<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 19, 1999.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
LIBERATE TECHNOLOGIES
(Exact name of Registrant as specified in its charter)
--------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7372 94-3245315
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
1000 BRIDGE PARKWAY
REDWOOD SHORES, CA 94065
(650) 631-4600
(Address, including zip code, and telephone number, including area code, of the
Registrant's principal executive offices)
--------------------------
MITCHELL E. KERTZMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LIBERATE TECHNOLOGIES
1000 BRIDGE PARKWAY
REDWOOD SHORES, CA 94065
(650) 631-4600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
ROBERT V. GUNDERSON, JR., ESQ. MARK A. BERTELSEN, ESQ.
BROOKS STOUGH, ESQ. JOSE F. MACIAS, ESQ.
ANTHONY J. MCCUSKER, ESQ. DON S. WILLIAMS, ESQ.
ROBERT C. SEPUCHA, JR., ESQ. MELISSA V. HOLLATZ, ESQ.
RICHARD H. ZAMBOLDI, ESQ. ELISE M. BRINCK, ESQ.
GUNDERSON DETTMER STOUGH WILSON SONSINI GOODRICH & ROSATI
VILLENEUVE FRANKLIN & HACHIGIAN, LLP PROFESSIONAL CORPORATION
155 CONSTITUTION DRIVE 650 PAGE MILL ROAD
MENLO PARK, CALIFORNIA 94025 PALO ALTO, CALIFORNIA 94304
(650) 321-2400 (650) 493-9300
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after 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, as amended, 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 this prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $0.01 par value per share $100,000,000 $27,800
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 19, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
Shares
[LIBERATE TECHNOLOGIES LOGO]
Common Stock
-----------
Prior to this offering, there has been no public market for the common
stock. The initial public offering price is expected to be between $ and
$ per share. We have applied to list the common stock on The Nasdaq Stock
Market's National Market under the symbol "LBRT."
The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.
Investing in our common stock involves risks. See "Risk Factors" on page 5.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Liberate
Public Commissions Technologies
------------------- ------------------- -------------------
<S> <C> <C> <C>
Per Share............................................. $ $ $
Total................................................. $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about
, 1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Credit Suisse First Boston Hambrecht & Quist
Charles Schwab & Co., Inc.
This prospectus is dated , 1999.
<PAGE>
[ART WORK]
<PAGE>
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUMMARY............................. 3
RISK FACTORS................................... 5
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS................................... 17
USE OF PROCEEDS................................ 18
DIVIDEND POLICY................................ 18
CAPITALIZATION................................. 19
DILUTION....................................... 20
SELECTED CONSOLIDATED FINANCIAL DATA........... 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................... 22
BUSINESS....................................... 35
<CAPTION>
PAGE
-----
<S> <C>
MANAGEMENT..................................... 47
CERTAIN TRANSACTIONS........................... 57
PRINCIPAL STOCKHOLDERS......................... 62
DESCRIPTION OF CAPITAL STOCK................... 64
SHARES ELIGIBLE FOR FUTURE SALE................ 67
UNDERWRITING................................... 69
NOTICE TO CANADIAN RESIDENTS................... 71
LEGAL MATTERS.................................. 72
EXPERTS........................................ 72
WHERE YOU CAN FIND MORE INFORMATION............ 72
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS..... F-1
</TABLE>
--------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
--------------
EXCEPT AS OTHERWISE INDICATED, INFORMATION IN THIS PROSPECTUS IS BASED ON
THE FOLLOWING ASSUMPTIONS:
- A ONE-FOR-SIX REVERSE SPLIT OF ALL OUTSTANDING SHARES OF OUR COMMON STOCK
TO BE COMPLETED IMMEDIATELY PRIOR TO THE EFFECTIVENESS OF THIS OFFERING;
- THE CONVERSION OF ALL OUTSTANDING SHARES OF PREFERRED STOCK INTO SHARES OF
COMMON STOCK UPON THE EFFECTIVENESS OF THIS OFFERING;
- THE CONVERSION OF AN OUTSTANDING CONVERTIBLE PROMISSORY NOTE INTO 421,941
SHARES OF OUR COMMON STOCK UPON THE EFFECTIVENESS OF THIS OFFERING; AND
- NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
--------------
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), 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 DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
THIS SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD
CONSIDER BEFORE BUYING SHARES IN THE OFFERING. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY.
LIBERATE TECHNOLOGIES
We are a leading provider of standards-based software that serves as a
platform for the delivery of Internet-enhanced content and applications to a
broad range of information appliances, such as television set-top boxes, game
consoles, smart phones and personal digital assistants. Our software allows
network operators, such as telecommunications companies, cable and satellite
television operators and Internet service providers, or ISPs, and information
appliance manufacturers to provide consumers access to Internet-based
applications and services from anywhere at anytime.
Network operators are investing billions of dollars to construct broadband
networks to deliver Internet services and applications using technologies such
as cable modems, digital subscriber lines, or xDSL, and digital broadcast
satellite. According to Paul Kagan Associates, the number of U.S. households
with access to broadband delivery will grow from 19 million in 1998 to 51
million in 2002. Network operators intend to attract consumers by offering new
and enhanced voice, video and data services over these broadband networks. We
expect that the richer Internet content and range of additional services that
can be offered by network operators will significantly improve user experiences
and accelerate the adoption of the Internet among a broad base of consumers.
We believe that users are increasingly seeking access to the Internet from
multiple, alternative devices and that this trend will accelerate with the
adoption of the Internet by a broader base of consumers. In response to these
needs, information appliances, a new category of low-cost devices designed to
combine everyday user activities with Internet connectivity, have been
developed. International Data Corporation, or IDC, estimates that the worldwide
market for information appliances will grow at a compound annual growth rate of
approximately 62% to become a $15 billion market by 2002. Television provides
one of the most attractive devices for network operators to deliver new
Internet-enabled services. According to IDC, at the end of 1998, 99 million out
of 101 million households in the United States had at least one television set.
In addition, a television set's display and sound capabilities make it ideally
suited for Internet-related, rich media services such as interactive program
guides, e-commerce, communications (including e-mail and chat), and multi-user
gaming. Network operators are aggressively expanding their broadband networks to
provide these services to television viewers.
Network operators and information appliance manufacturers require a standard
software platform that manages the delivery of Internet content and applications
to a large number of consumers employing many different information appliances.
Our robust server software is designed to economically scale to millions of
users and allow network operators to support a wide variety of appliances.
Information appliance manufacturers use our client software to add connectivity
and Internet functionality to enhance their products. The small footprint of our
client software allows it to operate effectively in many access devices, even
those with limited memory and computing resources. Morever, network operators
and information appliance manufacturers use our open platform cooperatively to
create a uniform environment for developers to enhance existing content and
create new Internet applications and services.
We began operations as a division of Oracle in 1995 and were incorporated in
April 1996. In August 1997, we acquired Navio Communications. We began shipping
our initial products in May 1997. We continue to extend the functionality of our
software platform through extensive internal development and strategic alliances
with leading technology vendors such as Cisco Systems, Inktomi, Lucent
Technologies, Netscape, Oracle and Sun Microsystems. In addition, we recently
solidified relationships with several large network operators, including
Comcast, Cox Communications, MediaOne, Rogers Communications and Shaw
Communications, through a sale of equity completed in May 1999.
As of April 1999, we have licensed our server and client software to over 35
network operators and information appliance manufacturers. Our network operator
customers include America Online, Cable and Wireless, NTT and U S WEST. Our
information appliance manufacturer customers include Acer, Fujitsu, General
Instrument, Hughes Network Systems, NEC and Philips.
Our principal executive offices are located at 1000 Bridge Parkway, Redwood
Shores, California 94065 and our telephone number is (650) 631-4600. Our World
Wide Web address is www.liberate.com. Information on our web site does not
constitute part of this prospectus.
Our logo and certain titles and logos of our products mentioned in this
prospectus are our service marks or trademarks. Each trademark, trade name or
service mark of any other company appearing in this prospectus belongs to its
holder.
3
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Common stock offered....................................... shares
Common stock to be outstanding after this offering......... shares
Use of proceeds............................................ For general corporate purposes, including product
development, expansion of our sales, marketing and
services capabilities and other working capital
requirements. See "Use of Proceeds."
Proposed Nasdaq National Market symbol..................... LBRT
</TABLE>
- ------------------------
This table is based on shares outstanding as of February 28, 1999. This table
excludes:
- 6,080,783 shares of common stock issuable upon the exercise of stock
options outstanding under our stock option plans, and 3,485,622 additional
shares of common stock available for issuance under these stock option
plans;
- 421,941 shares of common stock issuable upon the conversion of an
outstanding convertible promissory note;
- 833,333 shares of common stock available for issuance under our 1999
employee stock purchase plan; and
- Warrants to purchase up to an aggregate of 2,300,000 shares of our common
stock that may be issued in the future if network operator customers
satisfy commercial milestones.
------------------------
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FEBRUARY 28,
PERIOD FROM INCEPTION YEARS ENDED MAY 31, ------------------------
(DECEMBER 1, 1995) TO ------------------------ 1998
MAY 31, 1996 1997 1998 ----------- 1999
--------------------- ----------- ----------- (UNAUDITED) -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Total revenues........................ $ -- $ 275 $ 10,272 $ 6,719 $ 12,190
Gross margin.......................... -- 275 4,263 2,117 5,538
Operating expenses.................... 5,479 30,549 100,679 90,753 28,481
Loss from operations.................. (5,479) (30,274) (96,416) (88,636) (22,943)
Net loss.............................. (3,279) (18,989) (94,391) (86,826) (21,917)
Pro forma basic and diluted net
loss per share...................... $ (4.07) $ (0.79)
Shares used in computing pro forma
basic and diluted net loss per
share............................... 23,209 27,710
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 28, 1999
------------------------
ACTUAL AS ADJUSTED
----------- -----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............................................................. $ 5,517 $
Working capital........................................................................ (34,532)
Total assets........................................................................... 19,608
Deferred revenues...................................................................... 28,909
Long-term debt......................................................................... 4,260
Total stockholders' equity (deficit)................................................... (27,408)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the determination of the number of shares used in computing per share data.
The as adjusted consolidated balance sheet data give effect to (1) the
receipt of the net proceeds of $47.2 million from the sale of 5,208,326 shares
of Series E preferred stock in May 1999, (2) the repayment in May 1999 of $5.1
million owed to Oracle under a convertible note purchase agreement, (3) the
conversion of an outstanding convertible promissory note into 421,941 shares of
common stock and (4) the net proceeds from the sale of the shares of
common stock offered hereby by Liberate at an assumed public offering price of
$ per share after deducting the estimated underwriting discounts and
commissions and estimated offering expenses. See "Use of Proceeds" and
"Capitalization."
4
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE BUYING SHARES
IN THIS OFFERING.
WE HAVE A LIMITED OPERATING HISTORY THAT MAKES AN EVALUATION OF OUR BUSINESS
DIFFICULT
We were incorporated in April 1996 and began shipping our initial products
to customers in May 1997. Our limited operating history makes evaluation of our
business and prospects difficult. Companies in an early stage of development
frequently encounter heightened risks and unexpected expenses and difficulties.
For us, these risks include the:
- Limited number of network operators that have deployed products and
services incorporating our technology;
- Limited number of information appliance manufacturers that have
incorporated our technology into their products;
- Uncertainty as to whether consumers will accept products and services
incorporating our technology;
- Changes by our current or potential customers in strategic direction or
vendor selection as a result of consolidation in the market or the
emergence of new technologies;
- Delays in deployment of broadband networks and Internet-enhanced services
and applications by our network operator customers;
- Our unproven long-term business model, which depends on generating the
majority of our revenues from royalty fees paid by information appliance
manufacturers;
- Need to compete in a highly competitive market;
- Need to manage rapidly expanding operations;
- Need to recruit and retain key personnel; and
- Need to expand our sales and professional services organization.
These risks, expenses and difficulties apply particularly to us because our
market, the information appliance software market, is new and rapidly evolving.
If we do not successfully address these risks, our business will be seriously
harmed.
WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR LOSSES IN THE FUTURE
We incurred net losses of approximately $3.3 million in fiscal 1996, $19.0
million in fiscal 1997, $94.4 million in fiscal 1998 (including a $58.1 million
charge related to acquired in-process research and development) and
approximately $21.9 million for the nine months ended February 28, 1999. As of
February 28, 1999, we had an accumulated deficit of approximately $138.6
million. Since our inception, we have not had a profitable quarter and may never
achieve or sustain profitability. Although our revenues increased from fiscal
1997 to fiscal 1998 and from the nine months ended February 28, 1998 to the nine
months ended February 28, 1999, we may not be able to sustain our historical
revenue growth rates. We also expect to continue to incur increasing research
and development, sales and marketing and general and administrative expenses. If
we are to achieve profitability given our planned expenditure levels, we will
need to generate and sustain substantially increased license and royalty
revenues; however, we are unlikely to be able to do so for the foreseeable
future. As a result, we expect to incur significant and increasing losses and
negative cash flows for the foreseeable future. In addition, to date a
substantial majority of our revenues have been derived from services provided by
us and not from license and royalty fees paid by network operators and
information appliance manufacturers in conjunction with the deployment of
products and services incorporating our software
5
<PAGE>
products. If we are unable to derive a greater proportion of our revenues from
these license and royalty fees, our losses will likely continue indefinitely.
OUR QUARTERLY REVENUES AND OPERATING RESULTS ARE VOLATILE AND MAY CAUSE OUR
STOCK PRICE TO FLUCTUATE
Our quarterly revenues and operating results are volatile and difficult to
predict. As a result, we believe that period-to-period comparisons of our
operating results are not a good indication of our future performance. Moreover,
we expect to derive substantially all of our revenues for the near term from
license fees and related consulting and support services. Over the longer term,
to the extent deployments increase, we expect to derive an increasing portion of
our revenues from royalties paid by network operators and information appliance
manufacturers. If deployments do not increase or this transition otherwise does
not occur, we are unlikely to be able to generate or sustain substantially
increased revenue and our operating results will be seriously harmed. It is
likely that in some future quarter or quarters our operating results will be
below the expectations of public market analysts or investors. In such event,
the market price of our common stock may decline significantly.
Our quarterly operating results have varied in the past and are likely to
vary significantly from quarter-to-quarter. A number of factors are likely to
cause these variations, including:
- The development of the information appliance market;
- Fluctuations in demand for our products and services;
- The timing of the introductions and promotion of products and services
incorporating our technology by network operators and information
appliance manufacturers;
- Acceptance of products and services incorporating our technology by
customers of network operators and information appliance manufacturers;
- Announcements of new products by us and our competitors and changes in our
pricing policies or the pricing policies of our competitors;
- Our ability to manage costs, including personnel costs and support
services costs; and
- Delays of customer purchases caused by announcements of new technology or
otherwise.
In the short-term, we expect our quarterly revenues to be significantly
dependent on the sale of a small number of relatively large orders for our
products and services, which generally have a long sales cycle. As a result, our
quarterly operating results may fluctuate significantly if we are unable to
complete one or more substantial sales in any given quarter. In many cases, we
recognize revenues from services on a percentage of completion basis. Our
ability to recognize these revenues may be subject to delays if we are unable to
meet service milestones on a timely basis. Moreover, because our expenses are
relatively fixed in the near term, any shortfall from anticipated revenues could
result in losses for the quarter.
Although we have limited historical financial data, we have experienced and
expect to continue to experience seasonality in revenues. Revenues and operating
results in our quarter ending August 31 are typically lower relative to our
other quarters. These seasonal trends may continue to affect our
quarter-to-quarter operating results.
THE MARKET FOR INFORMATION APPLIANCES IS NEW AND MAY NOT DEVELOP AS WE
ANTICIPATE
Because the information appliance market is newly emerging, the potential
size of this new market opportunity and the timing of its development are
uncertain. As a result, our profit potential is unproven. We are dependent upon
the commercialization and broad acceptance by consumers and businesses of a wide
variety of information appliances including, among others, television set-top
boxes, game consoles, smart phones and personal digital assistants. Initial
commercialization efforts in this
6
<PAGE>
industry have been primarily focused on television set-top boxes. Broad
acceptance of all information appliances, particularly television set-top boxes,
will depend on many factors. These factors include:
- The willingness of large numbers of consumers to use devices other than
personal computers to access the Internet;
- The development of content and applications for information appliances;
and
- The emergence of industry standards that facilitate the distribution of
content over the Internet to these devices.
If the market for information appliances does not develop or develops more
slowly than we anticipate, our business will be seriously harmed.
OUR SUCCESS DEPENDS ON NETWORK OPERATORS INTRODUCING, MARKETING AND PROMOTING
PRODUCTS AND SERVICES FOR INFORMATION APPLIANCES BASED ON OUR TECHNOLOGY
Our success depends on large network operators introducing, marketing and
promoting products and services based on our technology. There are, however,
only a limited number of large network operators worldwide. Moreover, only a
limited number of network operators have introduced or are in the process of
deploying products and services incorporating our technology and services for
information appliances. In addition, none of our network operator customers is
contractually obligated to introduce, market or promote products and services
incorporating our technology, nor are any of our network operator customers
contractually required to achieve any specific introduction schedule.
Accordingly, even if a network operator initiates a customer trial of products
incorporating our technology, it is under no obligation to continue its
relationship with us or to launch a full-scale deployment of these products.
Further, our agreements with network operators are not exclusive, so network
operators with whom we have agreements may enter into similar license agreements
with one or more of our competitors. Unless network operators introduce, market
and promote products and services incorporating our technology in a successful
and timely manner, our software platform will not achieve widespread acceptance,
information appliance manufacturers will not use our software in their products
and our business will be seriously harmed.
IF INFORMATION APPLIANCE MANUFACTURERS DO NOT MANUFACTURE PRODUCTS THAT
INCORPORATE OUR TECHNOLOGY, OR IF THESE PRODUCTS DO NOT ACHIEVE ACCEPTANCE, WE
MAY NOT BE ABLE TO SUSTAIN OR GROW OUR BUSINESS
We do not manufacture hardware components that incorporate our technology.
Rather, we license software technology to information appliance manufacturers.
Accordingly, our success will depend, in part, upon our ability to convince a
number of information appliance manufacturers to manufacture products
incorporating our technology and the successful introduction and commercial
acceptance of these products. Our efforts in this regard are significantly
dependent on network operators deploying services using our server software.
While we have entered into a number of agreements with information appliance
manufacturers, none of these manufacturers is contractually obligated to
introduce or market information appliances incorporating our technology, nor is
any of them contractually required to achieve any specific production schedule.
Moreover, our agreements with information appliance manufacturers are not
exclusive, so information appliance manufacturers with whom we have agreements
may enter into similar license agreements with one or more of our competitors.
Our failure to convince information appliance manufacturers to incorporate our
software platform into their products, or the failure of these products to
achieve broad acceptance with consumers and businesses, will seriously harm our
business.
7
<PAGE>
COMPETITION FROM BIGGER, BETTER CAPITALIZED COMPETITORS COULD RESULT IN PRICE
REDUCTIONS, REDUCED GROSS MARGINS AND LOSS OF MARKET SHARE
Competition in the information appliance software market is intense. Our
principal competitors on the client software side include Microsoft, OpenTV and
Spyglass. On the server side, our primary competitor is Microsoft. We expect
additional competition from other established and emerging companies. We expect
competition to persist and intensify as the information appliance market
develops and competitors focus on additional product and service offerings.
Increased competition could result in price reductions, fewer customer orders,
reduced gross margins, longer sales cycles and loss of market share, any of
which could seriously harm our business.
Many of our existing and potential competitors, particularly Microsoft, have
longer operating histories, a larger customer base, greater name recognition and
significantly greater financial, technical, sales and marketing and other
resources than we do. This may place us at a disadvantage in responding to our
competitors' pricing strategies, technological advances, advertising campaigns,
strategic partnerships and other initiatives. In addition, many of our
competitors have well-established relationships with our current and potential
customers. Moreover, some of our competitors, particularly Microsoft, have
significant financial resources which have enabled them in the past and may
enable them in the future to make large strategic investments in our current and
potential customers. Such investments may enable competitors to strengthen
existing relationships or quickly establish a new relationship with our current
or potential customers. For example, as a result of a recent investment in AT&T,
Microsoft obtained a non-exclusive licensing agreement whereby AT&T will
purchase at least 7.5 million licenses of Microsoft software for television
set-top boxes. Investments such as this may discourage our potential or current
customers who receive the investment from deploying our information appliance
software, regardless of their views of the relative merits of our products and
services. Further, current or potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties, thereby increasing their ability to address the needs of our
current or potential customers and rapidly acquire significant market share. Our
current or future indirect channel partners may establish cooperative
relationships with our current or potential competitors, thereby limiting our
ability to sell our products through particular distribution channels. Moreover,
existing or future competitors may develop or offer technologies that provide
significant economic, technological, creative or strategic advantages over those
we offer. These technologies, therefore, may achieve greater acceptance than
ours. To the extent our competitors are perceived as providing superior products
and services, or to the extent that our customers are dissatisfied with our
products and services, our business could be seriously harmed.
ORACLE'S OWNERSHIP OF OUR STOCK AND OTHER RELATIONSHIPS WITH US WILL GIVE IT
SIGNIFICANT INFLUENCE OVER OUR BUSINESS
Following this offering (based on shares outstanding as of
, 1999), Oracle will beneficially own approximately % of our
outstanding capital stock. In addition, in May 1999, we entered into a voting
agreement with Oracle, Comcast, Cox Communications and MediaOne. Pursuant to
this agreement, among other things, Comcast, Cox and MediaOne have agreed to
vote the shares of our common stock held by them in order to elect a
representative designated by Oracle to our board of directors. Currently, two of
our six directors are directors and officers of Oracle. As a result, Oracle,
acting both through our board of directors and through its ownership of our
capital stock, will exert significant influence over us. This concentration of
ownership could also have the effect of delaying or preventing a third party
from acquiring control over us at a premium over the then-current market price
of our common stock.
In addition, Oracle has significant influence in our day-to-day business
because it provides us with, among other things, a distribution channel for our
products in Asia/Pacific, Europe and the United States and it assists us in
providing our customers with support. We have also entered into several
8
<PAGE>
commercial, technological and financial arrangements with Oracle on which our
business depends. If Oracle terminates these arrangements, or if Oracle does not
fulfill its obligations under these arrangements, our business may be seriously
harmed. Oracle's interests may not always be aligned with ours. If Oracle ever
acts in a way that is adverse to our interests, our business may be seriously
harmed. For a more detailed description of our agreements with Oracle, you
should read "Certain Transactions--Transactions with Oracle."
WE HAVE RELIED AND EXPECT TO CONTINUE TO RELY ON A LIMITED NUMBER OF CUSTOMERS
FOR A SIGNIFICANT PORTION OF OUR REVENUES
We currently derive, and we expect to continue to derive, a significant
portion of our revenues from a limited number of customers. For the nine months
ended February 28, 1999, our five largest customers accounted for approximately
55% of our total revenues, with Wind River Systems accounting for 24% of those
total revenues. For fiscal 1998, our five largest customers accounted for
approximately 48% of our total revenues, with Wind River Systems accounting for
16% and Thomson multimedia accounting for 10% of those total revenues. We expect
that we will continue to be dependent upon a limited number of customers for a
significant portion of our revenues in future periods, although the customers
may vary from period to period. As a result, if we fail to successfully sell our
products and services to one or more customers in any particular period, or a
large customer purchases less of our products or services, defers or cancels
orders, or terminates its relationship with us, our revenues could decline
significantly. As a result, the loss of any large customer could seriously harm
our business.
OUR SALES CYCLE IS LONG AND WE HAVE A LIMITED ABILITY TO FORECAST THE TIMING AND
AMOUNT OF SPECIFIC SALES
We believe that the purchase of our products and services involves a
significant commitment of capital and other resources by a customer. In many
cases, the decision for our customers to use our products and services requires
them to change their established business practices and conduct their business
in new ways. As a result, we may need to educate our potential customers on the
use and benefits of our products and services. In addition, our customers
generally must consider a wide range of other issues before committing to
purchase and incorporate our technology into their offerings. As a result of
these and other factors, it frequently takes several months to finalize a sale
and requires approval at a number of management levels within a customer's
organization. Our sales cycle averages from six to 12 months and is sometimes
significantly longer.
As a result of the length of our sales cycle, we have a limited ability to
forecast the timing and amount of specific sales. In the past, our sales have
occurred in quarters other than those anticipated by us. Should we fail to
accurately predict the timing and size of individual sales in the future, in
particular if individual sales are delayed or smaller than expected, our
business would be seriously harmed.
THE DEPLOYMENT BY NETWORK OPERATORS OF PRODUCTS AND SERVICES INCORPORATING OUR
TECHNOLOGY IS COMPLEX, TIME CONSUMING AND EXPENSIVE
Our success depends on the large-scale deployment of products and services
incorporating our software by network operators. Such deployment is complex,
time consuming and expensive. Each deployment of products and services
incorporating our technology typically requires our expertise to tailor the
technology to the customer's product offering. Accordingly, the implementation
and deployment of our products requires a lengthy and significant commitment of
resources by our customers and us. Historically, many network operators have
encountered greater customer service demands to support these new offerings
rather than their traditional products and services. In the future, these and
other challenges may slow the rate of implementation or deployment of the
products and services our technology enables, which would seriously harm our
business.
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<PAGE>
IF OUR SOFTWARE PLATFORM DOES NOT SCALE AS ANTICIPATED, OUR BUSINESS WILL BE
HARMED
Despite frequent testing of our software's scalability in a laboratory
environment, the ability of our software platform to support and manage a
substantial number of users in an actual deployment is uncertain. If our
software platform does not efficiently scale to support and manage a substantial
number of users while maintaining a high level of performance, our business will
be seriously harmed.
WE DEPEND UPON INTERNATIONAL SALES FOR MUCH OF OUR REVENUE AND OUR ABILITY TO
SUSTAIN AND INCREASE INTERNATIONAL SALES DEPENDS ON SUCCESSFULLY EXPANDING OUR
INTERNATIONAL OPERATIONS
International sales accounted for approximately 77% of our total revenues in
fiscal 1997, 50% of our total revenues in fiscal 1998 and 52% of our total
revenues in the nine months ended February 28, 1999. We anticipate that a
significant portion of our revenues for the foreseeable future will be derived
from sources outside the United States, especially as we increase our sales and
marketing activities with respect to international licensing of our technology.
Accordingly, our success will depend, in part, upon international economic
conditions and upon our ability to manage international sales and marketing
operations. To date, we have relied primarily on Oracle for the international
distribution of our products and services in Asia/Pacific. To successfully
expand international sales, we must establish additional foreign operations,
hire additional personnel, and increase our foreign direct and indirect sales
forces. This expansion will require significant management attention and
resources, which could divert attention from other aspects of our business. To
the extent we are unable to expand our international operations in a timely
manner, our growth in international sales, if any, will be limited, and our
business could be seriously harmed.
Moreover, international operations are subject to a variety of additional or
heightened risks associated with conducting business internationally that could
harm our business. These risks include the following:
- Difficulties in staffing and managing foreign operations;
- Problems in collecting accounts receivable;
- Longer sales and payment cycles;
- Unexpected changes in regulatory requirements;
- Fluctuations in currency exchange rates;
- Restrictions on the import and export of certain technologies;
- Difficulties in successfully adapting our products to the language and
technology standards of foreign countries;
- Reduced protection for intellectual property rights in some countries;
- Political and economic instability;
- Potentially adverse tax consequences; and
- Tariffs and trade barriers imposed by foreign countries.
To date, substantially all of our revenues and costs have been denominated
in U.S. dollars. However, expanded international operations may result in
increased foreign currency payables. Although we may from time to time undertake
foreign exchange hedging transactions to cover a portion of our foreign currency
transaction exposure, we do not currently attempt to cover potential foreign
currency exposure. Accordingly, any fluctuation in the value of foreign currency
could seriously harm our business.
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<PAGE>
THE INABILITY TO OBTAIN KEY TECHNOLOGY FROM THIRD PARTIES MAY HARM OUR BUSINESS
We rely on technology licensed from third parties, including applications
that are integrated with internally developed software and used in our products.
Most notably, we license the VxWorks real time operating system from Wind River
Systems, font technology from BitStream and multimedia architecture from
RealNetworks. These third-party technology licenses may not continue to be
available to us on commercially reasonable terms, or at all, and we may not be
able to obtain licenses for other existing or future technologies that we desire
to integrate into our products. Our business could be seriously harmed if we
cannot maintain existing third-party technology licenses or enter into licenses
for other existing or future technologies needed for our products.
THIRD PARTY INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS MAY HARM OUR BUSINESS
Although we do not believe that our products infringe on the intellectual
property rights of third parties, we cannot guarantee that:
- An infringement claim will not be asserted against us in the future;
- The assertion of such a claim will not result in litigation;
- We would prevail in such litigation; or
- We would be able to obtain a license for the use of any infringed
intellectual property from a third party on commercially reasonable terms,
or at all.
Further, we expect that software product developers will increasingly be
subject to infringement claims as the number of products and competitors
developing information appliance software grows and the functionality of
products in different industry segments overlaps. From time to time, we hire or
retain employees or consultants who have worked for independent software vendors
or other companies developing products similar to those offered by us. These
prior employers may claim that our products are based on their products and that
we have misappropriated their intellectual property.
We currently do not have liability insurance to protect against the risk
that licensed third-party technology infringes the intellectual property of
others. Any claims relating to our intellectual property, regardless of their
merit, could seriously harm our business, operating results and financial
condition because they could:
- Be time consuming and costly to defend;
- Divert management's attention and resources;
- Cause product shipment delays;
- Require us to redesign our products; or
- Require us to enter into royalty or licensing agreements.
THIRD PARTY PRODUCT LIABILITY CLAIMS MAY HARM OUR BUSINESS
Our technology is incorporated into the products and services of our
customers. Accordingly, we may be subject to product liability claims by our
customers or our customers' end-users for any defects, errors or performance
problems of our customers' products.
Any of these claims could be expensive and require the expenditure of a
significant amount of resources regardless of whether we prevail. We currently
do not have liability insurance to protect against the risk.
11
<PAGE>
OUR SUCCESS DEPENDS ON OUR ABILITY TO KEEP PACE WITH THE LATEST TECHNOLOGICAL
CHANGES
The market for information appliance software is characterized by evolving
industry standards, rapid technological change and frequent new product
introductions and enhancements. Our technology enables network operators to
deliver content and applications to information appliances over the Internet.
Accordingly, our success will depend in large part upon our ability to adhere to
and adapt our products to evolving Internet protocols and standards. Therefore,
we will need to develop and introduce new products that meet changing customer
requirements and emerging industry standards on a timely basis. We have in the
past experienced delays in completing development and introduction of new
software products and we may encounter such delays in the development and
introduction of future products. In addition, we may:
- Fail to design our current or future products to meet customer
requirements;
- Fail to develop and market products and services that respond to
technological changes or evolving industry standards in a timely or
cost-effective manner; and
- Encounter products, capabilities or technologies developed by others that
render our products and services obsolete or noncompetitive or that
shorten the life cycles of our existing products and services.
The failure of any of our product development efforts could seriously harm
our business.
OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
MAY HARM OUR COMPETITIVENESS
Our ability to compete and continue to provide technological innovation is
substantially dependent upon internally developed technology. We rely primarily
on a combination of trademark laws, copyright laws, trade secrets,
confidentiality procedures and contractual provisions to protect our proprietary
technology. In addition, we have 16 patent applications pending in the United
States. Patents may not issue from these or any future applications. Even if
they issue, these patents may not survive a legal challenge to their validity or
provide significant protection for us.
The steps we have taken to protect our proprietary rights may not be
adequate to prevent misappropriation of our proprietary information. Further, we
may not be able to detect unauthorized use of, or take appropriate steps to
enforce, our intellectual property rights. Our competitors may also
independently develop similar technology. In addition, the laws of many
countries do not protect our proprietary rights to as great an extent as do the
laws of the United States. Any failure by us to meaningfully protect our
intellectual property could result in competitors offering products that
incorporate our most technologically advanced features, which could seriously
harm our business.
FAILURE TO MANAGE OUR GROWTH MAY SERIOUSLY HARM OUR BUSINESS
Our rapid growth has placed, and is expected to continue to place, a
significant strain on our managerial, operational and financial resources.
Moreover, we expect to significantly expand our domestic and international
operations by, among other things, expanding the number of employees in
professional services, research and development and sales and marketing. This
additional growth will place a significant strain on our limited personnel,
financial and other resources. Our future success will depend, in part, upon the
ability of our senior management to manage growth effectively. This will require
us to implement additional management information systems, to further develop
our operating, administrative, financial and accounting systems and controls, to
hire additional personnel, to develop additional levels of management within the
corporation, to locate additional office space in the United States and
internationally and to maintain close coordination among our development,
accounting, finance, sales and marketing, consulting services and customer
service and support organizations. Failure to manage our future growth
successfully would seriously harm our business.
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<PAGE>
WE DEPEND ON CERTAIN KEY PERSONNEL, AND THE LOSS OF ANY KEY PERSONNEL MAY
SERIOUSLY HARM OUR BUSINESS
We believe that our success will depend on the continued employment of our
senior management team and key technical personnel. If one or more members of
our senior management team or key technical personnel were unable or unwilling
to continue in their present positions, these individuals would be very
difficult to replace and our business could be seriously harmed.
OUR SUCCESS DEPENDS UPON OUR ABILITY TO ATTRACT, TRAIN AND RETAIN QUALIFIED
EMPLOYEES
Our future success depends in large part on our ability to hire, train and
retain highly qualified technical, sales and management personnel. Such skilled
personnel are in short supply, and this shortage is likely to continue for some
time. As a result, competition for these people is intense. Any inability to
hire, train and retain a sufficient number of qualified employees could hinder
the growth of our business.
EXPANSION OF OUR INDIRECT DISTRIBUTION CHANNELS WILL REQUIRE SIGNIFICANT
INVESTMENT AND OTHER EFFORTS
To date, we have sold our products and services principally through our
direct sales force. In the future, we intend to expand the number and reach of
our indirect channel partners, primarily overseas, through distribution
agreements similar to the one we have with Oracle. The development of these
indirect channels will require the investment of significant company resources,
which could seriously harm our business if our efforts do not generate
significant revenues. Moreover, we may not be able to attract indirect channel
partners that will be able to effectively market our products and services. The
failure to recruit indirect channel partners that are able to successfully
market our products and services could hinder the growth of our business.
Failure to successfully expand our indirect distribution channels would
seriously harm our business.
POTENTIAL FUTURE ACQUISITIONS COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR
BUSINESS, DILUTE STOCKHOLDER VALUE AND SERIOUSLY HARM OUR OPERATING RESULTS
Although we have no current plans to do so, we may acquire other businesses
in the future, which may complicate our management tasks. We may need to
integrate widely dispersed operations with distinct corporate cultures. These
integration efforts may not succeed or may distract our management from
operating our existing business. Our failure to successfully manage future
acquisitions could seriously harm our operating results. In addition, our
stockholders would be diluted if we finance the acquisitions by incurring
convertible debt or issuing equity securities.
IF WIDESPREAD INTERNET ADOPTION DOES NOT CONTINUE, OR THE INTERNET CANNOT
ACCOMMODATE CONTINUED GROWTH, OUR BUSINESS WILL BE HARMED
Acceptance of our software platform depends substantially upon the
widespread adoption of the Internet for commerce, communications and
entertainment. As is typical in the case of an emerging industry characterized
by rapidly changing technology, evolving industry standards and frequent new
product and service introductions, demand for and acceptance of recently
introduced Internet products and services are subject to a high level of
uncertainty. In addition, critical issues concerning the commercial use of the
Internet remain unresolved and may affect the growth of Internet use, especially
in the consumer markets we target. The adoption of the Internet for commerce,
communications and access to content and applications, particularly by those
that have historically relied upon alternative means of commerce, communications
and access to content and applications, generally requires understanding and
acceptance of a new way of conducting business and exchanging information.
Moreover, widespread application of the Internet outside of the United States
will require reductions in
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<PAGE>
the cost of Internet access to prices affordable to the average consumer. If the
use of the Internet fails to develop or develops more slowly than expected, our
business may be seriously harmed.
To the extent that the Internet continues to experience an increase in
users, an increase in frequency of use or an increase in the bandwidth
requirements of users, we cannot guarantee that the Internet infrastructure will
be able to support the demands placed upon it. In addition, the Internet could
lose its viability as a commercial medium due to delays in development or
adoption of new standards or protocols required to handle increased levels of
Internet activity, or due to increased government regulation. Changes in, or
insufficient availability of, telecommunications or similar services to support
the Internet also could result in slower response times and could adversely
impact use of the Internet generally. If use of the Internet does not continue
to grow or grows more slowly than expected, or if the Internet infrastructure,
standards, protocols or complementary products, services or facilities do not
effectively support any growth that may occur, our business would be seriously
harmed.
INCREASING GOVERNMENT REGULATION COULD HARM OUR BUSINESS
We are subject not only to regulations applicable to businesses generally,
but also laws and regulations directly applicable to the Internet. Although
there are currently few such laws and regulations, state, federal and foreign
governments may adopt a number of these laws and regulations governing any of
the following issues:
- User privacy;
- Copyrights;
- Consumer protection;
- Taxation of e-commerce;
- The online distribution of specific material or content; and
- The characteristics and quality of online products and services.
Any such legislation or regulation could dampen the growth of the Internet
and decrease its acceptance as a communications and commercial medium. If such a
reduction in growth occurs, our business would be seriously harmed.
OUR FAILURE TO DELIVER DEFECT-FREE SOFTWARE COULD RESULT IN LOSSES AND NEGATIVE
PUBLICITY
Our software products are complex and may contain defects or failures that
may be detected at any point in the product's life. We have in the past
discovered software defects in certain of our products after their release and
we may experience delays or lost revenue to correct such defects in the future.
Despite testing by us, defects and errors may still be found in new or existing
products resulting in delayed or lost revenues, loss of market share, failure to
achieve acceptance, diversion of development resources and harm to our
reputation. Moreover, third parties may develop and spread computer viruses that
may damage the functionality of our software products. Any damage to or
interruption in performance of our software could similarly result in delayed or
lost revenues, harm to our reputation and, accordingly, harm to our business.
YEAR 2000 ISSUES COULD HARM OUR BUSINESS
Year 2000 issues may adversely affect our business and our customers'
business. Many currently installed computer systems and software products are
coded to accept only two-digit year entries in the date code field.
Consequently, on January 1, 2000, many of these systems could fail or
malfunction because they may not be able to distinguish 21(st) century dates
from 20(th) century dates. As a result, throughout 1999, computer systems and
software used by many companies, including us, our customers
14
<PAGE>
and our potential customers, may need to be upgraded to comply with such "Year
2000" requirements. Any failure of our customers' systems, or of our internal
systems, the products we license to our customers or the third-party equipment
or software that we utilize in our business could seriously harm our business,
financial condition and operating results. For a more detailed description of
our Year 2000 assessment, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Compliance."
WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY NOT BE AVAILABLE
We expect that the net proceeds from this offering will be sufficient to
meet our working capital and capital expenditure needs for at least the next
twelve months. After that, we may need to raise additional funds, and we cannot
be certain that we will be able to obtain additional financing on favorable
terms, or at all. If we need additional capital and cannot raise it on
acceptable terms, we may not be able to, among other things:
- Develop or enhance our products and services;
- Acquire complementary technologies, products or businesses;
- Open new offices, in the United States or internationally;
- Hire, train and retain employees; or
- Respond to competitive pressures or unanticipated requirements.
Our failure to do any of these things could seriously harm our business.
WE HAVE VARIOUS MECHANISMS IN PLACE TO DISCOURAGE TAKEOVER ATTEMPTS
Certain provisions of our certificate of incorporation and bylaws may
discourage, delay or prevent a change in control of us that a stockholder may
consider favorable. These provisions include:
- Authorizing the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and thwart a takeover attempt;
- Prohibiting cumulative voting in the election of directors, which would
otherwise allow less than a majority of stockholders to elect director
candidates;
- Limitations on who may call special meetings of stockholders;
- Prohibiting stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders; and
- Establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted upon by
stockholders at stockholder meetings.
In addition, Section 203 of the Delaware General Corporations Law and our
stock incentive plans may discourage, delay or prevent a change in control of
Liberate. See "--Oracle's Ownership of Our Stock and Other Relationships with Us
Will Give It Significant Influence Over Our Business;" "Description of Capital
Stock--Anti-Takeover Effects of Provisions and the Certificate of Incorporation,
Bylaws and Delaware Law."
OUR STOCK PRICE MAY BE VOLATILE BECAUSE OUR SHARES HAVE NOT BEEN PUBLICLY TRADED
BEFORE
There has not previously been a public market for our common stock. We
cannot predict the extent to which investor interest in Liberate will lead to
the development of a trading market or how liquid that market might become. The
initial public offering price for our shares will be determined by negotiations
between us and the representatives of the underwriters and may not be indicative
of prices
15
<PAGE>
that will prevail in the trading market. The trading price of our common stock
could be subject to wide fluctuations in response to factors such as those
described in "Our Quarterly Revenues and Operating Results Are Volatile and May
Cause Our Stock Price to Fluctuate" above.
In addition, the stock market in general, and the Nasdaq National Market and
technology companies in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of such companies. The trading prices of many technology companies'
stocks are at or near historical highs and these trading prices and multiples
are substantially above historic levels. These trading prices and multiples may
not be sustained. These broad market and industry factors may seriously impact
the market price of our common stock, regardless of our actual operating
performance.
WE ARE AT RISK OF LITIGATION DUE TO OUR EXPECTED STOCK PRICE VOLATILITY
In the past, litigation, particularly securities class action litigation,
has often been brought against a company following periods of volatility in the
market price of its securities. Due to the potential volatility of our stock
price, we may be the target of similar litigation in the future. Securities
litigation could result in substantial costs and divert management's attention
and resources, which could seriously harm our business.
WE COULD BE REQUIRED TO RECORD A SIGNIFICANT ACCOUNTING EXPENSE UPON THE
ANTICIPATED VESTING OF WARRANTS
Under the terms of letter agreements with network operators entered into in
April and May 1999, we may in the future be required to issue warrants to
purchase up to an aggregate of 2,300,000 shares of our common stock if network
operators satisfy commercial milestones. In the event the milestones are met, we
would be required to record a significant non-cash accounting expense based upon
the value of the warrants at the time the milestones are satisfied. For more
information about these warrants, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Description of Capital
Stock--Warrants."
PURCHASERS IN THIS OFFERING WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price of our common stock will be substantially
higher than the book value per share of the outstanding common stock. As a
result, if we were liquidated for book value immediately following this
offering, each stockholder purchasing in this offering would receive less than
they paid for their common stock. To the extent that outstanding options to
purchase our common stock are exercised, or options or warrants reserved for
issuance are issued and exercised, each stockholder purchasing in this offering
will experience further substantial dilution.
OUR STOCK PRICE COULD BE AFFECTED BY SHARES BECOMING AVAILABLE FOR SALE
Sales of a substantial number of shares of common stock after this offering
could adversely affect the market price of our common stock and could impair our
ability to raise capital through the sale of additional equity securities. For a
description of the shares of our common stock that are eligible for future sale,
see "Shares Eligible for Future Sale."
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements in "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere. These statements relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of such terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks outlined
under "Risk Factors," that may cause our or our industry's actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels or activity, performance or achievements expressed or
implied by such forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of such statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus to conform such statements to actual results.
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USE OF PROCEEDS
The net proceeds to us from the sale of the shares of common stock
offered by us are estimated to be $ at an assumed public offering price of
$ per share, after deducting the estimated underwriting discounts and
commissions and estimated offering expenses.
We intend to use the proceeds for general corporate purposes, including
product development, expansion of sales, marketing and service capabilities and
other working capital requirements. A portion of the proceeds may also be used
to acquire or invest in complementary businesses or products or to obtain the
right to use complementary technologies. We have no specific understandings,
commitments or agreements with respect to any such acquisition or investment.
Pending such uses, the proceeds of this offering will be invested in short-term,
interest-bearing, investment-grade securities, certificates of deposit or direct
or guaranteed obligations of the United States.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.
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CAPITALIZATION
The following table sets forth the following information:
- Our actual capitalization as of February 28, 1999;
- Our pro forma capitalization after giving effect to the receipt of net
proceeds of approximately $47.2 million from the sale of 5,208,326 shares
of Series E preferred stock sold in May 1999, the conversion of all
outstanding shares of preferred stock and the conversion of an outstanding
convertible note into 421,941 shares of our common stock; and
- Our pro forma as adjusted capitalization to give effect to the sale of
shares of common stock at an assumed initial public offering price
of $ per share in this offering, less the estimated underwriting
discounts and commissions and estimated offering expenses.
