mplayer.com for adherence to this MA.
1. ACCOUNT INFORMATION.
(i) Registration. You agree to provide Mpath with ongoing, accurate, complete,
and updated registration information. Failure to do so constitutes a breach of
this MA and unauthorized access to mplayer.com, and may result in immediate
termination of your account and subject you to civil and/or criminal liability.
(ii) Master Account and Sub-Accounts When you register online for mplayer.com,
you will receive a password and a master account ("Master Account"). You are
entirely responsible for any and all activities conducted through your Master
Account and any sub-accounts or Member-names under your Master Account ("Sub-
Accounts"). You may permit another individual,
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including a minor, to use your Master Account or Sub-Accounts subject to your
supervision and assumption of all resulting liabilities. You agree to notify
Mpath immediately of any unauthorized use of your password or any of your
accounts, or of any other breach of security.
(iii) Passwords. Upon your registration as a Member of mplayer.com, you will
select a password. You are responsible for maintaining the confidentiality of
your password and are liable for any harm resulting from disclosing or allowing
disclosure of any password or from use by any person of your password to gain
access to your Master Account(s) or any Sub-Accounts. Therefore, for security
purposes, Mpath recommends that you change your password often. (You can do this
by selecting the "Info" button on the mplayer.com Gizmo, then "Modify Account"
function of the mplayer.com client software.) At no time should you respond to
an online request for a password, except when prompted by the mplayer.com Gizmo
or for special mplayer.com promotional programs. Mpath employees will never ask
for your password online. You acknowledge that although mplayer.com offers a
feature that allows you to bypass the password protection, this feature permits
anyone who has access to your computer to easily access your Master Account
and/or Sub-Accounts. Use of this password bypass feature is at your own risk.
YOU ARE FULLY LIABLE FOR ALL CHARGES UNDER YOUR MASTER ACCOUNT AND/OR SUB-
ACCOUNTS, INCLUDING ANY UNAUTHORIZED CHARGES TO THOSE ACCOUNTS.
(iv) Member Names. Upon your registration as a Member of mplayer.com, you must
choose one or more Member names to identify yourself to other Members and
mplayer.com staff. You may not select or use a Member name of another person
(unless it is also your name), or a name which violates any third party's
trademark right, copyright, or other proprietary right, which is or may be
illegal, which may cause confusion, or which Mpath deems in its discretion to be
vulgar or otherwise offensive. Mpath reserves the right to delete any vulgar or
otherwise offensive Member name, or to require deletion thereof.
(v) Former Members. Members whose accounts have been terminated by Mpath may
not access mplayer.com in any manner or for any reason without the express
written permission of Mpath. Active Members may not knowingly allow former
Members who have been terminated to use the active Members' accounts.
2. MEMBER PRIVACY
It is Mpath's policy to respect the privacy of its Members. Please refer to
Mpath's PRIVACY POLICY for more information.
You agree that Mpath may access and disclose any information about you or your
accounts, if Mpath believes in good faith that such action is reasonably
necessary to comply with the law, to comply with legal process, to operate its
systems properly, or to protect itself, its Members, or others.
3. PROPRIETARY RIGHTS TO CONTENT
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You acknowledge that (a) mplayer.com contains games, information,
communications, software, text, photos, video, graphics, music, voices, sounds
and other material and services (collectively, "Content"), and (b) such Content
may be provided under license by independent content providers ("ICPs"),
including, but not limited to, game publishers and other Members. You, and any
user of your Master Account or Sub-Accounts, must evaluate, and bear the risk
associated with, the accuracy, completeness or usefulness of any Content. Mpath
does not pre-screen Content as a matter of policy, but Mpath and ICPs shall have
the right, but not the responsibility, to remove Content which is deemed in
their discretion harmful, offensive, or otherwise in violation of this MA. Such
removal may be immediate and without notice.
You acknowledge that: (a) mplayer.com permits access to Content that is
protected by copyrights, trademarks, service marks, patents or other proprietary
rights owned by Mpath or third parties (collectively, "Rights"), (b) these
Rights are valid and protected in all media existing now or later developed, and
(c) except as is explicitly provided otherwise, your use of Content shall be
governed by generally applicable copyright and other intellectual property laws.
You may make a copy of this Content for your personal, non-commercial use only,
provided that you keep all copyright or other proprietary notices intact. You
may not modify, copy, reproduce, republish, upload, post, transmit, sell,
publish, broadcast, create derivative works from, perform, or distribute in any
way Content available through mplayer.com, including code and software, without
express prior written consent.
You agree that you may upload or otherwise transmit on or through mplayer.com
only Content (including games) that is not subject to any Rights, or Content in
which any holder of Rights has given express authorization for distribution on
mplayer.com. Unless specified otherwise in your upload or transmission, by
submitting Content to any area of the mplayer.com Web Site you automatically
grant -- or warrant that the owner of such Content has expressly granted -
Mpath, its successors and assigns a royalty-free, perpetual, irrevocable, non-
exclusive right and license to use, reproduce, modify, adapt, publish,
translate, create derivative works from, distribute, perform and display such
Content (in whole or part) worldwide and/or to incorporate it in other works in
any form, media, or technology now known or later developed for the full term of
any Rights that may exist in such Content. You also grant Mpath the right to
authorize the downloading and printing of such material, or any portion thereof,
by end users for their personal use. If you participate in audio conversations
in mplayer.com's public chat rooms, you give Mpath your consent to record those
conversations and to use those recorded conversations, in whole or in part, for
promotional purposes.
4. END USER LICENSE
The Software License Agreement states the rights you are granted in connection
with all software provided by Mpath. By using mplayer.com you reaffirm on an
ongoing basis that you agree to be bound by the terms and conditions of the
then-current version of the Software License Agreement.
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5. DISCLAIMER OF WARRANTY
To the maximum extent allowed by law, Mpath, its licensors and subcontractors do
not warrant any connection to, compatibility with, transmission over, nor
results or use of, any network connection or facilities provided (or failed to
be provided) through mplayer.com. From time to time the porting of a particular
game may not be feasible and Mpath may remove any such game from its "Coming
Soon" list without any liability to Member. Member is responsible for assessing
its own computer and transmission network needs, and the results to be obtained
therefrom.
YOU EXPRESSLY AGREE THAT USE OF MPLAYER.COM, ALL SOFTWARE DISTRIBUTED BY MPATH,
AND THE INTERNET ARE AT YOUR SOLE RISK. MPLAYER.COM AND ALL SOFTWARE DISTRIBUTED
BY MPATH AND ANY THIRD PARTY ARE PROVIDED ON AN "AS IS" AND "AS AVAILABLE" BASIS
AND WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND EITHER EXPRESS OR IMPLIED.
YOU ACKNOWLEDGE THAT MPATH DOES NOT CONTROL IN ANY RESPECT ANY INFORMATION,
PRODUCTS OR SERVICES OFFERED BY THIRD PARTIES THROUGH MPLAYER.COM. MPATH IS NOT
RESPONSIBLE FOR CONTENT PROVIDED BY THIRD PARTIES, AND ASSUMES NO RESPONSIBILITY
FOR AND MAKES NO WARRANTY OR REPRESENTATION AS TO THE ACCURACY, CURRENCY,
COMPLETENESS, RELIABILITY OR USEFULNESS OF CONTENT DISTRIBUTED THROUGH
MPLAYER.COM. MPATH DOES NOT ENDORSE, WARRANT OR GUARANTEE ANY PRODUCT OR SERVICE
OFFERED THROUGH MPLAYER.COM BY ANY THIRD PARTY, WILL NOT BE A PARTY TO OR IN ANY
WAY MONITOR ANY TRANSACTION BETWEEN YOU AND THIRD-PARTY PROVIDERS OF PRODUCTS OR
SERVICES, AND WILL NOT BEAR ANY RESPONSIBILITY FOR THEIR PRODUCTS, SERVICES,
POLICIES OR ACTIONS. MEMBERS USING ANY SUCH PRODUCTS AND SERVICES MAY BE SUBJECT
TO ADDITIONAL TERMS AND CONDITIONS RELATING TO THE USE OF SUCH THIRD PARTY
CONTENT, SOFTWARE OR SERVICES AND FAILURE TO ABIDE BY THOSE ADDITIONAL TERMS AND
CONDITIONS MAY RESULT IN TERMINATION OF MEMBERSHIP.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, MPATH EXPRESSLY DISCLAIMS ALL
WARRANTIES AND CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS, AND
THOSE ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE, WITH RESPECT TO THE
MPATH SERVICE, ALL SOFTWARE DISTRIBUTED BY MPATH, OR THE INTERNET.