<TABLE>
<CAPTION>
AS OF FEBRUARY 28, 1999
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term debt............................................................ $ 4,260 $ -- $
----------- -----------
Stockholders' equity (deficit):
Convertible preferred stock, $.01 par value per share, 259,749,900
shares authorized; 27,336,823 shares outstanding actual; 259,749,900
shares authorized, no shares outstanding pro forma; 20,000,000 shares
authorized, no shares outstanding pro forma as adjusted............... 273 --
Common stock, $.01 par value per share, 407,500,000 shares authorized,
254,889 shares issued and outstanding actual; 407,500,000 shares
authorized, 32,800,045 shares outstanding pro forma; 200,000,000
shares authorized, shares outstanding pro forma as adjusted..... 2 328
Contributed and paid-in capital......................................... 113,960 165,157
Deferred stock compensation............................................. (2,925) (2,925)
Stockholder notes receivable............................................ (160) (160)
Accumulated comprehensive income (loss) 18 18
Accumulated deficit..................................................... (138,576) (138,316)
----------- ----------- -----------
Total stockholders' equity (deficit).................................. (27,408) (24,102)
----------- ----------- -----------
Total capitalization................................................ $ 23,148 $ 24,102 $
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
This table excludes the following shares:
- 6,080,783 shares of common stock issuable upon the exercise of stock
options outstanding under our stock option plans, and 3,485,622 additional
shares of common stock available for issuance under these stock option
plans;
- 833,333 shares of common stock available for issuance under our 1999
employee stock purchase plan; and
- Warrants to purchase up to an aggregate of 2,300,000 shares of our common
stock that may be issued if network operator customers satisfy commercial
milestones.
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DILUTION
The pro forma net tangible book value of our common stock (after giving
effect to the receipt of net proceeds of approximately $47.2 million from the
sale of 5,208,326 shares of our Series E preferred stock in May 1999, the
conversion of an outstanding convertible promissory note into 421,941 shares of
common stock and the conversion of all outstanding shares of our preferred
stock) on February 28, 1999 was approximately $ , or approximately $
per share. Pro forma net tangible book value per share represents the amount of
our total tangible assets less total liabilities, divided by the number of
shares of common stock outstanding. Dilution in pro forma net tangible book
value per share represents the difference between the amount per share paid by
purchasers of shares of common stock in this offering and the net tangible book
value per share of our common stock immediately afterwards. Assuming our sale of
shares of common stock offered by this prospectus at an assumed initial
public offering price of $ per share and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses payable,
our net tangible book value at February 28, 1999 would have been approximately
$ , or $ per share. This represents an immediate increase in net
tangible book value of $ per share to existing stockholders and immediate
dilution in net tangible book value of $ per share to new investors
purchasing shares of common stock in this offering. The following table
illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
Pro forma net tangible book value per share as of February 28,
1999........................................................ $
Increase per share attributable to new investors..............
---------
Pro forma net tangible book value per share after this
offering......................................................
---------
Dilution per share to new investors............................. $
---------
---------
</TABLE>
This table excludes all options and warrants that will remain outstanding
upon completion of this offering. See Notes 8 and 12 of Notes to Consolidated
Financial Statements. The exercise of outstanding options and warrants having an
exercise price less than the offering price would increase the dilutive effect
to new investors.
The following table sets forth, as of February 28, 1999, on the pro forma
basis described above, the differences between the number of shares of common
stock purchased from us, the total price paid and the average price per share
paid by existing stockholders and by the new investors in this offering at an
assumed initial public offering price of $ per share (before deducting the
estimated underwriting discounts and commissions and estimated offering expenses
payable).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Existing stockholders....................................... % $ % $
New investors...............................................
--------- ----- ---------- -----
Totals.................................................. 100.0% $ 100.0% $
--------- ----- ---------- -----
--------- ----- ---------- -----
</TABLE>
If the underwriters exercise their over-allotment in full, the following
will occur:
- the number of shares of common stock held by existing stockholders will
decrease to , or approximately % of the total number of shares
of our common stock outstanding, and
- the number of shares held by new public investors will increase to ,
or approximately % of the total number of shares of our common stock
outstanding after this offering.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial data included elsewhere in this prospectus. The
consolidated statements of operations data for the period from inception
(December 1, 1995) to May 31, 1996, the years ended May 31, 1997 and 1998 and
the nine months ended February 28, 1999 and the consolidated balance sheet data
at May 31, 1997, May 31, 1998 and February 28, 1999 are derived from audited
consolidated financial statements included elsewhere in this prospectus. The
consolidated statement of operations data for the nine months ended February 28,
1998, is derived from unaudited consolidated financial statements appearing
elsewhere in this prospectus which, in the opinion of management, reflect all
normal recurring adjustments that we consider necessary for a fair presentation
of such information in accordance with generally accepted accounting principles.
Historical results are not necessarily indicative of future results and the
results for interim periods are not necessarily indicative of results to be
expected for the entire year.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS ENDED
(DECEMBER 1, YEARS ENDED MAY 31, FEBRUARY 28,
1995) -------------------- ----------------------
TO MAY 31, 1996 1997 1998 1998 1999
--------------- --------- --------- ----------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License and royalty............................... $ -- $ 231 $ 4,162 $ 3,056 $ 4,062
Service........................................... -- 44 6,110 3,663 8,128
------- --------- --------- ----------- ---------
Total revenues.................................. -- 275 10,272 6,719 12,190
Cost of revenues:
License and royalty............................... -- -- 3,779 3,057 1,954
Service........................................... -- -- 2,230 1,545 4,698
------- --------- --------- ----------- ---------
Total cost of revenues.......................... -- -- 6,009 4,602 6,652
------- --------- --------- ----------- ---------
Gross margin........................................ -- 275 4,263 2,117 5,538
------- --------- --------- ----------- ---------
Operating expenses:
Research and development.......................... 5,479 21,721 19,981 15,649 12,889
Sales and marketing............................... -- 7,805 14,407 10,944 8,076
General and administrative........................ -- 1,023 2,453 1,843 2,560
Amortization of purchased intangibles............. -- -- 4,563 3,042 4,563
Restructuring charge.............................. -- -- 1,175 1,175 --
Amortization of deferred stock compensation....... -- -- -- -- 393
Acquired in-process research and development...... -- -- 58,100 58,100 --
------- --------- --------- ----------- ---------
Total operating expenses............................ 5,479 30,549 100,679 90,753 28,481
------- --------- --------- ----------- ---------
Loss from operations................................ (5,479) (30,274) (96,416) (88,636) (22,943)
Interest and other income (expense), net............ -- (465) 10 23 139
------- --------- --------- ----------- ---------
Loss before income tax benefit...................... (5,479) (30,739) (96,406) (88,613) (22,804)
Income tax benefit.................................. 2,200 11,750 2,015 1,787 887
------- --------- --------- ----------- ---------
Net loss............................................ $ (3,279) $ (18,989) $ (94,391) $ (86,826) $ (21,917)
------- --------- --------- ----------- ---------
------- --------- --------- ----------- ---------
Basic net loss per share............................ $ -- $ -- $(1,780.96) $(4,341.30) $ (93.66)
Shares used in computing basic net loss per share... -- -- 53 20 234
Pro forma basic net loss per share.................. $ (4.07) $ (0.79)
Shares used in computing pro forma basic net loss
per share......................................... 23,209 27,710
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
-------------------- FEBRUARY 28,
1997 1998 1999
--------- --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................................................... $ 245 $ 12,138 $ 5,517
Working capital................................................................ (23,180) (18,275) (34,532)
Total assets................................................................... 4,441 30,812 19,608
Deferred revenues.............................................................. 45 23,868 28,909
Long-term debt................................................................. -- 4,115 4,260
Accumulated deficit............................................................ (22,268) (116,659) (138,576)
Total stockholders' deficit.................................................... (19,256) (6,136) (27,408)
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH "SELECTED CONSOLIDATED
FINANCIAL DATA" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION AND ANALYSIS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS.
OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING, BUT NOT
LIMITED TO, THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS.
OVERVIEW
Liberate is a leading provider of standards-based software that serves as a
platform for the delivery of Internet-enhanced content and applications to a
broad range of information appliances, such as television set-top boxes, game
consoles, smart phones and personal digital assistants. We began operations in
December 1995 as a division of Oracle to develop server and thin-client software
for the consumer, corporate and educational markets. In April 1996, we were
incorporated as a Delaware corporation. In August 1997, we acquired Navio
Communications.
Navio was a development stage company involved in designing Internet
application and server software for the consumer market. In connection with the
acquisition, we changed our strategic direction and restructured our operations.
Prior to the acquisition, we focused on selling software to original equipment
manufacturers of thin-client products for corporate customers. Following the
acquisition, we focused our development and marketing efforts on fewer products
targeted primarily at the consumer information appliance market and aggressively
pursued sales to a limited number of large network operators and information
appliance manufacturers. As a result of this strategic shift, we significantly
reduced our sales and engineering operations and increased investment in the
development of client and server software for the consumer market. In connection
with the acquisition, we wrote off approximately $58.1 million of acquired
in-process research and development. Purchased intangibles of approximately
$18.3 million were recorded in connection with the acquisition and are being
amortized on a straight-line basis over a useful life of three years. See
"--Valuation of In-Process Research and Development."
In May 1999, to more closely align our product offerings with this strategic
shift in direction, we entered into an agreement with Sun Microsystems to
transfer our NC Navigator and NC Administration Server technology to Sun while
retaining the right to ship, support and maintain these products for our
existing customers using this technology. Although we will not actively pursue
new sales opportunities in the corporate thin-client market, outside of this
market we intend to continue developing new products based on this technology.
For the nine months ended February 28, 1999, sales of these products and related
services accounted for $1.6 million of our total revenues. Sun has also agreed
to co-develop television set-top box technology with us. We will distribute the
co-developed technology pursuant to a non-exclusive license with Sun.
We began shipping our initial products and generating revenues in May 1997.
We generate revenues by licensing our server and client products and providing
related services to network operators and information appliance manufacturers.
Network operators generally pay up-front license fees for our server software.
We recognize server license revenues upon final delivery of the licensed
product, when collection is probable and when the fair market value and the fee
for each element of the transaction is fixed and determinable. We also generate
service revenues from maintenance provided in connection with server licenses.
Maintenance fees typically represent a percentage of associated license fees.
We license our client software and provide related services to both
information appliance manufacturers and network operators. Information appliance
manufacturers pay us royalties on a per
22
<PAGE>
unit basis. Typically, we recognize these royalty fees upon shipment of the
device by the manufacturer. Network operators also pay per-subscriber royalty
fees when information appliance owners activate the operators' service.
Generally, network operators pay these royalty fees upon activation, either in
the form of an up-front payment or on a subscription basis. Up-front royalty
fees are recognized when a network operator reports to us that a user has
activated the service. These network operators pay an additional per subscriber
maintenance fee typically on an annual basis for the duration of the activation
period. Subscription-based royalty fees are recognized quarterly when reported
by the network operators. A portion of this subscription-based royalty fee is
allocated to service revenues as maintenance and is also recognized quarterly.
In addition to the maintenance services we offer in connection with our
software licenses, which include upgrades and technical support, we provide
comprehensive consulting, engineering and training services to network operators
and information appliance manufacturers. Revenues generated from these services
are recognized as the services are performed while maintenance fees are
recognized ratably over the term of the maintenance. For the nine months ended
February 28, 1999, total service revenues were $8.1 million, representing 67% of
our total revenues. We expect service revenues to continue to account for a
significant portion of total revenues until customers begin deploying services
and information appliances incorporating our software on a large scale. Any
volume deployments should increase the portion of total revenues derived from
the payment of royalty fees.
Wind River Systems accounted for 16% of our total revenues in fiscal 1998
and 24% of our total revenues in the nine months ended February 28, 1999.
Revenues attributable to Wind River Systems relate to a source code license we
granted Wind River in December 1997. Wind River paid us a license fee of $10.0
million for this license which was recorded as deferred revenues and is being
amortized over a 30-month period as license and royalty revenues and service
revenues. For fiscal 1998, Thomson multimedia accounted for 10% of our total
revenues. Payments made by Thomson multimedia related to a one-time paid-up
software license. We do not expect Thomson multimedia to continue to be a
significant customer in future periods. We do, however, expect that we will
continue to be dependent upon a limited number of customers for a significant
portion of our revenues in future periods, although the customers may vary from
period to period.
Deferred revenues consist primarily of payments received from customers for
prepaid license and royalty fees and prepaid service for undelivered product and
services. Deferred revenues increased from $45,000 at May 31, 1997 to $28.9
million at February 28, 1999. This increase resulted in part from our license to
Wind River and prepayments from network operators. Other than the deferred
revenues from the source code license to Wind River, deferred revenues can
fluctuate significantly. These fluctuations are the result of (1) when we record
deferred revenues, which depends on the timing of large prepaid license and
royalty fees and service contracts and (2) when we recognize deferred revenues,
which depends on when services are performed and when network operators and
information appliance manufacturers deploy products and services based on our
technology.
International sales accounted for approximately 77% and 50% of our total
revenues in the years ended May 31, 1997 and 1998, respectively, and 52% of our
total revenues in the nine months ended February 28, 1999. We anticipate
international sales to continue to represent a significant portion of total
revenues.
Since inception, we have incurred net operating losses of $138.6 million.
These losses include a write-off of $58.1 million of acquired in-process
research and development related to the Navio acquisition and $60.1 million of
research and development expenditures. We anticipate incurring significant
operating losses for the foreseeable future as we continue to invest in research
and development and professional and engineering services to support new devices
for our software platform and large-scale deployments by our network operator
customers.
23
<PAGE>
In May 1999, we entered into letter agreements with several network
operators that require us to issue warrants to purchase up to an aggregate of
approximately 2,300,000 shares of our common stock if the network operators
satisfy commercial milestones. Warrants to purchase up to 341,665 shares of our
common stock, if issued, will have an exercise price of $9.60 per share,
warrants to purchase up to 1,608,332 shares of our common stock, if issued, will
have an exercise price of $13.80 per share and warrants to purchase up to
350,000 shares of our common stock, if issued, will have an exercise price of
either $9.60 or $13.80 per share, depending on whether commitments are made to
us by the warrant holders. In the event the milestones are met, we would be
required to record a significant non-cash accounting expense based upon the
value of the warrants at the time the milestones are satisfied. See "Certain
Transactions--Other Transactions."
RESULTS OF OPERATIONS
Because we did not begin shipping products until May 1997 and implemented
significant changes in our operations following our restructuring in December
1997, we believe that annual and quarterly period-to-period comparisons of our
operating results involving periods prior to February 28, 1998 are less
meaningful than an analysis of recent annual and quarterly operating results.
Accordingly, we are providing a discussion and analysis of our operating results
that is primarily focused upon fiscal 1997 and 1998, the nine months ended
February 28, 1998 and 1999, and each of our last four quarters. The following
table lists, for the periods indicated, the percentage of total revenues of each
line item:
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
MAY 31, FEBRUARY 28,
------------------------- -------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
License and royalty................... 84% 41% 45% 33%
Service............................... 16 59 55 67
----------- --- ----------- ---
Total revenues...................... 100 100 100 100
----------- --- ----------- ---
Cost of revenues:
License and royalty................... -- 37 45 16
Service............................... -- 22 23 39
----------- --- ----------- ---
Total cost of revenues.............. -- 59 68 55
----------- --- ----------- ---
Gross margin...................... 100 41 32 45
----------- --- ----------- ---
Operating expenses:
Research and development.............. 7,899 195 233 106
Sales and marketing................... 2,838 140 163 66
General and administrative............ 372 24 27 21
Amortization of purchased
intangibles......................... -- 44 45 37
Restructuring charge.................. -- 11 17 --
Amortization of deferred stock
compensation........................ -- -- -- 2
Acquired in-process research and
development......................... -- 566 865 --
----------- --- ----------- ---
Total operating expenses............ 11,109 980 1,350 232
----------- --- ----------- ---
Loss from operations.................... (11,009) (939) (1,318) (187)
Interest and other income (expense),
net................................... (169) -- -- 1
----------- --- ----------- ---
Loss before income tax benefit.......... (11,178) (939) (1,318) (186)
Income tax benefit...................... 4,273 20 27 7
----------- --- ----------- ---
Net loss................................ (6,905)% (919)% (1,291)% (179)%
----------- --- ----------- ---
----------- --- ----------- ---
</TABLE>
24
<PAGE>
NINE MONTHS ENDED FEBRUARY 28, 1998 AND 1999
REVENUES
Total revenues increased 81% from $6.7 million for the nine months ended
February 28, 1998 to $12.2 million for the nine months ended February 28, 1999.
LICENSE AND ROYALTY. License and royalty revenues increased 33% from $3.1
million for the nine months ended February 28, 1998 to $4.1 million for the nine
months ended February 28, 1999. This increase was due primarily to higher
revenues recognized the source code license agreement with Wind River and, to a
lesser extent, an increase in the number of information appliances shipped by
our licensees.
SERVICE. Service revenues increased 122% from $3.7 million for the nine
months ended February 28, 1998 to $8.1 million for the nine months ended
February 28, 1999. This increase was due primarily to an increase in engineering
services to new and existing customers and the creation of our professional
services organization. In addition, we recorded higher maintenance revenues as a
result of a larger number of server and client licensees.
COST OF REVENUES
Total cost of revenues increased 45% from $4.6 million for the nine months
ended February 28, 1998 to $6.7 million for the nine months ended February 28,
1999.
LICENSE AND ROYALTY. Cost of license and royalty revenues consists
primarily of license and support fees paid to third parties for technology
incorporated into our products. Cost of license and royalty revenues decreased
36% from $3.1 million for the nine months ended February 28, 1998 to $2.0
million for the nine months ended February 28, 1999. The decrease in cost of
license and royalty revenues in absolute dollars was due primarily to isolated
costs of approximately $970,000 incurred in the nine months ended February 28,
1998 relating to payments made to support third party sales of television
set-top boxes and smart cards. In addition, certain prepaid licenses were fully
amortized during the nine month period ended February 28, 1998. We expect cost
of license and royalty revenues to increase in absolute dollar as shipments of
our products to licensees increase and as additional licensing of third party
technology incorporated into our products.
SERVICE. Cost of service revenues consists of employee compensation,
payments to independent consultants and related overhead. Cost of service
revenues increased 204% from $1.5 million for the nine months ended February 28,
1998 to $4.7 million for the nine months ended February 28, 1999. These amounts
represented 42% and 58% of service revenues over the respective periods. The
increase in absolute dollars and as a percentage of cost of service revenues was
due primarily to expenses associated with the establishment and expansion of our
customer support and professional services organizations. We expect cost of
service revenues to increase in absolute dollars to the extent existing and new
customers install and deploy our products.
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salary and other related costs for personnel and third party
consultants as well as costs related to outsourced development projects to
support product development. Research and development expenses decreased 18%
from $15.6 million for the nine months ended February 28, 1998 to $12.9 million
for the nine months ended February 28, 1999. Our efforts following the Navio
acquisition to focus on the development of fewer products resulted in lower
headcount and fewer outsourced development projects. This resulted in lower
research and development expenses during the fiscal 1999 period. Nevertheless,
during this period, we also incurred expenses associated with the development of
our core
25
<PAGE>
products. We believe that continued investment in research and development is
critical to attaining our strategic objectives, and, as a result, expect
research and development expenses to increase significantly in absolute dollars
in future periods. In addition, in May 1999 we entered into an agreement with
General Instrument pursuant to which we committed to pay $10.0 million over a
three-year period for development services to be performed by General
Instrument.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries and other related costs for sales and marketing personnel, sales
commissions, travel, facilities for regional offices, public relations,
marketing materials and tradeshows. Sales and marketing expenses decreased 26%
from $10.9 million for the nine months ended February 28, 1998 to $8.1 million
for the nine months ended February 28, 1999. In connection with the refocusing
of our product line discussed above, we also realigned our sales efforts which
resulted in a significant reduction in the number of sales and marketing
personnel and a reduction in other sales and marketing expenditures. We believe
these expenses will increase in future periods as we expand our direct sales and
marketing efforts domestically and abroad.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and other related costs for legal, human resource and
finance employees, as well as attorney and other professional fees. General and
administrative expenses increased 39% from $1.8 million for the nine months
ended February 28, 1998 to $2.6 million for the nine months ended February 28,
1999. The increase in absolute dollars was primarily due to increased staffing.
We believe these expenses will increase in absolute dollars as we continue to
add personnel to support our expanding operations and assume the
responsibilities of a public company.
RESTRUCTURING CHARGE. In the third quarter of fiscal 1998, we recognized a
restructuring charge of $1.2 million resulting primarily from a reduction in
workforce. This charge consisted primarily of severance payments and the
acceleration of vesting on options. As of February 28, 1999, we had $277,000
remaining in accrued restructuring, related to severance payments that have not
yet been paid out.
AMORTIZATION OF DEFERRED STOCK COMPENSATION. Deferred stock compensation
expense represents the difference between the estimated fair value of the common
stock for accounting purposes and the option exercise price of such options at
the date of grant. As of February 28, 1999, we recorded total deferred stock
compensation of $3.3 million in connection with stock options granted to
employees through this date. These amounts are being amortized on a
straight-line basis over the 48-month vesting period of such options. Of the
total deferred stock compensation, approximately $393,000 was amortized during
the nine months ended February 28, 1999. We will record additional deferred
stock compensation of $3.8 million in connection with stock options granted from
March 1, 1999 through May 31, 1999. We expect to record deferred stock
compensation expenses of approximately $116,000 for the quarter ended May 31,
1999 and approximately $448,000 each quarter thereafter through the quarter
ended August 31, 2002. We expect that deferred stock compensation recorded in
quarters after August 31, 2002 will not be significant. No compensation expense
was recorded for the nine month period ended February 28, 1998.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT In August 1997, we acquired
Navio in a stock-for-stock exchange valued at approximately $77.1 million. The
acquisition was accounted for using the purchase method. In connection with this
acquisition we wrote-off $58.1 million of acquired in-process research and
development which, in the opinion of management, had not reached technological
feasibility and had no alternative future use. See "--Valuation of In-Process
Research and Development."
26
<PAGE>
INTEREST AND OTHER INCOME (EXPENSE), NET
Net interest income increased from $23,000 for the nine months ended
February 28, 1998 to $139,000 for the nine months ended February 28, 1999. Net
interest income increased as a result of higher average cash balances.
INCOME TAX BENEFIT
Our income tax benefit was $1.8 million for the nine months ended February
28, 1998 and $887,000 for the nine months ended February 28, 1999. The benefit
for fiscal 1999 represents the estimated cash benefit we will receive from
Oracle related to their utilization in the consolidated Oracle state tax returns
of our state operating losses for fiscal 1999. The benefit was calculated
pursuant to a tax allocation and indemnity agreement with Oracle which was
effective after the Navio acquisition on August 11, 1997. Pursuant to this
agreement, Oracle agreed to pay us the cash attributable to the tax savings from
utilization of our operating losses. Due to the reduction in Oracle's ownership
percentage resulting from the Navio acquisition, we are no longer included in
their consolidated federal U.S. tax return. See Note 9 of Notes to Consolidated
Financial Statements.
The benefit for fiscal 1998 consists of the estimated cash benefit pursuant
to the above agreement plus the estimated assumed federal and state tax benefit
Oracle received for the period from June 1, 1997 through August 11, 1997.
As of February 28, 1999, we had federal and state net operating loss
carryforwards of approximately $30.1 million which expire at various dates, from
2003 to 2014, if not utilized. The Tax Reform Act of 1986 imposes substantial
restrictions on the utilization of net operating losses and tax credits in the
event of an "ownership change" of a corporation. Our ability to utilize net
operating loss carry-forwards on an annual basis will be limited as a result of
a prior "ownership change" in connection with private sales of equity
securities. We have provided a full valuation allowance on the deferred tax
asset because of the uncertainty regarding its realization. Our accounting for
deferred taxes under Statement of Financial Accounting Standards No. 109
involves the evaluation of a number of factors concerning the reliability of our
deferred tax assets. In concluding that a full valuation allowance was required,
management primarily considered factors such as our history of operating losses
and expected future losses and the nature of our deferred tax assets.
FISCAL YEARS ENDED MAY 31, 1997 AND 1998
REVENUES
Total revenues increased from $275,000 for fiscal 1997 to $10.3 million for
fiscal 1998.
LICENSE AND ROYALTY. License and royalty revenues increased from $231,000
for fiscal 1997 to $4.2 million for fiscal 1998. The increase in license and
royalty revenues was due primarily to increased shipments of our initial
products. We commenced shipment of our initial products in May 1997.
SERVICE. Service revenues increased from $44,000 for fiscal 1997 to $6.1
million for fiscal 1998. The increase was due primarily to an increase in
services provided to network operators and information appliance manufacturers
as a result of the introduction of our initial products in May 1997.
COST OF REVENUES
There were no cost of revenues in fiscal 1997. Total cost of revenues
increased to $6.0 million for fiscal 1998.
LICENSE AND ROYALTY. Cost of license and royalty revenues was $3.8 million
in fiscal 1998, representing 91% of license revenues. The increase in cost of
license and royalty revenues in absolute
27
<PAGE>
dollars was due primarily to isolated costs of approximately $970,000 incurred
in fiscal 1998 relating to payments made to support third party sales of
television set-top boxes and smart cards, costs associated with products that
initially shipped in May 1997 and increases in the number of third-party
technology licenses.
SERVICE. Cost of service revenues was $2.2 million in fiscal 1998,
representing 36% of service revenues. Although modest service revenues of
$44,000 were recorded in fiscal 1997, related costs were not material. The
increase in cost of service revenues was due to the creation of our customer
support and engineering service organizations.
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT. Research and development expenses decreased 8%
from $21.7 million for fiscal 1997 to $20.0 million for fiscal 1998. The
decrease in fiscal 1998 was due primarily to fewer outsourced development
projects.
SALES AND MARKETING. Sales and marketing expenses increased 85% from $7.8
million for fiscal 1997 to $14.4 million for fiscal 1998. The increase was due
to higher levels of marketing activities in the beginning of fiscal 1998 and
higher commissions related to increased prepaid licenses during the period.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
140% from $1.0 million for fiscal 1997 to $2.5 million for fiscal 1998. The
increase was due to increased personnel following the acquisition of Navio and,
to a lesser extent, costs incurred for legal and other professional service fees
in fiscal 1998.
INTEREST AND OTHER INCOME (EXPENSE), NET
Net interest and other expense in fiscal 1997 of $465,000 was primarily
attributable to interest payments to Oracle on inter-company advances. The
conversion of these outstanding balances into equity in the first quarter of
fiscal 1998, and higher average cash balances during the period, resulted in net
interest income of $10,000 in fiscal 1998.
INCOME TAX BENEFIT
Our income tax benefit was $11.8 million for fiscal 1997 and $2.0 million
for fiscal 1998. The benefit for fiscal 1998 represents amounts to be refunded
to us from Oracle under the tax allocation and indemnity agreement and the
estimated assumed federal and state tax benefit Oracle received for the period
from June 1, 1997 to the date of the tax allocation and indemnity agreement.
The benefit for fiscal 1997 represents Oracle's assumed estimated federal
and state tax benefit for the entire fiscal year. See Note 9 of Notes to
Consolidated Financial Statements.
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited consolidated statements of
operations data for each of our last four quarters. This data has been derived
from unaudited consolidated financial statements that have been prepared on the
same basis as the annual audited consolidated financial statements and, in our
opinion, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such information. These
unaudited quarterly results should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this prospectus.
The consolidated results of operations for any quarter are not necessarily
indicative of the results for any future period.
28
<PAGE>
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------
MAY 31, AUG. 31, NOV. 30, FEB. 28,
1998 1998 1998 1999
--------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues:
License and royalty......... $ 1,106 $ 1,139 $ 1,398 $ 1,525
Service..................... 2,447 2,169 3,003 2,956
--------- ---------- ------------ ------------
Total revenues............ 3,553 3,308 4,401 4,481
--------- ---------- ------------ ------------
Cost of revenues:
License and royalty......... 722 600 716 638
Service..................... 685 1,199 1,672 1,827
--------- ---------- ------------ ------------
Total cost of revenues.... 1,407 1,799 2,388 2,465
--------- ---------- ------------ ------------
Gross margin.................. 2,146 1,509 2,013 2,016
--------- ---------- ------------ ------------
Operating expenses:
Research and development.... 4,332 4,041 4,014 4,834
Sales and marketing......... 3,463 2,145 3,258 2,673
General and
administrative............ 610 814 794 952
Amortization of purchased
intangibles............... 1,521 1,521 1,521 1,521
Amortization of deferred
stock compensation........ -- 7 104 282
--------- ---------- ------------ ------------
Total operating
expenses................ 9,926 8,528 9,691 10,262
--------- ---------- ------------ ------------
Loss from operations.......... (7,780) (7,019) (7,678) (8,246)
Interest and other income
(expense), net.............. (13) 81 68 (10)
--------- ---------- ------------ ------------
Loss before income tax
benefit..................... (7,793) (6,938) (7,610) (8,256)
Income tax benefit............ 228 271 287 329
--------- ---------- ------------ ------------
Net loss...................... $(7,565) $(6,667) $(7,323) $(7,927)
--------- ---------- ------------ ------------
--------- ---------- ------------ ------------
AS A PERCENTAGE OF TOTAL
REVENUES:
Revenues:
License and royalty......... 31% 34% 32% 34%
Service..................... 69 66 68 66
--------- ---------- ------------ ------------
Total revenues............ 100 100 100 100
--------- ---------- ------------ ------------
Cost of revenues:
License and royalty......... 20 18 16 14
Service..................... 19 36 38 41
--------- ---------- ------------ ------------
Total cost of revenues.... 39 54 54 55
--------- ---------- ------------ ------------
Gross margin............ 61 46 46 45
--------- ---------- ------------ ------------
Operating expenses:
Research and development.... 122 122 91 108
Sales and marketing......... 97 65 74 60
General and
administrative............ 17 25 18 21
Amortization of purchased
intangibles............... 43 46 35 34
Amortization of deferred
stock compensation........ -- -- 2 6
--------- ---------- ------------ ------------
Total operating
expenses................ 279 258 220 229
--------- ---------- ------------ ------------
Loss from operations.......... (218) (212) (174) (184)
Interest and other income
(expense), net.............. -- 2 2 --
--------- ---------- ------------ ------------
Loss before income tax
benefit..................... (218) (210) (172) (184)
Income tax benefit............ 6 8 7 7
--------- ---------- ------------ ------------
Net loss...................... (212)% (202)% (165)% (177)%
--------- ---------- ------------ ------------
--------- ---------- ------------ ------------
</TABLE>
29
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LIQUIDITY AND CAPITAL RESOURCES
Prior to the Navio acquisition, Oracle funded our operations primarily
through inter-company advances, capital contributions and the purchase of equity
securities. In connection with the acquisition of Navio, Oracle converted
approximately $18.0 million of outstanding inter-company payables into Liberate
equity. Following the Navio acquisition, we funded operations primarily through
sales of convertible debt, sales of equity securities and prepaid customer
licenses.
Cash used in operating activities was $5.1 million for fiscal 1996, $9.4
million for fiscal 1997 and $2.2 million for fiscal 1998. Cash used in fiscal
1997 was primarily attributable to a net loss of $19.0 million, offset in part
by an increase in accounts payable to Oracle of $18.7 million. Cash used in
fiscal 1998 was primarily attributable to a net loss of $94.4 million, offset in
part by an increase of $20.8 million in deferred revenues and $6.1 million in
amortization and depreciation expenses and a $58.1 million write-off of
in-process research and development related to our acquisition of Navio. We used
$11.1 million in cash during the first nine months of fiscal 1999, primarily due
to a net loss of $21.9 million, offset in part by an increase of $5.5 million in
amortization and depreciation expenses and increases of $5.0 million in deferred
revenues.
We used $1.7 million and $781,000 of cash in investing activities during
fiscal 1997 and the first nine months of fiscal 1999, respectively, to fund
capital expenditures. Cash generated from investing activities of $1.2 million
in fiscal 1998 consisted primarily of cash acquired in the acquisition of Navio,
offset in part by purchases of property and equipment.
Net cash generated from financing activities was $5.1 million for fiscal
1996, $11.4 million for fiscal 1997, $12.8 million for fiscal 1998 and $5.2
million for the nine months ended February 28, 1999. Cash provided by financing
activities related primarily to proceeds from capital contributions from Oracle
and from issues of preferred stock and convertible notes.
At February 28, 1999, we had $5.5 million in cash and cash equivalents and
did not have any material commitments for capital expenditures. Under a
development agreement entered into with General Instrument in April 1999, we are
committed to pay $10.0 million in development fees for certain services to be
performed by General Instrument. These fees will be paid out in quarterly
installments over a three year period. We believe that the net proceeds of this
offering and of our recent Series E preferred stock financing, together with
cash and cash equivalents generated from operations, will be sufficient to meet
our working capital requirements for at least the next 12 months. If our cash
balances and cash generated from operations is insufficient to satisfy our
liquidity requirements, we may seek to raise such additional funds through
public or private equity or debt financings. If additional funds are raised
through the issuance of debt securities, these securities could have certain
rights, preferences, and privileges senior to holders of common stock, and the
terms of such debt could impose restrictions on our operations. The sale of
additional equity or debt securities could result in additional dilution to our
stockholders. Additional financing may not be available at all and, if
available, such financing may not be obtainable on terms favorable to us. If we
are unable to obtain this additional financing, we may be required to reduce the
scope of our planned product development and marketing efforts, which could
seriously harm our business.
VALUATION OF IN-PROCESS RESEARCH AND DEVELOPMENT
OVERALL VALUATION METHODOLOGY. An independent valuation of Navio was
performed and used as an aid in determining the fair value of the identifiable
assets and in allocating the purchase price among the acquired assets, including
the portion of the purchase price attributed to in-process research and
development. Assets identified generally included in-process research and
development, developed technology, assembled workforce, installed customer base
and goodwill.
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The valuation technique employed in the appraisal was designed to properly
reflect all intellectual property rights in the intangible assets, including
core technology. The value of the developed technology was derived from direct
sales of existing products including their contribution to in-process research
and development. In this way, value was properly attributed to the engineering
know-how embedded in the existing product that will be used in developmental
products. The appraisal also considered the fact that the existing know-how
diminishes in value over time as new technologies are developed and changes in
market conditions render current products and methodologies obsolete.
Assets were identified through on-site interviews with management and a
review of data provided by Navio's and our management concerning the acquired
assets, technologies in development, costs necessary to complete the in-process
research and development, market potential, historical financial performance,
estimates of future performance and the assumptions underlying these estimates.
Purchased incomplete research and development projects were identified
through extensive interviews and detailed analysis of development plans provided
by management concerning the following:
- Uniqueness of developmental work and the costs incurred;
- Critical tasks required to complete the project;
- Opportunities which were expected to arise from the project;
- Degree of leverage of the new technology on legacy technology;
- Risks associated with project completion;
- Assessment of types of efforts involved, for example software development;
- Length of time project was expected to be useful; and
- Timing related to completion of projects and resources allocated to
completion, including associated expenses.
None of the in-process research and development value was associated with
routine on-going efforts to enhance or otherwise improve on the qualities of the
existing products. Navio's engineers were developing advanced, next generation
technologies that involved creating product designs and disparate technologies
to form superior products. The in-process research and development value was
determined by estimating the costs to develop the purchased in-process
technology into commercially viable products, estimating the resulting net cash
flows from such projects and discounting the net cash flows back to their
present value. The discount rate of 37.5% considers the uncertainty surrounding
the successful development of the purchased in-process technology, the useful
life of such technology, the profitability levels of such technology, and the
uncertainty of technological advances that were indeterminable at that time.
STAGE OF COMPLETION. The appraisal included the valuation of each specific
research and development project underway at the acquisition date. In the months
leading up to the purchase, Navio had made significant progress in their
research and development programs. However, due to the substantial time and
effort necessary to produce these products in accordance with functional
specifications, technological feasibility of the research and development
projects had not yet been achieved. The acquired projects included Navio's
Internet browser software. The efforts required to develop the purchased
in-process technology of Navio into commercially viable products principally
related to the completion of planning, designing, prototyping, verification and
testing activities that were necessary to establish that the software could be
produced to meet its design specifications, including functions, features and
technical performance requirements. Anticipated completion dates for the
projects in-process was approximately three to 36 months, at which time Navio
expected to begin
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selling the developed software products. Remaining research and development
expenditures were projected to be approximately $34.0 million.
The resulting net cash flows from such projects were based on management's
estimates of product revenues, operating expenses, research and development
costs, and income taxes from such projects. The revenue projections used to
value the in-process research and development were based on estimates of
relevant market sizes and growth factors, expected trends in technology and the
nature and expected timing of new product introductions by us and our
competitors. Our projections may ultimately prove to be incomplete or
inaccurate, and unanticipated events and circumstances are likely to occur. As a
result, the underlying assumptions used to forecast revenues and costs to
develop such projects may not transpire as estimated.
Navio's development team had made significant technological and creative
strides in the development of its experimental Internet technologies as of
August 1997. Navio had expended in excess of $9.0 million on the acquired
research and development since its inception in February 1996. As of the
acquisition date, Navio was a development stage company with minimal product
revenues and large net losses. Navio was entering the testing phase for two of
its developmental products, NC Navigator 3.0 and TV Navigator 1.1. Historical
revenues represented services and limited sales of a Netscape product sold as a
test network computer browser on an experimental basis. This product was
superseded by NC Navigator 3.0.
ALTERNATIVE FUTURE USE. Before we made the decision not to capitalize the
value ascribed to in-process research and development, the projects were
evaluated individually to determine if technological feasibility had been
achieved and if there were any alternative future uses. Such evaluation
consisted of a specific review of the efforts, including the overall objectives
of the project, progress toward the objectives and uniqueness of the development
efforts.
Navio's technical activities were concentrated on the development of new
product knowledge having specific commercial objectives, and efforts were
focused on translating those applied research findings and other scientific
know-how into commercially viable software products. The acquired research and
development was related to developing experimental Internet technologies for
which no market existed at the time of the acquisition. Due to its specialized
nature, the in-process research and development project had no alternative
future use, either for re-deployment elsewhere in the business or in
liquidation, in the event the project failed.
CONTINUING EFFORTS. We expect that the remaining acquired in-process
research and development will be successfully developed. However, we cannot
guarantee that commercial viability of this project will be achieved. If this
project is not successfully developed, our future revenues and profitability may
be seriously harmed and the value of the intangible assets relating to the
acquisition may become impaired. Commercial results will also be subject to
uncertain market events and risks that are beyond our control, such as trends in
technology, government regulations, market size and growth, and product
introduction or other actions by competitors.
RECENT ACCOUNTING PRONOUNCEMENTS
In fiscal year 1998 we adopted Statement of Position, or SOP 97-2, "Software
Revenue Recognition", and SOP 98-4, "Deferral of the Effective Date of a
Provision of SOP 97-2, Software Revenue Recognition". SOP 97-2 and SOP 98-4
provide guidance for recognizing revenue on software transactions and supercede
SOP 91-1. The adoption of SOP 97-2 and SOP 98-4 did not have a material impact
on our financial results. However, full implementation guidelines for this
standard have not yet been issued. Once available, our current revenues
accounting practices may need to change and such changes could affect our future
revenue and earnings. In fiscal 1999 we adopted Statement of Financial
Accounting Standard, or SFAS No. 130, "Reporting Comprehensive Income". SFAS No.
130 requires disclosures of total non-stockholder changes in equity in interim
periods and additional disclosures of
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components of non-stockholder changes in equity on an annual basis. The adoption
of SFAS No. 130 did not have a material effect on our financial disclosures. In
fiscal 1999, we adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". The adoption of SFAS No. 131 did not have a
material effect on our financial disclosures. In June 1998, the Financial
Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which requires us to value derivative
financial instruments, including those used for hedging foreign currency
exposures, at current market value with the impact of any change in market value
being charged against earnings in each period. SFAS No. 133 will be effective
for and adopted by us in the first quarter of the fiscal year ending May 31,
2001. We anticipate that SFAS No. 133 will not have a material impact on our
consolidated financial statements.
MARKET RISK DISCLOSURE
At February 28, 1999, all of our investments consisted of short-term money
market securities of $5.5 million which are classified as cash and cash
equivalents (see Note 2 of Notes to Consolidated Financial Statements). These
securities, like all fixed income instruments, are subject to interest rate risk
and will fall in value if market interest rates increase. If market interest
rates were to increase immediately and uniformly by 10% from levels as of
February 28, 1999, the decline of the fair value of the portfolio would not be
material.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit year entries in the date code field. Consequently, on
January 1, 2000, many of these systems could fail or malfunction because they
may not be able to distinguish 21(st) century dates from 20(th) century dates.
As a result, computer systems and software used by many companies, including us,
our customers and our potential customers, may need to be upgraded to comply
with such "Year 2000" requirements.
We have developed and implemented a company-wide program to identify and
remedy the Year 2000 issues. The scope of our Year 2000 readiness program
includes the review and evaluation of:
- our IT systems, such as hardware and software utilized in the operation of
our business;
- our non-IT systems or embedded technology, such as micro-controllers
contained in various equipment and facilities;
- the readiness of third parties, including customers, suppliers and other
key vendors; and
- our client and server software products.
Although we have inventoried our principal internal information technology
systems and believe that they are Year 2000 compliant, some of our internal
information technology systems are not yet certified. We anticipate that we will
complete our certification of these systems by November 1, 1999. We have
received Year 2000 compliance statements from the suppliers of some of our
principal internal systems, and have sought similar statements from other
vendors. Our review of the internal systems of third parties with whom we have
material interactions is ongoing. Because we and our customers are substantially
dependent upon the proper functioning of our computer systems, a failure of our
systems to be Year 2000 complaint could materially disrupt our operations which
could seriously harm our business.
We have tested our client and server products to determine that they are
Year 2000 compliant, when configured and used in accordance with the related
documentation and our customer's hardware platform. We have performed
operational tests for each of our products by testing various future dates in
each of the products' functional areas from installation to standard operation
on our customers'
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platforms. In addition, the transition from year 1999 to year 2000 was simulated
for our client and server software. According to the results of our tests, our
products should not abnormally end or provide incorrect or invalid results due
to date data, including dates that represent a different century, provided the
underlying operating system and customer hardware platform are Year 2000
compliant.
The Year 2000 problem may also affect third party software products that are
incorporated into our client and server tools, applications and other software
products that we modify and license to our customers. When we incorporate third
party software products into our products, we generally discuss Year 2000 issues
with these third parties and sometimes perform internal testing on their
products. We do not, however, guarantee or certify that the software licensed by
these suppliers is Year 2000 compliant. Any failure by third parties to provide
Year 2000 compliant software products that we incorporate into our products
could result in financial loss, harm to our reputation, and liability to others
and could seriously harm our business.
Although we are in the process of inquiring as to the Year 2000 readiness of
our customers, we do not currently have extensive information concerning the
Year 2000 compliance status of our customers. Our current or potential customers
may incur significant expense to achieve Year 2000 compliance. If our customers
are not Year 2000 compliant, they may experience material costs to remedy
problems, or they may face litigation costs. In either case, Year 2000 issues
could reduce or eliminate the budgets that current or potential customers could
have to license our products.
We have funded our Year 2000 plan from operating cash flows and have not
separately accounted for these costs in the past. To date, these costs have not
been material. We may incur additional costs related to Year 2000 compliance for
administrative personnel to manage the testing, review and remediation, and
outside vendor and contractor assistance. In addition, we may experience
material problems and costs with Year 2000 compliance that could seriously harm
our business, including:
- Operational disruptions and inefficiencies for us, our customers and
vendors that provide us with internal systems that will divert
management's time and attention and financial and human-resources from
ordinary business activities;
- Business disputes and claims for pricing adjustments by our customers,
some of which could result in litigation or contract termination; and
- Harm to our reputation to the extent that our customer's products
experience errors or interruptions of service.
Although it is not yet fully developed, we expect to complete our Year 2000
contingency plan well in advance of December 31, 1999. We are designing our Year
2000 contingency plan to address situations that may result if we are unable to
achieve Year 2000 readiness for our critical operations. The cost of developing
and implementing our plan may be material.
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BUSINESS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE INDICATED IN SUCH
FORWARD-LOOKING STATEMENTS. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS."
OVERVIEW
Liberate is a leading provider of standards-based software that serves as a
platform for the delivery of Internet-enhanced content and applications to a
broad range of information appliances. Information appliances, which include
television set-top boxes, game consoles, smart phones and personal digital
assistants, are devices that are enhanced by Internet connectivity and
functionality. Network operators, such as telecommunications companies, cable
and satellite television operators and Internet service providers, or ISPs, can
use our server software to deliver Internet-enhanced services to numerous
information appliances and millions of consumers. Information appliance
manufacturers can use our client software to Internet-enable their products. Our
open platform also provides a uniform environment for developers to enhance
existing content and create new Internet applications and services for delivery
on multiple platforms. Our software platform is designed to enable network
operators to provide consumers universal access to these Internet-enhanced
applications and services. To extend the functionality of our software platform,
we have also developed strategic alliances with leading technology vendors such
as Cisco Systems, Inktomi, Lucent Technologies, Netscape, Oracle and Sun
Microsystems.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET
The Internet is a global network of interconnected public and private
networks that enables millions of people to communicate, collaborate, access
information and conduct business electronically. International Data Corporation,
or IDC, estimates that there were approximately 159 million worldwide users of
the Internet at the end of 1998 and that the number of users will grow to
approximately 410 million by the end of 2002. This growth encourages development
of information and content on the Internet. Furthermore, additional users on the
Internet increase the number of network connections. This increased connectivity
among parties creates a more robust communications environment that enables new
ways of interaction. Networked applications for information access and
entertainment, such as e-mail and e-commerce, have already become an integral
part of the daily lives of millions of consumers. The Internet has the potential
to become even more pervasive among consumers and businesses worldwide, as new
infrastructure technologies emerge to enable more universally available and
higher speed communications and richer, more interactive services.