MPATH MAKES NO WARRANTY THAT MPLAYER.COM WILL MEET YOUR REQUIREMENTS, NOR THAT
THE MPLAYER.COM WILL BE UNINTERRUPTED, TIMELY, SECURE, OR ERROR FREE. MPATH DOES
NOT MAKE ANY WARRANTY OR
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REPRESENTATION AS TO THE USE OR THE RESULTS THAT MAY BE OBTAINED FROM THE USE OF
MPLAYER.COM.
MPATH ASSUMES NO RESPONSIBILITY FOR ANY DAMAGES SUFFERED BY MEMBER, INCLUDING,
BUT NOT LIMITED TO, FAILURE OF A GAME TO BE PORTED TO MPATH DESPITE ADVERTISING
TO THE CONTRARY, LOSS OF DATA FROM DELAYS, NONDELIVERIES, ERRORS, SYSTEM DOWN
TIME, MISDELIVERIES, NETWORK OR SYSTEM OUTAGES, FILE CORRUPTION, OR SERVICE
INTERRUPTIONS CAUSED BY THE NEGLIGENCE OF MPATH, ITS LICENSORS AND
SUBCONTRACTORS, OR MEMBER'S OWN ERRORS AND/OR OMISSIONS.
Mpath makes no warranty with respect to any related software or hardware used or
provided by Mpath in connection with the Service. Any patent, trademark, trade
secret or warranty infringements, whether actual or alleged, are the direct
responsibility of the manufacturer of said hardware or software product. Mpath
assumes no responsibility for any actions or liabilities arising from the
possession or use of these software or hardware products. Mpath makes no
warranty that defects in the software will be corrected or that the Web Site or
the server that makes it available is free of viruses or other harmful
components.
No advice or information, whether oral or written, obtained by you from Mpath or
through mplayer.com shall create any warranty not expressly stated herein.
SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF CERTAIN WARRANTIES OR
CONDITIONS, SO SOME OF THE ABOVE EXCLUSIONS MAY NOT APPLY TO YOU.
6. LIMITATION OF LIABILITY
YOU ACKNOWLEDGE THAT MPATH SHALL NOT ASSUME OR HAVE ANY LIABILITY FOR ANY ACTION
BY MPATH OR ITS ICPs OR OTHER LICENSORS WITH RESPECT TO CONDUCT, COMMUNICATION
OR CONTENT ON MPLAYER.COM. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
UNDER NO CIRCUMSTANCES, INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE, SHALL MPATH
BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, DAMAGES OR LOSS OF BUSINESS, LOST PROFITS,
BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, OR ANY OTHER PECUNIARY
LOSS, EVEN IF MPATH HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES) IN
CONNECTION WITH MPLAYER.COM OR WITH ANY OTHER PRODUCT OR SERVICE PROVIDED BY
MPATH, OR RESULTING FROM THE USE OR THE INABILITY TO USE MPLAYER.COM, OR FROM
ANY GOODS OR SERVICES PURCHASED OR OBTAINED OR TRANSACTION ENTERED INTO THROUGH
OR FROM MPLAYER.COM, OR FROM UNAUTHORIZED ACCESS TO OR ALTERATION OF YOUR
TRANSMISSIONS, DATA, OR ACCOUNT.
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YOU SPECIFICALLY AGREE THAT MPATH IS NOT RESPONSIBLE OR LIABLE TO YOU OR ANYONE
ELSE FOR ANY THREATENING, DEFAMATORY, OBSCENE, OFFENSIVE OR ILLEGAL CONDUCT OF
ANY OTHER PARTY OR ANY INFRINGEMENT OF ANOTHER'S RIGHTS, INCLUDING INTELLECTUAL
PROPERTY RIGHTS.
MPATH'S ENTIRE LIABILITY AND YOUR EXCLUSIVE REMEDY WITH RESPECT TO USE OF
MPLAYER.COM AND ALL SOFTWARE DISTRIBUTED BY MPATH SHALL BE THE REPLACEMENT OF
ANY SOFTWARE DEVELOPED BY OR FOR MPATH WHICH IS FOUND TO BE DEFECTIVE, USING
MEDIA CHOSEN BY MPATH. MPATH'S LIABILITY TO YOU FOR BREACH OF THIS AGREEMENT IS
LIMITED SOLELY TO $15.
SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR CERTAIN
DAMAGES; IN SUCH STATES MPATH'S LIABILITY IS LIMITED TO THE EXTENT PERMITTED BY
LAW.
7. INDEMNIFICATION
You agree to defend, indemnify and hold harmless Mpath, its parents,
subsidiaries, affiliated companies, officers, employees, licensees, distributors
and ICPs from all losses, liabilities, claims, demands, damages or expenses,
including reasonable attorney's fees, (i) arising from breach of this MA by use
of, or in connection with, the transmission by or through your Master Account or
Sub-Accounts of any Content on mplayer.com, or (ii) asserted by any third party
due to or arising from or in connection with your use of or conduct on
mplayer.com. Mpath reserves the right, at its own expense, to assume the
exclusive defense and control of any matter otherwise subject to indemnification
by you hereunder, which shall not excuse your indemnity obligations.
8. TERMINATION
Either you or Mpath may terminate your subscription to mplayer.com at any time
with or without cause. Your only right with respect to any dissatisfaction with
any (i) MA term, or policy or practice of Mpath in operating mplayer.com, (ii)
Content available through mplayer.com or change therein, or (iii) amount or type
of fees or billing methods, or change therein, is to terminate your subscription
to mplayer.com by notifying mplayer.com Member Support of your desire to
terminate by telephone. Billing only applies to mplayer.com Plus membership and
certain special events for which a charge may be levied. Prior to any such
charges being levied you will be prompted to accept any such charges and submit
your billing information. Your notice of termination will be effective upon
receipt by Mpath, or upon receipt of confirmation if confirmation is requested.
If your Master Account and Sub-Accounts are terminated or canceled, no refund of
any mplayer.com Plus or special event fees will be granted and any online time
credited to your Master Account(s) or Sub-Accounts is not convertible to cash or
other form of credit.
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9. IMPERMISSIBLE CONDUCT
You may not engage in conduct or communication while using mplayer.com which is
unlawful or which restricts or inhibits any other user from using or enjoying
mplayer.com. You agree to use mplayer.com only for lawful purposes. You agree to
abide by all applicable local, state, national and international laws and
regulations. Any conduct by you that in Mpath's sole discretion restricts or
inhibits any other Member, person or entity from using or enjoying mplayer.com
or another service will not be permitted and shall entitle Mpath to immediately
terminate your membership without notice.
Mpath reserves the right to terminate your membership if it determines in its
sole discretion that you have engaged in any impermissible conduct. Mpath
reserves the right to exercise whatever means it deems necessary to prevent
unauthorized access to our service, including, but not limited to, technological
barriers, IP mapping, and direct contact with your Internet Service Provider
(ISP).
Set forth below by way of example, and not as a limitation, are some common
examples of impermissible conduct, which may result in termination of your
membership. This list is not exhaustive. Mpath reserves the right, but does not
assume the responsibility, to restrict conduct which Mpath deems in its
discretion to be harmful to individual Members, damaging to the communities
which use mplayer.com, or in violation of Mpath's or any third party's rights.
You acknowledge that communications over mplayer.com often occur in real-time,
or may be posted on one of mplayer.com's message boards or libraries, and Mpath
cannot, and does not intend to, review, screen or edit communications.