NETWORK OPERATORS SEEK TO LEVERAGE THE GROWTH OF THE INTERNET
Network operators seek to capitalize on revenue opportunities offered by
rapidly growing Internet traffic across worldwide communications networks. To
date, a limiting factor in consumer Internet usage has been the low transmission
speeds associated with analog modems and standard phone lines. With the
increasing availability of broadband technologies such as cable modems, xDSL and
digital broadcast satellite, network operators can now offer transmission speeds
over 50 times faster than standard analog modems. As the Internet challenges
traditional channels of communications and media, network operators are
investing billions of dollars to construct high-speed network infrastructures.
According to Paul Kagan Associates, the number of U.S. households with access to
broadband delivery will grow from 19 million in 1998 to 51 million in 2002.
Network operators intend to attract consumers by offering new voice, video and
data services over these broadband networks. The richer Internet content and
range of additional services that can be offered by network operators
35
<PAGE>
are expected to significantly improve user experiences and accelerate the
adoption of the Internet among casual consumers.
THE NEED FOR INCREASED ACCESSIBILITY TO THE INTERNET
Since its inception, the Internet has been accessed primarily through
personal computers, which are relatively complex and expensive. While the
personal computer remains an important access device, Liberate believes users
are increasingly looking to access the Internet from multiple, alternative
devices. At the same time, network operators are seeking to provide greater
Internet access to increase the value of traditional phone, satellite and
cable-based services. In response to these needs, information appliances, a new
category of low-cost devices designed to combine everyday user activities with
Internet connectivity, have been developed. These devices are characterized by
their ease of use and flexible form factors (e.g., size, weight, shape,
portability or mobility). Specific examples of information appliances include
television set-top boxes, game consoles, smart phones and personal digital
assistants. Liberate believes that in the short term, information appliances
will be extensions of common consumer electronics products such as television
sets and game consoles. Liberate expects that over the longer term, many new
information appliances will be introduced, some of which will be derivatives of
existing products while others may represent radically new designs. IDC
estimates that the worldwide market for information appliances will grow at a
compound annual growth rate of approximately 62% to become a $15 billion market
by 2002.
EMERGENCE OF THE TELEVISION AS A PLATFORM FOR INTERNET-ENABLED SERVICES
Television provides one of the most attractive devices for network operators
to deliver new Internet-enabled services. The television set has become a
ubiquitous consumer product that people are comfortable using for entertainment
and information. According to IDC, at the end of 1998, over 99 million out of
101 million households in the United States had at least one television set and
many had multiple television sets. The display and sound capabilities of the
television also make it ideally suited for Internet-enhanced, rich media
services such as interactive program guides, e-commerce, communications
(including e-mail and chat) and multi-user gaming. Cable, satellite and
telecommunications operators are already aggressively expanding their high-speed
digital networks to provide many new services to their subscribers through the
television. IDC estimated that 15 million U.S. households had digital television
service in 1998, and IDC expects that number to rise to over 37 million in 2002.
MARKET OPPORTUNITY FOR STANDARDS-BASED SOFTWARE PLATFORM
Just as the development of the Internet required standards-based
infrastructure to link personal computers to Web servers and other personal
computers, the emerging convergence of voice, data, the Internet and related
enhanced services requires an open and standards-based infrastructure. A
standards-based server software platform will enable network operators to expand
their service offerings to a greater number of people and will enable
information appliance manufacturers to deliver a wide range of devices to
network operators and consumers. Both network operators and information
appliance manufacturers require a standards-based software platform that manages
the delivery of Internet content and services to a large number of users
employing many different connectivity devices. This software platform must
consist of server software that is deployed throughout the network
infrastructure and client software that can effectively operate over a wide
range of low-cost devices that may be optimized for size, weight and power
consumption. The software platform's ability to deliver new kinds of
Internet-enabled services to any type of information appliance increases the
value of the subscriber to the network operator.
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THE LIBERATE SOLUTION
Liberate provides a standards-based software platform that enables the
delivery of Internet-enhanced content and applications to a broad range of
information appliances. Using the Liberate software platform, network operators
can deliver a new generation of interactive digital content and applications to
their subscribers. Manufacturers of information appliances use our software to
enable the connectivity and Internet functionality of their products. In
addition, network operators and information appliance manufacturers use the
Liberate open platform cooperatively to create a uniform environment for
developers to enhance existing content and create new Internet applications and
services for delivery on multiple information appliances. Subscribers will be
able to access these Internet-enhanced applications and services from anywhere
at anytime.
Our open, standards-based software platform includes server and client
products. Our robust server software solution economically scales to millions of
users and allows the network operators to support a broad range of appliances
using a single server software platform. Liberate's open server architecture can
seamlessly integrate into major databases and existing billing systems,
facilitating the deployment and maintenance of Internet services for a range of
information appliances. Our client software is based on the Netscape Navigator
source code and has been designed to run Internet applications on information
appliances. The small footprint of our client software allows it to be
implemented in many access devices, even ones that have limited memory and
computing resources. Liberate's client software is highly portable, which
enables it to run on many devices with differing capabilities. Also embedded in
the client software is proprietary technology that enables information appliance
manufacturers to deliver a high quality picture on a wide range of displays.
The graphic shows four icons of information appliances: an "Analog TV
Set-top Box" with "TV Navigator," a "Digital Cable TV Set-top Box" with "TV
Navigator," a "Game Console" with "eNavigator" and a "PDA" with "eNavigator."
These icons are connected to a picture of the Connect Server by four lines.
These lines are labeled "POTs," "Cable/Satellite," "xDSL" and "Wireless." The
other side of the Connect Server is attached to a circle with "Internet" inside.
The circle is connected by lines to three computer icons labeled: "Additional
Content (news, ATVEF)," "Network Operator and third-party applications (program
guide, VOD, e-commerce)" and "Liberate Applications (TV Mail, TV Chat)."
Key benefits of our platform for network operators include the following:
OPPORTUNITY FOR INCREASED REVENUE AND PROFITABILITY PER
SUBSCRIBER. Liberate's platform allows network operators to maintain direct
contact with their subscribers, giving network operators control over the value
of their brand, the look and feel of their user interface and identity of their
service. Network operators can generate additional revenues by offering enhanced
voice and video services over their existing infrastructure. The deployment and
maintenance of information appliances can generate incremental revenue from new
services such as Internet-enhanced television, e-commerce, multi-user gaming and
others yet to be developed. These differentiated services help reduce subscriber
turnover and create a competitive advantage over other operators.
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ACCELERATED TIME TO REVENUE. Using the Liberate platform, network operators
can quickly deploy Internet-enhanced services. Our products easily integrate
into the network operators' existing backend systems allowing for rapid
installation. Liberate has developed several applications that network operators
can use to rapidly introduce new services. In addition, Liberate provides
comprehensive systems integration and implementation services and customer
support to complement the flexible architecture of our server software.
Key benefits of our platform for information appliance manufacturers include
the following:
POTENTIAL FOR LOWER COST DEVICES. Liberate's client software is designed to
work efficiently in many types of information appliances. Our source code has
been optimized to reduce the system resources required to run the client
software. As a result, information appliance manufacturers can lower the cost of
producing information appliances by using less powerful microprocessors, less
memory and other more cost-effective components.
MORE DESIGN FLEXIBILITY. Our client software is a highly flexible solution
for the information appliance manufacturer. It is portable and currently
supports five microprocessor architectures, seven operating systems and a wide
variety of display technologies. In addition, our software can operate with
multiple transport software protocols and run across multiple broad- and
narrow-band networks. By using our client software, manufacturers can create new
information appliances or turn existing devices into information appliances.
STRATEGY
Our objective is to be the leading provider of a standards-based software
platform that enables the delivery of Internet content and applications to
information appliances. In order to achieve this goal, Liberate must:
EXTEND MARKET LEADERSHIP. We intend to continue targeting network operators
that have large subscriber bases and information appliance manufacturers that
are leaders in their markets. Our initial efforts have focused on achieving
early design wins with operators of multiple cable and satellite television
systems, ISPs, telecommunications companies and information appliance
manufacturers in the television marketplace. We believe that these early design
wins have helped to establish us as a market leader and will allow us to extend
the platform to other markets.
INVEST AGGRESSIVELY IN TECHNOLOGY. To date, we have spent more than $60.0
million on research and development to create our current software platform. Our
software products are designed to be highly scalable, are portable and support a
wide range of devices. We have built extensive expertise in thin-client
technology, Internet content display algorithms, scalable and modular server
components and multi-platform development. We intend to continue investing
heavily in research and development to meet the network operators' and
information appliance manufacturers' needs for more devices, and additional
features and functionality.
LEVERAGE AND EXPAND STRATEGIC ALLIANCES. We believe that forging
relationships with key vendors is critical to promoting open standards and
delivering a comprehensive solution to network operators and information
appliance manufacturers. We work closely with major technology companies such as
Netscape, Oracle and Sun Microsystems for the integration of core Internet
browser and server components. In addition, we work with companies such as Cisco
Systems, Inktomi and Lucent Technologies to ensure compatibility within the
network operator's current and future network infrastructure. We are also
working with companies such as General Instrument, Intel and Scientific Atlanta
on integrating our software with digital set-top boxes, Web boxes and digital
satellite architectures. We intend to seek additional relationships to expand
the scope of our customer reach and functionality.
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PROMOTE THE DEVELOPMENT OF INTERNET-ENHANCED SERVICES. We intend to
continue developing additional core applications and are actively encouraging
developers to build new content and applications using our software platform. In
connection with this activity, we provide our content and applications
development kit to developers free of charge. Companies currently using our
tools to develop content and applications include America Online, At Home and
Yahoo.
DEVELOP, MAINTAIN AND ADHERE TO INDUSTRY STANDARDS. We are a recognized
leader in developing and setting the next generation of standards for the
information appliance infrastructure. We adhere to industry standards throughout
our product line and we believe that support for standards strengthens our
market position. In addition to incorporating existing standards such as Java,
HTML and JavaScript, we have led industry consortiums to develop standards for
information appliance services such as enhanced television, home networking and
smartcards. Our active participation in setting these and other standards allows
us to play an important role in defining and supporting standards for new market
opportunities as they develop.
PRODUCTS AND TECHNOLOGY
Liberate's information appliance software platform includes a full range of
client and server products, tools and applications. Liberate offers network
operators a suite of server solutions tailored to the cable, satellite,
telecommunications and ISP markets. Liberate delivers three client products
targeted for the needs of information appliance manufacturers in the television
and embedded markets. Our tools and pre-configured applications allow network
operators and information appliance manufacturers to offer a fully customizable
client and server platform.
The Liberate client and server software platform incorporates proprietary
technology that we have developed to address the needs of network operators and
information appliance manufacturers. This technology includes:
- SMALL FOOTPRINT CLIENT TECHNOLOGY. Starting at 700Kb, Liberate offers one
of the smallest, most efficient HTML and JavaScript engines available,
which allows it to be used in a wide variety of information appliances.
- PORTABLE CLIENT ARCHITECTURE. We have developed our client software with
the flexibility to operate on a wide variety of information appliances.
Our client software currently supports processors from, among others, ARM,
Hitachi, IBM, Intel, MIPS and Sun Microsystems, and runs on multiple
operating systems from, among others, Integrated Systems, Microsoft,
Scientific Atlanta and Wind River Systems.
- INNOVATIVE DISPLAY TECHNOLOGY. Liberate has developed a proprietary
display software called IQView. IQView optimizes Internet content for
delivery on virtually any display device, without specialized graphics
hardware.
- EXPERTISE IN INTERNET TECHNOLOGY. Liberate has spent over two years
developing fundamental expertise in working with Internet browser and
server code. This enables Liberate to easily modify and enhance its client
software with critical third-party technologies such as Java and Real
Audio while maintaining compatibility with Internet standards.
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The following table provides a list of our principal products and a brief
description of the features and benefits to our customers of each.
<TABLE>
<S> <C> <C>
- ------------------------------
PRODUCT FEATURES BENEFITS
- -----------------------------------------------------------------------------------------------------------------
LIBERATE SERVER PRODUCTS
LIBERATE CONNECT SERVER Subscriber and application management Network operators can control subscriber
access to applications and services and
can access subscriber data for efficient
customer support
Internet standard security Network operators can offer subscribers
and external e-commerce providers highly
secure transactions
Open standards integration interfaces Network operators can seamlessly
integrate Liberate servers with existing
subscriber management systems
Device management tools Network operators can distribute software
updates automatically and efficiently to
all network devices and restore services
rapidly in case of client or network
failure
Highly scalable architecture Network operators can scale networks to
support millions of subscribers by simply
installing more servers on the system
LIBERATE MEDIACAST SERVER Content and application broadcasting Network operators can utilize existing
headend infrastructure to broadcast
Internet content and interactive
applications
Multiple transport stream capability Network operators can more fully utilize
infrastructure assets by transmitting
data over different networks
LIBERATE TRANSCODING SERVER Reduced processing and memory load Network operators can deliver rich
Internet content and applications to a
broad range of information appliances
Internet content error checking Network operators can ensure accurate
rendering of HTML, image and audio
content
LIBERATE SYSTEM MANAGER Server and applications management Network operators can manage and monitor
all Liberate client and server systems
throughout their network from a
centralized workstation
Web-based interface Network operators can manage their
complete network from any Internet
connected workstation
- -----------------------------------------------------------------------------------------------------------------
LIBERATE APPLICATIONS
LIBERATE TV INFO XML-based architecture receives, Network operators can combine and deliver
integrates and exports multiple TV and TV program data and Internet data to
Internet data sources to multiple various applications, including
clients and applications interactive program guides, channel bars
and pay-per-view applications
LIBERATE TV MAIL TV-based e-mail application Network operators can offer customized
e-mail services using existing
infrastructure
Picture and video e-mail Network operators are able to offer rich
multimedia content which enhances the
e-mail experience
LIBERATE TV CHAT Chat application integrated with TV Network operators can promote subscriber
programming communities by supplementing existing TV
programming with interactive chat
capabilities
</TABLE>
40
<PAGE>
<TABLE>
<S> <C> <C>
- ------------------------------
PRODUCT FEATURES BENEFITS
- -----------------------------------------------------------------------------------------------------------------
LIBERATE CLIENT PRODUCTS
TV NAVIGATOR FOR DTV Extremely small footprint, 700Kb Information appliance manufacturers can
reduce costs by reducing memory and
processing component costs. Software runs
on memory-constrained devices, including
digital set-top boxes
Integrated video and data path Network operators can use existing
broadband video delivery systems to
deliver Internet-based interactive
television content and applications, such
as TV-based browsers and e-mail
HTML and JavaScript support Network operators can deliver standard
Internet applications, content and
services to their customer base
Highly portable Information appliance manufacturers can
easily add the Liberate software platform
to a variety of existing and
next-generation information appliances
Customizable user interface Network operators and information
appliance manufacturers can brand and
control the user interface associated
with the service and of applications
offered
TV NAVIGATOR FOR ISP INCLUDES ALL OF THE FEATURES FOR TV
NAVIGATOR FOR DTV LISTED ABOVE PLUS
THESE FEATURES:
Transport independent Network operators can deliver services
through, among others, standard
telephone, cable, ISDN and xDSL lines
Broad language localization Network operators can deliver services to
a number of international markets
including the Japanese and Chinese
markets
ENAVIGATOR Small memory requirements Information appliance manufacturers can
add a feature-rich Internet-based
communications platform to highly
memory-constrained information
appliances, such as smart phones and
personal digital assistants
Rich development environment Developers can rapidly integrate modular
components to develop Internet
applications for numerous devices
HTML and JavaScript support, rich Information appliance manufacturers can
graphics engines and extensive font enhance the interactivity of embedded
libraries systems by utilizing proprietary
hardware-independent graphics display
capabilities
- -----------------------------------------------------------------------------------------------------------------
LIBERATE TOOLS
LIBERATE CONTENT DEVELOPMENT Tools and tutorials for creating Developers can rapidly develop Internet
KIT applications content and applications targeted to a
television audience
TV NAVIGATOR FOR DTV SET-TOP Real time emulator running on Windows Developers can avoid investing in
EMULATOR 98 expensive prototypes during the design
and testing of applications
Suite of integrated debugging tools Developers can debug JavaScript and
HTML-based code in an easy-to-use
development environment
</TABLE>
SERVICES
Liberate provides a comprehensive set of consulting and engineering services
to its customers. The deployment by network operators of Internet-enhanced
services and the development by information appliance manufacturers of new
products require a high level of customer service and support. We believe that
our consulting and engineering services organizations are critical to the
successful sale and
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deployment of our products. We typically charge customers on a time and
materials basis for our services.
CONSULTING SERVICES. Liberate's consulting services organization consists
of six full-time employees. This organization provides project management
support, which includes service implementation guidance, product customization
and product configuration support. To help ensure seamless product deployments,
this organization works closely, often on site, with network operators to
integrate, install and maintain our software.
ENGINEERING SERVICES. Liberate's engineering services organization consists
of 21 full-time engineers. This organization provides project management and
porting assistance to information appliance manufacturers. In addition, this
organization provides assistance with custom application development. We
typically retain the rights to intellectual property developed by our
engineering services organization.
CUSTOMER SERVICE, SUPPORT AND TRAINING. Liberate's service and support
organization consists of 11 full-time employees that provide worldwide support
and services. Outside of the United States, we often work with Oracle pursuant
to a services agreement to augment our service capability. Liberate runs a
worldwide technical training program for customers and developers. Curriculum
and training classes are available for most Liberate products. See "Certain
Transactions--Transactions with Oracle."
SALES AND MARKETING
Liberate sells products through its direct sales force and indirectly
through Oracle and Wind River Systems. We intend to increase the number of
indirect distribution partners. Our sales force, which consists of 28
individuals, is organized into teams consisting of sales representatives and
systems engineers. Currently, direct sales professionals are located in North
America, Europe and Asia/Pacific. Liberate uses its direct sales force to target
the customers that it believes provide the highest potential for service
deployment and revenues.
More specifically, Liberate sells its server products either directly to
network operators or to system integrators who then resell to the network
operators. Liberate sells its client products directly to information appliance
manufacturers or to embedded operating system vendors who resell the client
software to information appliance manufacturers. Information appliances
containing our software platform are then distributed by the manufacturer to the
end user either through a retail channel or through network operators.
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To complement the direct sales and distribution efforts, Liberate utilizes
an integrated marketing approach focused on identifying customer needs, defining
products and stimulating demand. Liberate participates in trade shows worldwide,
arranges speaking engagements for key personnel, sponsors conferences and runs a
developers program. An internal creative production group supports the marketing
effort by helping to define the next generation of interfaces for Liberate
products. Market research is used to test Liberate prototypes and products to
help ensure ease-of-use and a high degree of customer satisfaction.
The graphic shows a box with "Liberate" inside. The box has arrows pointing
left to a box with "Embedded OS Vendors" inside and another box with "Info.
Appliance Manufacturers" inside. This box has arrows pointing right to a box
with "Network Operators" inside and down to a box with "Channel" inside. This
box has an arrow pointing down to a box with "End User" inside. The box with
"Liberate" also has arrows pointing right to a box with "System Integrators"
inside and the box with "Network Operators" inside. This box has an arrow
pointing down to the box with "End User" in it.
CUSTOMERS
Information appliance manufacturers have shipped over 240,000 units that
incorporate Liberate software. Liberate software is localized for a number of
international markets and languages, including the recent deployment of Japanese
language TV Navigator. Over 50% of our current customers are
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<PAGE>
located outside the United States. The following is a partial list of our
customers, grouped according to industry, that we believe is representative of
our overall customer base:
<TABLE>
<S> <C>
NETWORK OPERATORS INFORMATION APPLIANCE MANUFACTURERS
CABLE AND SATELLITE WEB BOXES
Cable and Wireless Acer
Pacific Convergence Boca Research
HOTEL INTERACTIVE SERVICES DIGITAL SET-TOP BOXES
Guestlink International General Instrument
LodgeNet Entertainment Hughes Network Systems
MagiNet Philips Electronics
INTERNET SERVICE PROVIDERS INTERNET TELEVISIONS
America Online NEC
Dream Train Internet
PERSONAL DIGITAL ASSISTANTS
TELECOMMUNICATIONS Fujitsu
Belgacom
NTL
NTT
U S WEST
</TABLE>
SELECTED CASE STUDIES
The following case studies illustrate how some of our customers have used
Liberate's products.
NETWORK OPERATORS
AMERICA ONLINE. With more than 17 million subscribers, America Online is
the world's leader in interactive services. America Online has licensed
Liberate's TV Navigator and the Liberate Connect ISP Suite in connection with
offering Internet-based information appliance services. AOL-TV is part of the
AOL Anywhere initiative, which extends interactive services to devices beyond
the personal computer. It will combine enhanced television services with America
Online's world-class ease-of-use and community, commerce and communication
features. America Online has made a major commitment of internal resources to
the design and launch of AOL-TV.
CABLE & WIRELESS PLC. Cable & Wireless, the leading provider of integrated
telecommunications and television entertainment services in the United Kingdom,
has chosen Liberate's DTV Navigator platform technology for its digital and
interactive television services. Cable & Wireless intends to roll out
multichannel television in July 1999 and interactive services based on Internet
standards in October 1999. Cable & Wireless will distribute Liberate's TV
Navigator on set-top boxes manufactured by Pace Micro Technology.
GUESTLINK. Guestlink is an affiliate of Akai Electric, a leading Japanese
consumer electronics manufacturer. Akai is a subsidiary of Semi-Tech (Global)
Company. Guestlink brings in-room interactive entertainment, communications and
management services to the world's premier hotel properties. The Guestlink
system is currently in more than 200,000 rooms in 1,000 hotels in Europe and
Asia. Guestlink recently introduced its Guestlink Global system, which
incorporates Liberate technology. The new system leverages Liberate's technology
to offer fully integrated interactive services to both guests and management,
including simple and attractive Internet access and e-mail.
NTL. NTL is one of the United Kingdom's top three telecommunications
companies and supplies integrated cable and telephony service to more than one
million homes. NTL has integrated Liberate's technology into its advanced
fiber-optic network infrastructure to deliver an easy-to-use interactive
service. Liberate's software platform serves as the foundation of this service,
enabling NTL's customers to view television and Internet content simultaneously
on their television screens. NTL uses Liberate
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Connect ISP Suite server software to manage the analog set-top boxes, provide
security and administer the network.
U S WEST. U S WEST provides a full range of telecommunications services
including wireline, wireless PCS and data networking services to more than 25
million customers. U S WEST is utilizing its advanced network and Liberate's
software to offer a service that will merge television, the Internet and
telephony features. The U S WEST television service allows subscribers to watch
television programs, surf the web and make telephone calls, all through a
television set-top box equipped with a speakerphone. TV Navigator for ISP and
Liberate Connect Server furnish a complete platform, which further affords U S
WEST the flexibility to brand its television service and provide network access
via both dial-up and xDSL connections.
INFORMATION APPLIANCE MANUFACTURERS
ACER. Acer is one of the world's largest computer manufacturers and has
leveraged that experience into the information appliance marketplace with TV
Navigator software. Acer has already obtained several design wins with network
operators and has shipped more than 50,000 units of its CyberTV product, which
incorporates TV Navigator as the software platform. CyberTV customers include
Belgacom and NTL.
FUJITSU. Fujitsu is one of the world's largest suppliers of computers and
information systems solutions, telecommunications and semiconductor products,
software and services. Fujitsu is the first hardware manufacturer to offer the
eNavigator product embedded within a consumer electronic device. Fujitsu is
using the eNavigator product running on top of the Wind River Systems operating
system to incorporate Internet connectivity and functionality into its INTERTop
personal digital assistant. With eNavigator technology, Fujitsu's INTERTop now
features e-mail and Web browsing and is currently available in retail outlets in
Japan. Fujitsu has shipped over 16,000 of these units.
GENERAL INSTRUMENT. General Instrument is a leading worldwide provider of
integrated and interactive broadband access solutions, teaming with its business
partners to lead the convergence of the Internet, telecommunications and video
entertainment industries. General Instrument and Liberate have entered into a
multiyear joint development effort to produce integrated software on General
Instrument's DCT line of digital cable set-top boxes including the DCT-5000.
PHILIPS ELECTRONICS. Philips is the largest consumer electronics maker in
Europe, and the third largest in the world. The company markets under the names
Philips, Marantz and Magnavox. It is a major supplier of communications
infrastructure equipment and semiconductors for consumer electronics. Philips is
licensing both TV Navigator for ISP and TV Navigator for DTV for worldwide
usage. The first customer for the Philips television set-top box will be America
Online.
COMPETITION
Competition in the information appliance software market is intense. Our
principal competitors on the client software side include Microsoft, OpenTV and
Spyglass. On the server side, our primary competitor is Microsoft. We also
expect additional competition from other established and emerging companies. We
expect competition to persist and intensify as the information appliance market
develops and competitors focus on additional product and service offerings. We
believe that the principal competitive factors in our industry are the quality
and breadth of product and service offerings, the ease and speed with which a
product can be integrated into network operators' existing internal systems and
deployed to network operators' customers, whether the software platform operates
efficiently with numerous information appliances, financial resources, price,
time-to-market and the effectiveness of sales and marketing efforts. We believe
that we presently compete favorably with our competitors in these areas.
However, the market for information appliances is evolving and we cannot be
certain that we will compete successfully in the future. See "Risk
Factors--Competition from Bigger, Better Capitalized Competitors Could Result in
Price Reductions, Reduced Gross Margins and Loss of Market Share."
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<PAGE>
INTELLECTUAL PROPERTY
Liberate seeks to protect its proprietary rights and its other intellectual
property through a combination of copyrights, trademarks, patents and trade
secret protection, as well as through contractual protections such as
proprietary information agreements and nondisclosure agreements. However, we
cannot guarantee that the steps we have taken to protect our proprietary rights
will be adequate to deter misappropriation of our proprietary information, and
we may not be able to detect unauthorized use and take appropriate steps to
enforce our intellectual property rights. See "Risk Factors--Our Limited Ability
to Protect Our Intellectual Property and Proprietary Rights May Harm Our
Competitiveness."
EMPLOYEES
As of April 30, 1999, we had 227 employees, including 120 in engineering, 50
in sales and marketing, 38 in services and 19 in administration. None of our
employees is represented by a collective bargaining agreement. We have never
experienced a work stoppage, and we consider our relations with our employees to
be good.
Our future operating results depend in significant part on the continued
service of our key technical, sales and senior management personnel, none of
whom, except Mitchell E. Kertzman, are party to an employment agreement. Our
future success also depends on our continuing ability to attract and retain
highly qualified technical, sales and senior management personnel. Competition
for these personnel is intense, and we may not be able to retain our key
technical, sales and senior management personnel or attract these personnel in
the future. We have experienced difficulty in recruiting qualified technical,
sales and senior management personnel, and we expect to experience these
difficulties in the future. If we are unable to hire and retain qualified
personnel in the future, our business could be seriously harmed.
FACILITIES
Liberate leases approximately 48,000 square feet of office space for our
headquarters in Redwood Shores, California, approximately 5,000 square feet of
office space in Salt Lake City, Utah, two offices in a business center in
Bellevue, Washington and an office suite in Placerville, California. In
addition, Liberate leases approximately 1,100 square feet in London for its
United Kingdom sales office. Liberate also leases approximately 45,000 square
feet in Sunnyvale, California, which it subleases.
In April 1999, we entered into a 10-year lease for approximately 78,000
square feet of office space in San Carlos, California. We intend to relocate our
headquarters to this facility in the second quarter of fiscal 2000.
LITIGATION
In December 1998, one of our former employees filed an action in the
California Superior Court for the county of San Mateo against us for, among
other things, unpaid commissions of approximately $1,482,000, constructive
employment termination, intentional misrepresentation and negligent
misrepresentation. We believe that we have strong defenses against this lawsuit.
Accordingly, we intend to vigorously defend this action. However, we might not
prevail in this litigation, as litigation is inherently uncertain. A failure to
prevail in this litigation could result in our paying substantial monetary
damages, which would seriously harm our business.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors and other key employees of Liberate,
and their ages as of April 30, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Mitchell E. Kertzman...................... 50 President, Chief Executive Officer and Director
Nancy J. Hilker........................... 41 Vice President and Chief Financial Officer
David A. Limp............................. 33 Senior Vice President of Corporate Development
Charles G. Tritschler..................... 33 Vice President of Marketing
Philip A. Vachon.......................... 42 Senior Vice President of Worldwide Sales
Steven Weinstein.......................... 44 Senior Vice President of Product Development
Gordon T. Yamate.......................... 44 Vice President, General Counsel and Secretary
David J. Roux (1)(2)...................... 42 Chairman of the Board of Directors
James L. Barksdale........................ 56 Director
Charles Corfield.......................... 40 Director
Lawrence J. Ellison....................... 54 Director
Jeffrey O. Henley (1)(2).................. 54 Director
</TABLE>
- ------------------------
(1) Member of finance and audit committee.
(2) Member of compensation committee.
- --------------------------------------------------------------------------------
MITCHELL E. KERTZMAN has been President, Chief Executive Officer and a
director of Liberate since November 1998. Prior to joining Liberate, Mr.
Kertzman was Chairman of the board of directors of Sybase, a database company,
from February 1995 until he joined Liberate. Between February 1998 and August
1998, he also served as Co-Chief Executive Officer of Sybase. From July 1996
until February 1997 Mr. Kertzman served as Chief Executive Officer of Sybase and
from July 1996 until July 1997 he also served as President of Sybase. Between
February 1995 and July 1996 he served as an Executive Vice President of Sybase.
In February 1995, Sybase merged with Powersoft Corporation, a provider of
application development tools. Mr. Kertzman had served as Chief Executive
Officer and a director of Powersoft since he founded it in 1974. He also served
as President of Powersoft from April 1974 to June 1992. Mr. Kertzman also serves
as a director of CNET.
NANCY J. HILKER has been Vice President and Chief Financial Officer of
Liberate since its merger with Navio in August 1997. Prior to the merger, she
had served as Vice President and Secretary of Navio since July 1996. Prior to
joining Navio, Ms. Hilker served in various capacities at IntelliCorp, a
software company, from June 1991 to July 1996, most recently as Chief Financial
Officer and Secretary. From October 1979 to June 1991, Ms. Hilker held various
positions at Deloitte & Touche, an accounting firm, as a manufacturing and high
technology specialist in the emerging business services group. Ms. Hilker is a
Certified Public Accountant.
DAVID A. LIMP has been Senior Vice President of Corporate Development since
January 1999. Mr. Limp was our Vice President of Marketing from August 1997 to
January 1999. From December 1996 to August 1997, Mr. Limp was Vice President of
Marketing of Navio. Prior to joining Navio, Mr. Limp served in various
capacities at Apple Computer from July 1987 to November 1996, most recently as
director of its North and South American PowerBook division.
CHARLES G. TRISCHLER has been Vice President of Marketing since January
1999. Mr. Trischler was our Director of Product Marketing from August 1997 to
January 1999. From April 1997 to August 1997, Mr. Trischler was Director of
Product Marketing of Navio. Prior to joining Navio, Mr. Trischler
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<PAGE>
served in various capacities at Apple Computer from July 1988 to April 1997,
most recently as Product Line Manager.
PHILIP A. VACHON has been Senior Vice President of Worldwide Sales since
January 1999. Before that he served as our Senior Vice President of Americas
Sales from June 1997 to January 1999. Prior to joining Liberate, Mr. Vachon
served in various capacities at Oracle, from March 1987 to June 1997, most
recently as Vice President of Alliances. Prior to joining Oracle, Mr. Vachon
worked at Applied Data Research, a database software company, from February 1984
to December 1986 in various sales and technical positions.
STEVEN WEINSTEIN has been Senior Vice President of Product Development since
March, 1999. From August 1997 to March 1999, Mr. Weinstein was our Vice
President of Product Development. From September 1996 to August 1997, Mr.
Weinstein was Vice President of Product Development of Navio. Prior to joining
Navio, Mr. Weinstein was the General Manager and Vice President of Production at
Spectrum HoloByte/MicroProse, a computer game manufacturer, from July 1992 to
September 1996. Prior to that, Mr. Weinstein served as Vice President of
Software Engineering at Electronics for Imaging, a hardware and software
company, from August 1991 to August 1992.
GORDON T. YAMATE has been Vice President and General Counsel since March
1999. Prior to joining Liberate, Mr. Yamate was associated with the law firm of
McCutchen, Doyle, Brown & Enersen, LLP since September 1983, and had been a
partner since June 1988.
DAVID J. ROUX has been a director of Liberate since May 1996 and Chairman of
the Board of Directors since October 1998. He previously served as our Chairman
from October 1996 to September 1997. From February 1998 to November 1998, he
served as the Chief Executive Officer and President of Liberate. Mr. Roux is
currently a partner of Silver Lake Partners, a private equity firm. Mr. Roux
held various management positions with Oracle from September 1994 until December
1998, most recently as Executive Vice President of Corporate Development. Before
joining Oracle, Mr. Roux served as Senior Vice President, Marketing and Business
Development at Central Point Software from April 1992 to July 1994. From October
1987 to April 1992, Mr. Roux served in various capacities at Lotus, a software
company, most recently as Senior Vice President of the Portable Computing Group.
Before joining Lotus, Mr. Roux co-founded and served as the Chief Executive
Officer of Datext, a CD ROM publishing company, from June 1984 to October 1987.
JAMES L. BARKSDALE has been a director of Liberate since August 1997, when
Liberate acquired Navio. Mr. Barksdale served as a Director of Navio from July
1996 until the merger with Liberate. Mr. Barksdale is currently a partner at The
Barksdale Group. Mr. Barksdale served at Netscape from January 1995 to March
1999 as President and Chief Executive Officer. From January 1992 to January
1995, Mr. Barksdale served as President and Chief Operating Officer, and, as of
September 1994, Chief Executive Officer, of AT&T Wireless Services, formerly,
McCaw Cellular Communications, a cellular telecommunications company. From April
1983 to January 1992, Mr. Barksdale served as Executive Vice President and Chief
Operating Officer of Federal Express. Mr. Barksdale also serves as a director of
3Com, America Online and Robert Mondavi.
CHARLES CORFIELD has been a director of Liberate since December 1998. Mr.
Corfield has been a partner at both Whitman Capital and Mercury Capital, venture
capital firms since 1996. Mr. Corfield co-founded Frame Technology, a software
company, in 1986 and served as a member of its board of directors and as its
Chief Technology Officer until it was acquired by Adobe Systems in 1995.
LAWRENCE J. ELLISON has been a director of Liberate since August 1997. Mr.
Ellison previously served as Liberate's Chairman from September 1997 to October
1998. Mr. Ellison has been Chief Executive Officer and a director of Oracle
since he co-founded it in May 1977, and was President of Oracle until June 1996.
Mr. Ellison has been Chairman of the Board of Oracle since June 1995 and
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was Chairman of the Board of Oracle from April 1990 until September 1992. Mr.
Ellison also serves as a director of Apple Computer, SuperGen and Spring Group.
JEFFREY O. HENLEY has been a director of Liberate since May 1996. Mr. Henley
has been Executive Vice President and Chief Financial Officer of Oracle since
March 1991 and has been a director of Oracle since June 1995. Prior to joining
Oracle, he served as Executive Vice President and Chief Financial Officer of
Pacific Holding Company, a privately-held company with diversified interests in
manufacturing and real estate, from August 1986 to February 1991.
BOARD OF DIRECTORS
Liberate currently has authorized seven directors. The officers serve at the
discretion of the Board. There are no family relationships among the directors
and officers of Liberate.
BOARD COMMITTEES
The finance and audit committee consists of Messrs. Henley and Roux. The
finance and audit committee makes recommendations to the board of directors
regarding the selection of independent accountants, reviews the results and
scope of audit and other services provided by our independent accountants and
reviews and evaluates our audit and control functions. The compensation
committee consists of Messrs. Henley and Roux. The compensation committee
administers our stock plans and makes decisions concerning salaries and
incentive compensation for our employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the compensation committee is currently an officer or
employee of Liberate. Mr. Henley has not, at any time since the formation of
Liberate, been an officer or employee of Liberate. Although Mr. Roux was
formerly an officer of Liberate, he has not served as an officer or employee of
Liberate at any time while serving on our compensation committee. Except for Mr.
Henley, no member of our compensation committee serves as a member of the board
of directors or compensation committee of any entity that has one or more
executive officers serving as a member of our board of directors or compensation
committee.
DIRECTOR COMPENSATION
We do not currently provide our directors with cash compensation for their
services as members of the board of directors, although members are reimbursed
for some expenses in connection with attendance at board and committee meetings.
On December 11, 1998, we granted Messrs. Barksdale and Corfield each an option
to purchase 41,666 shares of our common stock at an exercise price of $5.10 per
share. At each annual stockholders' meeting, non-employee directors will receive
automatic option grants under our 1999 Equity Incentive Plan. See "Employee
Stock Plans--1999 Equity Incentive Plan."
INDEMNIFICATION
In May 1999, the board of directors authorized Liberate to enter into
indemnification agreements with each of our directors and executive officers.
The form of indemnity agreement provides that we will indemnify against any and
all expenses of the director or executive officer who incurred such expenses
because of his or her status as a director or executive officer, to the fullest
extent permitted by Delaware law, our certificate of incorporation and our
bylaws.
Our certificate of incorporation and bylaws contain certain provisions
relating to the limitation of liability and indemnification of directors and
officers. The certificate of incorporation provides that our
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directors shall not be personally liable to Liberate or its stockholders for
monetary damages for any breach of fiduciary duty as a director, except for
liability
- For any breach of the director's duty of loyalty to Liberate or our
stockholders;
- For acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- In respect of certain unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law; or
- For any transaction from which the director derives any improper personal
benefit.
The certificate of incorporation also provides that if Delaware law is
amended after the approval by our stockholders of the certificate of
incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of our directors shall be
eliminated or limited to the fullest extent permitted by Delaware Law. The
foregoing provisions of the certificate of incorporation are not intended to
limit the liability of directors or officers for any violation of applicable
federal securities laws. In addition, as permitted by Section 145 of the
Delaware General Corporation Law, our bylaws provide that
- We are required to indemnify our directors and executive officers to the
fullest extent permitted by the Delaware law;
- We may, in our discretion, indemnify other officers, employees and agents
as provided by Delaware Law;
- To the fullest extent permitted by Delaware law, we are required to
advance all expenses incurred by our directors and executive officers in
connection with a legal proceeding (subject to certain exceptions);
- The rights conferred in the bylaws are not exclusive;
- We are authorized to enter into indemnification agreements with our
directors, officers, employees and agents; and
- We may not retroactively amend the bylaws provisions relating to
indemnity.
Our bylaws provide that we shall indemnify our directors to the fullest
extent permitted by Delaware law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law.
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EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation for the
fiscal year ended May 31, 1998 that we paid for services rendered by our current
Chief Executive Officer, our four other executive officers who earned more than
$100,000 during the fiscal year ended May 31, 1998, and several former executive
officers, collectively referred to as the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
AWARDS
ANNUAL COMPENSATION ----------------------
---------------------------- SECURITIES ALL OTHER
SALARY ($) BONUS ($) UNDERLYING OPTIONS (#) COMPENSATION ($)
------------- --------- ---------------------- ----------------
<S> <C> <C> <C> <C>
Mitchell E. Kertzman(1)................. -- -- -- --
President and Chief Executive Officer
Nancy J. Hilker......................... $ 124,167 $29,375 25,000 --
Vice President and Chief Financial
Officer
David A. Limp........................... 128,109 19,375 50,000 --
Senior Vice President of Corporate
Development
Philip A. Vachon........................ 516,071(2) -- 58,333 --
Senior Vice President of Worldwide Sales
Steven Weinstein........................ 142,019 19,375 25,000 --
Senior Vice President of Product
Development
David J. Roux(3)........................ 141,665 -- -- $ 1,869
Former Chief Executive Officer
Jerry W. Baker.......................... 211,433 -- -- 180,000(5)
Former Chief Executive Officer
Wei Yen................................. 266,866 -- -- 685,530(6)
Former President
</TABLE>
- ------------------------
(1) Mr. Kertzman became our President and Chief Executive Officer on November
16, 1998. His current annual salary is $300,000. We granted him an option to
purchase 1,666,666 shares of our common stock on November 16, 1998.
(2) Includes $57,633 that was paid by Oracle on behalf of Liberate for Mr.
Vachon's services rendered to Liberate. Also includes $385,612 in
commissions earned for the fiscal year ended May 31, 1998.
(3) Mr. Roux was our Chief Executive Officer from February 1998 to November
1998, and all compensation in this table represents payments made by Oracle
to Mr. Roux for this period for his services as an officer of Oracle and
Liberate. We granted Mr. Roux, the Chairman of our board of directors an
option to purchase 833,333 shares of our common stock on October 15, 1998.
(4) Represents matching contributions.
(5) Consists entirely of severance payments made to Mr. Baker upon his
resignation from Liberate.
(6) Consists of $108,807 in severance payments made to Dr. Yen, and $576,723 in
loan and interest forgiveness, all in connection with Dr. Yen's resignation
from Liberate.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options during the fiscal
year ended May 31, 1998, to each of the Named Executive Officers. No stock
appreciation rights were granted during this period.
The exercise price of each option was equal to the fair market value of our
common stock as valued by the board of directors on the date of grant. The
exercise price may be paid in cash, in shares of our common stock valued at fair
market value on the exercise date or through a cashless exercise procedure
involving a same-day sale of the purchased shares. We may also finance the
option exercise by loaning the optionee sufficient funds to pay the exercise
price for the purchased shares, together with any federal and state income tax
liability incurred by the optionee in connection with such exercise. The fair
market value of our common stock was estimated by the board of directors on the
basis of the purchase price paid by investors for shares of our preferred stock
(taking into account the liquidation preferences and other rights, privileges
and preferences associated with the preferred stock) and an evaluation by the
board of our revenues, operating history and prospects.
The potential realizable value is calculated based on the ten-year term of
the option at the time of grant. Stock price appreciation of 5% and 10% is
assumed pursuant to rules promulgated by the SEC and does not represent our
prediction of our stock price performance. The potential realizable values at 5%
and 10% appreciation are calculated by assuming that the estimated fair market
value on the date of grant appreciates at the indicated rate for the entire term
of the option and that the option is exercised at the exercise price and sold on
the last day of its term at the appreciated price. The initial public offering
price may be higher than the estimated fair market value on the date of grant,
and the potential realizable value of the option grants could be significantly
higher than the numbers shown in the table if future stock prices were projected
to the end of the option term by applying the same annual rates of stock price
appreciation to the initial public offering price.
The shares listed in the following table under "Number of Securities
Underlying Options Granted" are subject to vesting. Upon completion of 12 months
of service from the vesting start date, 25% of the option shares vest and the
balance vest in a series of equal monthly installments over the next three years
of service. Each of the options has a ten-year term, subject to earlier
termination if the optionee's service with us ceases.
Percentages shown under "Percent of Total Options Granted to Employees in
the Last Fiscal Year" are based on an aggregate of 1,315,962 options granted to
employees of Liberate under its 1996 Stock Option Plan during the fiscal year
ended May 31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN THE LAST PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
- ------------------------------ -------------- ----------------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mitchell E. Kertzman(1)....... -- -- -- -- -- --
Nancy J. Hilker............... 25,000 1.9% $ 3.90 02/06/08 $ 61,317 $ 155,390
David A. Limp................. 50,000 3.8 3.90 02/06/08 122,634 310,780
Philip A. Vachon.............. 41,666 3.2 2.16 07/09/07 56,601 143,437
16,666 1.3 3.90 02/06/08 40,878 103,593
Steven Weinstein.............. 25,000 1.9 3.90 02/06/08 61,317 155,390
David J. Roux(2).............. -- -- -- -- -- --
Jerry W. Baker................ -- -- -- -- -- --
Wei Yen....................... -- -- -- -- -- --
</TABLE>
- ------------------------
(1) We granted Mr. Kertzman an option to purchase 1,666,666 shares of our common
stock on November 16, 1998 at an exercise price of $5.10 per share.
(2) We granted Mr. Roux an option to purchase 833,333 shares of our common stock
on October 15, 1998 at an exercise price of $5.10 per share.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth options exercised by each of the Named
Executive Officers during the fiscal year ended May 31, 1998, and the number and
value of securities underlying unexercised options that are held by the Named
Executive Officers as of May 31, 1998.
Amounts shown under the column "Value Realized" are equal to the fair market
value of the purchased shares on the option exercise date, less the exercise
price paid for such shares.
Amounts shown under the column "Value of Unexercised In-the-Money Options at
Fiscal Year End" are based on the fair market value of our common stock at May
31, 1998 as determined by our board of directors, $4.50 per share, less the
exercise price payable for such shares. The fair market value of our common
stock at May 31, 1998 was estimated by the board of directors on the basis of
the purchase price paid by investors for shares of our preferred stock, taking
into account the liquidation preferences and other rights, privileges and
preferences associated with the preferred stock, and an evaluation by the board
of our revenues, operating history and prospects. The initial public offering
price is higher than the estimated fair market value on May 31, 1998, and the
value of unexercised options would be higher than the numbers shown in the table
if the value were calculated by subtracting the exercise price from the initial
public offering price.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END
ACQUIRED ON VALUE ---------------------------- --------------------------
NAME EXERCISE REALIZED EXERCISEABLE UNEXERCISEABLE EXERCISEABLE UNEXERCISEABLE
- ----------------------------- ----------- ---------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mitchell E. Kertzman......... -- -- -- -- -- --
Nancy J. Hilker.............. 24,866 $ 157,714 62,784 25,000 -- $ 15,000
9,324 46,835 -- -- -- --
David A. Limp................ 20,833 132,141 68,681 50,000 284,339 30,000
Philip A. Vachon............. -- -- -- 58,332 -- 107,498
Steven Weinstein............. 27,972 177,429 102,569 25,000 350,786 15,000
18,648 93,669 -- -- -- --
David J. Roux................ -- -- -- -- -- --
Jerry W. Baker............... -- -- -- -- -- --
Wei Yen...................... -- -- -- -- -- --
</TABLE>
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
We entered into an employment agreement, dated October 12, 1998, with
Mitchell E. Kertzman, our President and Chief Executive Officer. Mr. Kertzman's
annual salary is $300,000 and he is eligible for an annual bonus of up to
$200,000. His bonus for the first year of employment is guaranteed to be
$200,000. We granted him an option to purchase 1,666,666 shares of our common
stock. Upon his completion of 12 months of service, 25% of the option shares
will vest and the balance of the option shares will vest in a series of equal
monthly installments upon his completion of each of the next 36 months. If we
experience a change in control, 50% of any unvested option shares will become
vested upon the effective date of the change in control.
We entered into a settlement agreement in March 1998, with Jerry W. Baker,
our former Chief Executive Officer. Under this agreement, we paid Mr. Baker a
severance amount of $180,000, which represented six months of his base salary.
In addition, Mr. Baker agreed to release all claims against us.
We entered into an employment agreement, dated October 17, 1997 and amended
February 27, 1998, with Wei Yen, our former President. The amendment provided
for the resignation of Dr. Yen from Liberate. The amendment terminated our right
of repurchase as to his shares of our Series C preferred stock. In addition, Dr.
Yen received a severance payment equal to $820,000, payable in 24 equal monthly
installments, beginning on February 27, 1998, and the forgiveness of
indebtedness plus
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interest amounting to $576,723. In addition, Dr. Yen agreed to release all
claims that he may have against us.
EMPLOYEE STOCK PLANS
1999 EQUITY INCENTIVE PLAN
SHARE RESERVE. Our board of directors adopted our 1999 Equity Incentive
Plan on May 17, 1999. Our stockholders also approved this plan. We have reserved
that number of shares of our common stock equal to the number of shares then
available for grant of stock options under our 1996 stock option plan at the
time of this offering of its capital stock, for issuance under the 1999 Equity
Incentive Plan. On June 1 of each year, starting with the Year 2000, the number
of shares in the reserve will automatically increase by 5% of the total number
of shares of common stock that are outstanding at that time or, if less, by
3,000,000 shares. In general, if options or shares awarded under the 1999 Equity
Incentive Plan are forfeited, then those options or shares will again become
available for awards. We have not yet granted any options under the 1999 Equity
Incentive Plan.
ADMINISTRATION. The compensation committee of our board of directors
administers the 1999 Equity Incentive Plan. The committee has complete
discretion to make all decisions relating to the interpretation and operation of
our 1999 Equity Incentive Plan. The committee has discretion to determine who
will receive an award, what type of award it will be, how many shares will be
covered by the award, what the vesting requirements will be, if any, and what
the other features and conditions of each award will be. The compensation
committee may also reprice outstanding options and modify outstanding awards in
other ways.
ELIGIBILITY. The following groups of individuals are eligible to
participate in the 1999 Equity Incentive Plan:
- Employees;
- Members of our board of directors who are not employees; and
- Consultants.
TYPES OF AWARDS. The 1999 Equity Incentive Plan provides for the following
types of awards:
- Options to purchase shares of our common stock;
- Stock appreciation rights;
- Restricted shares of our common stock; and
- Stock units, sometimes called phantom shares.
OPTIONS AND STOCK APPRECIATION RIGHTS. Options may be incentive stock
options or nonstatutory stock options. An optionee who exercises an incentive
stock option may qualify for favorable tax treatment under Section 422 of the
Internal Revenue Code of 1986. On the other hand, nonstatutory stock options do
not qualify for such favorable tax treatment. The exercise price for all
incentive stock options and nonstatutory stock options granted under the 1999
Equity Incentive Plan may not be less than 100% and 85%, respectively, of the
fair market value of our common stock on the option grant date. At the
discretion of the committee, optionees may pay the exercise price by using:
- Cash;
- Shares of common stock that the optionee already owns;
- A full-recourse promissory note, except that the par value of newly issued
shares must be paid in cash;
- An immediate sale of the option shares through a broker designated by us;
or
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<PAGE>
- A loan from a broker designated by us, secured by the option shares.
Options and stock appreciation rights vest at the time or times determined
by the compensation committee. In most cases, our options vest over the
four-year period following the date of grant. Options and stock appreciation
rights generally expire 10 years after they are granted, except that they
generally expire earlier if the optionee's service terminates earlier. The 1999
Equity Incentive Plan provides that no participant may receive options or stock
appreciation rights covering more than 750,000 shares in the same year, except
that a newly hired employee may receive options or stock appreciation rights
covering up to 1,500,000 shares in the first year of employment.
RESTRICTED SHARES. Restricted shares may be awarded under the 1999 Equity
Incentive Plan in return for:
- Cash;
- A full-recourse promissory note, except that the par value of newly issued
shares must be paid in cash;
- Services already provided to us; and
- In the case of treasury shares only, services to be provided to us in the
future.
Restricted shares and stock units vest at the time or times determined by
the compensation committee.
AUTOMATIC OPTION GRANTS. The non-employee members of our board of directors
will be eligible for option grants under the automatic option grant program. At
the time of each of our annual stockholders' meetings, beginning in 2000, each
non-employee director who will continue to serve as a board member following the
meeting will automatically be granted a fully vested option for 5,000 shares of
our common stock. The exercise price of each option will be equal to the fair
market value of our common stock on the option grant date. A director may pay
the exercise price by using cash, shares of common stock that the director
already owns, an immediate sale of the option shares through a broker designated
by us or a loan from a broker designated by us, secured by the option shares.
The options have a 10-year term, except that they expire 12 months after a
director leaves the board, if earlier.
CHANGE IN CONTROL. If a change in control of Liberate occurs, the board or
the compensation committee has discretion to accelerate vesting of options and
other awards. A change in control includes:
- A merger of Liberate after which our own stockholders own 50% or less of
the surviving corporation (or its parent company) and a stockholder who
did not own any shares of Liberate immediately before the change in
control owns 50% or more of Liberate after the change in control;
- A sale of all or substantially all of our assets;
- A proxy contest that results in the replacement of more than one-half of
our directors over a 24-month period; or
- An acquisition of 50% or more of our outstanding stock by any person or
group, other than a person related to Liberate, such as a holding company
owned by our stockholders.
However, Oracle's disposition of its securities, such that it holds less
than 50% of Liberate, and/or its later increase in ownership to at least 50% of
Liberate, will not in itself be deemed a change in control.
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<PAGE>
AMENDMENTS OR TERMINATION. Our board may amend or terminate the 1999 Equity
Incentive Plan at any time. If our board amends the plan, stockholder approval
will only be sought if required by an applicable law. The 1999 Equity Incentive
Plan will continue in effect indefinitely unless the board decides to terminate
the plan.
1999 EMPLOYEE STOCK PURCHASE PLAN
SHARE RESERVE AND ADMINISTRATION. Our board of directors adopted our 1999
Employee Stock Purchase Plan on May 17, 1999. Our stockholders will also approve
this plan. Our 1999 Employee Stock Purchase Plan is intended to qualify under
Section 423 of the Internal Revenue Code. We have reserved 833,333 shares of our
common stock for issuance under the plan. On June 1 of each year, starting in
2000, the number of shares in the reserve will automatically increase by 2% of
the total number of shares of common stock then outstanding or, if less, 833,333
shares. The compensation committee of our board of directors will administer the
plan.
ELIGIBILITY. All of our employees are eligible to participate, if they are
employed by us for more than 20 hours per week and for more than five months per
year. Eligible employees may begin participating in the 1999 Employee Stock
Purchase Plan at the start of any offering period. Each offering period lasts
six months. Overlapping offering periods start on April 1 and October 1 of each
year. However, the first offering period will start on the effective date of
this offering and end on March 31, 2000.
AMOUNT OF CONTRIBUTIONS. Our 1999 Employee Stock Purchase Plan permits each
eligible employee to purchase common stock through payroll deductions. Each
employee's payroll deductions may not exceed 15% of the employee's cash
compensation. Purchases of our common stock will occur on March 31 and September
30 of each year. Each participant may purchase up to 750 shares on any purchase
date (1,500 shares per year). But the value of the shares purchased in any
calendar year, measured as of the beginning of the offering period, may not
exceed $25,000.
PURCHASE PRICE. The price of each share of common stock purchased under our
1999 Employee Stock Purchase Plan will be 85% of the lower of:
- The fair market value per share of common stock on the date immediately
before the first day of the applicable offering period; or
- The fair market value per share of common stock on the purchase date.
In the case of the first offering period, the price per share under the plan
will be 85% of the lower of:
- The price per share to the public in this offering; or
- The fair market value per share of common stock on the purchase date.
OTHER PROVISIONS. Employees may end their participation in the 1999
Employee Stock Purchase Plan at any time. Participation ends automatically upon
termination of employment with Liberate. If a change in control of Liberate
occurs, our 1999 Employee Stock Purchase Plan will end and shares will be
purchased with the payroll deductions accumulated to date by participating
employees, unless the plan is assumed by the surviving corporation or its
parent. Our board of directors may amend or terminate the 1999 Employee Stock
Purchase Plan at any time. If our board increases the number of shares of common
stock reserved for issuance under the plan, except for the automatic increases
described above, it must seek the approval of our stockholders.
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<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH ORACLE
From our inception until our acquisition of Navio Communications in August
1997, we were a wholly-owned subsidiary of Oracle. Following the Navio
acquisition, Oracle remained our majority stockholder. After the offering,
Oracle will beneficially own approximately % of our outstanding stock, and
will continue to exercise significant influence over the election of our
directors and other corporate matters. In addition, two of our directors,
Messrs. Ellison and Henley, are executive officers and directors of Oracle. We
have entered into numerous transactions and arrangements with Oracle, including
the following:
FINANCINGS, LOANS AND INTER-COMPANY ARRANGEMENTS
In May 1996, we sold 16 shares of our common stock to Oracle and in October
1996, we sold 14,166,650 shares of our Series A preferred stock to Oracle. In
exchange, we received an inter-company transfer of approximately $10.0 million
and all of the tangible assets and some of the intangible assets of Oracle's
network computer division, including the right to hire the employees of the
division, intellectual property rights associated with the division and
contractual relationships with suppliers, customers and contractors of the
division. The aggregate value of the transfer, including cash, was estimated by
our board of directors to be approximately $85 million.
In May 1996, Oracle forgave an inter-company payable balance of
approximately $5 million.
In July 1997, we entered into a convertible note purchase agreement with
Oracle. Pursuant to this agreement, Oracle agreed to provide up to $10.0 million
to us for general working capital purposes, as needed, in the form of
convertible notes, and up to $19.2 million to fund our obligations under the
put/ call and voting agreement, as discussed below. The convertible notes bear
annual interest at 8% and are convertible, at Oracle's option, into shares of
our stock. As of April 30, 1999, we had borrowed approximately $10.0 million
under this arrangement and Oracle has converted $5.0 million of the indebtedness
into 757,575 shares of our Series A-1 preferred stock. In May 1999, we repaid
the outstanding portion of the indebtedness, totalling approximately $5.0
million. We do not currently intend to borrow additional funds under this
arrangement.
In November 1996, Oracle transferred the assets, liabilities and personnel
of a corporate division to us. At the time of this assignment, the assets and
liabilities had a net book value of approximately $79,000. In July 1997, we
transferred the assets, liabilities and personnel of this corporate division
back to Oracle. At the time of this transfer, the assets and liabilities had a
net book value of approximately $90,000.
From our inception until August 1997, Oracle funded our operations through
an inter-company payable account. In connection with our acquisition of Navio in
August 1997, Oracle converted approximately $18 million of outstanding
inter-company payables into 2,727,272 shares of our Series A-1 preferred stock.
From inception until June 1, 1998, from time to time in the ordinary course of
business, we and Oracle entered into inter-company transactions. As of February
28, 1999, we had approximately $380,000 of inter-company payables outstanding.
Additionally, in fiscal 1998, Oracle contributed capital of approximately $8.0
million to us.
In August 1997, we entered into a tax allocation and indemnity agreement
with Oracle. This agreement provides for our consolidation into Oracle's tax
group for income tax payment purposes. Under the agreement, our tax liability is
computed as if we had filed a separate return for amounts due in certain state
and local jurisdictions. As a member of Oracle's tax group, we are allocated our
share of the aggregate tax liability of the group. The agreement provides that
Oracle will indemnify us for penalties or other damages attributed to the
failure of Oracle to make timely filings or to make timely or full payments,
provided that we pay our allocated share and provide necessary information on a
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<PAGE>
timely basis. Under the agreement, Oracle owes us approximately $787,000 for use
of tax losses related to fiscal 1998.
In August 1997, in connection with our acquisition of Navio, we entered into
a put/call and voting agreement with Oracle and these former Navio stockholders,
including Netscape. Among other things, this agreement granted these former
Navio stockholders the right, for a period of 60 days following the closing of
the acquisition, to compel Oracle to purchase up to 50% of the shares received
by them in the acquisition or 50% of the shares issuable under stock options
assumed by us in the acquisition. As a result of the exercise of these put
rights, Oracle purchased a total of 1,835,569 shares of our Series C preferred
stock. Oracle subsequently converted these shares into shares of our Series C-1
preferred stock.
In May 1999, Wei Yen, our former president, sold 757,575 shares of our
Series C preferred stock to Oracle for $6.60 per share, or an aggregate of
approximately $5.0 million. Immediately after purchasing these shares from Dr.
Yen, Oracle sold the shares to General Instrument for $6.60 per share, or an
aggregate of approximately $5.0 million, pursuant to a purchase agreement among
us, Oracle and General Instrument.
SERVICE ARRANGEMENTS
From our inception until September 1997, Oracle performed various tax,
treasury, risk management, employee benefits, legal, accounting and other
general corporate services for us. The costs of these services were allocated to
us, and had a value of approximately $1.3 million. We ceased obtaining these
services from Oracle in September 1997.
In December 1997, Oracle provided services to us in connection with
development of our products. We paid Oracle approximately $62,000 for services
provided pursuant to this arrangement.
Since December 1997, we have paid Oracle approximately $176,000 for services
provided to us by a salesperson in Taiwan.
From November 1997 to March 1998, we paid Oracle approximately $127,000 for
services provided to us by two members of the Oracle North American sales force.
In March 1998, we entered into a services agreement with Oracle. Under this
agreement, Oracle provides professional services to some of our customers. To
date, we have made payments to Oracle amounting to approximately $96,000 under
this agreement.
In connection with the services agreement discussed in the previous
paragraph, we entered into a time and materials agreement with Oracle. The
agreement provides for Oracle to assist us with management and testing in
connection with the deployment of our products to Cable & Wireless, one of our
customers. The agreement provides for us to pay for services on a time and
materials basis. We have incurred expenses totalling approximately $236,000 for
services provided under the agreement.
In August 1998, we entered into a technical support services agreement with
Oracle and amended this agreement in January 1999. Pursuant to this agreement,
we and Oracle provide each other worldwide technical support services. We have
made no payments to Oracle under the agreement, and have received $42,000 from
Oracle for services rendered pursuant to the agreement.
In April 1998, we paid Oracle approximately $133,000 for services performed
by Oracle to localize our products for the Japanese market.
In a joint representation and defense agreement, we agreed with Oracle to
jointly defend ourselves in a trademark infringement and unfair competition
lawsuit brought by Network Computers against Oracle and us. In April 1998, our
motion for summary judgment was granted and the case was dismissed. We paid
Oracle approximately $105,000 for legal services in connection with our defense.
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<PAGE>
TECHNOLOGY AGREEMENTS
In September 1998, we entered into a technology license agreement with
Oracle. Pursuant to the agreement, Oracle may promote, market and distribute
sublicenses of our products through its worldwide distribution channels for a
period of three years. We have been paid license fees totalling approximately
$325,000 under the agreement.
For the nine months ended February 28, 1999, we accrued $300,000 for
commissions due to Oracle Japan in conjunction with a sale of our software to
Fujitsu.
We have an agreement with Oracle pursuant to which we distribute our
products under an OEM license agreement between Oracle and Netscape discussed
below in "Transactions with Netscape and America Online."
LEASES
We lease office space in Redwood Shores, California from Oracle under a
lease that provides for monthly payments of approximately $124,000. The lease
terminates in September 2002. We also lease furniture and equipment for our
Redwood Shores office from Oracle pursuant to a lease entered into in September
1997, as amended, that obligates us to make monthly payments to Oracle of
approximately $57,000. The furniture and equipment lease terminates
simultaneously with the office lease. In addition, we have contracted for Oracle
to perform maintenance and repair services at our Redwood Shores office. We have
incurred expenses totalling $601,000 for maintenance and repair services for the
fiscal year ended May 31, 1998 and the nine months ended February 28, 1999. The
maintenance and repair services agreement terminates simultaneously with our
Redwood Shores office lease. Pursuant to the terms of a letter from Oracle to us
in April 1999, Oracle agreed to terminate our Redwood Shores office lease, as
well as the furniture and equipment lease and the maintenance and repair
services agreement for our Redwood Shores office, upon 30 days notice from us to
Oracle.
We previously leased office space in Salt Lake City, Utah from Oracle under
a lease that provided for monthly payments of approximately $4,000. The lease
terminated in February 1999. We will continue to lease furniture and equipment
for our Salt Lake City office from Oracle pursuant to a subsequent lease, dated
April 1999, that provides for monthly payments of approximately $750.
We lease office space in London, England from Oracle under a lease that
provides for monthly payments of approximately $4,100. The lease terminates in
October 1999, with an option to extend through October 2000.
We recently entered into a lease for office space in San Carlos, California.
The lease provides for initial monthly payments of approximately $202,000 and
terminates in April 2009. Oracle provided a $10 million guaranty to our
landlord. The guaranty can be terminated if we receive at least $40 million in
this offering and provide an irrevocable letter of credit covering 10 months
rent and operating costs. We intend to relocate our headquarters from the
Redwood Shores facility to these offices in the second quarter of fiscal 1999.
TRANSACTIONS WITH NETSCAPE AND AMERICA ONLINE
After the offering, Netscape will beneficially own approximately % of
our outstanding stock. Netscape became a wholly-owned subsidiary of America
Online, one of our customers, in March 1999. In connection with this merger, one
of our directors, Mr. Barksdale, became a director of America Online.
Prior to our acquisition of Navio, Navio's predecessor, TVsoft, sold shares
of its common stock to Netscape in July 1996. In exchange for these shares of
common stock, TVsoft entered into a source code license agreement with Netscape.
We amended this agreement in April 1998 and September 1998. Under this
agreement, Netscape granted a worldwide, nonexclusive, fully paid-up and
nontransferable
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license to TVsoft for certain Netscape software, including Netscape Navigator.
In connection with our acquisition of Navio, and pursuant to a letter agreement
entered into in May 1997, Netscape consented to the assignment of this license
from Navio to us. As a result of our acquisition of Navio in August 1997,
Netscape's shares of Navio common stock converted into 3,812,675 shares of our
Series C preferred stock.
Pursuant to the letter agreement described in the preceding paragraph,
Netscape and Oracle also agreed that our products would be distributed pursuant
to an OEM license agreement between Netscape and Oracle. Pursuant to an
amendment to the letter agreement, we have the right to use approximately $1.0
million in prepaid royalties with Netscape. As of April 1999, we have used
approximately $5,000 of these royalties.
Pursuant to a letter agreement executed in December 1997 in connection with
the source code license agreement with Netscape we have also paid Netscape
approximately $200,000 for the purchase of rights and licenses. We amended this
letter agreement in April 1998.
We are co-sublessors of office space located in Sunnyvale, California with
Netscape. Netscape and Navio originally leased the space in November 1996.
Navio's rights and duties under the lease were assigned to us in connection with
our acquisition of Navio. Subsequently, the property was subleased to a third
party. The monthly lease payments are approximately $68,000 and we receive
approximately $72,000 from our subtenant each month. The lease and sublease
terminate in November 2001.
We entered into a trial license and support agreement with Netscape in July
1998, which terminated upon the execution of a technology license and support
agreement entered into in August 1998. We also entered into a source code access
agreement in August 1998, which also terminated upon the execution of the
technology license and support agreement. In addition, we entered into a
consulting services agreement in February 1999 with America Online, pursuant to
which America Online will license our products. We have received payments from
America Online aggregating approximately $6.3 million pursuant to this
agreement.
OTHER TRANSACTIONS
In May 1999, we sold 5,208,326 shares of our Series E preferred stock for
$50.0 million to several investors, including Comcast, Cox Communications and
MediaOne. In connection with this sale of stock, we entered into a voting
agreement with Comcast, Cox, MediaOne and Oracle. Pursuant to the voting
agreement, Comcast, Cox, MediaOne and Oracle agreed to vote their shares of our
common stock held by them to elect a representative designated by Oracle and a
single representative designated by Comcast, Cox and MediaOne to our board of
directors. In the voting agreement, we also agreed to create a three member
advisory board to our board of directors consisting of one representative of
each of Comcast, Cox and MediaOne. The voting agreement will terminate on the
earlier of:
- A change in control of us;
- Three years following the date of this prospectus; or
- The date on which Comcast, Cox and MediaOne own less than 50% of the
common stock issuable upon conversion of the Series E preferred stock
originally sold to each of them.
In connection with the sale of our Series E preferred stock described above,
we entered into letter agreements with Comcast, Cox and MediaOne. The letter
agreements provide that we and each of these network operators will use
commercially reasonable efforts to execute definitive license agreements within
120 days of these letter agreements. The letter agreements further provide that
these network operators will have the right to test our software free of charge
and without any commitment to deploy services using our technology for an
evaluation period. In addition, the letter agreements provide that, if certain
commercial milestones are satisfied, we will issue each of these network
60
<PAGE>
operators warrants to purchase up to 466,666 shares of our common stock. In
addition, pursuant to these letter agreements, these network operators are
entitled to "most favored nation" terms and conditions in the event we enter
into an agreement with any other North American network operator providing more
favorable terms.
TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS
We entered into an employment agreement, dated October 12, 1998, with
Mitchell E. Kertzman, our President and Chief Executive Officer. Mr. Kertzman's
annual salary is $300,000 and he is eligible for an annual bonus of up to
$200,000. His bonus for the first year of employment is guaranteed to be
$200,000. We granted him an option to purchase 1,666,666 shares of our common
stock. Upon his completion of 12 months of service, 25% of the option shares
will vest, and the balance of the option shares will vest in a series of equal
monthly installments upon his completion of each of the next 36 months. If we
experience a change in control, 50% of any unvested option shares will become
vested.
We entered into a settlement agreement, dated March 16, 1998, with Jerry W.
Baker, our former Chief Executive Officer. Under this agreement, we paid Mr.
Baker a severance amount of $180,000, which represented six months of his base
salary. In consideration for the severance payment, Mr. Baker agreed to release
all claims against us.
In October 1997, we entered into an employment agreement, as amended in
February 1998, with Wei Yen, our former President. The amendment provided for
the resignation of Dr. Yen from Liberate. Pursuant to the agreement, we agreed
to terminate our right of repurchase as to his shares of Series C preferred
stock. In addition, Dr. Yen received a severance payment of $820,000, payable in
24 equal monthly installments, beginning on February 27, 1998, and the
forgiveness of indebtedness amounting to $576,000. In consideration for the
severance payment and the loan forgiveness, Dr. Yen agreed to release all claims
that he may have against us.
We have granted options to our executive officers and directors. See
"Management--Option Grants in Last Fiscal Year" and "Principal Stockholders."
We have entered into an Indemnification Agreement with each of our executive
officers and directors described in the "Management" section.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information, as of April 30, 1999, with
respect to shares beneficially owned by (1) each person who we know to be the
beneficial owner of more than five percent of our outstanding shares of common
stock; (2) each of the Named Executive Officers; (3) each of our directors; and
(4) all current directors and executive officers as a group. Beneficial
ownership has been determined in accordance with Rule 13d-3 under the Exchange
Act. Under this rule, certain shares may be deemed to be beneficially owned by
more than one person, if, for example, persons share the power to vote or the
power to dispose of the shares. In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire shares,
for example, upon exercise of an option or warrant, within sixty (60) days of
the date as of which the information is provided; in computing the percentage
ownership of any person, the amount of shares is deemed to include the amount of
shares beneficially owned by such person, and only such person, by reason of
such acquisition rights. As a result, the percentage of outstanding shares of
any person as shown in the following table does not necessarily reflect the
person's actual voting power at any particular date. The percentage of
beneficial ownership for the following table is based on 33,475,333 shares of
common stock outstanding as of April 30, 1999 after giving effect to the sale of
5,208,326 shares of Series E preferred stock in May 1999 and assuming conversion
of all outstanding preferred stock into common stock in connection with this
offering, and shares of common stock outstanding after the
completion of this offering. Unless otherwise indicated, the address for each
listed stockholder is: c/o Liberate Technologies, 1000 Bridge Parkway, Redwood
Shores, California, 94065. To our knowledge, except as indicated in the
footnotes to this table and pursuant to applicable community property laws, the
persons named in the table have sole voting and investment power with respect to
the shares of common stock indicated.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED
------------------------
NUMBER OF BEFORE AFTER
NAME AND ADDRESS SHARES OFFERING OFFERING
- -------------------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Oracle Corporation(1)........................................................... 19,851,249 59.24%
Lawrence J. Ellison
Jeffrey O. Henley
500 Oracle Parkway
Redwood Shores, California 94065
James L. Barksdale(2)........................................................... 3,817,833 11.40%
Netscape Communications Corporation............................................. 3,812,675 11.39%
501 E. Middlefield Road
Mountain View, California 94043
David J. Roux(3)................................................................ 277,777 *
Steven Weinstein(4)............................................................. 109,265 *
David A. Limp(5)................................................................ 85,347 *
Nancy J. Hilker(6).............................................................. 71,116 *
Philip A. Vachon(7)............................................................. 25,520 *
Charles G. Tritschler(8)........................................................ 17,474 *
Charles Corfield(9)............................................................. 5,208 *
Mitchell E. Kertzman(10)........................................................ -- *
Gordon T. Yamate(11)............................................................ -- *
All executive officers and directors as a group (12 persons).................... 24,260,839 71.72%
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
our common stock.
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(1) Includes 32,646 shares that Oracle has the right to acquire pursuant to the
put/call and voting agreement. Mr. Ellison, one of our directors, is the
chief executive officer and chairman of the board of directors of Oracle.
Mr. Henley, one of our directors, is an executive officer and a director of
Oracle. Messrs. Ellison and Henley disclaim beneficial ownership of Oracle's
shares.
(2) Represents 5,208 shares issuable upon the exercise of stock options held by
Mr. Barksdale exercisable within 60 days of April 30, 1999 and 3,812,675
shares held of record by Netscape. In March 1999, Netscape became a
wholly-owned subsidiary of America Online, one of our customers. In
connection with the merger, Mr. Barksdale was elected to the board of
directors of America Online. Mr. Barksdale disclaims beneficial ownership of
the 3,812,675 shares held of record by Netscape.
(3) Includes 52,083 shares issuable upon the exercise of stock options
exercisable within 60 days of April 30, 1999.
(4) Consists of shares issuable upon the exercise of stock options exercisable
within 60 days of April 30, 1999.
(5) Includes 43,681 shares issuable upon exercise of stock options exercisable
within 60 days of April 30, 1999.
(6) Consists of shares issuable upon exercise of stock options exercisable
within 60 days of April 30, 1999.
(7) Includes 16,145 shares issuable upon the exercise of stock options
exercisable within 60 days of April 30, 1999. Mr. Vachon has transferred
9,375 shares to certain of his immediate family and other relatives and
disclaims beneficial ownership of such shares.
(8) Consists of shares issuable upon exercise of stock options exercisable
within 60 days of April 30, 1999.
(9) Consists of shares issuable upon exercise of stock options exercisable
within 60 days of April 30, 1999.
(10) On November 16, 1998, Mr. Kertzman was granted an option to purchase
1,666,666 shares. This option is not yet exercisable.
(11) On April 2, 1999, Mr. Yamate was granted an option to purchase 62,500
shares. This option is not yet exercisable.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
On the closing of this offering, our authorized capital stock will consist
of 200,000,000 shares of common stock, $0.01 par value, and 20,000,000 shares of
preferred stock, $0.01 par value. The following description is intended to be a
summary and does not describe all provisions of our certificate of incorporation
or bylaws or Delaware law applicable to Liberate. For a more thorough
understanding of the terms of our capital stock, you should refer to our
certificate of incorporation and bylaws, which are included as exhibits to the
registration statement of which this prospectus is part.
COMMON STOCK
As of April 30, 1999, there were 33,475,333 shares of common stock
outstanding that were held of record by approximately 103 stockholders. As of
April 30, 1999 there are 3,063,549 shares of common stock subject to outstanding
options, 344,772 of which are currently exercisable. There will be shares
of common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and assuming no exercise after April 30, 1999, of
outstanding options or warrants, after giving effect to the sale of the shares
of common stock to the public offered hereby and the conversion of our preferred
stock into common stock on a one-for-one basis. The holders of common stock are
entitled to one vote per share on all matters to be voted on by the
stockholders. Subject to preferences that may be applicable to any outstanding
preferred stock, the holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the board of
directors out of funds legally available therefor. In the event of the
liquidation, dissolution, or winding up of Liberate, the holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of preferred stock, if any,
then outstanding. The common stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are fully
paid and nonassessable, and the shares of common stock to be issued on
completion of this offering will be fully paid and nonassessable. See "Dividend
Policy."
PREFERRED STOCK
On the closing of this offering, 20,000,000 shares of preferred stock will
be authorized and no shares will be outstanding. The board of directors has the
authority to issue the 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 Liberate without
further action by the stockholders and may adversely affect the voting and other
rights of the holders of common stock. The issuance of preferred stock with
voting and conversion rights may adversely affect the voting power of the
holders of common stock, including the loss of voting control to others. We
currently do not plan to issue any of the preferred stock.
REGISTRATION RIGHTS
After this offering, the holders of approximately 32,903,883 shares of
common stock and rights to acquire common stock will be entitled to certain
rights with respect to the registration of such shares under the Securities Act.
Under the terms of the agreement between us and the holders of such registrable
securities, if we propose to register any of our securities under the Securities
Act, either for our own account or for the account of other security holders
exercising registration rights, such holders are entitled to notice of such
registration and are entitled to include shares of such common stock therein.
Additionally, if we are meeting certain revenue and income milestones, such
holders are also entitled to demand registration rights, pursuant to which they
may require us on one occasion to file a registration statement under the
Securities Act at our expense with respect to their shares of common stock, and
we are required to use all reasonable efforts to effect such registration. In
addition, if the holders of at least 40% our Series E preferred stock so
request, they will have two rights to demand registration, provided that such
offering is for an aggregate offering of at least $20 million. Further, holders
may require us to file an unlimited number of additional registration statements
on Form S-3
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at our expense. All of these registration rights terminate after five (5) years
following the consummation of our initial public offering and are subject to
certain conditions and limitations, among them the right of the underwriters of
an offering to limit the number of shares included in such registration and our
right not to effect a requested registration within 180 days following an
offering of our securities, including this offering.
WARRANTS
In April and May 1999, we entered into letter agreements with several
network operators that require us to issue warrants to purchase up to an
aggregate of approximately 2,300,000 shares of our common stock if the network
operators satisfy commercial milestones. Warrants to purchase up to 341,665
shares of our common stock, if issued, will have an exercise price of $9.60 per
share, warrants to purchase up to 1,608,332 shares of our common stock, if
issued, will have an exercise price of $13.80 per share and warrants to purchase
up to 350,000 shares of our common stock, if issued, will have an exercise price
of either $9.60 or $13.80 per share, depending on whether commitments are made
to us by the warrant holders. The warrants, if issued, will terminate on various
dates, between May 31, 2000, for the earliest warrants, and a date five years
from the vesting date of the warrants for the latest warrants, which vesting
date is contingent upon different prepayment or deployment milestones.
CONVERTIBLE PROMISSORY NOTE
In November 1997, we entered into a cooperation agreement and a convertible
promissory note purchase agreement with Middlefield Ventures, an affiliate of
Intel. Pursuant to this agreement, we issued a promissory note to Middlefield in
the amount of $4.0 million in November 1997. The note bears interest at 5% per
year. Interest is due, together with principal, in November 2002, unless the
note is previously converted. This note will automatically convert into 421,941
shares of our common stock if we receive proceeds in excess of $20.0 million in
this offering. If we meet specific development milestones in connection with the
cooperation agreement, Middlefield will fund two additional notes under the
agreement, each with principal of $4.0 million.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate of incorporation
provides that, effective upon the closing of this offering, all stockholder
actions must be effected at a duly called meeting and not by a consent in
writing. The bylaws provide that our stockholders may call a special meeting of
stockholders only upon a request of stockholders owning at least 50% of our
capital stock. These provisions of the certificate of incorporation and bylaws
could discourage potential acquisition proposals and could delay or prevent a
change in control of Liberate. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the board of
directors and in the policies formulated by the board of directors and to
discourage certain types of transactions that may involve an actual or
threatened change of control of Liberate. These provisions are designed to
reduce the vulnerability of Liberate to an unsolicited acquisition proposal. The
provisions also are intended to discourage certain tactics that may be used in
proxy fights. However, these provisions could have the effect of discouraging
others from making tender offers for our shares and, as a consequence, they also
may inhibit fluctuations in the market price of our shares that could result
from actual or rumored takeover attempts. These provisions also may have the
effect of preventing changes in our management. See "Risk Factors--We Have
Various Mechanisms In Place To Discourage Takeover Attempts."
DELAWARE TAKEOVER STATUTE. We are subject to Section 203 of the Delaware
General Corporation Law, which regulates corporate acquisitions. Section 203
prevents Delaware corporations whose securities are listed on the Nasdaq
National Market from engaging in a "business combination" with any "interested
stockholder" for three years following the date that such stockholder became an
"interested stockholder." For purposes of Section 203, a "business combination"
includes a merger or consolidation involving Liberate and the interested
stockholder and the sale of 10% or more of Liberate's assets. In general,
Section 203 defines an "interested stockholder" as any entity or person
beneficially owning 15% or more of the outstanding voting stock of Liberate and
any entity or person
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affiliated with or controlling or controlled by such entity or person. A
Delaware corporation may "opt out" of Section 203 with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or bylaws resulting from amendments approved by the
holders of at least a majority of the corporation's outstanding voting shares.
We have not "opted out" of the provisions of Section 203.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is , and
its telephone number is .
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and
we cannot assure you that a significant public market for our common stock will
develop or be sustained after this offering. Future sales of substantial amounts
of common stock, including shares issued upon exercise of outstanding options
and warrants, in the public market following this offering could adversely
affect market prices prevailing from time to time and could impair our ability
to raise capital through sale of our equity securities. As described below, no
shares currently outstanding will be available for sale immediately after this
offering because of certain contractual restrictions on resale. Sales of
substantial amounts of our common stock in the public market after the
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding
shares of common stock based upon shares outstanding as of April 20, 1999,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options or warrants prior to completion of this offering. Of
these shares, the shares sold in this offering will be freely
tradable without restriction under the Securities Act except for any shares
purchased by our "affiliates" as that term is defined in Rule 144 under the
Securities Act. The remaining shares of common stock held by existing
stockholders are restricted shares as that term is defined in Rule 144. All such
restricted shares are subject to lock-up agreements providing that, with certain
limited exceptions, the stockholder will not offer, sell, contract to sell or
otherwise dispose of any common stock or any securities that are convertible
into common stock for a period of 180 days after the date of this prospectus
without the prior written consent of Credit Suisse First Boston Corporation. As
a result of these lock-up agreements notwithstanding possible earlier
eligibility for sale under the provisions of Rule 144, 144(k) and 701,
of these shares will be resellable until 181 days after the date of
this prospectus. Beginning 181 days after the date of this prospectus,
approximately restricted shares will be eligible for sale in the
public market, all of which are subject to volume limitations under Rule 144,
except shares eligible for sale under Rule 144(k), Rule 701 or otherwise. On
April 19, 2000, approximately restricted shares will be eligible for
sale in the public market, all of which will be subject to volume limitations
under Rule 144. In addition, as of April 20, 1999, there were outstanding
options and warrants to purchase preferred stock convertible into
shares of common stock, some of which will be exercised prior to
this offering. All such options and warrants are subject to lock-up agreements.
Credit Suisse First Boston Corporation may, in their sole discretion and at any
time without notice, release all of any portion of the securities subject to
lock-up agreements, however any release shall apply pro-rata to all stockholders
subject to the lock-up agreements.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned restricted
shares for at least one year including the holding period of any prior owner
except an affiliate would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding which will
equal approximately shares immediately after this offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
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 us at any time during the three months preceding a sale, and who
has beneficially owned the shares proposed to be sold for a least two years
including the holding period of any prior owner except an affiliate, is entitled
to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
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Rule 701, as currently in effect, permits resales of shares in reliance upon
Rule 144 but without compliance with certain restrictions, including the holding
period requirement, of Rule 144. Any employee, officer or director of or
consultant to us who purchased shares under 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 nonaffiliates 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. All holders of Rule 701 shares are required to
wait until 90 days after the date of this prospectus before selling such shares.
However, all Rule 701 shares are subject to lock-up agreements and will only
become eligible for sale at the earlier of the expiration of the 180-day lock-up
agreements. Credit Suisse First Boston may, in their sole discretion and at any
time without notice, release all or any portion of the securities subject to
lock-up agreements.
Within 90 days following the effectiveness of this offering, we will file a
Registration Statement on Form S-8 registering shares of common
stock subject to outstanding options or reserved for future issuance under our
stock plans. As of April 20, 1999, options to purchase a total of
shares were outstanding and shares were reserved for future issuance
under our stock plans. Common stock issued upon exercise of outstanding vested
options or issued under our purchase plan, other than common stock issued to our
affiliates, is available for immediate resale in the open market.
Also beginning six months after the date of this offering, holders of
restricted shares and holders of warrants to purchase preferred
stock convertible into shares of common stock will be entitled to
certain registration rights for sale in the public market. See "Description of
Capital Stock--Registration Rights." Registration of such shares under the
Securities Act would result in such shares becoming freely tradable without
restriction under the Securities Act, except for shares purchased by affiliates,
immediately upon the effectiveness of such registration.
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UNDERWRITING
Under the terms and subject to the conditions contained in the underwriting
agreement dated , 1999, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Hambrecht & Quist
LLC and Charles Schwab & Co., Inc. are acting as representatives, the following
respective number of shares of common stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------------------------- ----------
<S> <C>
Credit Suisse First Boston Corporation...............................................................
Hambrecht & Quist LLC................................................................................
Charles Schwab & Co., Inc............................................................................
----------
Total............................................................................................
----------
----------
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares from us at the initial public offering
price less the underwriting discounts and commissions. This option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares to the public initially at the
public offering price on the cover page of this prospectus and to selling group
members at that price less a concession of $ per share. The underwriters
and selling group members may allow a discount of $ per share on sales to
other broker/dealers. After the initial public offering, the public offering
price and concession and discount to dealers may be changed by the
representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------------------ ------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and commissions paid by
us.............................................. $ $ $ $
Expenses payable by us............................ $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We, our officers and directors and our stockholders have agreed that we and
they will not offer, sell, contract to sell, announce our intention to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the
Securities and Exchange Commission a registration statement under the Securities
Act relating to, any additional shares of our common stock or securities
convertible into or exchangeable or exercisable for any of our common stock
without the prior consent of Credit Suisse First Boston Corporation for a period
of 180 days after the date of this prospectus, except in our case issuances
pursuant to the exercise of employee stock options outstanding on the date.
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The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and
certain other persons associated with us who have expressed an interest in
purchasing common stock in the offering. The number of shares available for sale
to the general public in the offering will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the other
shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.
We have made application to list our shares of common stock on The Nasdaq
Stock Market's National Market under the symbol "LBRT."
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters. The principal factors to be considered in
determining the public offering price include: the information set forth in this
prospectus and otherwise available to the underwriters; the history and the
prospects for the industry in which we will compete; the ability of our
management; the prospects for our future earnings; the present state of our
development and our current financial condition; the general condition of the
securities markets at the time of this offering; and the recent market prices
of, and the demand for, publicly traded common stock of generally comparable
companies.
The representatives on behalf of the underwriters may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of such transactions. These transactions may be effected on The
Nasdaq Stock Market's National Market or otherwise and, if commenced, may be
discontinued at any time.
Individuals and entities affiliated with Hambrecht & Quist LLC also
purchased an aggregate of 21,872 shares of our Series E preferred stock for a
total purchase price of approximately $210,000, or $9.60 per share. In addition,
a venture capital fund managed by an entity affiliated with Hambrecht & Quist
LLC purchased an aggregate of 82,291 shares of our Series E preferred stock for
a total purchase price of approximately $790,000, or $9.60 per share.
70
<PAGE>
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (1) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under these securities laws, (2) where
required by law, that the purchaser is purchasing as principal and not as agent,
and (3) the purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein, may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada upon
the issuer or such persons. All or a substantial portion of the assets of the
issuer and these persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or these persons in
Canada or to enforce a judgment obtained in Canadian courts against such issuer
or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the SECURITIES ACT (British Columbia)
applies is advised that a purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
71
<PAGE>
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for us by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP, Menlo Park, California. Various legal matters in connection with this
offering will be passed upon for the underwriters by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, California.
EXPERTS
The audited consolidated financial statements and schedule of Liberate
Technologies, Inc. (formerly known as Network Computer, Inc.) and subsidiaries
included in this prospectus and elsewhere in the registration statement to the
extent and for the periods indicated in their reports have been audited by
Arthur Andersen LLP, independent public accountants, and are included herein as
indicated in their reports with respect thereto, in reliance upon the authority
of said firm as experts giving said reports. Reference is made to said reports,
which includes an explanatory paragraph with respect to the change in accounting
for its acquisition of Navio Communications, Inc. as discussed in Note 3 to the
financial statements.
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1996, and for the period from inception (February 12,
1996) to December 31, 1996, as set forth in their report (which contains an
explanatory paragraph describing conditions that raise substantial doubt about
the Company's ability to continue as a going concern as described in Note 1 to
the financial statements). We've included our financial statements in the
prospectus and elsewhere in the registration statement in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, a registration statement on Form S-1 (which term shall include any
amendments thereto) 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 or the exhibits and schedules to the registration statement. For
further information with respect to us and such common stock offered hereby,
reference is made to the registration statement and the exhibits and schedules
filed as a part of the registration statement. Statements contained in this
prospectus concerning the contents of any contract or any other document
referred to are not necessarily complete; reference is made in each instance to
the copy of such contract or document filed as an exhibit to the registration
statement. Each such statement is qualified in all respects by such reference to
such exhibit. The registration statement, including exhibits and schedules
thereto, may be inspected without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, NY 10048, and at the Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of all or any
part thereof may be obtained from such office after payment of fees prescribed
by the Commission. These reports and other information may also be without
charge at a Web site maintained by the Commission. The address of the site is
http://www.sec.gov.
72
<PAGE>
LIBERATE TECHNOLOGIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS OF LIBERATE TECHNOLOGIES AS OF MAY 31, 1997, MAY
31, 1998 AND FEBRUARY 28, 1999
Report of Independent Public Accountants..................................... F-2
Consolidated Balance Sheets.................................................. F-3
Consolidated Statements of Operations and Comprehensive Loss................. F-4
Consolidated Statements of Stockholders' Equity (Deficit).................... F-5
Consolidated Statements of Cash Flows........................................ F-6
Notes to Consolidated Financial Statements................................... F-7
AUDITED FINANCIAL STATEMENTS OF NAVIO COMMUNICATIONS, INC. AS OF DECEMBER 31,
1996
Report of Independent Auditors............................................... F-28
Balance Sheets............................................................... F-29
Statement of Operations...................................................... F-30
Statement of Shareholders' Equity............................................ F-31
Statement of Cash Flows...................................................... F-32
Notes to Financial Statements................................................ F-33
UNAUDITED INTERIM FINANCIAL STATEMENTS OF NAVIO COMMUNICATIONS, INC. AS OF
JUNE 30, 1997................................................................ F-43
UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF LIBERATE
TECHNOLOGIES AND NAVIO COMMUNICATIONS, INC................................... F-48
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Liberate Technologies:
We have audited the accompanying consolidated balance sheets of Liberate
Technologies (a Delaware corporation, formerly known as Network Computer, Inc.)
and subsidiaries as of May 31, 1997 and 1998 and February 28, 1999, and the
related consolidated statements of operations and comprehensive loss,
stockholders' equity (deficit) and cash flows for the period from inception
(December 1, 1995) to May 31, 1996, for the years ended May 31, 1997 and 1998,
and for the nine months ended February 28, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Liberate Technologies and
subsidiaries as of May 31, 1997 and 1998 and February 28, 1999, and the results
of their operations and their cash flows for the period from inception (December
1, 1995) to May 31, 1996, for the years ended May 31, 1997 and 1998, and for the
nine months ended February 28, 1999 in conformity with generally accepted
accounting principles.