You may not post material or use mplayer.com to:
(1) harass, threaten, embarrass or cause distress, unwanted attention or
discomfort upon another user of mplayer.com or other person or entity,
(2) post or transmit sexually explicit images or other content which is deemed
by Mpath to be offensive or harmful to minors,
(3) transmit any unlawful, harmful, threatening, abusive, harassing, defamatory,
vulgar, obscene, hateful, or otherwise objectionable Content, including but not
limited to material based on a person's race, national origin, ethnicity,
religion, gender, sexual orientation, disablement or other such affiliation,
even if masked by symbols or other characters,
(4) cause the screen to "scroll" faster than other users are able to type to it,
including but not limited to entering a set of random characters, repeatedly
entering a carriage return or taking any action with a similar disruptive
effect,
(5) impersonate any person, including but not limited to, an Mpath official or
employee, an ICP or ICP official or employee, or a moderator, forum leader,
guide or host, or communicate under a false name or a name that you are not
entitled or authorized to use, in any form of online communication, including,
but not limited to, Member names, Member profiles, voice, text or graphic chat
and message postings,
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(6) disrupt the normal flow of dialogue in a chat room or otherwise act in a
manner that negatively affects other users, individuals or entities, including
but not limited to repeatedly interrupting conversation between Members, acting
in such a way as to antagonize, harass or create hostility in a chat room or
lobby, or making commercial postings, solicitations or advertisements,
(7) post or transmit chain letters, pyramid schemes, junk mail, spamming or any
duplicative or unsolicited messages (commercial or otherwise),
(8) post or transmit any unsolicited advertising, promotional materials, or
other forms of solicitation to other Members, individuals or entities, except in
those areas that are designated for such a purpose,
(9) violate any operating rule, regulation, procedure, policy or guideline of
any other interactive service, or interfere with or disrupt networks connected
to mplayer.com, (10) intentionally or unintentionally violate any applicable
local, state, national or international law or regulation,
(11) modify any files which Mpath does not specifically authorize you to modify,
(12) knowingly distribute a virus, worm, Trojan horse, time bomb, cancelbot, or
other destructive program,
(13) knowingly distribute software or content in violation of any license
agreement,
(14) violate any U.S. law regarding the transmission of technical data or
software exported from the United States,
(15) harvest or otherwise collect information about others, including e-mail
addresses, without their consent,
(16) transmit or use any material that may infringe the intellectual property
rights or other rights of third parties, including trademark, copyright or right
of publicity, without the express permission of the Rights holder,
(17) attempt to gain unauthorized access to mplayer.com, other member accounts,
computer systems or networks connected to mplayer.com, through password mining
or any other means, or
(18) use the HTML capabilities of your profile to negatively affect another
member's experience.
If you witness any conduct that violates Mpath's terms of conduct, Mpath
encourages you to contact Mpath Customer Service through any means described on
the Web Site. Mpath will handle information you provide in its sole discretion,
and does not guarantee any action based on such information.
10. USE OF PERSONAL PUBLISHING TOOLS
Mpath may provide Members with personal publishing tools to enable Members to
create personal home pages or other Content. Use of such publishing tools will
be subject to this MA. Mpath reserves the right to require the removal of links
or other content on or through Members' home pages or personal Internet sites if
providing such content or links causes undue load or other problems on
mplayer.com, or constitutes impermissible member conduct.
11. ENTIRE AGREEMENT; MODIFICATION OF MA
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This Agreement and the Software License Agreement comprise the entire agreement
between Mpath and you, and supersede any prior agreements between you and Mpath
with respect to the subject matter hereof or thereof. However, you are subject
to any additional terms and conditions of which you are notified and/or which
may apply when using third-party content, software or services. Mpath reserves
the right, at its discretion, to revise this MA at any time, and such revision
shall be effective immediately upon the posting of the revised MA at the Web
Site on www.mplayer.com. You agree to review the MA periodically to become aware
of such revisions. If any such revision is unacceptable to you, you may
terminate your membership as provided in Section 8. Your continued use of
mplayer.com following posting of the revised MA on the Web Site shall be
conclusively deemed to be acceptance of all such revisions.
12. GENERAL PROVISIONS
You may not use, copy, modify, sublicense, rent, sell, assign or transfer the
license granted pursuant to this MA, or mplayer.com, except as expressly
provided in this MA. Any assignment in violation of this MA is void.