As explained in Note 3 to the consolidated financial statements, the Company
has given retroactive effect to the change in accounting for its acquisition of
Navio Communications, Inc.
/s/ ARTHUR ANDERSEN LLP
San Jose, California
April 8, 1999
F-2
<PAGE>
LIBERATE TECHNOLOGIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
MAY 31, LIABILITIES AND
---------------------- FEBRUARY 28, STOCKHOLDERS'
1997 1998 1999 DEFICIT AT
--------- ---------- ------------ FEBRUARY 28,
1999 (NOTE 7)
---------------
(UNAUDITED)
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents....................... $ 245 $ 12,138 $ 5,517
Accounts receivable, net of allowance for
doubtful accounts of $1 in 1997, $278 in 1998
and $267 in 1999.............................. 254 820 1,076
Prepaid expenses and other current assets....... 18 1,600 1,631
--------- ---------- ------------
Total current assets.......................... 517 14,558 8,224
PROPERTY AND EQUIPMENT, net....................... 1,756 1,915 1,734
OTHER ASSETS:
Advanced royalties.............................. 1,910 570 444
Purchased intangibles, net...................... 254 13,691 9,128
Other........................................... 4 78 78
--------- ---------- ------------
Total assets.................................. $ 4,441 $ 30,812 $ 19,608
--------- ---------- ------------
--------- ---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable................................ $ 1,040 $ 1,455 $ 1,123
Accounts payable to affiliate................... 18,723 1,252 46
Accrued liabilities............................. 2,949 4,411 5,661
Accrued payroll and related expenses............ 940 1,795 1,965
Deferred revenues............................... 45 23,868 28,909
Note payable to affiliate....................... -- 52 5,052
--------- ---------- ------------
Total current liabilities..................... 23,697 32,833 42,756 $ 42,756
LONG-TERM DEBT.................................... -- 4,115 4,260 --
--------- ---------- ------------ ---------------
Total liabilities............................. 23,697 36,948 47,016 42,756
--------- ---------- ------------ ---------------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock, $0.01 par value,
aggregate liquidation preferences of $135,468
at February 28, 1999
Authorized--259,749,900 shares
Outstanding--14,166,650 shares, 26,998,800
shares and 27,336,823 shares at May 31,
1997, May 31, 1998 and February 28, 1999,
respectively; no shares outstanding pro
forma....................................... 142 270 273 --
Common stock, $0.01 par value
Authorized--407,500,000 shares
Outstanding--16 shares, 213,328 shares and
254,889 shares at May 31, 1997, May 31, 1998
and February 28, 1999, respectively;
28,013,653 shares outstanding pro forma..... -- 2 2 280
Contributed and paid-in-capital................. 2,874 110,262 113,960 117,955
Deferred stock compensation..................... -- -- (2,925) (2,925)
Stockholder notes receivable.................... -- (26) (160) (160)
Accumulated other comprehensive income (loss)... (4) 15 18 18
Accumulated deficit............................. (22,268) (116,659) (138,576) (138,316)
--------- ---------- ------------ ---------------
Total stockholders' deficit................... (19,256) (6,136) (27,408) (23,148)
--------- ---------- ------------ ---------------
Total liabilities and stockholders' deficit... $ 4,441 $ 30,812 $ 19,608 $ 19,608
--------- ---------- ------------ ---------------
--------- ---------- ------------ ---------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
LIBERATE TECHNOLOGIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS ENDED
INCEPTION
(DECEMBER 1, YEARS ENDED MAY 31, FEBRUARY 28,
1995) TO MAY ----------------------- -----------------------
31, 1996 1997 1998 1999
------------- ---------- ----------- 1998 ----------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
License and royalty.......................... $ -- $ 231 $ 4,162 $ 3,056 $ 4,062
Service...................................... -- 44 6,110 3,663 8,128
------------- ---------- ----------- ----------- ----------
Total revenues........................... -- 275 10,272 6,719 12,190
------------- ---------- ----------- ----------- ----------
COST OF REVENUES:
License and royalty.......................... -- -- 3,779 3,057 1,954
Service...................................... -- -- 2,230 1,545 4,698
------------- ---------- ----------- ----------- ----------
Total cost of revenues................... -- -- 6,009 4,602 6,652
------------- ---------- ----------- ----------- ----------
Gross margin............................. -- 275 4,263 2,117 5,538
------------- ---------- ----------- ----------- ----------
OPERATING EXPENSES:
Research and development..................... 5,479 21,721 19,981 15,649 12,889
Sales and marketing.......................... -- 7,805 14,407 10,944 8,076
General and administrative................... -- 1,023 2,453 1,843 2,560
Amortization of purchased intangibles........ -- -- 4,563 3,042 4,563
Restructuring charge......................... -- -- 1,175 1,175 --
Amortization of deferred stock
compensation............................... -- -- -- -- 393
Acquired in-process research and
development................................ -- -- 58,100 58,100 --
------------- ---------- ----------- ----------- ----------
Total operating expenses................. 5,479 30,549 100,679 90,753 28,481
------------- ---------- ----------- ----------- ----------
Loss from operations..................... (5,479) (30,274) (96,416) (88,636) (22,943)
INTEREST AND OTHER INCOME (EXPENSE), net..... -- (465) 10 23 139
------------- ---------- ----------- ----------- ----------
Loss before income tax benefit........... (5,479) (30,739) (96,406) (88,613) (22,804)
INCOME TAX BENEFIT........................... 2,200 11,750 2,015 1,787 887
------------- ---------- ----------- ----------- ----------
Net loss................................. (3,279) (18,989) (94,391) (86,826) (21,917)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT...... -- (4) 19 45 3
------------- ---------- ----------- ----------- ----------
Comprehensive loss....................... $ (3,279) $ (18,993) $ (94,372) $ (86,781) $ (21,914)
------------- ---------- ----------- ----------- ----------
------------- ---------- ----------- ----------- ----------
BASIC NET LOSS PER SHARE..................... $ -- $ -- $ (1,780.96) $ (4,341.30) $ (93.66)
------------- ---------- ----------- ----------- ----------
------------- ---------- ----------- ----------- ----------
SHARES USED IN COMPUTING BASIC NET LOSS PER
SHARE...................................... -- -- 53 20 234
------------- ---------- ----------- ----------- ----------
------------- ---------- ----------- ----------- ----------
PRO FORMA BASIC NET LOSS PER SHARE........... $ (4.07) $ (0.79)
----------- ----------
----------- ----------
SHARES USED IN COMPUTING PRO FORMA BASIC NET
LOSS PER SHARE............................. 23,209 27,710
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
LIBERATE TECHNOLOGIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED
STOCK COMMON STOCK CONTRIBUTED
------------------------ ---------------------- AND PAID-IN DEFERRED STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION
----------- ----------- --------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
INCEPTION, DECEMBER 1, 1995................... -- $ -- -- $ -- $ -- $ --
Issuance of common stock to affiliate upon
incorporation............................. -- -- 16 -- 1 --
Contribution of assets from affiliate....... -- -- -- -- 487 --
Forgiveness of payable to affiliate......... -- -- -- -- 5,066 --
Refund of contributed capital............... (2,200)
Net loss.................................... -- -- -- -- -- --
----------- ----------- --------- ----------- ------------ -------
BALANCE, MAY 31, 1996......................... -- -- 16 -- 3,354 --
Issuance of convertible preferred stock to
affiliate................................. 14,166,650 142 -- -- 11,270 --
Translation loss............................ -- -- -- -- -- --
Refund of contributed capital............... (11,750)
Net loss.................................... -- -- -- -- -- --
----------- ----------- --------- ----------- ------------ -------
BALANCE, MAY 31, 1997......................... 14,166,650 142 16 -- 2,874 --
Value of options assumed in acquisition..... -- -- -- -- 18,234 --
Issuance of convertible preferred stock..... 12,205,527 122 -- -- 81,613 --
Contribution of capital from affiliate...... -- -- -- -- 8,080 --
Stock options exercised..................... 626,646 6 213,312 2 598 --
Acceleration of option vesting.............. -- -- -- -- 365 --
Stockholder note repayment.................. -- -- -- -- -- --
Translation gain............................ -- -- -- -- -- --
Refund of contributed capital............... (1,502)
Net loss.................................... -- -- -- -- -- --
----------- ----------- --------- ----------- ------------ -------
BALANCE, MAY 31, 1998......................... 26,998,823 270 213,328 2 110,262 --
Stock options exercised..................... 338,000 3 41,561 -- 380 --
Deferred stock compensation related to stock
options................................... -- -- -- -- 3,318 (3,318)
Amortization of deferred stock
compensation.............................. -- -- -- -- -- 393
Translation gain............................ -- -- -- -- -- --
Net loss.................................... -- -- -- -- -- --
----------- ----------- --------- ----------- ------------ -------
BALANCE, FEBRUARY 28, 1999.................... 27,336,823 $ 273 254,889 $ 2 $ 113,960 $ (2,925)
----------- ----------- --------- ----------- ------------ -------
----------- ----------- --------- ----------- ------------ -------
<CAPTION>
TOTAL
STOCKHOLDER ACCUMULATED OTHER STOCKHOLDERS'
NOTES COMPREHENSIVE ACCUMULATED EQUITY
RECEIVABLE INCOME (LOSS) DEFICIT (DEFICIT)
------------ ------------------- ------------- -------------
<S> <C> <C> <C> <C>
INCEPTION, DECEMBER 1, 1995................... $ -- $ -- $ -- $ --
Issuance of common stock to affiliate upon
incorporation............................. -- -- -- 1
Contribution of assets from affiliate....... -- -- -- 487
Forgiveness of payable to affiliate......... -- -- -- 5,066
Refund of contributed capital............... (2,200)
Net loss.................................... -- -- (3,279) (3,279)
------------ ---------- ------------- -------------
BALANCE, MAY 31, 1996......................... -- -- (3,279) 75
Issuance of convertible preferred stock to
affiliate................................. -- -- -- 11,412
Translation loss............................ -- (4) -- (4)
Refund of contributed capital............... (11,750)
Net loss.................................... -- -- (18,989) (18,989)
------------ ---------- ------------- -------------
BALANCE, MAY 31, 1997......................... -- (4) (22,268) (19,256)
Value of options assumed in acquisition..... -- -- -- 18,234
Issuance of convertible preferred stock..... (34) -- -- 81,701
Contribution of capital from affiliate...... -- -- -- 8,080
Stock options exercised..................... (2) -- -- 604
Acceleration of option vesting.............. -- -- -- 365
Stockholder note repayment.................. 10 -- -- 10
Translation gain............................ -- 19 -- 19
Refund of contributed capital............... (1,502)
Net loss.................................... -- -- (94,391) (94,391)
------------ ---------- ------------- -------------
BALANCE, MAY 31, 1998......................... (26) 15 (116,659) (6,136)
Stock options exercised..................... (134) -- -- 249
Deferred stock compensation related to stock
options................................... -- -- -- --
Amortization of deferred stock
compensation.............................. -- 393
Translation gain............................ -- 3 -- 3
Net loss.................................... -- -- (21,917) (21,917)
------------ ---------- ------------- -------------
BALANCE, FEBRUARY 28, 1999.................... $ (160) $ 18 $ (138,576) $ (27,408)
------------ ---------- ------------- -------------
------------ ---------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
LIBERATE TECHNOLOGIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(DECEMBER YEARS ENDED MAY 31, NINE MONTHS ENDED FEBRUARY 28,
1, 1995) TO
MAY 31, --------------------------- -------------------------------
1996 1997 1998 1998 1999
----------- ------------ ------------ -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................... $ (3,279) $ (18,989) $ (94,391) $ (86,826) $ (21,917)
Adjustments to reconcile net loss to net
cash used in operating activities:
Write-off of acquired in-process
research and development............. -- -- 58,100 58,100 --
Depreciation and amortization.......... -- 470 6,070 4,005 5,525
Loss on disposal of fixed assets....... -- -- 71 71 --
Non-cash compensation expense.......... -- -- 365 365 393
Non-cash tax benefit................... (2,200) (11,750) (1,502) (1,502) --
Changes in operating assets and
liabilities, net of acquisition:
(Increase) decrease in accounts
receivable....................... -- (254) 338 399 (256)
Increase in prepaid expenses and
other current assets............. -- (18) (957) (581) (31)
(Increase) decrease in other
assets........................... -- (2,168) 1,601 1,274 126
Increase (decrease) in accounts
payable.......................... -- 1,040 141 17 (332)
Increase (decrease) in accounts
payable to affiliate............. -- 18,723 5,529 5,475 (1,206)
Increase in accrued liabilities.... 335 2,591 961 1,018 1,250
Increase in accrued payroll and
related expenses................. 77 886 586 516 170
Increase in deferred revenues...... -- 45 20,786 9,957 5,041
Increase in interest payable....... -- -- 115 65 145
----------- ------------ ------------ -------------- --------------
Net cash used in operating
activities..................... (5,067) (9,424) (2,187) (7,647) (11,092)
----------- ------------ ------------ -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........ -- (1,739) (923) (699) (781)
Proceeds from sale of fixed assets......... -- -- 170 170 --
Cash acquired in Navio acquisition......... -- -- 1,970 1,970 --
----------- ------------ ------------ -------------- --------------
Net cash provided by (used in)
investing activities........... -- (1,739) 1,217 1,441 (781)
----------- ------------ ------------ -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issued, net..... 1 -- 161 43 48
Proceeds from convertible preferred stock
issued................................... -- 11,000 603 303 201
Contribution of capital.................... -- 412 8,080 8,080 --
Forgiveness of payable to affiliate........ 5,066 -- -- -- --
Proceeds from notes payable................ -- -- 4,000 4,000 5,000
----------- ------------ ------------ -------------- --------------
Net cash provided by financing
activities..................... 5,067 11,412 12,844 12,426 5,249
----------- ------------ ------------ -------------- --------------
EFFECT OF EXCHANGE RATES ON CASH............. -- )(4 19 45 3
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................ -- 245 11,893 6,265 (6,621)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD..................................... -- -- 245 245 12,138
----------- ------------ ------------ -------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD..... $ -- $ 245 $ 12,138 $ 6,510 $ 5,517
----------- ------------ ------------ -------------- --------------
----------- ------------ ------------ -------------- --------------
SUPPLEMENTAL NON-CASH ACTIVITIES:
Conversion of intercompany payable to
convertible preferred stock.............. $ -- $ -- $ 23,000 $ 23,000 $ --
----------- ------------ ------------ -------------- --------------
----------- ------------ ------------ -------------- --------------
Deferred stock compensation................ $ -- $ -- $ -- $ -- $ 3,318
----------- ------------ ------------ -------------- --------------
----------- ------------ ------------ -------------- --------------
Contribution of assets from affiliate...... $ 487 $ -- $ -- $ -- $ --
----------- ------------ ------------ -------------- --------------
----------- ------------ ------------ -------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
1. ORGANIZATION AND OPERATIONS OF THE COMPANY:
Liberate Technologies (the "Company"), formerly known as Network Computer,
Inc., was incorporated on April 24, 1996, for the purpose of developing,
manufacturing and marketing information appliance software for consumer,
corporate and educational marketplaces. In December 1995, the Company began
operations as a division of Oracle Corporation ("Oracle") developing technology
for use in the network computer. Expenses associated with the activity from
inception (December 1, 1995) through incorporation (April 24, 1996) have been
identified by the Company and included in the accompanying consolidated
financial statements. On February 28, 1999, Oracle owned 72% of the outstanding
shares of the Company and the Company was a consolidated entity of Oracle.
On August 11, 1997, the Company completed the acquisition of Navio
Communications, Inc. ("Navio"), a development stage entity which was in the
process of developing consumer Internet applications software (the
"acquisition"). The acquisition was recorded under the purchase method of
accounting and, therefore, the results of operations of Navio and the fair value
of the acquired assets and liabilities were included in the Company's
consolidated financial statements beginning on the acquisition date (see Note
3).
During fiscal 1998, the Company commenced shipment of its principal products
and emerged from the development stage. Although the Company is no longer in the
development stage, the Company continues to be subject to the risks and
challenges associated with companies in a comparable stage of development,
including: dependence on key individuals; key suppliers and customers;
competition from substitute products and from larger companies; successful
marketing of its products and acceptance of its technology; successful
development of product enhancements on a continuing basis; and the need for
adequate financing to support future growth.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All intercompany accounts and transactions have been
eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents. Cash equivalents consist principally of money market
accounts.
F-7
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk principally consist of accounts receivable. As of
May 31, 1997 and 1998, and for the nine months ended February 28, 1999
approximately 78%, 85% and 91% of accounts receivable were concentrated with
six, four and three customers, respectively. The Company performs ongoing credit
evaluations of its customers' financial condition, and the risk of loss with
respect to its accounts receivables is further mitigated by the fact that the
Company's customer base is comprised of well established companies. The Company
provides reserves for credit losses which, to date, have been insignificant.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets of three
to five years. Leasehold improvements are amortized over the shorter of the
remaining lease term or the estimated useful lives of the improvements using the
straight-line method.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's subsidiaries is the local currency.
Accordingly, all assets and liabilities are translated into U.S. dollars at the
current exchange rate as of the applicable balance sheet date. Revenues and
expenses are translated at the average exchange rate prevailing during the
period. Gains and losses resulting from the translation of the financial
statements are reported as a separate component of stockholders' equity.
Foreign currency transaction gains and losses are included in other income
(expense) and have not been material.
SOFTWARE DEVELOPMENT COSTS
Under the criteria set forth in Statement of Financial Accounting Standards
("SFAS") No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed," capitalization of software development costs
begins upon the establishment of technological feasibility of the product, which
the Company has defined as the completion of beta testing of a working product.
The establishment of technological feasibility and the ongoing assessment of the
recoverability of these costs require considerable judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future gross product revenues, estimated economic life and changes in software
and hardware technology. Amounts that could have been capitalized under this
statement after consideration of the above factors were immaterial and,
therefore, no software development costs have been capitalized by the Company to
date.
REVENUE RECOGNITION
Effective June 1, 1998, the Company adopted Statement of Position ("SOP")
97-2, "Software Revenue Recognition." SOP 97-2 provides guidance on applying
generally accepted accounting principles in recognizing revenue on software
transactions. The adoption of SOP 97-2 did not have a material impact on the
Company's financial position, results of operations or cash flows.
F-8
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
License revenues consist principally of up front license fees earned from
the licensing of the Company's software and royalty fees earned upon the
shipment of, or activation of products which incorporate, the Company's
software. Revenues from up front software license agreements are recognized when
delivery has occurred, collection of the receivable is probable, the fee is
fixed or determinable and vendor-specific objective evidence exists to allocate
the total fee to all delivered and undelivered elements of the arrangement.
Revenue is deferred in cases where the license arrangement calls for the future
delivery of products or services for which the Company does not have vendor-
specific objective evidence to allocate a portion of the total fee to the
undelivered element. In such cases, revenue is recognized when the undelivered
elements are delivered or vendor-specific objective evidence of the undelivered
elements becomes available. If license arrangements include the rights to
unspecified future products, revenue is recognized over the contractual or
estimated economic term of the arrangement. Royalty revenues are recognized when
reported to the Company after shipment of or activation of the related products.
Prepaid royalties are deferred and recognized when reported.
Service revenues consist of consulting services, training and maintenance,
which includes updates and technical support. Consulting service and training
revenues are recognized as services are performed. Maintenance revenue is
recognized ratably over the term of the agreement. In instances where software
license agreements include a combination of consulting services, training, and
maintenance, these separate elements are unbundled from the arrangement based on
the element's relative fair value.
The percentage of sales to significant customers is as follows:
<TABLE>
<CAPTION>
YEARS ENDED MAY 31, NINE MONTHS
-------------------------------- ENDED FEBRUARY
1997 1998 28, 1999
--------------- --------------- ---------------
<S> <C> <C> <C>
Customer A.......................................... * 16% 24%
Customer B.......................................... * 10% *
Customer C.......................................... 16% * *
</TABLE>
* Less than 10%
DEFERRED REVENUES
Deferred revenues consists principally of payments received from customers
for services, prepaid royalties and license fees for undelivered product.
COMPREHENSIVE INCOME
In fiscal 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 requires companies to report a new, additional measure of
income on the income statement or to create a new financial statement that shows
the new measure of income. Comprehensive income includes foreign currency
translation gains and losses and unrealized gains and losses on equity
securities that have been previously excluded from net income and reflected
instead in equity. The Company has reported the components of comprehensive
income on its statement of operations.
F-9
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
SEGMENT REPORTING
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 changes the way
companies report selected segment information in annual financial statements and
requires companies to report selected segment information in interim financial
reports to stockholders. SFAS 131 is effective for Liberate's year ending May
31, 1999. Liberate operates solely in one segment, the development,
manufacturing and sale of information appliance software for consumer, corporate
and educational marketplaces. As of May 31, 1997 and 1998 and February 28, 1999,
the Company's long-term assets are located primarily in the United States. The
Company's revenues by geographic area are as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED MAY 31, ENDED
----------------------------- FEBRUARY 28,
1997 1998 1999
--------------- ------------ ------------
<S> <C> <C> <C>
United States....................................... $ 62 $ 5,137 $ 5,841
Japan............................................... 17 3,280 2,920
England............................................. 10 682 1,762
Canada.............................................. 82 346 499
Other............................................... 104 827 1,168
----- ------------ ------------
Consolidated........................................ $ 275 $ 10,272 $ 12,190
----- ------------ ------------
----- ------------ ------------
</TABLE>
Export sales consist of sales to customers in foreign countries. During the
years ended May 31, 1997 and 1998 and the nine months ended February 28, 1999,
export sales were 77%, 50%, and 52% of total revenues, respectively.
UNAUDITED INTERIM FINANCIAL DATA
The unaudited interim financial statements for the nine months ended
February 28, 1998, have been prepared on the same basis as the audited financial
statements and, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the financial information set forth therein, in accordance with generally
accepted accounting principles.
COMPUTATION OF BASIC NET LOSS PER SHARE AND PRO FORMA BASIC NET LOSS PER SHARE
Historical net loss per share has been calculated under SFAS No. 128
"Earnings per Share." Basic net loss per share on a historical basis is computed
using the weighted average number of shares of common stock outstanding. No
diluted loss per share information has been presented in the accompanying
consolidated statements of operations since potential common shares from
conversion of preferred stock, stock options, and warrants are antidilutive.
Pro forma basic net loss per share has been calculated assuming the
conversion of preferred stock into an equivalent number of common shares, as if
the shares had converted on the dates of their
F-10
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
issuance. It also assumes the conversion of the outstanding convertible
long-term debt (see Note 11) into common stock, as if the debt had converted
upon its original issuance date.
REVERSE STOCK SPLIT
Subsequent to February 28, 1999, the Company's Board of Directors approved a
one-for-six reverse stock split of the Company's outstanding shares of common
and preferred stock. All share and per share information included in the
accompanying consolidated financial statements and notes have been adjusted
retroactively to reflect this reverse stock split.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
companies to value derivative financial instruments, including those used for
hedging foreign currency exposures, at current market value with the impact of
any change in market value being charged against earnings in each period. SFAS
No. 133 will be effective for and adopted by the Company in the first quarter of
the fiscal year ending May 31, 2001. The Company anticipates that SFAS No. 133
will not have a material impact on its consolidated financial statements.
RESTRUCTURING CHARGE
A restructuring charge of $1.2 million was recorded in the third quarter
ended February 28, 1998. This charge related principally to severance and other
related costs associated with a reduction in the Company's workforce. All
terminations and termination benefits were communicated to the affected
employees prior to period end and severance benefits are expected to be paid in
fiscal 1998 and 1999. At February 28, 1999, $277,000 was remaining in accrued
liabilities in the accompanying balance sheet.
RECLASSIFICATIONS
Certain amounts presented in prior years financial statements have been
reclassified to conform to the nine months period ended February 28, 1999.
3. ACQUISITION OF NAVIO COMMUNICATIONS, INC.:
Effective August 11, 1997, the Company acquired Navio. In connection with
the acquisition, the Company issued Series B and C convertible preferred stock
and stock options to acquire Series C convertible preferred stock in exchange
for all of the outstanding common stock, preferred stock and options to purchase
shares of Navio common stock. The acquisition was accounted for as a purchase
and, accordingly, the results of operations of Navio have been included in the
consolidated financial statements commencing on the date of acquisition. The
fair market value of the equity securities issued in the acquisition was
approximately $77.1 million.
In connection with the acquisition, the Company originally wrote off
approximately $75.6 million of acquired in-process research and development
(IPR&D) which, in the opinion of management, had not reached technological
feasibility and had no alternative future use. Subsequent to the Securities and
Exchange Commission's letter to the American Institute of Certified Public
Accountants, dated
F-11
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
3. ACQUISITION OF NAVIO COMMUNICATIONS, INC.: (CONTINUED)
September 9, 1998, regarding its views on IPR&D, the Company has revised the
purchase price allocations and restated its financial statements. As a result,
the Company has made adjustments to decrease the amounts previously expensed as
IPR&D in fiscal 1998 and increase purchased intangibles by a similar amount.
The effect of this adjustment on the previously reported May 31, 1998
consolidated financial statements is as follows (in thousands):
<TABLE>
<CAPTION>
AS REPORTED AS RESTATED
----------- -----------
<S> <C> <C>
Amortization of purchased intangibles.............................. $ 200 $ 4,563
Acquired in-process research and development....................... $ 75,554 $ 58,100
Loss before income tax benefit..................................... $ 109,772 $ 96,406
</TABLE>
The adjustment had no impact on the reported income tax benefit.
After the adjustment discussed above, the Company wrote off approximately
$58.1 million of acquired in-process research and development which, in the
opinion of management, had not reached technological feasibility and had no
alternative future use. Purchased intangibles of approximately $18.3 million
were recorded and are being amortized on a straight-line basis over a useful
life of three years. Accumulated amortization was approximately $4.6 million and
$9.1 million at May 31, 1998 and February 28, 1999, respectively.
The value assigned to acquired in-process research and development was
determined by identifying research projects in areas for which technological
feasibility has not been established. The value was determined by estimating the
costs to develop the acquired in-process technology into commercially viable
products, estimating the resulting net cash flows from such projects, and
discounting the net cash flows back to their present values. The discount rate
includes a factor that takes into account the uncertainty surrounding the
successful development of the acquired in-process technology. If these projects
are not successfully developed, future revenue and profitability of the Company
may be adversely affected. Additionally, the value of the other purchased
intangible assets may be impaired.
In connection with the acquisition, net assets acquired were as follows (in
thousands):
<TABLE>
<S> <C>
Purchased intangibles, including in-process technology............. $ 76,354
Property, plant and equipment and other noncurrent assets.......... 1,752
Cash, receivables and other current assets......................... 3,715
Current liabilities assumed........................................ (4,133)
---------
Net assets acquired.............................................. $ 77,688
---------
---------
</TABLE>
In connection with the acquisition, for up to 60 days after the closing
date, certain former common stockholders of Navio had the right to put to Oracle
up to 50% of the preferred shares they received, and shares issuable under stock
options assumed by the Company in the acquisition, for a price of $6.70 per
share. A total of 1,909,248 shares of Series C convertible preferred stock for
approximately $12.8 million in proceeds were put to Oracle under this
arrangement.
F-12
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
3. ACQUISITION OF NAVIO COMMUNICATIONS, INC.: (CONTINUED)
Additionally, there is a call option held by Oracle to purchase all of the
Series B and Series C convertible preferred stock at a to-be-determined buy-out
price. The buy-out price is determined as follows: (1) if exercised prior to
December 31, 1999, the price would be 120% of the per share price determined by
an independent third party valuation of the Company's shares, or (2) if
exercised after December 31, 1999, the per share price determined by an
independent third party valuation of the Company's shares. The option must be
exercised in whole for all shares of Series B and Series C preferred stock
subject to such call option.
The call option will terminate upon a change in control of the Company or
upon an initial public offering of at least $20.0 million.
The following table presents the unaudited pro forma results assuming that
the Company had merged with Navio at the beginning of fiscal year 1997. Net
income has been adjusted to exclude the write-off of acquired in-process
research and development of $58.1 million and includes amortization of purchased
intangibles of approximately $6.1 million for both of the years ended May 31,
1997 and 1998. This information may not necessarily be indicative of the future
combined results of operations of the Company.
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
--------------------------
1997 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues............................................ $ 1,090 $ 11,065
Net loss............................................ $ (35,300) $ (42,227)
Basic net loss per share............................ $ -- $ (796.38)
</TABLE>
4. PROPERTY AND EQUIPMENT:
At May 31, 1997 and 1998 and February 28, 1999, property and equipment
consisted of the following (in thousands):
<TABLE>
<CAPTION>
MAY 31,
--------------------------- FEBRUARY 28,
1997 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
Computer equipment.................................. $ 1,893 $ 2,881 $ 3,490
Software............................................ 303 561 701
Furniture and equipment............................. 30 209 241
Leasehold improvements.............................. -- 280 280
------ ------------ ------------
2,226 3,931 4,712
Less: Accumulated depreciation and amortization..... (470) (2,016) (2,978)
------ ------------ ------------
$ 1,756 $ 1,915 $ 1,734
------ ------------ ------------
------ ------------ ------------
</TABLE>
F-13
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
5. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company has various operating leases (including building, furniture and
equipment and maintenance agreements) that expire at various times through 2003.
Future minimum lease payments relating to these agreements as of February 28,
1999, are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------------------------------------------------------------
<S> <C>
1999 (3 months).................................................. $ 552
2000............................................................. 2,129
2001............................................................. 2,090
2002............................................................. 2,111
2003............................................................. 710
---------
$ 7,592
---------
---------
</TABLE>
Rent expense under the Company's operating leases for the period from
inception to May 31, 1996 and for the years ended May 31, 1997 and 1998 were
approximately $105,000, $582,000 and $2,010,000, respectively. Rent expense for
the nine month periods ended February 28, 1998 and 1999 was approximately
$1,396,000 and $1,541,000, respectively. The above future minimum lease payments
include a commitment of approximately $72,000 per month expiring on November 30,
2001, which has been sub-leased at an amount greater than the monthly commitment
and is offset against rent expenses in the consolidated statements of
operations.
LEGAL MATTERS
The Company is a defendant in various legal matters arising in the normal
course of business. In the opinion of management, after consultation with legal
counsel, the ultimate resolution of these matters is not expected to have a
material effect on these consolidated financial statements.
6. CONVERTIBLE PREFERRED STOCK:
On October 1, 1996, the Company issued 14,166,650 shares of Series A
convertible preferred stock to Oracle in exchange for a cash payment of $10.0
million, a contribution of tangible assets and certain intangible assets
including intellectual property rights and contractual relationships with
suppliers, customers and contractors. The issuance of these shares was recorded
at the carryover basis of the contributed assets plus the cash received.
In connection with the acquisition (see Note 3), the Company issued Series B
and C convertible preferred stock and authorized the issuance of Series A-1 and
C-1 convertible preferred stock. In addition, on November 12, 1997, the Company
obtained financing from a third party investor of $4 million. The financing was
obtained through issuance of convertible notes which are convertible, at the
option of the holder, into Series D preferred stock at $9.48 per share (see Note
11). The Company
F-14
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
6. CONVERTIBLE PREFERRED STOCK: (CONTINUED)
has authorized the total number of shares of each series of convertible
preferred stock with rights, preferences and restrictions described below:
DESIGNATED AND OUTSTANDING SHARES OF CONVERTIBLE PREFERRED STOCK
<TABLE>
<CAPTION>
OUTSTANDING AT
DESIGNATED FEBRUARY 28, 1999
------------------- -------------------
<S> <C> <C>
Series A Preferred Stock........................... 84,999,900 shares 14,166,650 shares
Series A-1 Preferred Stock......................... 25,500,000 shares 3,484,847 shares
Series B Preferred Stock........................... 14,000,000 shares 2,320,758 shares
Series C Preferred Stock........................... 42,500,000 shares 5,535,402 shares
Series C-1 Preferred Stock......................... 53,500,000 shares 1,829,166 shares
Series D Preferred Stock........................... 8,000,000 shares zero shares
Series E Preferred Stock........................... 31,250,000 shares zero shares
</TABLE>
RIGHTS, PREFERENCES AND RESTRICTIONS OF CONVERTIBLE PREFERRED STOCK
(a) Series A, A-1, B, C, C-1, D and E convertible preferred stock have a
liquidation preference of $6.00, $6.60, $6.60, $1.65, $1.65, $9.48 and
$9.60 per share, respectively. Additionally, Series A, A-1, B, D and E
convertible preferred stock are senior in liquidation to Series C and C-1
convertible preferred stock and common stock. Series C and C-1
convertible preferred stock are senior in liquidation to common stock.
(b) Each holder of Series A, A-1, B, D and E convertible preferred stock is
entitled to receive non-cumulative dividends at the rate of $0.60, $0.66,
$0.66, $0.948 and $0.96 per share, respectively, per annum, payable
quarterly, when and as declared by the Board of Directors, prior to
payment of dividends on common stock. Holders of Series C and C-1
convertible preferred stock do not have stated dividends.
(c) The holder of each share of Series A, A-1, B, C-1, D and E convertible
preferred stock is entitled to the full voting rights and powers and
shall have the right to one vote for each share of common stock into
which such convertible preferred stock could be converted. The holders of
Series C convertible preferred stock do not have the right to vote for
the election or removal of directors of the Company, but may vote on all
other matters.
(d) Each share of Series A, A-1, B, C-1, D and E preferred stock will be
convertible, at the option of the holder, into one share of Series A
common stock. Each share of Series C preferred stock will be convertible,
at the option of the holder, into (i) one share of Series C-1 preferred
stock or (ii) one share of Series A or B common stock. The conversion
ratio is determined by dividing $6.60 for each share of Series A, A-1, B,
C and C-1 preferred stock, $9.48 for each share of Series D preferred
stock and $9.60 for each share of Series E preferred stock by the
conversion price. The initial conversion price for Series A, A-1, B, C
and C-1 preferred stock is $6.60 per share. The initial conversion price
for Series D preferred stock is $9.48 per share, and Series E preferred
stock is $9.60 per share.
F-15
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
6. CONVERTIBLE PREFERRED STOCK: (CONTINUED)
(e) Each share of Series A, A-1, B, C-1, D and E preferred stock will be
automatically converted into one share of Series A common stock upon the
sale of Series A common stock in a public offering pursuant to a
registration statement under the Securities Act of 1933, as amended with
net proceeds of greater than $20.0 million. Each share of Series C
preferred stock will also be automatically converted into one share of
Series A common stock in the same public offering provided that, if the
conversion of such shares would result in a filing requirement on behalf
of a holder of Series C preferred stock pursuant to the Hart-Scott-Rodino
Antitrust Improvement Act of 1976 (the "HSR Act"), as amended, all shares
of Series C preferred stock held by such holder shall automatically be
converted into shares of Series B common stock; (i) each share of Series
A and A-1 preferred stock shall automatically be converted into shares of
Series A common stock at the conversion price at the time in effect for
each such share of preferred stock on the date specified by written
consent or agreement of the holders of a majority of the then outstanding
shares of Series A and A-1 preferred stock, voting together as a class;
and (ii) each share of Series B, C, C-1, D and E preferred stock shall
automatically be converted into shares of Series A common stock at the
conversion price at the time in effect for each such share of preferred
stock on the date specified by written consent or agreement of the
holders of a majority of the then outstanding shares of Series B, C, C-1,
D and E preferred stock, voting together as a class, provided, that if
the conversion of such shares of Series C preferred stock would result in
a filing requirement on behalf of a holder of Series C preferred stock
pursuant to the HSR Act, all shares of Series C preferred stock held by
such holder shall automatically be converted into shares of Series B
common stock.
7. COMMON STOCK:
The Company has authorized the total number of shares of common stock with
rights, preferences and restrictions described below:
DESIGNATED SHARES OF COMMON STOCK
<TABLE>
<S> <C> <C>
Series A common stock.................... 365,000,000 shares
Series B common stock.................... 42,500,000 shares
----------
407,500,000
----------
----------
</TABLE>
F-16
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
7. COMMON STOCK: (CONTINUED)
At February 28, 1999, the Company has reserved the following shares of
authorized but unissued shares of common stock for future issuance:
<TABLE>
<S> <C>
Conversion of Series A Preferred Stock......... 14,166,650
Conversion of Series A-1 Preferred Stock....... 4,242,424
Conversion of Series B Preferred Stock......... 2,320,758
Conversion of Series C Preferred Stock......... 5,535,402
Conversion of Series C-1 Preferred Stock....... 1,829,166
Notes convertible into Series D Preferred
Stock........................................ 421,941
Stock options.................................. 6,080,783
----------
34,597,124
----------
----------
</TABLE>
RIGHTS, PREFERENCES AND RESTRICTIONS OF COMMON STOCK
(a) Each share of Series B common stock shall be convertible, at the option
of the holder, into one share of Series A common stock, at any time after
issuance.
(b) Each share of Series B common stock will automatically be converted into
one share of Series A common stock upon the sale of Series A common stock
in a public offering pursuant to a registration statement under the
Securities Act of 1933, with net proceeds of greater than $20.0 million;
provided, that if the conversion of such shares would result in a filing
requirement on behalf of a holder of Series B common stock pursuant to
the HSR Act, such conversion shall not occur unless and until the
expiration or termination of all waiting and review periods (and any
extensions thereof) applicable thereto under the HSR Act at which time
such conversion shall occur.
(c) The holders of each share of Series A common stock are entitled to the
full voting rights and powers equal to one vote for each share of Series
A and B common stock held. The holders of Series B common stock do not
have the right to vote for the election or removal of directors of the
Company, but may vote on all other matters.
PRO FORMA STOCKHOLDERS' DEFICIT (UNAUDITED)
In May 1999, the board of directors authorized the filing of a registration
statement with the Securities and Exchange Commission to register shares of its
common stock in connection with a proposed Initial Public Offering ("IPO"). If
the offering is consummated under the terms presently anticipated, all of the
currently outstanding convertible preferred stock will convert to 27,336,823
shares of common stock upon the closing of the IPO. Additionally, the Company
has $4.3 million of outstanding debt (see Note 11) which will automatically
convert to 421,941 shares of common stock upon the closing of the IPO. The
effect of these conversions has been reflected as unaudited pro forma
stockholders' equity (deficit) in the accompanying consolidated balance sheet as
of February 28, 1999.
F-17
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
8. STOCK OPTION PLANS:
OPTIONS ASSUMED FROM NAVIO
In connection with the Company's acquisition of Navio, each outstanding
option to purchase shares of Navio common stock was automatically converted into
an option to purchase Series C convertible preferred stock of the Company based
upon the conversion ratio.
Options assumed are immediately exercisable, and the shares of stock issued
upon exercise are subject to repurchase, at the original purchase price, by the
Company, upon the termination of the option holders service to the Company. The
Company's repurchase right expires generally at the rate of 25% of the original
grant, commencing 12 months after the date of grant or employment, and in
monthly increments over the following 36 months.
At February 28, 1999, 1,487,946 options were outstanding at a weighted
average exercise price of $1.04, of which 662,197 options were vested.
NETWORK COMPUTER, INC. 1996 STOCK OPTION PLAN
On October 1, 1996, the Company adopted the Network Computer, Inc. 1996
Stock Option Plan (the "Plan"). The Plan, as amended, provides for the grant of
both incentive and non-qualified stock options to employees, consultants and
directors for the purchase of up to 5,800,000 shares of Series A common stock.
Incentive stock options may only be granted to employees.
The exercise price of incentive stock options cannot be less than the fair
market value of the common stock on the grant date, as determined by the board
of directors. The Plan also provides for holders of non-qualified options to
purchase shares at not less than 85% of the fair market value on the grant date.
The term of the incentive and non-qualified stock options is generally ten years
from the date of grant or a shorter term as provided in the option agreement.
Options generally vest over four years.
The Company accounts for outstanding stock options under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB No. 25"). In accordance with APB No. 25, no compensation expense has been
recognized related to options granted to employees except as discussed below in
"Deferred Stock Compensation", as all employee options were granted with an
exercise price equal to the fair market value of the underlying stock. If
compensation cost had been determined consistent with SFAS No. 123, "Accounting
for Stock-Based Compensation," the Company's pro forma net loss would have been
as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED MAY 31, FEBRUARY 28,
------------------------ ------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net loss--as reported............ $ (18,989) $ (94,391) $ (86,826) $ (21,917)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net loss--pro forma.............. $ (19,013) $ (94,415) $ (86,886) $ (23,191)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Pro forma information has not been presented for the period from inception
to 1996 as there were no stock option grants during that period.
F-18
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
8. STOCK OPTION PLANS: (CONTINUED)
Pursuant to the provisions of SFAS No. 123, the fair value of options
granted was estimated on the grant date using the Black-Scholes option pricing
model and the following assumptions:
<TABLE>
<CAPTION>
NINE MONTHS ENDED FEBRUARY
YEARS ENDED MAY 31, 28,
---------------------------- ----------------------------
1997 1998 1998 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Risk-free interest rate................. 5.98% 5.56% 5.55% 4.42%
<CAPTION>
Average expected life of option......... 2.83 years 2.83 years 4.01 years 3.96 years
<S> <C> <C> <C> <C>
Dividend yield.......................... 0% 0% 0% 0%
Volatility of common stock.............. 0% 0% 0% 0%
Weighted average fair value of options
granted............................... $ 0.02 $ 0.08 $ 0.42 $ 2.16
</TABLE>
Stock option activity under the Network Computer, Inc. 1996 Option Plan is
summarized below:
<TABLE>
<CAPTION>
OPTIONS
AVAILABLE OPTIONS WEIGHTED AVERAGE
FOR GRANT OUTSTANDING EXERCISE PRICE
------------ ------------ -----------------
<S> <C> <C> <C>
Balance at May 31, 1996......................... -- -- --
Authorized.................................... 2,500,000 -- --
Granted....................................... (1,166,632) 1,166,632 $ .60
Cancelled..................................... 33,331 (33,331) $ .60
------------ ------------ -----
Balance at May 31, 1997......................... 1,366,699 1,133,301 $ .60
Granted....................................... (1,315,962) 1,315,962 $ 3.38
Exercised..................................... -- (213,312) $ 0.76
Cancelled..................................... 805,246 (805,246) $ 1.21
------------ ------------ -----
Balance at May 31, 1998......................... 855,983 1,430,705 $ 2.80
Authorized.................................... 3,333,333 -- --
Granted....................................... (970,451) 970,451 $ 4.96
Exercised..................................... -- (41,561) $ 1.15
Cancelled..................................... 266,757 (266,757) $ 2.89
------------ ------------ -----
Balance at February 28, 1999.................... 3,485,622 2,092,838 $ 3.82
------------ ------------ -----
------------ ------------ -----
</TABLE>
Additionally, on October 15, 1998, the Company issued non-qualified stock
options outside of the Plan to two key executives for the purchase of 2,499,999
shares of the Company's common stock at a price of $5.10 per share. The options
vest over four years and have a term of ten years.
F-19
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
8. STOCK OPTION PLANS: (CONTINUED)
A summary of all outstanding options to purchase common stock and preferred
stock at February 28, 1999 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------------------------------- OPTIONS EXERCISABLE
RANGE OF WEIGHTED AVERAGE -------------------------------
EXERCISE NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- -------------- ------------ ------------------- ----------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
$0.36-$2.16 1,952,810 7.96 $ 1.10 1,694,416 $ 1.08
$3.90 628,567 8.94 $ 3.90 157,388 $ 3.90
$4.50 469,762 9.33 $ 4.50 416 $ 4.50
$5.10 2,812,157 9.63 $ 5.10 212,055 $ 5.10
$5.70 217,487 9.95 $ 5.70 -- --
------------ ------------
6,080,783 9.01 $ 3.67 2,064,275 $ 1.69
------------ ------------
------------ ------------
</TABLE>
DEFERRED STOCK COMPENSATION
In connection with the grant of certain stock options to employees during
the nine months ended February 28, 1999, the Company recorded deferred
compensation of $3.3 million, representing the difference between the estimated
fair value of the common stock for accounting purposes and the option exercise
price of such options at the date of grant. Such amount is presented as a
reduction of shareholders' equity and amortized ratably over the vesting period
of the applicable options (generally four years). Approximately $393,000 was
expensed during the nine months ended February 28, 1999, and the balance will be
expensed ratably over the period the options vest. Compensation expense is
decreased in the period of forfeiture for any accrued but unvested compensation
arising from the early termination of an option holder's services. In addition,
the Company will record additional deferred stock compensation of approximately
$3.8 million, which will be expensed over four years.
9. INCOME TAXES:
The Company and Oracle have entered into a tax sharing agreement effective
August 12, 1997. Under the terms of the agreement, the Company is responsible
for its share of Oracle's consolidated tax liability, computed as if the Company
had filed a separate return. Further, if the Company would have no tax due on a
separate return basis and the inclusion of the Company's tax operating losses
reduces Oracle's consolidated tax liability, Oracle will pay to the Company the
tax savings generated by including the Company in its consolidated tax return.
Oracle is not required to reimburse the Company for the tax savings obtained by
Oracle prior to August 12, 1997. Oracle realized a tax savings of approximately
$2.2 million, $11.8 million and $1.4 million for the period from inception to
May 31, 1996, the year ended May 31, 1997, and the period from June 1, 1997 to
August 11, 1997, respectively. These amounts are reflected as a tax benefit in
the accompanying statement of operations and a corresponding refund of
contributed capital to Oracle in the accompanying consolidated statement of
stockholders' equity (deficit). Subsequent to the acquisition of Navio on August
12, 1997, the Company is no longer included in Oracle's consolidated Federal Tax
Returns. For the period from August 12, 1997 to May 31, 1998, and for the nine
months ended February 28, 1999, Oracle will realize state and
F-20
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
9. INCOME TAXES: (CONTINUED)
local tax savings of approximately $787,000 and $935,000. These amounts are
reflected as a receivable from affiliate in the accompanying consolidated
balance sheets.
Income taxes have been calculated on a separate company basis pursuant to
the provisions of SFAS No. 109, "Accounting for Income Taxes". The components of
the benefit for income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(DECEMBER NINE MONTHS ENDED FEBRUARY
1, 1995) TO YEARS ENDED MAY 31, 28,
MAY 31, ------------------------ --------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal............................ $ 1,900 $ 10,100 $ 1,200 $ 1,200 $ --
State.............................. 300 1,650 987 715 935
Foreign............................ -- -- (172) (129) (48)
----------- ----------- ----------- ----------- -----
Total benefit.................... $ 2,200 $ 11,750 $ 2,015 $ 1,786 $ 887
----------- ----------- ----------- ----------- -----
----------- ----------- ----------- ----------- -----
</TABLE>
The (provision) benefit for income taxes differs from the amounts which
would result by applying the applicable statutory Federal income tax rate to
income before taxes, as follows (in thousands):
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS ENDED
(DECEMBER YEARS ENDED MAY 31, FEBRUARY 28,
1, 1995) TO ------------------------ ------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Benefit at Federal statutory rate.... $ 1,900 $ 10,700 $ 33,755 $ 31,000 $ 7,981
State income taxes, net of Federal
benefit............................ 300 1,750 5,500 5,050 1,830
Change in valuation allowance........ -- (198) (15,162) (12,779) (7,122)
Nondeductible write-off of in-process
research and development........... -- -- (20,335) (20,335) --
Nondeductible goodwill
amortization....................... -- -- (1,610) (1,050) (1,610)
Other................................ -- (502) (133) (99) (192)
----------- ----------- ----------- ----------- -----------
Total benefit.................... $ 2,200 $ 11,750 $ 2,015 $ 1,787 $ 887
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
F-21
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
9. INCOME TAXES: (CONTINUED)
Components of the net deferred tax asset are as follows (in thousands):
<TABLE>
<CAPTION>
MAY 31,
--------------------------- FEBRUARY 28,
1997 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
Net operating losses................................ $ -- $ 4,573 $ 10,524
Temporary differences............................... 198 9,998 11,447
Foreign tax credits................................. -- 789 510
----- ------------ ------------
Total deferred tax asset............................ 198 15,360 22,481
Valuation allowance................................. (198) (15,360) (22,481)
----- ------------ ------------
Total net deferred tax asset........................ $ -- $ -- $ --
----- ------------ ------------
----- ------------ ------------
</TABLE>
A valuation allowance has been recorded for the entire deferred tax asset as
a result of uncertainties regarding realization of the asset including limited
operating history of the Company, the lack of profitability to date and the
uncertainty over future operating profitability.
At February 28, 1999, the Company had federal net operating loss
carryforwards of approximately $30.1 million and tax credits totaling $1.3
million. The federal net operating loss carryforwards expire at various dates
through 2003 and 2014. Under current tax law, net operating loss carryforwards
available to offset future operating income in any given year may be limited
upon the occurrence of certain events, including significant changes in
ownership interests.
10. RELATED PARTY TRANSACTIONS:
TRANSACTIONS WITH ORACLE
Prior to September 1997, the Company's parent, Oracle, performed certain
services and incurred certain costs for the benefit of the Company. Services
provided included tax, treasury, risk management, employee benefits, legal,
accounting and other general corporate services. The costs of the services
provided by Oracle have been allocated to the Company based upon the relative
headcount of the Company to the total consolidated headcount of Oracle. The
charges for these services totaled approximately $24,000, $1,000,000 and
$250,000 for the period from inception to May 31, 1996, and for the years ended
May 31, 1997 and 1998, respectively. In the opinion of management, the method of
allocating the costs is reasonable and the cost of the services allocated to the
Company is not significantly different from the costs that would have been
incurred had the Company performed these functions. Commencing in September
1997, the Company ceased obtaining these services from Oracle.
Prior to the Company's acquisition of Navio, Oracle had provided cash flow
to fund the Company's operations through an intercompany payable account. At May
31, 1996, Oracle forgave the then outstanding intercompany payable balance of
approximately $5.1 million. This amount is reflected as a capital contribution
in the accompanying statement of stockholders' equity (deficit). In fiscal 1998,
in connection with the acquisition of Navio, Oracle converted approximately
$18.0 million of outstanding intercompany payables into 2,727,272 shares of the
Company's Series A-1 Preferred Stock. Additionally, in fiscal 1998, Oracle
contributed capital of approximately $8.1 million to the Company.
F-22
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
10. RELATED PARTY TRANSACTIONS: (CONTINUED)
The Company has entered into a Convertible Note Purchase Agreement dated
July 23, 1997 with Oracle. Pursuant to the Convertible Note Purchase Agreement,
Oracle agreed to provide up to $10.0 million to the Company for general working
capital purposes, as needed, in the form of convertible notes. The convertible
notes bear interest at 8% per annum and are convertible at Oracle's option into
shares of the Company's Series A-1 Preferred Stock, which is currently $6.60 per
share. As of February 28, 1999, the Company has drawn down approximately $10.0
million under such arrangement. During fiscal 1998, Oracle converted $5.0
million of such indebtedness into 757,575 shares of the Company's Series A-1
Convertible Preferred Stock. Subsequent to February 28, 1999, the Company paid
the remaining $5 million to Oracle.
The Company has entered into real property leases with Oracle for its
corporate headquarters and for certain of its field offices pursuant to which
the Company is obliged to make monthly rental payments to Oracle of
approximately $124,000 and approximately $4,000, respectively. The Company also
leases furniture and equipment for its corporate headquarters and for its Salt
Lake City facilities from Oracle pursuant to leases that obligate the Company to
make monthly rental payments to Oracle of approximately $57,000 and
approximately $2,700, respectively. In addition, the Company has contracted for
Oracle to perform maintenance at its corporate headquarters. The Company has
also entered into another real property agreement with Oracle for its UK
operations pursuant to which the Company is obligated to make quarterly rental
payments to Oracle of approximately $12,000.
In connection with the Company's acquisition of Navio, the Company, Oracle
and certain of the former Navio stockholders entered into a Put/Call and Voting
Agreement dated August 11, 1997 (the "PCV Agreement"). The PCV Agreement, among
other things, (i) grants Oracle an irrevocable option to purchase all of the
shares of Series B Preferred Stock and Series C Preferred Stock of the Company
or securities issuable upon conversion thereof held by the former Navio
stockholders, including Netscape, who are parties to the PCV Agreement, (ii)
contains a tag-along provision that is triggered in certain change-of-control
situations and (iii) contains a voting agreement that provides for the election
of four Oracle designees to the Company's board of directors.
In connection with the acquisition of Navio, certain former Navio
stockholders had the right for a period of 60 days following the closing of the
acquisition to compel Oracle to purchase up to 50% of the shares received by
them in the acquisition or issuable under stock options assumed by the Company
in the acquisition (the "Put"). Pursuant to the Put, a total of 1,909,248 shares
of the Company's Series C Preferred Stock were put to Oracle for approximately
$12.8 million. Oracle subsequently converted such shares into shares of the
Company's Series C-1 Preferred Stock.
On November 19, 1997, the Company's Board of Directors waived the Company's
right of first offer with respect to 331,537 shares of Series B Preferred Stock
offered for sale by Sony Corporation. Subsequently, such shares were acquired by
Oracle.
The Company has entered into a Services Agreement dated March 5, 1998 with
Oracle. Pursuant to the Services Agreement, Oracle provides professional
services to certain of the Company's customers.
The Company has entered into a Technology License Agreement with Oracle in
fiscal 1998. Pursuant to the Technology License Agreement, Oracle may promote,
market and distribute sublicenses of the Company's products through its
worldwide distribution channels for a period of three years.
F-23
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
10. RELATED PARTY TRANSACTIONS: (CONTINUED)
As of February 28, 1999 the Company had recorded an accrual of $300,000 for
commissions to Oracle Japan related to license of software.
TRANSACTIONS WITH NETSCAPE
Navio entered into a Source Code License Agreement with Netscape ("Netscape
Source Code License") dated July 9, 1996, as amended on April 6, 1998 and
September 28, 1998. In connection with the Company's acquisition of Navio and
pursuant to a letter agreement dated May 16, 1997, Netscape consented to the
assignment of the Netscape Source Code License from Navio to the Company.
Pursuant to such letter agreement, Netscape and Oracle also agreed that the
Company's products would be distributed pursuant to an OEM License Agreement by
and between Netscape and Oracle dated October 17, 1996.
Pursuant to this agreement, the Company has the right to use approximately
$1.0 million in prepaid royalties with Netscape. The Company has also paid
Netscape approximately $200,000 for the purchase of certain rights and licenses.
The Company and Netscape, which has merged with America Online ("AOL"), are
also co-sublessors of real property located in Sunnyvale, California. Netscape
and Navio originally leased the property in November 1996, and Navio's rights
and duties under the lease were assigned to the Company in connection with the
Company's acquisition of Navio. Subsequently, the property was subleased to a
third party. The lease terminates in November 2001.
The Company recognized 20% and 20%, or approximately $2.0 million and $2.4
million of total revenues from revenue transactions with related parties during
the fiscal year ended May 31, 1998 and the nine months ended February 28, 1999,
respectively. No amounts were recognized in fiscal 1997.
11. THIRD PARTY FINANCING AGREEMENTS:
On November 12, 1997, the Company entered into a Convertible Promissory Note
(the "Notes") Purchase and Cooperation Agreement (the "Agreement") with a third
party investor (the "Investor").
The Agreement is for the sale of up to three $4.0 million Notes that are
convertible into Series D convertible preferred stock. The Notes bear interest
at the lesser of 5% or the maximum interest rate permitted under applicable
Federal and state laws, which will be converted to stock if the notes are
converted. The principal amount and accrued interest outstanding under each Note
is due five years from the date of issuance unless converted or accelerated in
the event of an initial public offering, a merger or an asset sale. During the
year ended May 31, 1998, the Company sold the first Note of $4.0 million which
is convertible, at the option of the holder (or automatically on the
consummation of an initial public offering), into Series D convertible preferred
stock at $9.48 per share. Should the Company issue the second and third Note,
the conversion price will be the lower of $9.48 or the price of subsequent
preferred stock based on the preceding preferred round.
In the Agreement, the investor agreed to fund $3.0 million of the Company's
non-recurring engineering ("NRE") efforts through December 31, 1999. The Company
recognizes the NRE revenue as services are performed and recognized
approximately $72,000 and $243,000 of revenue in fiscal 1998 and during the nine
months ended February 28, 1999, respectively. In consideration of the funding,
the
F-24
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
11. THIRD PARTY FINANCING AGREEMENTS: (CONTINUED)
Company agreed to pay the investor a royalty for each license of the Company's
software incorporating that technology, up to a maximum of $3.9 million. The
obligation to pay the royalty terminates 4 years after the first commercial
shipment of hardware implementing the Company's software.
12. SUBSEQUENT EVENTS (UNAUDITED):
FACILITY LEASE
On April 27, 1999, the Company entered into a ten-year facility lease for
its new corporate headquarters. Total commitments over the 10-year operating
lease life is approximately $28.0 million. Oracle Corporation has provided a
$10.0 million guarantee to the landlord. The guarantee can be terminated upon
the Company completing an IPO with net proceeds of at least $40.0 million and
providing an Irrevocable Letter of Credit covering ten months rent and operating
costs. Also, the Company can eliminate the Irrevocable Letter of Credit by
achieving certain financial benchmarks. The Company has also, entered into an
agreement for non-penalty, early termination of the Company's current facility
and equipment leases with Oracle Corporation, due to expire on September 17,
2002. Commitments under the Oracle leases, subsequent to February 28, 1999 total
approximately $7.6 million.
PREFERRED STOCK ISSUANCE
In May 1999, the Company issued 5,208,326 shares of Series E convertible
preferred stock at $9.60 per share. The Series E stock has the same rights,
preferences and restrictions as the Series B convertible preferred stock, has a
liquidation preference of $9.60 per share, is entitled to receive non-cumulative
dividends at the rate of $0.96 per share, when and as declared by the Board of
Directors, and each share will automatically be converted into one share of
common stock upon the consummation of an initial public offering at a per share
price of at least $12.00.
1999 EMPLOYEE STOCK PURCHASE PLAN
On May 17, 1999, the board of directors approved the adoption of the
Company's 1999 Employee Stock Purchase (the "1999 Purchase Plan"), subject to
stockholder approval. A total of 833,333 shares of common stock has been
reserved for issuance under the 1999 Purchase Plan, plus, commencing on June 1,
2000, annual increases equal to the lesser of 833,333 shares, 2% of the
outstanding common shares on such date or a lesser amount determined by the
board of directors. The 1999 Purchase Plan permits eligible employees to acquire
shares of the Company's common stock through periodic payroll deductions of up
to 15% of base cash compensation. No more than 750 shares may be purchased by
each employee on any purchase date. Each offering period will have a maximum
duration of 6 months. The price at which the common stock may be purchased is
85% of the lesser of the fair market value of the Company's common stock on the
first day of the applicable offering period or on the last day of the respective
purchase period. The initial offering period will commence on the effectiveness
of the initial public offering and will end on March 31, 2000.
F-25
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
12. SUBSEQUENT EVENTS (UNAUDITED): (CONTINUED)
1999 EQUITY INCENTIVE PLAN
On May 17, 1999, the board of directors approved the adoption of the
Company's 1999 Equity Incentive Plan (the "1999 Plan"), subject to stockholder
approval. The types of awards that may be made under the 1999 Plan are options
to purchase shares of common stock, stock appreciation rights, restricted shares
and stock units. Any shares not yet issued under the Company's 1996 Stock Option
Plan as of the date of the Company's initial public offering will be available
for grant under the 1999 Plan. The exercise price for incentive stock options
may not be less than 100% of the fair market value of the Company's common stock
on the date of grant (85% for nonstatutory options).
GENERAL INSTRUMENT CORPORATION
In April 1999, the Company entered into a Manufacturer's Representative
Agreement and a Development Agreement with General Instrument Corporation
("GI"). Under the developer's agreement, Liberate committed to pay GI $10.0
million in development fees for certain services to be performed by GI. These
fees will be paid out in quarterly installments over a three-year period. Under
the manufacturer's agreement, Liberate agreed to pay to GI a "commission" on all
GI terminals deployed by network operators with the Liberate products on them.
However, the commissions only become effective after specific sales thresholds
are met. Prior to attaining those thresholds, no commissions are due to GI on
these sales. In connection with this commission, GI has committed to Liberate
that certain volumes of GI terminals will be sold. After the three year period
is over, GI may be required to pay Liberate for any shortfall of terminal sales
below committed volume levels. In addition to this arrangement, the Company has
also entered into a Series C Preferred Stock Purchase Agreement dated by and
between the Company, GI and Oracle pursuant to which Oracle sold GI 757,575
shares of the Company's Series C Preferred Stock.
SUN MICROSYSTEMS, INC.
In May 1999, the Company entered into an agreement with Sun Microsystems to
transfer their NC Navigator and NC Administration Server software to Sun while
retaining the right to ship, support and maintain these products for existing
customers using this technology. Although the Company does not intend to
actively pursue new sales opportunities in the corporate thin-client market,
outside of this market they intend to continue developing new products based on
this technology. For the nine months ended February 28, 1999, sales of these
products and related services accounted for $1.6 million of total revenues. Sun
has also agreed to co-develop television set-top box technology with the
Company, which will be distributed pursuant to a non-exclusive license with Sun.
As a result of this assignment agreement, the company will be recognizing a
charge of approximately $300,000 to $600,000 in Q4 of fiscal 1999 comprised
primarily of severance costs for terminated employees.
F-26
<PAGE>
LIBERATE TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF FEBRUARY 28, 1998 IS UNAUDITED)
12. SUBSEQUENT EVENTS (UNAUDITED): (CONTINUED)
WARRANT AGREEMENTS
In May 1999, the Company entered into letter agreements with several network
operators that require the Company to issue warrants to purchase up to an
aggregate of approximately 2,300,000 shares of common stock if the network
operators satisfy commercial milestones. Warrants to purchase up to 341,665
shares of common stock, if issued, will have an exercise price of $9.60 per
share, warrants to purchase up to 1,608,332 shares of common stock, if issued,
will have an exercise price of $13.80 per share and warrants to purchase up to
350,000 shares of common stock, if issued, will have an exercise price of either
$9.60 or $13.80 per share, depending on whether commitments are made by the
warrant holders. In the event the milestones are met, the Company would be
required to record a significant non-cash expense based upon the value of the
warrants at the time the milestones are satisfied.
F-27
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Navio Communications, Inc.
We have audited the accompanying balance sheet of Navio Communications, Inc.
(a development stage company) as of December 31, 1996, and the related
statements of operations, stockholders' equity, and cash flows for the period
from inception (February 12, 1996) to December 31, 1996. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Navio Communications, Inc.
(a development stage company) at December 31, 1996, and the results of its
operations and its cash flows for the period from inception (February 12, 1996)
to December 31, 1996, in conformity with generally accepted accounting
principles.
As more fully described in Note 1 to the financial statements, the Company
is in the development stage, has incurred losses since inception of
approximately $5.6 million and expects to incur substantial and increasing
operating losses in the next year. At December 31, 1996, the Company had working
capital of $8.3 million. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans as to these
matters are described in Note 1. The 1996 financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ ERNST & YOUNG LLP
March 6, 1997, except for
Note 8 as to which the date is
June 5, 1997
F-28
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 8,152
Short-term investments........................................................... 2,033
Other current assets............................................................. 174
---------
Total current assets............................................................... 10,359
Property and equipment, net........................................................ 1,290
Other assets....................................................................... 132
---------
$ 11,781
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................. $ 316
Accrued compensation and related liabilities..................................... 235
Other accrued liabilities........................................................ 746
Deferred revenues................................................................ 675
Short-term note payable, stockholder............................................. 51
---------
Total current liabilities.......................................................... 2,023
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.0001 par value; issuable in series; 7,777,777 shares
authorized; 7,777,777 Series A shares outstanding; aggregate liquidation
preference of $15,556.......................................................... 15,392
Common stock, $0.0001 par value; 55,555,555 shares authorized; 21,111,112 shares
outstanding.................................................................... 154
Note receivable, stockholder..................................................... (150)
Deficit accumulated during the development stage................................. (5,638)
---------
Total stockholders' equity......................................................... 9,758
---------
$ 11,781
---------
---------
</TABLE>
SEE ACCOMPANYING NOTES.
F-29
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
PERIOD FROM INCEPTION (FEBRUARY 12, 1996) TO DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
Operating expenses:
Research and development......................................................... $ 4,559
Sales and marketing.............................................................. 839
General and administrative....................................................... 432
---------
Total operating expenses........................................................... 5,830
---------
Operating loss..................................................................... (5,830)
Interest income, net............................................................... 192
---------
Net loss........................................................................... $ (5,638)
---------
---------
</TABLE>
SEE ACCOMPANYING NOTES.
F-30
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM INCEPTION (FEBRUARY 12, 1996) TO DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
SERIES A DURING THE TOTAL
PREFERRED COMMON NOTE DEVELOPMENT STOCKHOLDERS'
STOCK STOCK RECEIVABLE STAGE EQUITY
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Issuance of 21,111,112 shares of common stock to
founders for technology and a note in July
1996............................................. $ -- $ 150 $ (150) $ -- $ --
Issuance of 7,777,777 shares of Series A preferred
stock to investors at $2.00 per share, net of
issuance costs of $163 in July and October
1996............................................. 15,392 -- -- -- 15,392
Issuance of options to purchase 201,000 shares of
common stock for services valued at $0.02 per
share in November 1996........................... -- 4 -- -- 4
Net loss........................................... -- -- -- (5,638) (5,638)
----------- ----- ----- ------------ ------------
Balance at December 31, 1996....................... $ 15,392 $ 154 $ (150) $ (5,638) $ 9,758
----------- ----- ----- ------------ ------------
----------- ----- ----- ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-31
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
PERIOD FROM INCEPTION (FEBRUARY 12, 1996) TO DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss........................................................................... $ (5,638)
Adjustments to reconcile net loss to net cash (used in) provided by operating
activities:
Depreciation and amortization.................................................... 153
Issuance of stock for services................................................... 4
Changes in assets and liabilities:
Other current assets........................................................... (174)
Accounts payable............................................................... 316
Accrued compensation and related liabilities................................... 235
Other accrued liabilities...................................................... 746
Deferred revenues.............................................................. 675
---------
Net cash used in operating activities.............................................. (3,683)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures............................................................... (1,443)
Increase in other assets........................................................... (132)
Purchase of short-term investments................................................. (4,008)
Maturities of short-term investments............................................... 1,975
---------
Net cash used in investing activities.............................................. (3,608)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of Series A preferred stock, net............................ 15,392
Short-term notes payable, stockholder.............................................. 551
Repayment of short-term notes payable, stockholder................................. (500)
---------
Net cash provided by financing activities.......................................... 15,443
---------
Net increase in cash and cash equivalents.......................................... 8,152
Cash and cash equivalents at beginning of period................................... --
---------
Cash and cash equivalents at end of period......................................... $ 8,152
---------
---------
</TABLE>
SEE ACCOMPANYING NOTES.
F-32
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Navio Communications, Inc. ("Navio" or the "Company"), a development stage
company, was incorporated in the State of Delaware on February 12, 1996. The
Company was organized to develop and market Internet solutions to consumers on
non-PC devices.
DEVELOPMENT STAGE COMPANY
Since inception, the Company has been engaged primarily in research and
development activities in connection with the development of its products. Other
activities to date have included raising capital, recruiting managerial and
technical personnel, establishment of business development and marketing
organizations and execution of various license agreements. Accordingly, the
Company is classified as a development stage enterprise at December 31, 1996.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Since inception, the Company has
incurred cumulative net operating losses of approximately $5.6 million and has
working capital of approximately $8.3 million as of December 31, 1996. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management expects the Company to incur substantial and
increasing operating losses in the next year and recognizes the need for an
infusion of cash during 1997. The Company is actively pursuing various options
which include securing additional equity financing and believes that sufficient
funding will be available to achieve its planned business objectives. However,
if the Company is unable to obtain necessary cash, other more substantial
restructuring options may be necessary, which would have a material adverse
effect on the Company's business, results of operations and prospects. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result.
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 amounts in the financial statements and accompanying
notes. Actual results could differ from those estimates.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and cash equivalents consist of cash on deposit with banks and money
market instruments with original maturities of 90 days or less. Short-term
investments, all of which are classified as available-for-sale, consist of high
quality debt securities with original maturities between 90 days and one year.
F-33
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following table details the Company's investments at December 31, 1996
(in thousands):
<TABLE>
<S> <C>
U.S. Government agencies............................................ $ 4,624
Money market funds.................................................. 2,268
Corporate bonds and notes........................................... 3,025
---------
$ 9,917
---------
---------
Included in cash and cash equivalents............................... $ 7,884
Included in short-term investments.................................. 2,033
---------
$ 9,917
---------
---------
</TABLE>
The Company invests its excess cash in accordance with a short-term
investment policy set by the board of directors. The policy authorizes
investments in government securities, time deposits and certificates of deposit
in approved financial institutions, commercial paper rated A-1/P-1, and other
money market instruments of similar liquidity and credit quality.
The Company considers its investments in such instruments as
available-for-sale and, in accordance with Financial Accounting Standard No.
115, "Accounting for Certain Investments in Debt and Equity Securities" ("FAS
115"), would record its investments at fair value. However, as the difference
between cost and fair value was immaterial, no adjustment was made to the
historical carrying value of the investments and no unrealized gains and losses
have been recorded as a separate component of stockholders' equity. Realized
gains or losses from available-for-sale investments have not been material.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of cash investments. The Company primarily
invests its excess cash in deposits with major banks, in U.S. Treasury and U.S.
Agency obligations and in money market securities issued by companies with
strong credit ratings and in a variety of industries. Those securities
classified as cash equivalents and short-term investments typically mature
within one year of their purchase date.
PROPERTY AND EQUIPMENT
Property and equipment are depreciated using the straight-line method over
the estimated useful lives of the assets, generally two to five years. Leasehold
improvements are amortized over the lesser of the term of the lease or the
estimated useful life of the underlying asset.
DEFERRED REVENUE
Deferred revenue represents prepayments from customers for future consulting
services and product royalties.
F-34
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as incurred.
Statement of Financial Accounting Standard No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased or Otherwise Marketed," requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility.
Based on the Company's product development process, technological
feasibility is established upon completion of a working model. To date, all
research and development costs have been expensed.
STOCK-BASED COMPENSATION
In accordance with the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the
Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations, and to adopt the "disclosure only" alternative described in FAS
123, in accounting for its employee stock option plans. Under APB 25, if the
exercise price of the Company's employee stock options equals or exceeds the
fair value of the underlying stock on the date of grant as determined by the
Company's board of directors, no compensation expense is recognized.
2. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consists of the following at December 31,
1996 (in thousands):
<TABLE>
<S> <C>
Computer and office equipment....................................... $ 595
Purchased computer software......................................... 256
Furniture and fixtures.............................................. 249
Leasehold improvements.............................................. 343
---------
Total property and equipment........................................ 1,443
Accumulated depreciation and amortization........................... (153)
---------
Net property and equipment.......................................... $ 1,290
---------
---------
</TABLE>
3. SHORT-TERM NOTE PAYABLE, STOCKHOLDER
In July 1996, the Company entered into a note with a stockholder for the
purchase of equipment. The note is noninterest bearing, payable on demand and
secured by the equipment. The stockholder maintains the right, until the note is
repaid, to repurchase the equipment for the original purchase price paid by the
Company.
4. COMMITMENTS
The Company leases facilities, as cotenant with Netscape for its principal
office and research facilities under a noncancelable operating lease agreement
expiring in December 2001. Minimum payments are subject to annual increases
based in part on the consumer price index.
F-35
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. COMMITMENTS (CONTINUED)
In addition, during 1996, the Company entered into various agreements with
third party vendors requiring minimum royalty and maintenance payments. Certain
third party agreements contain cancelation provisions whereby the Company will
be free of further liability upon cancelation. In addition, certain third party
agreements provide for an irrevocable, worldwide, perpetual license for use in
any application upon payment of the minimum royalty payments.
Future minimum payments as of December 31, 1996 under the lease, net of
sublease income, and under third party royalty and maintenance agreements are as
follows (in thousands):
<TABLE>
<CAPTION>
NONCANCELABLE THIRD-PARTY
OPERATING ROYALTY
LEASE AGREEMENTS
------------- -----------
<S> <C> <C>
1997.............................................................. $ 736 $ 300
1998.............................................................. 843 487
1999.............................................................. 873 200
2000.............................................................. 904 409
2001 and thereafter............................................... 937 409
------ -----------
$ 4,293 $ 1,805
------ -----------
------ -----------
</TABLE>
Rent expense for the period ending December 31, 1996 was $141,000.
Payments under third party agreements for the period ending December 31,
1996, which have been expensed to research and development, were $874,000.
In addition, in July 1996, the Company entered into an employment agreement
with a founder. The agreement is terminable by either party on 30 days' written
notice, and provides for a base salary, subject to adjustment at the discretion
of the board of directors, with bonuses payable on March 31, 1998, 1999 and
2000, respectively. The agreement obligates the Company to loan money to the
founder for the purchase of a residence, which loan will bear interest at 5% and
be payable 12 months following funding. The loan will be secured by a deed of
trust in favor of the Company in the underlying real property, or other
acceptable collateral. The agreement further provides that in the event that (i)
the Company terminates the employment of the founder other than for "cause," as
defined therein, (ii) the founder's employment is "constructively terminated,"
as defined therein, or (iii) a "Change in Control," as defined therein, occurs,
then the founder will be entitled to (w) a severance payment equal to 24 months'
base salary, payable in 24 equal monthly installments, (x) cancelation and
forgiveness of any outstanding loans from the Company, (y) termination of the
Company's repurchase rights in any common stock held by the founder and (z) a
24-month consultancy at $1,000 per month, during which period any options held
by the founder would continue to be exercisable. In the event that the Company
terminates the employment of the founder for "cause," then the founder will be
entitled to receive a severance payment equal to six months' base salary and in
certain circumstances, the benefits prescribed in (y) and (z) above. In the
event the founder voluntarily terminates his employment with the Company, the
founder will be entitled to receive a severance payment equal to six months'
base salary (see Note 8).
F-36
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDERS' EQUITY
PREFERRED STOCK
During 1996, the Company issued 7,777,777 shares of Series A preferred stock
at $2.00 per share. In the event of a liquidation or winding up of the Company,
holders of Series A preferred stock are entitled to a liquidation preference of
$2.00 per share, together with any declared but unpaid dividends, prior and in
preference to the holders of common stock. Series A preferred stockholders are
entitled to noncumulative dividends at an annual rate of $0.0675 per share, when
and as declared by the board of directors, prior and in preference to dividends
on the common stock. No dividends have been declared by the Company.
The holders of Series A preferred stock are entitled to one vote for each
share of common stock into which such preferred stock is convertible. Each share
of Series A preferred stock is convertible, at an option of the holder, into
common stock on a one-for-one basis. Each share of Series A preferred stock
automatically converts into one share of common stock in the event of an
underwritten public offering of the Company's common stock with a price of at
least $4.00 per share and aggregate gross proceeds of at least $10,000,000 (a
"Qualified IPO") or upon the consent of the holders of a majority of the then
outstanding shares of Series A preferred stock. The conversion rate of the
Series A preferred stock is subject to adjustment in the event of, among other
things, certain dilutive issuances of stock, business combinations, stock splits
and stock dividends. The Company has reserved 7,777,777 shares of common stock
for conversion of preferred stock.
COMMON STOCK
In July 1996, 8,333,334 shares of common stock were issued to a founder in
exchange for technology and a $150,000 promissory note. The outstanding shares
are subject to certain transfer restrictions. Certain of these shares are
subject to repurchase, at $0.10 per share, upon the occurrence of certain
events, including termination of employment. The Company's repurchase option
expires as to 1,388,889 shares of common stock on each of February 12, 1997 and
1998. In addition, as to these 2,777,778 shares, the repurchase option will
expire immediately in the event of a Qualified IPO or upon acquisition of the
Company, subject to certain conditions, by a stockholder. As to an additional
2,777,778 shares of common stock, the Company's repurchase option expires based
on the achievement of specified performance objectives. Regardless of product
sold, the repurchase option shall expire on all such performance shares as of
February 12, 2003 (see Note 8).
As to the shares which are not subject to the repurchase option, the shares
are subject to the Company's right to first refusal on sale or transfer of the
shares. The Company's right of first refusal terminates upon the earliest to
occur of (i) a Qualified IPO, (ii) a merger or consolidation of the Company as a
result of which the Company is not the surviving entity, or any sale, conveyance
or other disposition of the assets of the Company as an entirety or
substantially as an entirety, or (iii) the achievement by the Company of
$100,000,000 in annual sales.
In addition, in July 1996, the Company issued to Netscape 12,777,778 shares
of common stock in exchange for the license of certain intellectual property
rights. Such shares are subject to the Company's right of first refusal on sale
or transfer of the shares. The Company's right of first refusal terminates upon
the earliest to occur of (i) the Company's underwritten initial public offering,
(ii) a merger or consolidation of the Company as a result of which the Company
is not the surviving entity or
F-37
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDERS' EQUITY (CONTINUED)
any sale, covenance or other disposition of the assets of the Company as an
entirety or substantially as an entirety; (iii) the achievement by the Company
of $100,000,000 in annual sales or (iv) the expiration of the Company's right of
first refusal with respect to the founder's common stock.
STOCKHOLDER AND VOTING AGREEMENT
The Company has an agreement with Netscape, which along with certain
stockholder rights, provides Netscape with the right and option to acquire
substantially all of the outstanding stock, of the Company at fair market value,
if the Company has not completed an underwritten initial public offering of
shares on or before February 12, 2000, or if, prior to that date, the board of
directors of the Company approves the selection of an investment banking firm
for the purpose of serving as lead manager of the Company's initial public
offering, holders of Series A preferred stock may elect not to sell their shares
in connection with such a transaction (see Note 8).
NOTE RECEIVABLE, STOCKHOLDER
In July 1996, the Company issued a full recourse promissory note in the
original principal amount of $150,000 to a founder. The note bears interest at
6.36% per annum and is payable in installments of $50,000 in principal, plus any
accrued but unpaid interest, on each of July 9, 1998, 2000 and 2002.
WARRANTS
In July 1996, the Company issued a warrant to Netscape to purchase up to
50.5% of the total number of shares of authorized capital stock of the Company,
as amended from time to time. The exercise price for each warrant share is equal
to the fair market value of one share of the Company's common stock on the
exercise date, as determined by the Company's board of directors. The warrant
may be exercised by the holder, in whole or in part, at any time or from
time-to-time until the first to occur of (i) the acquisition by the warrant
holder of all of the outstanding equity securities of the Company pursuant to
the Stockholder and Voting Agreement or (ii) upon the closing of a firm
commitment underwritten initial public offering of the Company's common stock
with respect to which the stockholder has declined to exercise its right to
effect an IPO Buyout, as defined therein. The number of shares purchasable under
the warrant and the exercise price are subject to adjustment in the event, among
other things, of a capital reorganization of the Company or business
combination. The Company has reserved 15,277,778 shares for issuance pursuant to
this warrant (see Note 8).
STOCK OPTION PLAN
During 1996, the board of directors of the Company adopted, and the
stockholders approved, the 1996 Stock Option Plan (the "1996 Plan"), which
provides for the grant of incentive stock options and nonstatutory stock options
to employees and consultants of the Company at prices ranging from 85% to 110%
(depending on the type of grant) of the fair market value of the common stock on
the date of grant as determined by the board of directors. The vesting and
exercise provisions of the option grants are determined by the board of
directors. Options expire no later than 10 years from the date of grant.
Options granted are immediately exercisable, and the shares of common stock
issued to employees upon exercise are subject to repurchase, at the original
purchase price, by the Company, at the
F-38
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDERS' EQUITY (CONTINUED)
discretion of the Company, upon the termination of the individual's employment
or consultancy with the Company. The Company's repurchase right expires
generally at the rate of 25% of the original grant, commencing 12 months after
the date of grant or employment, and in monthly increments over the following 36
months.
STOCK OPTION PLAN
A summary of activity under the 1996 Plan is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES -----------------------------------
AVAILABLE NUMBER OF EXERCISE AGGREGATE
FOR GRANT SHARES PRICE PRICE
------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Shares reserved.............................. 10,965,000 -- -- $ --
Options granted.............................. (4,930,000) 4,930,000 $ 0.10 493,000
Options canceled............................. -- -- -- --
Options exercised............................ -- -- -- --
------------ ---------- ----- ----------
Balance at December 31, 1996................. 6,035,000 4,930,000 $ 0.10 $ 493,000
------------ ---------- ----- ----------
------------ ---------- ----- ----------
</TABLE>
The weighted-average per share fair value of options and common stock
granted to employees during 1996 was $0.01 and $0.08, respectively.
No options were exercised or repurchased during the period ended December
31, 1996. The Company has reserved 10,965,000 shares of common stock for
issuance under the Plan.
In the period ended December 31, 1996, the Company granted options, outside
of the 1996 Plan, to certain service providers to purchase 201,000 shares of
common stock at $0.10 per share. The options were recorded at the fair value of
the option at the date of grant ($4,020 in 1996). The options granted are
immediately exercisable and the resulting shares issued are subject to
repurchase by the Company, at the original purchase price, at the discretion of
the Company, upon the termination of the vendor's service with the Company. The
right expires generally at the rate of 25% of the original grant, commencing 12
months after the date of grant or first date of service, and in monthly
increments over the following 36 months.
No options outside of the 1996 Plan were exercised or repurchased during the
period ended December 31, 1996. At December 31, 1996, there were options to
purchase 201,000 shares outstanding outside of the 1996 Plan, of which none were
vested. The Company has reserved 423,888 shares of common stock for current and
future issuance to certain providers of technology and services.
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and accordingly,
recognizes no compensation expense for stock option grants to employees and
directors.
Companies that continue to apply APB 25 are required to disclose pro forma
results from operations as if the measurement provisions of SFAS 123 had been
adopted in their entirety. The pro forma disclosures include the effects of all
options to employees during the period ended December 31,
F-39
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDERS' EQUITY (CONTINUED)
1996. In management's opinion, existing stock option valuation models do not
provide a reliable single measure of the fair value of employee stock options
because such models were developed for traded options which have no vesting
provisions and are fully transferable. In addition, stock option pricing models
require the input of highly subjective assumptions, including the expected
future stock price volatility.
The fair value of options at the date of grant, estimated using the minimum
value method, contained the following weighted-average 10-year assumptions (in
thousands):
<TABLE>
<CAPTION>
1996
-----------
<S> <C>
Expected option term from vest date.............................................. 4 months
Interest rate.................................................................... 5.6%
Dividend yield................................................................... 0
</TABLE>
The remaining contractual life of options outstanding at December 31, 1996
was 9.89 years.
For purposes of pro forma disclosures, the estimated fair value of the
options and common stock awards is amortized to pro forma net loss over the
related vesting periods. Pro forma net loss for the period ended December 31,
1996 was $5,988,000.
6. INCOME TAXES
As of December 31, 1996, the Company had federal net operating loss
carryforwards of approximately $4,400,000. The Company also had federal research
and development tax credit carryforwards of approximately $100,000. The net
operating loss and credit carryforwards will expire at various dates in 2011, if
not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986. The annual limitation may result in the
expiration of net operating losses and credits before utilization.
As of December 31, 1996, the Company had deferred tax assets of
approximately $2,800,000 which have been fully offset by a valuation allowance.
Deferred tax assets relate primarily to net operating loss carryforwards,
research credits and capitalized research and development costs.
7. RELATED PARTY TRANSACTIONS
During 1996, the Company entered into short-term loan arrangements totaling
$500,000 with Netscape. The loans were due on demand, unsecured and bore
interest at 8%. The loans were repaid during 1996.
In addition, during 1996, the Company purchased equipment from two
stockholders totaling $76,000 (see Note 3).
8. SUBSEQUENT EVENTS
On March 19, 1997, the board of directors and stockholders approved an
amendment to the Amended and Restated Certificate of Incorporation (a) to reduce
the number of authorized shares of
F-40
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. SUBSEQUENT EVENTS (CONTINUED)
preferred stock to 7,777,777, (b) to increase the number of shares of common
stock reserved for issuance under the Company's 1996 Stock Option Plan to
10,965,000, and (c) to reduce the number of shares reserved for issuance to
certain providers of technology and services to 423,888. These changes have been
reflected in the accompanying financial statements and notes.
In January and February 1997, the board of directors granted options to
purchase 1,405,000 shares of common stock at $0.10 per share. In March, the
board of directors granted options to purchase 4,490,000 shares of common stock
at $0.50 per share, pursuant to the 1996 Plan.
On May 16, 1997, the Company signed the Agreement and Plan of Merger (the
"Agreement") with Network Computer, Inc. ("NCI"). In accordance with the
Agreement, NCI proposes to acquire all of the outstanding shares of capital
stock of the Company. The merger will become effective immediately upon approval
by the stockholders of the Company and satisfaction or waiver of all other
conditions precedent in the Agreement. The closing is expected to occur no later
than August 15, 1997. In addition, upon the effective date of the merger, the
Netscape warrant and the Company's Stockholder and Voting Agreement as described
in Note 5 will terminate.
On June 5, 1997, the Company signed a new employment agreement with a
founder that supersedes the agreement described in Note 4 and a previous
agreement signed on May 16, 1997. The June 5, 1997 employment agreement will
become effective upon the earlier of the consummation of the Agreement or the
exercise by the Company of its option in accordance with the Stock Option
Agreement (the "Option") with the founder and Netscape (the "Stockholders"). In
accordance with the Option and upon certain conditions, NCI may elect to pay
either in cash at a price of $2.00 per share or pay in NCI Series C preferred
stock in accordance with the Agreement for the purchase of the Company's stock.
The Option also prevents Netscape from exercising its warrant without prior
consent from NCI. The Option shall expire at the earliest of the effective date
or the termination of the Agreement.
F-41
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER JUNE 30,
31, 1996 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......................................... $ 8,152 $ 3,650
Short-term cash investments........................................ 2,033 1,014
Accounts receivable, net........................................... -- 396
Other current assets............................................... 174 474
----------- -----------
Total Current Assets............................................. 10,359 5,534
----------- -----------
PROPERTY AND EQUIPMENT, net.......................................... 1,290 1,690
OTHER ASSETS......................................................... 132 89
----------- -----------
Total Assets..................................................... $ 11,781 $ 7,313
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term note payable to stockholder............................. $ 51 $ 51
Accounts payable................................................... 316 824
Accrued compensation and related liabilities....................... 235 433
Deferred revenues.................................................. 675 2,427
Other accrued liabilities.......................................... 746 698
----------- -----------
Total Current Liabilities........................................ 2,023 4,433
----------- -----------
STOCKHOLDERS' EQUITY:
Series A Preferred stock; $.0001 par value......................... 1 1
Common stock; $.0001 par value..................................... 2 2
Paid in capital.................................................... 15,543 15,577
Note receivable from stockholder................................... (150) (184)
Deficit accumulated during the development stage................... (5,638) (12,516)
----------- -----------
Total Stockholders' Equity....................................... $ 9,758 $ 2,880
----------- -----------
Total Liabilities and Stockholders' Equity....................... $ 11,781 $ 7,313
----------- -----------
----------- -----------
</TABLE>
See notes to condensed financial statements.
F-42
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FROM INCEPTION
(FEBRUARY 12, 1996) SIX MONTHS ENDED
TO JUNE 30, 1996 JUNE 30, 1997
------------------- -----------------
<S> <C> <C>
REVENUES................................................................... $ -- $ 615
----- -------
OPERATING EXPENSES
Cost of revenues......................................................... -- 707
Sales and marketing...................................................... -- 1,757
Research and development................................................. 395 4,464
General and administrative............................................... 255 762
----- -------
Total Operating Expenses............................................... 650 7,690
----- -------
OPERATING LOSS............................................................. (650) (7,075)
Other income (expense), net.............................................. (4) 197
----- -------
NET LOSS................................................................... $ (654) $ (6,878)
----- -------
----- -------
</TABLE>
See notes to condensed financial statements.
F-43
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FROM INCEPTION
(FEBRUARY 12, 1996) SIX MONTHS ENDED
TO JUNE 30, 1996 JUNE 30, 1997
------------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................................................. $ (654) $ (6,878)
Adjustment to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization.......................................... -- 320
Changes in assets and liabilities:
Accounts receivable.................................................. -- (396)
Other assets......................................................... (420) (257)
Accounts payable..................................................... 160 508
Deferred revenues.................................................... -- 1,752
Other accrued liabilities............................................ 1,456 150
------ -------
Net cash provided by (used in) operating activities...................... 542 (4,801)
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments...................................... -- 2,093
Purchases of short-term investments.................................... -- (1,074)
Capital expenditures................................................... (425) (720)
------ -------
Net cash (used for) provided by investing activities..................... (425) 299
------ -------
Net increase in cash and cash equivalents................................ 117 (4,502)
CASH AND CASH EQUIVALENTS
Beginning of period...................................................... -- 8,152
------ -------
End of period............................................................ $ 117 $ 3,650
------ -------
------ -------
</TABLE>
See notes to condensed financial statements.
F-44
<PAGE>
NAVIO COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulations S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. For further information, refer to the December 31, 1996
audited financial statements and footnotes thereto included in this prospectus.
2. SUBSEQUENT EVENT
On August 11, 1997 the Company entered into an merger agreement (the
"agreement") with Liberate Technologies ("Liberate"), formally known as Network
Computer, Inc. Pursuant to the terms of the agreement, Liberate issued Series B
and C Preferred Stock and stock options to acquire all of the outstanding common
stock, preferred stock and stock options of the Company.
F-45
<PAGE>
LIBERATE TECHNOLOGIES AND NAVIO COMMUNICATIONS, INC.
PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(UNAUDITED)
On August 11, 1997, Liberate Technologies (the "Company" or "Liberate")
formally known as Network Computer, Inc., completed the acquisition of Navio
Communications, Inc. ("Navio"), a development stage company in the process of
developing internet application software. The acquisition of Navio has been
accounted for as a purchase. Accordingly, the results of operations of Navio
have been included in the consolidated statement of operations of Liberate
commencing on the date of acquisition.