If any provision of this MA is held to be unenforceable or contrary to law for
any reason, such provision shall be reformed only to the extent necessary to
make it enforceable, and such decision shall not affect the enforceability (i)
of such provision under other circumstances, or (ii) of the remaining provisions
hereof under all circumstances.
The paragraph headings contained in this MA are for the purposes of convenience
only and are not intended to define or limit the contents of said paragraphs,
and have no legal or contractual significance.
Mpath and you are independent contractors under this MA. Mpath's failure to
enforce at any time any of the provisions of this MA shall in no way be
construed to be a present or future waiver of such provisions, nor in any way
affect the right of any party to enforce each and every such provision
thereafter. The express waiver by Mpath of any provision, condition or
requirement of this MA shall not constitute a waiver of any future obligation to
comply with such provision, condition or requirement. Notwithstanding anything
else in this MA, no default, delay or failure to perform on the part of Mpath
shall be considered a breach of this MA if such default, delay or failure to
perform is shown to be due to causes beyond the reasonable control of Mpath.
This MA is governed by and construed in accordance with the laws of the state of
California and the United States of America, excluding their conflict of law
provisions. You and Mpath agree to submit to the exclusive jurisdiction of the
courts located in the county of Santa Clara in the state of California or the
Northern District of California.
You and Mpath agree that any cause of action arising out of or related to your
use of mplayer.com must commence within one (1) year after the cause of action
arose, notwithstanding any statute to the contrary, otherwise such cause of
action is permanently barred.
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You acknowledge that you have read this MA, understand it, and agree to be bound
by its terms and conditions. This MA represents the complete and exclusive
statement of the agreements concerning mplayer.com between you and Mpath and
supersedes all prior agreements between the parties.
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EXHIBIT G
INFOSEEK CONTENT GUIDELINES
The guidelines may not be ready as of the Effective Date. Infoseek will provide
such guidelines to Mpath within [XXXXX] of the Effective Date. If Mpath finds
the Infoseek Guidelines unacceptable, in its reasonable good faith judgment then
Mpath may, within [XXXXX] of receipt of such guidelines, cancel this Agreement
without liability, on account of termination to either party. Such cancellation
right shall only apply to Mpath's initial receipt of the guidelines; it shall
not apply to subsequent revisions of the guidelines by Infoseek.
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EXHIBIT H
INFOSEEK CONTENT PROVIDER ADVERTISING GUIDELINES
The guidelines may not be ready as of the Effective Date. Infoseek will
provide the guidelines to Mpath within [XXXXX] of the Effective Date.
If Mpath finds the Infoseek Guidelines unacceptable, in its reasonable good
faith judgment then Mpath may, within [XXXXX] of receipt of such guidelines,
cancel this Agreement without liability, on account of termination to either
party. . Such cancellation right shall only apply to Mpath's initial receipt of
the guidelines; it shall not apply to subsequent revisions of the guidelines by
Infoseek.
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EXHIBIT I
EXCEPTION, SECTION 8.2(I)
[XXXXX], [XXXXX], [XXXXX], and [XXXXX] games are excepted from the Section
8.2(i) representation and warranty. In the case of [XXXXX], [XXXXX], and
[XXXXX], Mpath is engaged in license negotiations with the respective game
developers and/or owners but has not yet closed a written agreement with them.
The respective game developers and/or owners are aware that the games are
available on the Service. If such game developers/owners at any time object in
writing to the use of such games on the Service without a license, Mpath shall
immediately remove such games. As for [XXXXX] games, Mpath may, in the future,
provide enabling lobbies and matchmaking for [XXXXX] for which, due to the
technology employed, a license is not required.
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EXHIBIT J
CO-BRANDED SOFTWARE FUNCTIONALITY AND FEATURES
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EXHIBIT K
SECTION 4.4 USER DATA
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Amendment No. 1 to the Registration Statement on Form S-1 of our report dated
January 29, 1999, except as to Note 15, which is as of February 12, 1999,
relating to the financial statements of Mpath Interactive, Inc., which appears
in such Prospectus. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Jose, CA
March 15, 1999