The accompanying pro forma condensed combined statement of operations for
Liberate's fiscal year ended May 31, 1998 assumes that the acquisition took
place as of the beginning of fiscal 1998 and combines Navio's statement of
operations for the period from June 1, 1997 to the date of acquisition (August
11, 1997) with Liberate's consolidated statements of operations for the year
ended May 31, 1998. The pro forma condensed combined statement of operations for
the fiscal year ended May 31, 1998 does not include the effect of any
nonrecurring charges directly attributed to the acquisition.
The accompanying pro forma condensed combined financial statements should be
read in conjunction with the historical financial statements and related notes
thereto for both Liberate and Navio, which are included in this Prospectus.
F-46
<PAGE>
LIBERATE TECHNOLOGIES AND NAVIO COMMUNICATIONS, INC
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MAY 31, 1998 JUNE 1 - AUGUST 11, 1997 PRO FORMA PRO FORMA
LIBERATE NAVIO ADJUSTMENTS COMBINED
------------ ------------------------ -------------- ------------
<S> <C> <C> <C> <C>
REVENUES:
License and other................ $ 4,162 $ 55 $ -- $ 4,217
Service.......................... 6110 738 -- 6,848
------------ ------- -------------- ------------
Total revenue.................. 10,272 793 -- 11,065
------------ ------- -------------- ------------
COST OF REVENUES:
License and other................ 3,779 74 -- 3,853
Service.......................... 2,230 438 -- 2,668
------------ ------- -------------- ------------
Total cost of revenue.......... 6,009 512 -- 6,521
------------ ------- -------------- ------------
GROSS MARGIN....................... 4,263 281 -- 4,544
------------ ------- -------------- ------------
OPERATING EXPENSES:
Research and development......... 19,981 1,610 -- 21,591
Sales and marketing.............. 14,407 1,419 -- 15,826
General and administrative....... 2,453 380 -- 2,833
Amortization of purchased
intangible..................... 4,563 -- 1,517(b) 6,080
Restructuring charges............ 1,175 -- -- 1,175
Acquired in-process research and
development.................... 58,100 -- (58,100)(a) --
------------ ------- -------------- ------------
Total operating expenses....... 100,679 3,409 (56,583) 47,505
------------ ------- -------------- ------------
Loss from operations........... (96,416) (3,128) (42,961)
INTEREST AND OTHER INCOME
(EXPENSE), net................... 10 41 -- 51
------------ ------- -------------- ------------
LOSS BEFORE INCOME TAX BENEFIT..... (96,406) (3,087) (42,910)
INCOME TAX BENEFIT................. 2,015 -- (1,332)(c) 683
NET LOSS........................... $(94,391) $(3,087) $(42,227)
------------ ------- ------------
------------ ------- ------------
BASIC AND DILUTED NET LOSS PER
SHARE............................ ($1,780.96) $(796.74)(d)
SHARES USED TO IN COMPUTING BASIC
AND DILUTED NET LOSS PER SHARE... 53 53(d)
------------ ------------
------------ ------------
</TABLE>
F-47
<PAGE>
LIBERATE TECHNOLOGIES AND NAVIO COMMUNICATIONS, INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro forma
condensed combined statements of operations as described below:
(a) Eliminates the acquired in-process research and development expense for
approximately $58.1 million associated with the acquisition of Navio.
(b) Reflects amortization for 3 months of the excess of the purchase price over
the fair value of net assets acquired, which is being amortized over 3
years.
(c) Reflects a reduction in the estimated assumed income tax benefit received
from Oracle as a result of inclusion of Liberate's tax operating loss in
Oracles consolidated tax return prior to the acquisition of Navio.
(d) The pro forma basic and diluted net loss per share excludes the preferred
shares of Liberate issued in the acquisition as their inclusion would be
antidilutive.
NOTE 2. PURCHASE PRICE ALLOCATION
In connection with the acquisition, the Company issued Series B and C
convertible preferred stock and stock options to acquire Series C convertible
preferred stock in exchange for all of the outstanding common stock, preferred
stock and options to purchase shares of Navio common stock. The acquisition was
accounted for as a purchase and, accordingly, the results of operations of Navio
have been included in the consolidated financial statements commencing on the
date of acquisition. The fair market value of the equity securities issued in
the acquisition was approximately $77.1 million. In connection with the
acquisition, the Company wrote off approximately $58.1 million of acquired
in-process research and development which, in the opinion of management, had not
reached technological feasibility and had no alternative future use. The
purchased intangible of approximately $18.3 million was recorded and is being
amortized on a straight-line basis over a useful life of three years.
F-48
<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 the Company in connection
with the sale of common stock being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fees.
<TABLE>
<S> <C>
SEC registration fee............................................... $ 27,800
NASD fee........................................................... 10,500
Nasdaq National Market initial listing fee......................... 1,000
Printing and engraving.............................................
Legal fees and expenses of the Company.............................
Accounting fees and expenses.......................................
Directors and officers liability insurance.........................
Blue sky fees and expenses.........................................
Transfer agent fees................................................
Miscellaneous......................................................
---------
Total.......................................................... $
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's board of directors to grant indemnification 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
(the "Act"). Article VII of the Registrant's Bylaws provides for mandatory
indemnification of its directors and officers and permissible indemnification of
employees and other agents to the maximum extent permitted by the Delaware
General Corporation Law. The Registrant's Fifth Amended and Restated Certificate
of Incorporation provides that, pursuant to Delaware law, its directors shall
not be liable for monetary damages for breach of the directors' fiduciary duty
as directors to the Registrant and its stockholders. This provision in the Fifth
Amended and Restated Certificate of Incorporation does not eliminate the
directors' fiduciary duty, and in appropriate circumstances equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Registrant for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefit to
the director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. The Registrant has
entered into Indemnification Agreements with its officers and directors, a form
of which is attached as Exhibit 10.1 hereto and incorporated herein by
reference. The Indemnification Agreements provide the Registrant's officers and
directors with further indemnification to the maximum extent permitted by the
Delaware General Corporation Law. The Registrant maintains liability insurance
for its directors and officers. Reference is also made to Section of the
underwriting agreement contained in Exhibit 1.1 hereto, indemnifying officers
and directors of the Registrant against certain liabilities, and Section of
the Stockholders Agreement contained in Exhibit 10.21 hereto, indemnifying
certain of the Company's stockholders, including controlling stockholders,
against certain liabilities.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Since April 24, 1996 (inception), we have issued and sold the following
securities, none of which reflect the one-for-six reverse stock split to be
effected in June 1999:
1. On May 22, 1996, we issued and sold an aggregate of 100 shares of common
stock to Oracle.
2. On October 1, 1996, we issued and sold an aggregate of 14,166,650 shares
of our Series A preferred stock to Oracle in exchange for a $10 million
cash payment and the transfer of Oracle's network computer division to
us.
3. On July 23, 1997, we entered into a convertible note purchase agreement
with Oracle. During fiscal 1998, we issued 4,545,454 shares of Series A-1
preferred stock upon Oracle's conversion of $5 million outstanding under
this agreement.
4. On August 11, 1997, we issued an aggregate of 16,363,636 shares of our
Series A-1 preferred stock, 13,924,553 shares of our Series B preferred
stock and 38,399,450 shares of Series C preferred stock to Oracle and the
former stockholders of Navio pursuant to the agreement and plan of
merger.
5. On November 12, 1997, we issued a promissory note convertible into up to
an aggregate of 2,531,645 shares of our Series D preferred stock to
Middlefield Ventures for an aggregate consideration of $4,000,000.
6. We issued 7,870,755 shares of Series C preferred stock pursuant to
exercises of options, with exercise prices ranging from $.06 to $.28,
granted under the Navio 1996 Stock Option Plan.
7. We issued 121,584 shares of Series C preferred stock pursuant to
exercises of options, with exercise prices of $.06, granted pursuant to
Navio non-qualified option grants.
8. We issued 2,074,440 shares of Series A common stock pursuant to
exercises of options, with exercise prices ranging from $.10 to $1.25,
granted under the Liberate 1996 Stock Plan.
9. We issued 1,354,164 shares of Series A common stock pursuant to an
exercise of an option, with an exercise price of $.85, granted to David
J. Roux, our Chairman.
The issuances of the securities described in Items 15(a)(1) through 15(a)(5)
and 15(a)(9) were deemed to be exempt from registration under the Act in
reliance on Section 4(2) of such Act as transactions by an issuer not involving
any public offering. The issuances described in Items 15(a)(6) through 15(a)(8)
were deemed exempt from registration under the Act in reliance upon Rule 701
promulgated under the Act. In addition, 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 issued in such transactions. All recipients had adequate access,
through their relationships with the Registrant, to information about the
Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of underwriting agreement.
2.1 Agreement and Plan of Merger, dated May 16, 1997, between Liberate and Navio.
3.1 Fourth Amended and Restated Certificate of Incorporation of Liberate, as amended to date.
3.2* Form of Fifth Amended and Restated Certificate of Incorporation of Liberate to be filed after the
closing of the offering made pursuant to this Registration Statement.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
3.3* Bylaws of Liberate, as amended.
3.4* Amended and Restated Bylaws of Liberate.
4.1* Specimen Certificate of Liberate's common stock.
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to Liberate.
10.1* Form of Indemnification Agreement entered into between Liberate and its directors and executive
officers.
10.2 Network Computer, Inc. 1996 Stock Option Plan, and form of Option Agreement.
10.3 Navio Communications, Inc. 1996 Stock Option Plan and form of Option Agreement.
10.4 Navio Communications, Inc. 1996 Non-Qualified Option Plan, and form of Option Agreement.
10.5 1999 Equity Incentive Plan.
10.6 1999 Employee Stock Purchase Plan.
10.7 Employment Agreement between Liberate and Mitchell E. Kertzman, dated October 12, 1998.
10.8 Employment Agreement, dated October 17, 1997, with Wei Yen, as amended.
10.9 Settlement Agreement and Release of Claims, dated October 8, 1998, with Wei Yen.
10.10 Settlement Agreement and General Release of All Claims, dated March 16, 1998 between Jerry Baker,
Oracle and Liberate.
10.11 Employment letter between Liberate and Gordon Yamate, dated March 12, 1999.
10.12 Employment letter between Liberate and Jim Peterson, dated April 6, 1999.
10.13** OEM License Agreement, dated December 31, 1997, between Liberate and Wind River Systems, as amended.
10.14 Technology License Agreement, dated September 8, 1998, between Liberate and Oracle.
10.15 Letter Agreement, dated May 16, 1997, among Liberate, Oracle and Navio.
10.16 Source Code License Agreement, dated July 9, 1996, between Netscape and TVsoft, as amended.
10.17 OEM License Agreement, dated October 17, 1996, between Oracle and Netscape, as amended.
10.18* Cooperation Agreement, dated November 6, 1997, between Liberate and Intel, as amended.
10.19* Convertible Promissory Note, dated November 12, 1997, issued to Middlefield Ventures.
10.20* Convertible Promissory Note Purchase Agreement, dated November 12, 1997, entered into between Liberate
and Middlefield Ventures.
10.21 Stockholders Agreement, dated August 11, 1997, among Liberate and the investors named therein.
10.22* Admission Agreement, dated November 12, 1997, among Liberate and the investors named therein.
10.23 Sublease Agreement for Redwood Shores office space, dated September 17, 1997, between Liberate and
Oracle.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.24 Maintenance Agreement for Redwood Shores office space, dated September 17, 1997, between Liberate and
Oracle.
10.25 Furniture and Equipment Lease for Redwood Shores office space, dated September 17, 1997, between
Liberate and Oracle.
10.26 Sublease Agreement for Salt Lake City office space, dated September 17, 1997, between Liberate and
Oracle.
10.27 Letter Agreement for London office space, dated December , 1998, between Liberate and Oracle.
10.28 Lease Agreement for Sunnyvale office space, dated November 4, 1996, between Navio and Netscape.
10.29 Circle Star Lease Agreement for San Carlos office space, dated April 27, 1999.
10.30 Guaranty of Lease for San Carlos office space, dated April 27, 1999, between Circle Star Center
Associates and Oracle.
10.31 Tax Allocation and Indemnity Agreement, dated August 17, 1997, between Liberate and Oracle.
10.32* Network Computer, Inc. Stock Option Agreement, dated October 15, 1998, with David Roux.
10.33* Network Computer, Inc. Stock Option Agreement, dated October 15, 1998, with Mitchell Kertzman.
11.1* Statement regarding computation of loss per share.
21.1* Subsidiaries of Liberate.
23.1 Consent of Independent Public Accountants, Arthur Andersen LLP (see page II-7).
23.2* Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to Liberate.
Reference is made to Exhibit 5.1.
23.3 Consent of Ernst & Young LLP, Independent Auditors (see page II-8).
24.1 Power of Attorney (see page II-6).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be supplied by amendment.
** Confidential treatment requested as to certain portions of these exhibits.
(b) FINANCIAL STATEMENT SCHEDULE
Schedule II--Valuations and Qualifying Accounts
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 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 Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the Delaware General Corporation Law,
II-4
<PAGE>
the Amended and Restated Certificate of Incorporation or the Bylaws of the
Registrant, Indemnification Agreements entered into between the Registrant and
its officers and directors, the underwriting agreement, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of 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 Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, 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 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 Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California, on this 19th day of May, 1999.
<TABLE>
<S> <C> <C>
LIBERATE TECHNOLOGIES
By: /s/ MITCHELL E. KERTZMAN
-----------------------------------------
Mitchell E. Kertzman
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Mitchell E. Kertzman and Nancy J. Hilker,
and each of them, his or her true and lawful attorneys-in-fact and agents with
full power of substitution, for him or her and in his or her name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any
registration statement for the same offering covered by this Registration
Statement that is to be effective on filing pursuant to Rule 462(b) promulgated
under the Securities Act of 1933, and all post-effective amendments thereto, and
to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or her or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<C> <S> <C>
/s/ MITCHELL E. KERTZMAN President, Chief Executive
- ------------------------------ Officer and Director May 19, 1999
Mitchell E. Kertzman (Principal Executive Officer)
/s/ DAVID J. ROUX
- ------------------------------ Chairman May 19, 1999
David J. Roux
Vice President and Chief
/s/ NANCY J. HILKER Financial Officer (Principal
- ------------------------------ Financial and Accounting May 19, 1999
Nancy J. Hilker Officer)
/s/ JAMES L. BARKSDALE
- ------------------------------ Director May 19, 1999
James L. Barksdale
</TABLE>
II-6
<PAGE>
<TABLE>
<C> <S> <C>
/s/ CHARLES CORFIELD
- ------------------------------ Director May 19, 1999
Charles Corfield
/s/ LAWRENCE J. ELLISON
- ------------------------------ Director May 19, 1999
Lawrence J. Ellison
/s/ JEFFREY O. HENLEY
- ------------------------------ Director May 19, 1999
Jeffrey O. Henley
</TABLE>
II-7
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made part of this
registration statement and prospectus.
/S/ ARTHUR ANDERSEN LLP
San Jose, California
May 19, 1999
II-8
<PAGE>
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent the reference to our firm under the caption "Experts" and to the
use of our report dated March 6, 1997 (except for Note 8 as to which the date is
June 5, 1997), with respect to the financial statements of Navio Communications,
Inc. as of December 31, 1996 and for the period from inception (February 12,
1996) to December 31, 1996 included in the Registration Statement (Form S-1) and
related Prospectus of Liberate Technologies for the registration of
shares of its common stock.
/s/ ERNST & YOUNG LLP
Palo Alto, California
May 19, 1999
II-9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Stockholders of
Liberate Technologies, Inc. (formerly Network Computer, Inc.):
We have audited in accordance with generally accepted auditing standards,
the financial statements of Liberate Technologies, Inc. (a Delaware corporation,
formerly known as Network Computer, Inc.) and subsidiaries included in this
registration statement and have issued our report thereon dated April 8, 1999.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying schedule listed in the
index of financial statements is presented for purposes of complying with the
Securities and Exchange Commissions rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
San Jose, California
April 8, 1999
II-10
<PAGE>
LIBERATE TECHNOLOGIES, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DEDUCTIONS,
BALANCE AT ADDITIONS- RETURNS AND BALANCE AT
DESCRIPTION BEGINNING OF YEAR PROVISIONS WRITE-OFFS END OF YEAR
- --------------------------------------------------------- --------------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ending May 31, 1998............................... $ 1 $ 329 $ 52 $ 278
Year ending May 31, 1997............................... -- 1 -- 1
</TABLE>
II-11
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. EXHIBIT NUMBERED PAGE
- --------- ------------------------------------------------------------------------------------------ -------------
<C> <S> <C>
1.1* Form of underwriting agreement.
2.1 Agreement and Plan of Merger, dated May 16, 1997, between Liberate and Navio.
3.1 Fourth Amended and Restated Certificate of Incorporation of Liberate, as amended to date.
3.2* Form of Fifth Amended and Restated Certificate of Incorporation of Liberate to be filed
after the closing of the offering made pursuant to this Registration Statement.
3.3* Bylaws of Liberate, as amended.
3.4* Amended and Restated Bylaws of Liberate.
4.1* Specimen Certificate of Liberate's common stock.
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to
Liberate.
10.1* Form of Indemnification Agreement entered into between Liberate and its directors and
executive officers.
10.2 Network Computer, Inc. 1996 Stock Option Plan, and form of Option Agreement.
10.3 Navio Communications, Inc. 1996 Stock Option Plan and form of Option Agreement.
10.4 Navio Communications, Inc. 1996 Non-Qualified Option Plan, and form of Option Agreement.
10.5 1999 Equity Incentive Plan.
10.6 1999 Employee Stock Purchase Plan.
10.7 Employment Agreement between Liberate and Mitchell E. Kertzman, dated October 12, 1998.
10.8 Employment Agreement, dated October 17, 1997, with Wei Yen, as amended.
10.9 Settlement Agreement and Release of Claims, dated October 8, 1998, with Wei Yen.
10.10 Settlement Agreement and General Release of All Claims, dated March 16, 1998 between Jerry
Baker, Oracle and Liberate.
10.11 Employment letter between Liberate and Gordon Yamate, dated March 12, 1999.
10.12 Employment letter between Liberate and Jim Peterson, dated April 6, 1999.
10.13** OEM License Agreement, dated December 31, 1997, between Liberate and Wind River Systems,
as amended.
10.14 Technology License Agreement, dated September 8, 1998, between Liberate and Oracle.
10.15 Letter Agreement, dated May 16, 1997, among Liberate, Oracle and Navio.
10.16 Source Code License Agreement, dated July 9, 1996, between Netscape and TVsoft, as
amended.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. EXHIBIT NUMBERED PAGE
- --------- ------------------------------------------------------------------------------------------ -------------
<C> <S> <C>
10.17 OEM License Agreement, dated October 17, 1996, between Oracle and Netscape, as amended.
10.18* Cooperation Agreement, dated November 6, 1997, between Liberate and Intel, as amended.
10.19* Convertible Promissory Note, dated November 12, 1997, issued to Middlefield Ventures.
10.20* Convertible Promissory Note Purchase Agreement, dated November 12, 1997, entered into
between Liberate and Middlefield Ventures.
10.21 Stockholders Agreement, dated August 11, 1997, among Liberate and the investors named
therein.
10.22* Admission Agreement, dated November 12, 1997, among Liberate and the investors named
therein.
10.23 Sublease Agreement for Redwood Shores office space, dated September 17, 1997, between
Liberate and Oracle.
10.24 Maintenance Agreement for Redwood Shores office space, dated September 17, 1997, between
Liberate and Oracle.
10.25 Furniture and Equipment Lease for Redwood Shores office space, dated September 17, 1997,
between Liberate and Oracle.
10.26 Sublease Agreement for Salt Lake City office space, dated September 17, 1997, between
Liberate and Oracle.
10.27 Letter Agreement for London office space, dated December , 1998, between Liberate and
Oracle.
10.28 Lease Agreement for Sunnyvale office space, dated November 4, 1996, between Navio and
Netscape.
10.29 Circle Star Lease Agreement for San Carlos office space, dated April 27, 1999.
10.30 Guaranty of Lease for San Carlos office space, dated April 27, 1999, between Circle Star
Center Associates and Oracle.
10.31 Tax Allocation and Indemnity Agreement, dated August 17, 1997, between Liberate and
Oracle.
10.32* Network Computer, Inc. Stock Option Agreement, dated October 15, 1998, with David Roux.
10.33* Network Computer, Inc. Stock Option Agreement, dated October 15, 1998, with Mitchell
Kertzman.
11.1* Statement regarding computation of loss per share.
21.1* Subsidiaries of Liberate.
23.1 Consent of Independent Public Accountants, Arthur Andersen LLP (see page II-7).
23.2* Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to
Liberate. Reference is made to Exhibit 5.1.
23.3 Consent of Ernst & Young LLP, Independent Auditors (see page II-8).
24.1 Power of Attorney (see page II-6).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be supplied by amendment.
** Confidential treatment requested as to certain portions of these exhibits.
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
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ARTICLE I - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Effective Time of Merger. . . . . . . . . . . . . . . . . . . 1
Section 1.2 Effect of Merger. . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3 Capital Stock of Surviving Corporation. . . . . . . . . . . . 2
Section 1.4 Conversion or Cancellation of NAVIO CAPITAL STOCK . . . . . . 2
SECTION 1.5 NAVIO OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.6 No Fractional Interests . . . . . . . . . . . . . . . . . . . 4
Section 1.7 Issuance and Delivery of Merger Securities. . . . . . . . . . 4
Section 1.8 Stock Transfer Books. . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF NAVIO . . . . . . . . . . . . . 4
Section 2.1 Corporate Organization. . . . . . . . . . . . . . . . . . . . 4
Section 2.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.3 No Other Agreements . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4 Authorization; Execution and Delivery . . . . . . . . . . . . 5
Section 2.5 Governmental Approvals and Filings. . . . . . . . . . . . . . 6
Section 2.6 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.7 Financial Statements; Absence of Undisclosed Liabilities. . . 7
Section 2.8 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . 7
Section 2.9 Contracts and Commitments . . . . . . . . . . . . . . . . . . 7
Section 2.10 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 9
Section 2.11 Employee Matters . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.12 Employee Benefit Plans . . . . . . . . . . . . . . . . . . .10
Section 2.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 2.14 Intellectual Property. . . . . . . . . . . . . . . . . . . .13
Section 2.15 Environmental Matters. . . . . . . . . . . . . . . . . . . .16
Section 2.16 Interests of Officers and Directors. . . . . . . . . . . . .16
Section 2.17 Title to Properties; Absence of Liens and Encumbrances . . .16
Section 2.18 Governmental Authorizations and Licenses . . . . . . . . . .16
Section 2.19 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 2.20 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 2.21 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . .17
Section 2.22 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF NCI. . . . . . . . . . . . . .17
Section 3.1 Corporate Organization. . . . . . . . . . . . . . . . . . . .17
Section 3.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . .18
Section 3.3 No Other Agreements . . . . . . . . . . . . . . . . . . . . .18
Section 3.4 Authorization; Execution and Delivery . . . . . . . . . . . .18
Section 3.5 Governmental Approvals and Filings. . . . . . . . . . . . . .19
Section 3.6 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 3.7 Financial Statements; Absence of Undisclosed Liabilities. . .19
Section 3.8 Absence of Changes. . . . . . . . . . . . . . . . . . . . . .20
<PAGE>
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Section 3.9 Contracts and Commitments . . . . . . . . . . . . . . . . . .20
Section 3.10 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .22
Section 3.11 Employee Matters . . . . . . . . . . . . . . . . . . . . . .22
Section 3.12 Employee Benefit Plans . . . . . . . . . . . . . . . . . . .22
Section 3.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Section 3.14 Intellectual Property. . . . . . . . . . . . . . . . . . . .26
Section 3.15 Environmental Matters. . . . . . . . . . . . . . . . . . . .28
Section 3.16 Interests of Officers and Directors. . . . . . . . . . . . .28
Section 3.17 Title to Properties; Absence of Liens and Encumbrances . . .29
Section 3.18 Governmental Authorizations and Licenses . . . . . . . . . .29
Section 3.19 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . .29
Section 3.20 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . .29
Section 3.21 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . .29
ARTICLE IV - COVENANTS OF NAVIO. . . . . . . . . . . . . . . . . . . . . . . .30
Section 4.1 Regular Course of Business. . . . . . . . . . . . . . . . . .30
Section 4.2 Restricted Activities and Transactions. . . . . . . . . . . .30
Section 4.3 Taxes; Consent. . . . . . . . . . . . . . . . . . . . . . . .30
Section 4.4 Negotiation With Others . . . . . . . . . . . . . . . . . . .31
Section 4.5 Put/Call Agreement. . . . . . . . . . . . . . . . . . . . . .31
Section 4.6 Stockholder Agreement . . . . . . . . . . . . . . . . . . . .31
Section 4.7 Stockholder Approval. . . . . . . . . . . . . . . . . . . . .31
Section 4.8 Documents Delivered to Stockholders . . . . . . . . . . . . .32
Amendment to Certificate of Incorporation . . . . . . . . . . . . . . . .32
Section 4.9. Amendment to Certificate of Incorporation. . . . . . . . . .32
Section 4.10 Stockholder Approval of Excess Parachute Payments. . . . . .32
ARTICLE V - COVENANTS OF NCI . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 5.1 Regular Course of Business. . . . . . . . . . . . . . . . . .32
Section 5.2 Restricted Activities and Transactions. . . . . . . . . . . .32
Section 5.3 Documents Delivered to Stockholders . . . . . . . . . . . . .33
Section 5.4 Indemnification of Navio Directors and Officers . . . . . . .33
Section 5.5 Negotiation With Others. . . . . . . . . . . . . . . . . . .33
Section 5.6 Restated Certificate of Incorporation . . . . . . . . . . . .34
Section 5.7 Carve Out From Covenants. . . . . . . . . . . . . . . . . . .34
ARTICLE VI - MUTUAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . .34
Section 6.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . .34
Section 6.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 6.3 Public Announcements. . . . . . . . . . . . . . . . . . . . .34
Section 6.4 Agreements to Cooperate . . . . . . . . . . . . . . . . . . .34
Section 6.5 State Statutes. . . . . . . . . . . . . . . . . . . . . . . .35
Section 6.6 Fairness Hearing and Permit . . . . . . . . . . . . . . . . .35
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Section 6.7 Additional Agreements . . . . . . . . . . . . . . . . . . . .35
Section 6.8 HSR Act Filing. . . . . . . . . . . . . . . . . . . . . . . .35
Section 6.9 Dividends and Distributions; Repurchases. . . . . . . . . . .36
Section 6.10 Consents, Approvals and Filings. . . . . . . . . . . . . . .36
Section 6.11 Access to Records and Properties . . . . . . . . . . . . . .37
Section 6.12 Reorganization . . . . . . . . . . . . . . . . . . . . . . .37
Section 6.13 Employee Benefits. . . . . . . . . . . . . . . . . . . . . .37
ARTICLE VII - CONDITIONS TO THE OBLIGATIONS OF THE PARTIES . . . . . . . . . .37
Section 7.1 Stockholder Approval. . . . . . . . . . . . . . . . . . . . .37
Section 7.2 HSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Section 7.3 No Injunctions or Restraints; Illegality. . . . . . . . . . .37
ARTICLE VIII - CONDITIONS TO THE OBLIGATIONS OF NCI. . . . . . . . . . . . . .38
Section 8.1 Performance of Covenants. . . . . . . . . . . . . . . . . . .38
Section 8.2 No Governmental or Other Proceeding or Litigation . . . . . .38
Section 8.3 Approvals and Consents. . . . . . . . . . . . . . . . . . . .38
Section 8.4 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . .39
Section 8.5 Certificate . . . . . . . . . . . . . . . . . . . . . . . . .39
Section 8.6 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . .39
Section 8.7 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . .39
Section 8.8 FIRPTA. . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Section 8.9 Put/Call and Voting Agreement . . . . . . . . . . . . . . . .39
Section 8.10 Stockholders Agreements. . . . . . . . . . . . . . . . . . .39
Section 8.11 Fairness Hearing and Permit. . . . . . . . . . . . . . . . .39
Section 8.12 Netscape Warrant; Navio Stockholder Agreement . . . . . . .39
Section 8.13 Representations and Warranties . . . . . . . . . . . . . . .40
Section 8.14. Amendment to Certificate of Incorporation . . . . . . . . .40
ARTICLE IX - CONDITIONS TO NAVIO'S OBLIGATIONS . . . . . . . . . . . . . . . .40
Section 9.1 Performance of Covenant . . . . . . . . . . . . . . . . . . .40
Section 9.2 No Governmental or Other Proceeding or Litigation . . . . . .40
Section 9.3 Approvals and Consents. . . . . . . . . . . . . . . . . . . .40
Section 9.4 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . .41
Section 9.5 Certificates. . . . . . . . . . . . . . . . . . . . . . . . .41
Section 9.6 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . .41
Section 9.7 Fairness Hearing and Permit . . . . . . . . . . . . . . . . .41
Section 9.8 Representations and Warranties. . . . . . . . . . . . . . . .41
Section 9.9 Restated Certificate of Incorporation . . . . . . . . . . . .41
Section 9.10 Stockholders Agreement and Put/Call and Voting Agreement . .41
ARTICLE X - [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
ARTICLE XI - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Section 11.1 Termination and Abandonment. . . . . . . . . . . . . . . . .42
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Section 11.2 Effect of Termination. . . . . . . . . . . . . . . . . . . .43
ARTICLE XII - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . .43
Section 12.1 Amendment and Modification . . . . . . . . . . . . . . . . .43
Section 12.2 Waiver of Compliance . . . . . . . . . . . . . . . . . . . .43
Section 12.3 No Survival of Representations and Warranties. . . . . . . .43
Section 12.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . .43
Section 12.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . .44
Section 12.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . .44
Section 12.7 Parties in Interest. . . . . . . . . . . . . . . . . . . . .45
Section 12.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . .45
Section 12.9 Headings and References. . . . . . . . . . . . . . . . . . .45
Section 12.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . . .45
Section 12.11 Severability. . . . . . . . . . . . . . . . . . . . . . . .45
Section 12.12 Other Remedies. . . . . . . . . . . . . . . . . . . . . . .45
Section 12.13 Further Assurances. . . . . . . . . . . . . . . . . . . . .45
Section 12.14 Mutual Drafting . . . . . . . . . . . . . . . . . . . . . .45
EXHIBITS
- --------
<S> <C>
Exhibit 1.7 Procedures for Issuing Merger Securities
Exhibit 4.5 Put/Call and Voting Agreement
Exhibit 4.6 Stockholder Agreement
Exhibit 4.9 NAVIO Certificate of Amendment
Exhibit 5.6 NCI Restated Certificate of Incorporation
Exhibit 8.4 Opinion of Gunderson, Dettmer, Stough, Villeneuve, Franklin & Hachigian, LLP
Exhibit 9.4 Opinion of Venture Law Group
SCHEDULES
- ---------
Schedule 5.4 List of Indemnification Agreements between NAVIO and its Directors
Schedule 8.3 Consents to be obtained by NAVIO
Schedule 9.3 Consents to be obtained by NCI
</TABLE>
-iv-
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("AGREEMENT") is entered into as of May
__, 1997, among Network Computer, Inc., a Delaware corporation ("NCI"), and
NAVIO COMMUNICATIONS, INC., a Delaware corporation ("NAVIO").
BACKGROUND
ORACLE CORPORATION, A DELAWARE CORPORATION ("ORACLE") and the Boards of
Directors of NCI and NAVIO have approved and adopted this Agreement pursuant to
which NCI and NAVIO will combine their operations by means of a merger of NAVIO
with and into NCI (the "MERGER") under the Delaware General Corporation Law (the
"DGCL"). The Merger is intended to qualify for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "CODE").
The parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 EFFECTIVE TIME OF MERGER. As soon as practicable after each
condition to the obligations of NCI and NAVIO hereunder has been satisfied or
waived (but in any event within two business days of such time), a Certificate
of Merger in form reasonably satisfactory to the parties (the "MERGER
CERTIFICATE") will be properly completed, executed and delivered for filing to
the Secretary of State of the State of Delaware as provided in the DGCL. The
Merger will become effective upon the filing of the Merger Certificate or such
later time specified in the Merger Certificate (the "EFFECTIVE TIME").
Immediately prior to the filing of the Merger Certificate, a closing (the
"CLOSING") will be held at the offices of Venture Law Group, 2800 Sand Hill
Road, Menlo Park, California. The date on which the Closing shall occur is
referred to herein as the "CLOSING DATE."
Section 1.2 EFFECT OF MERGER. At the Effective Time:
(a) NAVIO will be merged with and into NCI. NCI will be the
surviving corporation (the "SURVIVING CORPORATION") in the Merger, and the
separate existence and corporate organization of NAVIO will cease. NCI, as the
Surviving Corporation, will succeed, insofar as permitted by law, to all rights,
assets, liabilities and obligations of NAVIO in accordance with the DGCL.
(b) The Certificate of Incorporation of NCI will be the Certificate
of Incorporation of the Surviving Corporation and the Bylaws of NCI will be the
Bylaws of the Surviving Corporation, each until amended as provided by law.
(c) The directors of NCI will be the initial directors of the
Surviving Corporation at and after the Effective Time, each to hold office in
accordance with the Certificate
<PAGE>
of Incorporation and Bylaws of the Surviving Corporation, and the officers of
NCI immediately prior to the Effective Time will be the initial officers of
the Surviving Corporation at and after the Effective Time, in each case until
their respective successors are duly elected or appointed and qualified.
(d) Prior to the Effective Time, NCI will take all necessary
corporate action to cause the following persons to comprise the Board of the
Directors of NCI at the Effective Time, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of NCI: four persons designated by
ORACLE; JERRY BAKER; WEI YEN; and one person designated by NETSCAPE
COMMUNICATIONS CORPORATION, A DELAWARE CORPORATION ("NETSCAPE"). NCI shall also
take all necessary corporate action to cause JERRY BAKER to be appointed as
Chief Executive Officer of NCI and for WEI YEN to be appointed as President of
NCI, in each case effective at the Effective Time and in each case until their
respective successors are duly elected or appointed and qualified.
Section 1.3 CAPITAL STOCK OF SURVIVING CORPORATION. Following the
Effective Time, all issued and outstanding shares of capital stock of NCI will
continue to be fully paid and nonassessable shares of capital stock of the
Surviving Corporation. Each certificate of NCI evidencing ownership of any such
shares will continue to evidence ownership of the same number and type of shares
of capital stock of the Surviving Corporation.
Section 1.4 CONVERSION OR CANCELLATION OF NAVIO CAPITAL STOCK. At the
Effective Time:
(a) (i) Each share of Series A Preferred Stock of NAVIO ("NAVIO
SERIES A PREFERRED STOCK") issued and outstanding immediately prior to the
Effective Time (other than any shares canceled or retired pursuant to Section
1.4(b) and other than Dissenting Shares (as defined below)) will cease to be
outstanding and will be converted into that number of shares of Series B
Preferred Stock of NCI, $0.001 par value per share ("NCI SERIES B STOCK"), equal
to the Preferred Stock Exchange Amount. The "PREFERRED STOCK EXCHANGE AMOUNT"
shall equal the Total Number of Shares of NCI Series B Stock (as defined below)
divided by the number of shares of NAVIO Series A Preferred Stock issued and
outstanding at the Effective Time.
(ii) Each share of Common Stock of NAVIO ("NAVIO COMMON STOCK")
issued and outstanding immediately prior to the Effective Time (other than any
shares canceled or retired pursuant to Section 1.4(b) and other than Dissenting
Shares (as defined below)) will cease to be outstanding and will be converted
into that number of shares of Series C Preferred Stock of NCI, $0.001 par value
per share ("NCI SERIES C STOCK"), equal to the Common Stock Exchange Amount. The
"COMMON STOCK EXCHANGE AMOUNT" shall equal the Total Number of Shares of NCI
Series C Stock (as defined below) divided by the total of (a) the number of
shares of NAVIO Common Stock issued and outstanding at the Effective Time and
(b) the number of shares of NAVIO Common Stock issuable upon exercise of options
and warrants issued and outstanding at the Effective Time.
(iii) The "TOTAL NUMBER OF SHARES OF NCI SERIES B STOCK" plus
the "TOTAL NUMBER OF SHARES OF NCI SERIES C STOCK" shall equal 40% of the fully
diluted shares of
-2-
<PAGE>
capital stock of NCI as of the Effective Time, assuming conversion of all
convertible securities of NCI (INCLUDING 16,363,636 SHARES OF NCI SERIES A-1
PREFERRED STOCK ISSUABLE TO ORACLE AS CONTEMPLATED IN SCHEDULE 3.2 TO THE NCI
DISCLOSURE SCHEDULE AND EXCLUDING ALL OTHER SHARES OF SERIES A-1 PREFERRED
STOCK), and the exercise of all outstanding options to acquire shares of NCI
capital stock, assuming that the shares of NCI Series B Stock and NCI Series
C Stock are outstanding (the "FULLY DILUTED NCI SHARES"). The ratio of the
"TOTAL NUMBER OF SHARES OF NCI SERIES B STOCK" to the "TOTAL NUMBER OF SHARES
OF NCI SERIES C STOCK" shall equal the ratio of the number of shares of NAVIO
Series A Preferred Stock issued and outstanding at the Effective Time to the
total of (a) the number of shares of NAVIO Common Stock issued and
outstanding at the Effective Time and (b) the number of shares of NAVIO
Common Stock issuable upon exercise of options and warrants issued and
outstanding at the Effective Time.
(b) Each share of NAVIO capital stock which, immediately prior to the
Effective Time, was issued and held in the treasury of NAVIO or was issued and
outstanding and held by NAVIO or any direct or indirect wholly-owned subsidiary
of NAVIO will be canceled or retired and no issuance of NCI Series B Stock or
NCI Series C Stock (collectively, "MERGER SECURITIES") or other payment will be
made with respect thereto.
(c) Notwithstanding anything in this Agreement to the contrary,
shares of NAVIO capital stock which are dissenting shares (as defined in the
DGCL, or alternatively, the California General Corporation Law (the "CGCL"), to
the extent that NAVIO is determined to be a foreign corporation contemplated by
Section 2115 of the CGCL) or which remain eligible at the Effective Time to
become dissenting shares (collectively, "DISSENTING SHARES") will not be
converted into or represent a right to receive any Merger Securities, but the
holders thereof will be entitled only to such rights as are granted by the DGCL
or the CGCL, as the case may be. Each holder of Dissenting Shares who becomes
entitled to payment therefor pursuant to the DGCL or CGCL will receive payment
from the Surviving Corporation in accordance with the DGCL or CGCL, as the case
may be. NAVIO will give NCI prompt notice of any written demands for purchase
and any other instruments served pursuant to either the DGCL or CGCL and will
cooperate with NCI in any negotiations or proceedings with respect to demands
for purchase under such laws. NAVIO will not, without the written consent of
NCI, voluntarily make any payment with respect to any demands for purchase or
offer to settle or settle any such demands.
Section 1.5 NAVIO OPTIONS. At the Effective Time, all NAVIO Options (as
defined in Section 2.2 below) outstanding at the Effective Time will, by virtue
of the Merger and without any further action on the part of NAVIO or the holder
of any such option, be assumed by NCI and each such option assumed by NCI will
be exercisable upon the same terms and conditions as under the existing
agreements covering such option, except that (i) each such option will be
exercisable for that whole number of shares of NCI Series C Stock (rounded to
the nearest whole share) into which the number of shares of NAVIO Common Stock
subject to such option immediately prior to the Effective Time would be
converted under Section 1.4(a), and (ii) the exercise price per share of NCI
Series C Stock will be an amount equal to the exercise price per share of NAVIO
Common Stock subject to such option in effect immediately prior to the Effective
Time divided by the Common Stock Exchange Amount (the exercise price per share,
as so
-3-
<PAGE>
determined, being rounded upward to the nearest full cent). From and after
the Effective Time, all references to NAVIO in any agreements covering such
options will be deemed to refer to NCI. The assumption of NAVIO Options
under this Section 1.5 is intended to constitute an assumption of stock
options in a transaction to which Section 424(a) of the Code applies, and
this Section 1.5 shall be interpreted and applied in a manner consistent with
such intent.
Section 1.6 NO FRACTIONAL INTERESTS. Neither certificates nor scrip for
fractional interests in the Merger Securities issued pursuant to Section 1.4(a)
hereof will be issued, but in lieu thereof each holder of shares of NAVIO
capital stock who would otherwise have been entitled pursuant to Section 1.4(a)
hereof to a fraction of a share of NCI Series B Stock will be paid an amount in
cash equal to such fraction multiplied by $1.10.
Section 1.7 ISSUANCE AND DELIVERY OF MERGER SECURITIES. The issuance
and delivery of the Merger Securities shall take place in accordance with the
procedures set forth in EXHIBIT 1.7 hereto.
Section 1.8 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of NAVIO will be closed and no transfer of NAVIO capital stock
will thereafter be made.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF NAVIO
As of the date hereof and as of the Closing Date, except as disclosed in a
document referring specifically to the relevant subsections of this Article II
which is delivered by NAVIO to NCI prior to execution of this Agreement (the
"NAVIO DISCLOSURE SCHEDULE"), NAVIO hereby represents and warrants to NCI as
follows:
Section 2.1 CORPORATE ORGANIZATION. NAVIO is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority and all
necessary governmental authorizations to own, lease and operate its properties
and to conduct its business as it is now being conducted, except to the extent
that the failure to obtain such governmental consents would not have a material
adverse effect on NAVIO's Business (as defined below). NAVIO has no
subsidiaries. NAVIO is duly qualified or licensed to do business and is in good
standing as a foreign corporation in each state or other jurisdiction in which
the nature of its business or operations or ownership of its property requires
such qualification or licensing, except where the failure to be so qualified or
licensed would not, individually or in the aggregate, have a material adverse
effect on the condition (financial or otherwise), business, properties, assets
or results of operations of NAVIO (collectively, "NAVIO'S BUSINESS"). The
minute books of NAVIO, as made available to NCI, contain complete and accurate
records of any and all corporate action material to NAVIO's Business taken by
NAVIO since its date of incorporation. NAVIO has no direct or indirect interest
in or loans to any partnership, corporation, joint venture, business association
or other entity. NAVIO has delivered to NCI complete and correct copies of the
Certificate of Incorporation and Bylaws of NAVIO as amended to the date hereof.
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Section 2.2 CAPITAL STRUCTURE. The authorized capital stock of NAVIO
consists of 55,555,555 shares of Common Stock, $.0001 par value ("NAVIO COMMON
STOCK"), 7,777,777 shares of Preferred Stock, all of which are designated Series
A Preferred Stock. There are issued and outstanding as of the date of this
Agreement 21,111,112 shares of NAVIO Common Stock and 7,777,777 shares of
Series A Preferred Stock. There are outstanding options to purchase 10,820,000
shares of NAVIO Common Stock (the "NAVIO OPTIONS") as of the date of this
Agreement, all of which have been granted to employees of or consultants to
NAVIO pursuant to the 1996 Stock Plan. In addition, the Company has issued to
NETSCAPE a warrant dated July 9, 1996 (the "NETSCAPE WARRANT") which is
outstanding as of the date hereof, a copy of which has been provided to counsel
to NCI. NETSCAPE has agreed in writing with NAVIO THAT THE NETSCAPE Warrant
shall terminate unexercised at the Effective Time. All outstanding shares of
NAVIO capital stock are, and all shares of NAVIO Common Stock to be issued upon
exercise of NAVIO Options will be when exercised and paid for, validly issued,
fully paid and nonassessable and not subject to any preemptive rights. The
NAVIO Disclosure Schedule includes a list of all holders of NAVIO capital stock
and all holders of NAVIO Options, including for each holder, his or her address,
the number and type of shares held by each holder, and any repurchase rights or
other restrictions on such shares and option, as well as the vesting schedule
and exercise price for each such NAVIO Option. Other than as disclosed in the
NAVIO Disclosure Schedule, the NAVIO Options, the conversion rights of the
Series A Preferred Stock set forth in the NAVIO Certificate of Incorporation and
the NETSCAPE Warrant, there are no options, warrants, calls, conversion rights,
commitments or agreements of any character to which NAVIO is a party or by it
may be bound that do or may obligate NAVIO to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of NAVIO capital stock.
NAVIO is not under any obligation to register under the Securities Act of 1933,
as amended (the "SECURITIES ACT") any of its presently outstanding securities or
any securities that may subsequently be issued. There are no agreements or
understandings to which NAVIO is a party or, to the knowledge of NAVIO, any
other agreements or understandings with respect to the transfer or voting of
shares of NAVIO capital stock. Except as set forth in the NAVIO Disclosure
Schedule, the NAVIO Options vest at the rate of 25% after one year, and 1/48 of
the total amount per month thereafter, and such vesting does not accelerate upon
the occurrence of any event. NAVIO has not accepted and is not obligated to
accept any license of technology or other proprietary rights of Silicon
Graphics, Inc. ("SGI") which would require NAVIO to issue equity securities to
SGI.
Section 2.3 NO OTHER AGREEMENTS. Except as provided in this Agreement,
NAVIO has no legal obligation, absolute or contingent, to any person or firm to
sell any of its assets other than in the ordinary course of business or to
effect any merger, consolidation or reorganization of NAVIO or to enter into any
agreement with respect thereto.
Section 2.4 AUTHORIZATION; EXECUTION AND DELIVERY. NAVIO has all
requisite corporate power and authority: (a) to execute and deliver this
Agreement, the Merger Certificate and the agreements attached as exhibits
hereto, and the Supplemental Agreement and the Stock Option Agreement each dated
the date hereof, to which NAVIO is, or is to be, a party (the "NAVIO ANCILLARY
AGREEMENTS"); (b) to perform its obligations under this Agreement, the Merger
Certificate and the NAVIO Ancillary Agreements; and (c) to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement,
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the Merger Certificate and the NAVIO Ancillary Agreements by NAVIO and the
consummation by NAVIO of the transactions contemplated hereby and thereby
have been duly approved and authorized by all requisite corporate action of
NAVIO and its stockholders. This Agreement and the NAVIO Ancillary
Agreements have been duly executed and delivered by NAVIO, and assuming its
due authorization, execution and delivery by NCI, constitutes the legal,
valid and binding obligation of NAVIO, enforceable in accordance with its
terms. The Board of Directors of NAVIO has unanimously determined that it is
advisable and in the best interest of NAVIO's stockholders for NAVIO to enter
into this Agreement, the Merger Certificate and the NAVIO Ancillary
Agreements and to consummate the transactions contemplated hereby and thereby.
Section 2.5 GOVERNMENTAL APPROVALS AND FILINGS. No approval,
authorization, consent, license, clearance or order of, declaration or
notification to, or filing, registration or compliance with, any governmental or
regulatory authority ("GOVERNMENTAL ENTITY") is required on the part of NAVIO in
order (a) to permit NAVIO to perform its obligations under this Agreement, or
(b) to prevent the termination of any right, privilege, license or agreement of
NAVIO or to prevent any loss to NAVIO's Business by reason of the transactions
contemplated by this Agreement, except for (i) the filing of a premerger
notification report by NAVIO, NETSCAPE AND WEI YEN under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), (ii) the filing
of the Merger Certificate with the Delaware Secretary of State, (iii) the
issuance of a permit by the California Department of Corporations with respect
to the issuance by NCI of the Merger Securities, and (iv) such other consents,
approvals authorizations, registrations or qualifications as may be required
under applicable securities or Blue Sky laws in connection with the Merger.
Section 2.6 NO CONFLICT. Except for compliance with the governmental
and regulatory requirements described in Section 2.5, neither the execution,
delivery and performance of this Agreement, the Merger Certificate and the NAVIO
Ancillary Agreements by NAVIO nor the consummation by NAVIO of the transactions
contemplated hereby and thereby will: (a) conflict with, or result in a breach
of, any of the terms, conditions or provisions of NAVIO's Certificate of
Incorporation or Bylaws; (b) conflict with, result in a breach or violation of,
give rise to a termination right or a default under, result in the acceleration
of performance under (whether or not after the giving of notice or lapse of time
or both), any mortgage, lien, lease, agreement, note, bond, indenture, guarantee
or instrument or any license or franchise granted by or to a third party, in
each case, that is material to NAVIO's Business or that is referenced in the
NAVIO Disclosure Schedule and that would reasonably be expected to have a
material adverse effect on NAVIO's Business or financial condition; (c) conflict
with, or result in a violation of, any statute, regulation, law, ordinance,
writ, injunction, order, judgment or decree to which NAVIO or any of its assets
may be subject; (d) give rise to a declaration or imposition of any lien,
charge, security interest or encumbrance of any nature whatsoever upon any of
the assets of NAVIO; (e) have a material adverse effect on any franchise,
license, permit or other governmental approval which is material to NAVIO's
Business or is necessary to enable NAVIO to carry on its business as presently
conducted or is required of any employee or agent of NAVIO to enable them to
carry out their duties on behalf of NAVIO; or (f) require the consent of any
third party.
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Section 2.7 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES.
(a) NAVIO has furnished NCI with the balance sheet of NAVIO as of
December 31, 1996, and the related statements of operations, cash flows and
changes in stockholders' equity for the year ended December 31, 1996, and the
unaudited balance sheet of NAVIO as of February 28, 1997, and the related
statements of operations, cash flows and changes in stockholders' equity for the
two-month period ended February 28, 1997 (the "NAVIO FINANCIAL STATEMENTS").
All of such financial statements, including the notes thereto, (i) are in
accordance with the respective books of NAVIO; (ii) have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods involved; (iii) present fairly the financial
position of NAVIO as of the respective dates thereof and the results of
operations and cash flows of NAVIO for the respective periods indicated therein;
and (iv) do not reflect any material items of nonrecurring income except as
stated therein.
(b) NAVIO has no liabilities of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, that would
be required to be reflected in a balance sheet, or in the notes thereto,
prepared in accordance with GAAP that were not disclosed or provided for in the
NAVIO Financial Statements or the notes thereto other than liabilities incurred
since February 28, 1997, which were incurred in the ordinary course of business
and are not individually or in the aggregate, material to NAVIO's Business. All
reserves set forth on the NAVIO Financial Statements or the notes thereto were
adequate. There are no material loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5) that were not adequately
provided for in the NAVIO Financial Statements or reflected in the notes
thereto.
Section 2.8 ABSENCE OF CHANGES. Since February 28, 1997: (a) there has
been no material adverse change in NAVIO's Business or any development
particular to NAVIO's Business and not generally known to the public that
reasonably could be expected to cause a material adverse change in NAVIO's
Business; (b) there has been no damage, destruction or loss (whether or not
covered by insurance) which has had a material adverse effect on any assets
material to NAVIO's Business; (c) there has been no change by NAVIO in
accounting principles or methods except insofar as may be required by a change
in generally accepted accounting principles; (d) there has been no revaluation
by NAVIO of any of its assets, including, without limitation, writing down the
value of inventory or writing off notes or accounts receivable; and (e) NAVIO
has conducted its business only in the ordinary course consistent with past
practice.
Section 2.9 CONTRACTS AND COMMITMENTS.
(a) NAVIO is not a party or subject to:
(i) Any union contract or collective bargaining agreement or
any employment contract or arrangement, written or oral, providing for future
compensation with any officer, consultant, director or employee that is not
terminable by it on 30 days' notice or less without penalty or obligation to
make payments related to such termination, other than (A) (in the case of
employees other than executive officers) such severance agreements as are not
different from standard arrangements offered to employees generally in the
ordinary course of
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business consistent with NAVIO's past practices, a description of which is
set forth in the NAVIO Disclosure Schedule and (B) such agreements as may be
imposed or implied by law;
(ii) Any plans, contracts or arrangements, written or oral,
which collectively require aggregate payments by NAVIO in excess of $50,000 for
bonuses, pensions, deferred compensation, severance pay or benefits, retirement
payments, profit-sharing, or the like;
(iii) Any joint marketing, joint development or joint venture
contract or arrangement or any other agreement that has involved or is expected
to involve a sharing of profits with other persons;
(iv) Any existing OEM agreement, distribution agreement,
volume purchase agreement, or other similar agreement pursuant to which NAVIO
has granted or received most favored customer provisions or exclusive marketing
rights related to any product, group of products or territory;
(v) Any lease for real or personal property pursuant to which
the amount of payments which NAVIO is required to make on an annual basis
exceeds $100,000;
(vi) Any agreement, contract, mortgage, indenture, lease,
instrument, license, franchise, permit, concession, arrangement, commitment or
authorization that may be, by its terms, terminated or breached by reason of the
execution of this Agreement, the Merger Certificate or any NAVIO Ancillary
Agreement, the closing of the Merger, or the consummation of the transactions
contemplated hereby or thereby;
(vii) Except for trade indebtedness incurred in the ordinary
course of business, any instrument evidencing or related in any way to
indebtedness in excess of $50,000 incurred in the acquisition of companies or
other entities or indebtedness in excess of $50,000 for borrowed money by way of
direct loan, sale of debt securities, purchase money obligation, conditional
sale, guarantee, indemnification or otherwise;
(viii) Any license agreement, either as licensor or licensee
(excluding nonexclusive object code software licenses granted to end-users in
the ordinary course of business that permit use of software products without a
right to modify, distribute or sublicense the same ("END-USER LICENSES"));
(ix) Any contract containing covenants purporting to limit
NAVIO's freedom to compete in any line of business or in any geographic area or
with any third party;
(x) Any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $50,000; or
(xi) Any other agreement, contract or commitment that is
material to NAVIO.
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(b) Each agreement, contract, mortgage, indenture, plan, lease,
instrument, permit, concession, franchise, arrangement, license and commitment
listed in the NAVIO Disclosure Schedule is valid and binding on NAVIO and is in
full force and effect, and neither NAVIO, nor to the knowledge of NAVIO any
other party thereto, has breached in any material respect any provision of, or
is in default in any material respect under the terms of, any such agreement,
contract, mortgage, indenture, plan, lease, instrument, permit, concession,
franchise, arrangement, license or commitment.
(c) There is no agreement, judgment, injunction, order or decree
binding upon NAVIO which has or could reasonably be expected to have the effect
of prohibiting or materially impairing any material current business practice of
NAVIO, any acquisition of material property by NAVIO or the conduct of business
by NAVIO as currently conducted or as proposed to be conducted.
Section 2.10 LEGAL PROCEEDINGS. NAVIO is not in violation of, and has
not received any notice of any violation of: (a) any applicable statute, law,
regulation, ordinance, writ, injunction, order, judgment or decree, the effect
of which violation could, individually or in the aggregate, reasonably be
expected to be materially adverse to NAVIO's Business; or (b) any provision of
the Certificate of Incorporation or Bylaws of NAVIO. There is no order, writ,
injunction, judgment or decree outstanding, and no legal, administrative,
arbitration or other proceeding, action, suit or governmental investigation or
inquiry against NAVIO or its assets or business ("NAVIO LEGAL PROCEEDINGS")
pending or, to the knowledge of NAVIO, threatened. To the knowledge of NAVIO,
there are no claims against NAVIO or its assets or business, that could,
individually or in the aggregate, have a material adverse effect on NAVIO's
Business. There is no NAVIO Legal Proceeding that in any manner challenges or
seeks to prevent, enjoin, alter or delay any of the transactions contemplated
hereby. There are no existing agreements to provide indemnification for
liabilities of its officers and directors for acts or omissions by such persons.
Section 2.11 EMPLOYEE MATTERS. NAVIO is in compliance in all material
respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment and
wages and hours and occupational safety and health and employment practices, and
is not engaged in any unfair labor practice. NAVIO has not received any notice
from any governmental entity, and to the knowledge of NAVIO, there has not been
asserted before any governmental entity, any claim action or proceeding to which
NAVIO is a party, and there is neither pending nor, to the knowledge of NAVIO,
threatened any investigation or hearing concerning NAVIO arising out of or based
upon any such laws, regulations or practices. There are no pending claims
against NAVIO under any workers compensation plan or policy for any long-term
disability. NAVIO has complied in all material aspects with all applicable
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and has no material obligations with respect to any former employees
or qualifying beneficiaries THEREUNDER.
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Section 2.12 EMPLOYEE BENEFIT PLANS.
(a) NAVIO has disclosed in Section 2.9(a)(ii) or 2.12 of the NAVIO
Disclosure Schedule a list of all material employee welfare benefit plans (as
defined in Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), employee pension benefit plans (as defined in
Section 3(2) of ERISA) and all other bonus, stock option, stock purchase,
benefit, profit sharing, savings, retirement, disability, insurance, incentive,
deferred compensation and other similar fringe or employee benefit plans,
programs or arrangements for the benefit of, or relating to, any employee of, or
independent contractor or consultant to, NAVIO or any of its subsidiaries
(together, the "NAVIO EMPLOYEE PLANS").
(b) NAVIO has made available to NCI true and complete copies of all
Employee Plans, as in effect, together with all amendments thereto that will
become effective at a later date, as well as the latest Internal Revenue Service
determination letters obtained with respect to any NAVIO Employee Plan qualified
under Section 401(a) or 501(a) of the Code. Also with respect to each NAVIO
Employee Plan, true and complete copies of the (i) three most recent annual
actuarial valuation reportS, if any, (ii) three last filed Forms 5500 together
with Schedule A or B thereto or both, (iii) summary plan description (as defined
in ERISA), if any, and all modifications thereto communicated to employees, and
(iv) three most recent annual and periodic accountingS of related plan assets,
if any, have been, or will be, made available to NCI and are, or will be,
correct in all material respects.
(c) Neither NAVIO nor any of its directors, officers, employees or
agents, nor, to the best knowledge of NAVIO, any "party in interest" or
"disqualified person", as such terms are defined in Section 3 of ERISA and
Section 4975 of the Code has, with respect to any NAVIO Employee Plan, engaged
in or been a party to any "prohibited transaction", as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, which could result in the
imposition of either a penalty assessed pursuant to Section 502(i) of ERISA or a
tax imposed by Section 4975 of the Code, in each case applicable to NAVIO, any
of its subsidiaries or any NAVIO Employee Plan.
(d) All NAVIO Employee Plans are in compliance in all material
respects with the currently applicable requirements prescribed by all statutes,
orders, or governmental rules or regulations currently in effect with respect to
such NAVIO Employee Plans, including, but not limited to, ERISA and the Code
and, to the best knowledge of NAVIO, there are no pending or threatened claims,
lawsuits or arbitrations (other than routine claims for benefits) which have
been asserted or instituted against NAVIO, any of its subsidiaries, any NAVIO
Employee Plan or the assets of any trust for any NAVIO Employee Plan. Each NAVIO
Employee Plan which is a group health plan (within the meaning of Section
5000(b)(i) of the Code) complies with and has been maintained and operated in
accordance with each of the requirements of Section 162(k) of the Code as in
effect for years beginning prior to 1989, Section 4980B of the Code for years
beginning after December 31, 1988 and Part 6 of Subtitle B of Title I of ERISA.
(e) Each NAVIO Employee Plan intended to qualify under Section 401(a)
of the Code does so qualify, and the trusts created thereunder are exempt from
tax under the
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provisions of Section 501(a) of the Code. Each NAVIO Employee Plan that has
been terminated by NAVIO or any of its subsidiaries which was intended to
qualify under Section 401(a) of the Code has received a final determination
of such qualification from the Internal Revenue Service.
(f) All contributions or payments required to be made or accrued
before the Effective Time under the terms of any NAVIO Employee Plan will have
been made or accrued by NAVIO or by its subsidiaries, as applicable, by the
Effective Time.
(g) NAVIO has no Employee Plan subject to Section 412 of the Code and
no "multiemployer plan" (as defined in Section 3(37) of ERISA).
(h) There have been no changes in the operation or interpretation of
any of the NAVIO Employee Plans since the most recent annual report or actuarial
report that would have any material effect on the cost of operating or
maintaining such NAVIO Employee Plans.
(i) No amounts payable under any NAVIO Employee Plan as a result of
the transactions contemplated by this Agreement will fail to be deductible for
federal income tax purposes by virtue of Section 280G of the Code.
(j) The consummation of the transaction contemplated by this
Agreement will not (i) entitle any current or former employee or officer of
NAVIO to severance pay or other payment except as expressly provided in this
Agreement; or (ii) accelerate the time of payment or vesting or increase the
amount of compensation due any sick employee or officer.
Section 2.13 TAXES.
(a) For purposes of this Agreement, the following definitions shall
apply:
(i) The term "TAXES" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
federal income taxes and state income taxes), payroll and employee withholding
taxes, unemployment insurance contributions, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, business license taxes, occupation taxes, real and personal property
taxes, stamp taxes, environmental taxes, hazardous waste fees, transfer taxes,
workers' compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, that are required to be paid, withheld or collected,
(B) any liability for the payment of amounts referred to in (A) as a result of
being a member of any affiliated, consolidated, combined or unitary group, or
(C) any liability for amounts referred to in (A) or (B) as a result of any
obligations to indemnify another person.
(ii) The term "RETURNS" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns relating to,
or required to be filed in
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connection with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third parties.
(b) All Returns required to be filed by or on behalf of NAVIO have
been duly filed on a timely basis and such Returns are true, complete and
correct in all material respects. All Taxes shown to be payable on the Returns
or on subsequent assessments with respect thereto, and all payments of estimated
Taxes required to be made by or on behalf of NAVIO under Section 6655 of the
Code or comparable provisions of state, local or foreign law, have been paid in
full on a timely basis or have been accrued on the NAVIO Financial Statements in
accordance with GAAP, and no other Taxes are payable by NAVIO with respect to
items or periods covered by such Returns (whether or not shown on or reportable
on such Returns) or with respect to any other period prior to the date hereof.
NAVIO has withheld and paid over all Taxes required to have been withheld and
paid over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party. There are no liens on any of the assets of
NAVIO with respect to Taxes, other than liens for Taxes not yet due and payable
or for Taxes that NAVIO is contesting in good faith through appropriate
proceedings and for which appropriate reserves have been established in
accordance with GAAP.
(c) The amount of NAVIO's liability for unpaid Taxes for all periods
ending on or before the date of the NAVIO Financial Statements does not, in the
aggregate, exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred Taxes) reflected on such NAVIO Financial
Statements.
(d) NCI has been furnished by NAVIO with true and complete copies of
(i) relevant portions of income tax audit reports, statements of deficiencies,
closing or other agreements received by or on behalf of NAVIO relating to Taxes,
(ii) all material federal and state income or franchise tax Returns and state
sales, use and property tax Returns for NAVIO for all periods since inception,
and (iii) any material elections relating to Taxes which are not reflected in
the Returns described in (ii). NAVIO has never been a member of an affiliated
group of corporations filing consolidated returns or a unitary group of
corporations filing combined returns. NAVIO does not do business in or derive
income from any state other than states for which Returns have been duly filed
and furnished to NCI.
(e) The Returns of NAVIO have never been audited by a government or
taxing authority, nor to the knowledge of NAVIO is any such audit in process
threatened or pending (either in writing or orally, formally or informally). No
deficiencies exist or have been asserted (either in writing or orally, formally
or informally) or are expected to be asserted with respect to Taxes of NAVIO,
AND NAVIO has not received notice (either in writing or orally, formally or
informally) nor expects to receive notice that it has not filed a Return or paid
Taxes required to be filed or paid by it. NAVIO is neither a party to any
action or proceeding for assessment or collection of Taxes, nor has such event
been asserted or threatened (either in writing or orally, formally or
informally) against NAVIO or any of its assets. No waiver or extension of any
statute of limitations is in effect with respect to Taxes or Returns of NAVIO.
NAVIO has disclosed on its
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federal income tax returns all positions taken therein that could give rise
to a substantial understatement penalty within the meaning of Section 6662 of
the Code.
(f) NAVIO is not and has never been a party to any tax sharing
agreement.
(g) NAVIO is not a party to any safe harbor lease within the meaning
of Section 168(f)(8) of the Code, as in effect prior to amendment by the Tax
Equity and Fiscal Responsibility Act of 1982. NAVIO is not, nor has it been, a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code, and NCI is not required to withhold tax on the
purchase of the stock of NAVIO by reason of Section 1445 of the Code. NAVIO is
not a "consenting corporation" under Section 341(f) of the Code. NAVIO has not
participated in an international boycott as defined in Section 999 of the Code.
NAVIO has not agreed to, and is not required to make, any adjustment under
Section 481(a) of the Code by reason of a change in accounting method, and NAVIO
does not otherwise have any income reportable for a period ending after the
Closing Date attributable to a transaction or other event (e.g., an installment
sale) occurring prior to the Closing Date involving in excess of $10,000. NAVIO
is not and has not been a "reporting corporation" subject to the information
reporting and record maintenance requirements of Section 6038A of the Code and
the regulations thereunder.
Section 2.14 INTELLECTUAL PROPERTY.
(a) NAVIO OWNS OR HAS THE EXCLUSIVE RIGHT TO USE, MAKE, SELL,
LICENSE, OR SUBLICENSE AND BRING ACTIONS FOR INFRINGEMENT OF ALL NAVIO PRODUCTS
(AS DEFINED BELOW) AND NAVIO INTELLECTUAL PROPERTY RIGHTS (AS DEFINED BELOW)
DEVELOPED BY OR FOR NAVIO OR THAT ARE USED IN THE BUSINESS OF NAVIO AS CURRENTLY
CONDUCTED. ALL OF THE NAVIO PRODUCTS AND NAVIO INTELLECTUAL PROPERTY RIGHTS ARE
OWNED BY NAVIO FREE AND CLEAR OF ANY RIGHTS OR CLAIMS OF ANY FORMER EMPLOYEES,
CONSULTANTS, OFFICERS AND DIRECTORS OF NAVIO. THE SOURCE CODE FOR THE NAVIO
PRODUCTS CONSTITUTES A TRADE SECRET OF NAVIO, AND IS NOT PART OF THE PUBLIC
KNOWLEDGE OR LITERATURE, AND NAVIO HAS TAKEN ALL REASONABLE ACTION TO PROTECT
SUCH SOURCE CODE AS A TRADE SECRET. ALL TAXES AND FEES, INCLUDING, WITHOUT
LIMITATION, PATENT AND TRADEMARK REGISTRATION AND PROSECUTION FEES AND ALL
PROFESSIONAL FEES IN CONNECTION THEREWITH PERTAINING TO THE NAVIO INTELLECTUAL
PROPERTY RIGHTS, DUE AND PAYABLE ON OR BEFORE THE DATE HEREOF, HAVE BEEN PAID BY
NAVIO.
(b) NAVIO'S CURRENT PRODUCTS AND PRODUCTS UNDER DEVELOPMENT ARE
LISTED ON THE NAVIO DISCLOSURE SCHEDULE (COLLECTIVELY, THE "NAVIO PRODUCTS").
NO PERSON HAS A LICENSE TO USE OR THE RIGHT TO ACQUIRE A LICENSE TO USE ANY
FUTURE VERSION OF ANY NAVIO PRODUCT OR ANY NAVIO PRODUCT THAT IS UNDER
DEVELOPMENT, AND NO AGREEMENT TO WHICH NAVIO IS A PARTY WILL RESTRICT THE
SURVIVING CORPORATION FROM CHARGING CUSTOMERS FOR ANY SUCH NEW VERSION. NO
AGREEMENT FOR THE SUPPORT OR MAINTENANCE OF NAVIO PRODUCTS OBLIGATES NAVIO, OR
WOULD OBLIGATE THE SURVIVING CORPORATION AFTER THE EFFECTIVE TIME TO PROVIDE ANY
IMPROVEMENT, ENHANCEMENT, CHANGE IN FUNCTIONALITY OR OTHER ALTERATION IN THE
PERFORMANCE OF THE NAVIO PRODUCTS.
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(c) NO PERSON HAS A RIGHT TO RECEIVE A ROYALTY OR SIMILAR PAYMENT IN
RESPECT OF ANY NAVIO PRODUCT OR NAVIO INTELLECTUAL PROPERTY RIGHTS OR OTHER
INTELLECTUAL PROPERTY RIGHT LICENSED TO NAVIO WHETHER OR NOT PURSUANT TO ANY
CONTRACTUAL ARRANGEMENTS ENTERED INTO BY NAVIO. EXCEPT FOR END-USER LICENSES,
NAVIO HAS NO LICENSES GRANTED, SOLD OR OTHERWISE TRANSFERRED BY OR TO IT NOR
OTHER AGREEMENTS TO WHICH IT IS A PARTY, RELATING IN WHOLE OR IN PART TO ANY
NAVIO PRODUCT OR NAVIO INTELLECTUAL PROPERTY RIGHTS.
(d) THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT, THE
MERGER CERTIFICATE AND THE NAVIO ANCILLARY AGREEMENTS, THE CONSUMMATION OF THE
MERGER AND THE CONSUMMATION OF THE OTHER TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY (INCLUDING WITHOUT LIMITATION THE CONTINUED CONDUCT BY THE SURVIVING
CORPORATION AFTER THE MERGER OF NAVIO'S BUSINESS AS PRESENTLY CONDUCTED AND THE
INCORPORATION OF ANY NAVIO PRODUCT OR NAVIO INTELLECTUAL PROPERTY RIGHT IN ANY
PRODUCT OF THE SURVIVING CORPORATION) WILL NOT BREACH, VIOLATE OR CONFLICT WITH
ANY INSTRUMENT OR AGREEMENT GOVERNING ANY SUCH NAVIO PRODUCT OR NAVIO
INTELLECTUAL PROPERTY RIGHT NECESSARY OR REQUIRED FOR THE CONDUCT OF THE
BUSINESS OF NAVIO AS PRESENTLY CONDUCTED WILL NOT CAUSE THE FORFEITURE OR
TERMINATION OR GIVE RISE TO A RIGHT OF FORFEITURE OR TERMINATION OF ANY SUCH
NAVIO PRODUCT OR NAVIO INTELLECTUAL PROPERTY RIGHT OR IN ANY WAY IMPAIR THE
RIGHT OF THE SURVIVING CORPORATION OR ANY OF ITS SUBSIDIARIES TO USE, SELL,
LICENSE OR DISPOSE OF, EITHER AS PART OR ALL OF A NAVIO PRODUCT OR SUBSEQUENT TO
THE CLOSING AS PART OR ALL OF A PRODUCT OF THE SURVIVING CORPORATION, OR TO
BRING ANY ACTION FOR THE INFRINGEMENT OF, ANY SUCH NAVIO PRODUCT OR NAVIO
INTELLECTUAL PROPERTY RIGHT OR PORTION THEREOF.
(e) NEITHER THE DEVELOPMENT, MANUFACTURE, MARKETING, LICENSE, SALE OR
INTENDED USE OF ANY NAVIO PRODUCT VIOLATES OR COULD REASONABLY BE EXPECTED TO
VIOLATE ANY LICENSE OR AGREEMENT TO WHICH NAVIO IS A PARTY OR INFRINGES OR COULD
REASONABLY BE EXPECTED TO INFRINGE ANY INTELLECTUAL PROPERTY RIGHT OF ANY OTHER
PARTY, PROVIDED, THAT WITH RESPECT TO PATENT RIGHTS, RIGHTS WITH RESPECT TO
MARKS, NAMES OR DESIGNATIONS AND MORAL RIGHTS, SUCH REPRESENTATION IS MADE ONLY
TO NAVIO'S KNOWLEDGE; THERE IS NO PENDING OR, TO THE KNOWLEDGE OF NAVIO,
THREATENED CLAIM OR LITIGATION CONTESTING THE VALIDITY, OWNERSHIP OR RIGHT TO
USE, SELL, LICENSE OR DISPOSE OF ANY NAVIO INTELLECTUAL PROPERTY RIGHT NECESSARY
OR REQUIRED FOR, OR USED IN, THE CONDUCT OF THE BUSINESS OF NAVIO AS PRESENTLY
CONDUCTED NOR, TO THE KNOWLEDGE OF NAVIO, IS THERE ANY BASIS FOR ANY SUCH CLAIM,
NOR HAS NAVIO RECEIVED ANY NOTICE ASSERTING THAT ANY SUCH INTELLECTUAL PROPERTY
RIGHT OR THE PROPOSED USE, SALE, LICENSE OR DISPOSITION THEREOF CONFLICTS OR
WILL CONFLICT WITH THE RIGHTS OF ANY OTHER PARTY, NOR, TO THE KNOWLEDGE OF
NAVIO, IS THERE ANY BASIS FOR ANY SUCH ASSERTION. TO NAVIO'S KNOWLEDGE, THERE
IS NO INFRINGEMENT ON THE PART OF ANY THIRD PARTY OF NAVIO'S INTELLECTUAL
PROPERTY RIGHTS.
(f) NAVIO HAS TAKEN REASONABLE AND PRACTICABLE STEPS (INCLUDING,
WITHOUT LIMITATION, ENTERING INTO CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENTS
WITH ALL OFFICERS AND EMPLOYEES OF AND CONSULTANTS TO NAVIO WITH ACCESS TO OR
KNOWLEDGE OF NAVIO'S INTELLECTUAL PROPERTY RIGHTS) TO MAINTAIN THE SECRECY AND
CONFIDENTIALITY OF, AND ITS PROPRIETARY RIGHTS IN, ALL NAVIO INTELLECTUAL
PROPERTY RIGHTS NECESSARY OR REQUIRED FOR THE CONDUCT OF NAVIO'S BUSINESS. ALL
EMPLOYEES, CONSULTANTS, OFFICERS, DIRECTORS AND STOCKHOLDERS OF NAVIO THAT HAVE
HAD ACCESS TO ANY MATERIAL PORTION OF THE NAVIO INTELLECTUAL PROPERTY RIGHTS ARE
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PARTIES TO A WRITTEN AGREEMENT UNDER WHICH EACH SUCH PERSON OR ENTITY (i) IS
OBLIGATED TO DISCLOSE AND TRANSFER TO NAVIO, WITHOUT THE RECEIPT BY SUCH PERSON
OF ANY ADDITIONAL VALUE THEREFOR (OTHER THAN NORMAL SALARY OR FEES FOR
CONSULTING SERVICES), ALL INVENTIONS, DEVELOPMENTS AND DISCOVERIES WHICH, DURING
THE PERIOD OF EMPLOYMENT (FOR EMPLOYEES) WITH OR PERFORMANCE OF SERVICES FOR, HE
MAKES OR CONCEIVES OF EITHER SOLELY OR JOINTLY WITH OTHERS, THAT RELATE TO ANY
SUBJECT MATTER WITH WHICH HIS OR HER WORK FOR NAVIO MAY BE CONCERNED, OR RELATE
TO OR ARE CONNECTED WITH THE BUSINESS, PRODUCTS OR PROJECTS OF NAVIO, OR INVOLVE
THE USE OF THE TIME, MATERIAL OR FACILITIES OF NAVIO, AND (ii) IS OBLIGATED TO
MAINTAIN THE CONFIDENTIALITY OF PROPRIETARY INFORMATION OF NAVIO. TO NAVIO'S
KNOWLEDGE, NONE OF NAVIO'S EMPLOYEES, CONSULTANTS, OFFICERS OR DIRECTORS IS
OBLIGATED UNDER ANY CONTRACT (INCLUDING LICENSES, COVENANTS OR COMMITMENTS OF
ANY NATURE) OR OTHER AGREEMENT, OR SUBJECT TO ANY JUDGMENT, DECREE OR ORDER OF
ANY COURT OR ADMINISTRATIVE AGENCY, THAT WOULD CONFLICT WITH THEIR OBLIGATION TO
PROMOTE THE INTERESTS OF NAVIO IN THE NAVIO BUSINESS OR THAT WOULD CONFLICT WITH
THE NAVIO BUSINESS. TO NAVIO'S KNOWLEDGE, IT IS CURRENTLY NOT NECESSARY, NOR
WILL IT BE NECESSARY FOR NAVIO TO UTILIZE IN THE NAVIO BUSINESS NOR HAS NAVIO
UTILIZED IN THE NAVIO BUSINESS ANY INVENTIONS OF ANY OF SUCH PERSONS OR ENTITIES
(OR PEOPLE IT CURRENTLY INTENDS TO HIRE) MADE OR OWNED PRIOR TO HIS OR HER
EMPLOYMENT BY OR AFFILIATION WITH NAVIO, NOR IS IT OR WILL IT BE NECESSARY TO
UTILIZE ANY OTHER ASSETS OR RIGHTS OF ANY SUCH PERSONS OR ENTITIES (OR PEOPLE IT
CURRENTLY INTENDS TO HIRE) MADE OR OWNED PRIOR TO THEIR EMPLOYMENT WITH OR
ENGAGEMENT BY NAVIO, IN VIOLATION OF ANY REGISTERED PATENTS, TRADE NAMES,
TRADEMARKS OR COPYRIGHTS OR ANY OTHER LIMITATIONS OR RESTRICTIONS TO WHICH ANY
SUCH PERSON OR ENTITY IS A PARTY OR TO WHICH ANY OF SUCH ASSETS OR RIGHTS MAY BE
SUBJECT, EXCEPT TO THE EXTENT THAT SUCH UTILIZATION WOULD NOT HAVE A MATERIAL
ADVERSE EFFECT ON THE NAVIO BUSINESS. TO NAVIO'S KNOWLEDGE, NONE OF NAVIO'S
EMPLOYEES, CONSULTANTS, OFFICERS, DIRECTORS OR STOCKHOLDERS THAT HAS HAD
KNOWLEDGE OR ACCESS TO INFORMATION RELATING TO NAVIO'S BUSINESS HAS TAKEN,
REMOVED OR MADE USE OF ANY PROPRIETARY DOCUMENTATION, MANUALS, PRODUCTS,
MATERIALS, OR ANY OTHER TANGIBLE ITEM FROM HIS OR HER PREVIOUS EMPLOYER RELATING
TO THE BUSINESS AS CONDUCTED OF SUCH PREVIOUS EMPLOYER WHICH HAS RESULTED IN
NAVIO'S ACCESS TO OR USE OF SUCH PROPRIETARY ITEMS IN NAVIO'S BUSINESS, AND
NAVIO WILL NOT GAIN ACCESS TO OR MAKE USE OF ANY SUCH PROPRIETARY ITEMS IN
NAVIO'S BUSINESS, EXCEPT TO THE EXTENT THAT ANY SUCH ACTIVITIES WOULD NOT HAVE A
MATERIAL ADVERSE EFFECT ON NAVIO'S BUSINESS.
(g) THE NAVIO DISCLOSURE SCHEDULE ALSO SETS FORTH A COMPLETE LIST
OF ALL LICENSES, SUBLICENSES AND OTHER AGREEMENTS AS TO WHICH NAVIO IS A
PARTY AND PURSUANT TO WHICH NAVIO OR ANY OTHER PERSON IS AUTHORIZED TO USE,
LICENSE, SUBLICENSE, SELL OR DISTRIBUTE ANY INTELLECTUAL PROPERTY RIGHT
(EXCLUDING END-USER LICENSES). NAVIO IS NOT IN VIOLATION OF ANY LICENSE,
SUBLICENSE OR AGREEMENT DESCRIBED ON SUCH LIST EXCEPT SUCH VIOLATIONS AS DO
NOT MATERIALLY IMPAIR NAVIO'S RIGHTS UNDER SUCH LICENSE, SUBLICENSE OR
AGREEMENT. THE NAVIO DISCLOSURE SCHEDULE SEPARATELY IDENTIFIES EACH
EXCLUSIVE ARRANGEMENT BETWEEN NAVIO AND ANY THIRD PARTY TO USE, LICENSE,
SUBLICENSE, SELL OR DISTRIBUTE ANY NAVIO INTELLECTUAL PROPERTY RIGHT OR ANY
NAVIO PRODUCT.
(h) THE NAVIO DISCLOSURE SCHEDULE CONTAINS A COMPLETE AND ACCURATE
LIST OF ALL APPLICATIONS, FILINGS AND OTHER FORMAL ACTIONS MADE OR TAKEN
PURSUANT TO FEDERAL, STATE, LOCAL AND FOREIGN LAWS BY NAVIO TO PERFECT OR
PROTECT ITS INTEREST IN NAVIO INTELLECTUAL
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PROPERTY RIGHTS, INCLUDING, WITHOUT LIMITATION, ALL PATENTS, PATENT
APPLICATIONS, TRADEMARK REGISTRATIONS, TRADEMARK APPLICATIONS, SERVICE MARK
REGISTRATIONS AND COPYRIGHT REGISTRATIONS. AS USED HEREIN, THE TERM
"INTELLECTUAL PROPERTY RIGHTS" MEANS ALL INTELLECTUAL PROPERTY RIGHTS,
INCLUDING, WITHOUT LIMITATION, DOMESTIC AND FOREIGN PATENTS, PATENT
APPLICATIONS, PATENT RIGHTS, TRADEMARKS, TRADEMARK REGISTRATIONS, TRADEMARK
APPLICATIONS, TRADE NAMES, SERVICE MARKS, SERVICE MARK APPLICATIONS,
COPYRIGHTS, COPYRIGHT APPLICATIONS, LICENSES, KNOW-HOW, TRADE SECRETS, TRADE
RIGHTS, PROPRIETARY PROCESSES AND FORMULAE, INVENTIONS, DEVELOPMENT TOOLS,
DESIGNS, PLANS, SPECIFICATIONS, TECHNICAL INFORMATION AND OTHER PROPRIETARY
RIGHTS, WHETHER OR NOT REGISTERED, AND ALL DOCUMENTATION AND MEDIA RELATING
TO THE ABOVE, AND THE TERM "NAVIO INTELLECTUAL PROPERTY RIGHT" SHALL MEAN
INTELLECTUAL PROPERTY RIGHTS OWNED BY OR GRANTED EXCLUSIVELY OR
NONEXCLUSIVELY TO NAVIO.
Section 2.15 ENVIRONMENTAL MATTERS. Except for failures which will
not have a material adverse effect on NAVIO, NAVIO has met, and continues to
meet, all applicable local, state, federal and national environmental
regulations and has disposed of its waste products and effluents and/or has
caused others to dispose of such waste products and effluents, in accordance
with all applicable state, local, federal and national environmental
regulations.
Section 2.16 INTERESTS OF OFFICERS AND DIRECTORS. No officer or
director of NAVIO or any "affiliate" or "associate" (as those terms are defined
in Rule 405 promulgated under the Securities Act) of any such person has, either
directly or indirectly, a material interest in: (a) any person or entity that
purchases from or sells, licenses or furnishes to NAVIO any goods, property,
technology or intellectual or other property rights or services; (b) any
contract or agreement to which NAVIO is a party or by which it may be bound; or
(c) any property, real or personal, tangible or intangible, used in or
pertaining to NAVIO's Business, including any interest in the NAVIO Intellectual
Property Rights.
Section 2.17 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
The NAVIO Disclosure Schedule lists all facilities occupied by NAVIO SINCE
NAVIO's incorporation, and indicates the nature of NAVIO's interest in such
facilities. NAVIO has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of their tangible
properties and assets, real, personal and mixed, used in their business, free
and clear of any liens, charges, pledges, security interests or other
encumbrances, except as reflected in the NAVIO Financial Statements or except
for such imperfections of title and encumbrances, if any, that are not
substantial in character, amount or extent, and which do not materially detract
from the value, or interfere with the present use, of the property subject
thereto or affected thereby.
Section 2.18 GOVERNMENTAL AUTHORIZATIONS AND LICENSES. NAVIO holds
all licenses, authorizations, permits, concessions, certificates and other
franchises of any Governmental Entity required to operate its business
(collectively, the "LICENSES"), except as would not have a material adverse
effect on NAVIO's Business or financial condition. The Licenses are in full
force and effect and NAVIO is in compliance in all material respects with the
terms of the Licenses.
Section 2.19 INSURANCE. The NAVIO Disclosure Schedule contains a
complete and accurate list of all policies or binders of fire, liability, title,
worker's compensation, product
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liability and other forms of insurance maintained by NAVIO. NAVIO is not in
default under any of such policies or binders, and has not failed to give any
notice or to present any claim under any such policy or binder in a due and
timely fashion. There are no outstanding unpaid claims under any such
policies or binders. All policies and binders provide sufficient coverage
for the risks insured against, are in full force and effect on the date
hereof and shall be kept in full force and effect through the Effective Time.
Section 2.20 BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement.
Section 2.21 BANK ACCOUNTS. The NAVIO Disclosure Schedule sets forth
the names and locations of all banks, trusts, companies, savings and loan
associations, and other financial institutions at which NAVIO maintains accounts
of any nature and the names of all persons authorized to draw thereon or make
withdrawals.
Section 2.22 DISCLOSURE. No representation or warranty made by NAVIO
in this Agreement, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit prepared and furnished by NAVIO or
its representatives pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading in light of the
circumstances under which they were furnished. To the knowledge of NAVIO after
reasonable inquiry, there is no event, fact or condition particular to NAVIO's
Business that is not generally known to the public that has resulted in, or
could reasonably be expected to result in, a material adverse effect on NAVIO's
Business that has not been set forth in this Agreement or in the NAVIO
Disclosure Schedule. NAVIO has complied in all material respects with the due
diligence request of NCI and ORACLE dated March 16, 1997.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NCI
As of the date hereof and as of the Closing Date, except as disclosed in a
document referring specifically to the relevant subsections of this Article III
which is delivered by NCI to NAVIO prior to execution of this Agreement (the
"NCI DISCLOSURE SCHEDULE"), NCI hereby represents and warrants to NAVIO as
follows:
Section 3.1 CORPORATE ORGANIZATION. NCI is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority and all
necessary governmental authorizations to own, lease and operate its properties
and to conduct its business as it is now being conducted, except to the extent
that the failure to obtain such governmental consents would not have a material
adverse effect on NCI's Business (as defined below). NCI is duly qualified or
licensed to do business and is in good standing as a foreign corporation in each
state or other jurisdiction in which the nature of its business or operations or
ownership of its property requires such qualification or
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licensing, except where the failure to be so qualified or licensed would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), business, properties, assets or results
of operations of NCI (collectively, "NCI'S BUSINESS"). The minute books of
NCI, as made available to NAVIO, contain complete and accurate records of any
and all corporate action material to NCI's Business taken by NCI since NCI's
date of incorporation. NCI has no direct or indirect interest in or loans to
any partnership, corporation, joint venture, business association or other
entity. NCI has delivered to NCI complete and correct copies of the
Certificate of Incorporation and Bylaws of NCI as amended to the date hereof.
Section 3.2 CAPITAL STRUCTURE. The authorized capital stock of NCI
consists of 115,000,000 shares of Common Stock, $.01 par value ("NCI COMMON
STOCK"), 100,000,000 shares of Preferred Stock, of which 84,999,900 shares
are designated Series A Preferred Stock. There are issued and outstanding as
of the date of this Agreement, 100 shares of NCI Common Stock and 84,999,900
shares of Series A Preferred Stock, all of which is owned by Oracle
Corporation. All outstanding shares of NCI Capital Stock are, and any shares
of NCI Common Stock issued upon exercise of any NCI Option will be, validly
issued, fully paid and nonassessable and not subject to any preemptive
rights. Options to purchase 7,545,000 shares of NCI Common Stock (the "NCI
OPTIONS") have been granted to employees of or consultants to NCI as of the
date of this Agreement pursuant to NCI's 1996 Stock Plan. Other than the NCI
Options, there are no options, warrants, calls, conversion rights,
commitments or agreements of any character to which NCI is a party or by it
may be bound that do or may obligate NCI to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of NCI Capital Stock. NCI
is not under any obligation to register under the Securities Act any of its
presently outstanding securities or any securities that may subsequently be
issued. There are no agreements or understandings to which NCI is a party
or, to the knowledge of NCI, any other agreements or understandings, with
respect to the transfer or voting of shares of NCI Capital Stock. Except as
set forth in the NCI Disclosure Schedule, the NCI Options vest at the rate of
25% after one year, and 1/48 of the total amount per month thereafter, and
such vesting does not accelerate upon the occurrence of any event.
Section 3.3 NO OTHER AGREEMENTS. Except as provided in this Agreement,
NCI has no legal obligation, absolute or contingent, to any person or firm to
sell any of its assets other than in the ordinary course of business or to
effect any merger, consolidation or reorganization of NCI or to enter into
any agreement with respect thereto.
Section 3.4 AUTHORIZATION; EXECUTION AND DELIVERY. NCI has all
requisite corporate power and authority: (a) to execute and deliver this
Agreement, the Merger Certificate and the agreements attached as exhibits
hereto, and the Supplemental Agreement and Stock Option Agreement each dated
the date hereof, to which NCI is, or is to be, a party (the "NCI ANCILLARY
AGREEMENTS"); (b) to perform its obligations under this Agreement, the Merger
Certificate and the NCI Ancillary Agreements; and (c) to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement, the Merger Certificate and the NCI Ancillary
Agreements by NCI and the consummation by NCI of the transactions
contemplated hereby and thereby have been duly approved and authorized by all
requisite corporate action of NCI and its stockholders. This Agreement has
been duly executed and
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delivered by NCI, and assuming its due authorization, execution and delivery
by NAVIO, constitutes the legal, valid and binding obligations of NCI,
enforceable in accordance with its terms. The Board of Directors of NCI has
unanimously determined that it is advisable and in the best interest of the
stockholders of NCI to enter into this Agreement, the Merger Certificate and
the NCI Ancillary Agreements and to consummate the transactions contemplated
hereby and thereby.
Section 3.5 GOVERNMENTAL APPROVALS AND FILINGS. No approval,
authorization, consent, license, clearance or order of, declaration or
notification to, or filing, registration or compliance with, any Governmental
Entity is required on the part of NCI in order (a) to permit it to perform
its obligations under this Agreement, or (b) to prevent the termination of
any right, privilege, license or agreement of NCI or to prevent any loss to
NCI's Business by reason of the transactions contemplated by this Agreement,
except for (i) the filing of a premerger notification report by NCI under the
HSR Act, (ii) the filing of the Merger Certificate with the Delaware
Secretary of State, (iii) the issuance of a permit by the California
Department of Corporations with respect to the issuance by NCI of the Merger
Securities, and (iv) such other consents, approvals authorizations,
registrations or qualifications as may be required under applicable
securities or Blue Sky laws in connection with the Merger.
Section 3.6 NO CONFLICT. Except for compliance with the governmental
and regulatory requirements described in Section 2.5, neither the execution,
delivery and performance of this Agreement, the Merger Certificate and the
NCI Ancillary Agreements by NCI nor the consummation by NCI of the
transactions contemplated hereby and thereby, will: (a) conflict with, or
result in a breach of, any of the terms, conditions or provisions of NCI's
Certificate of Incorporation or Bylaws; (b) conflict with, result in a breach
or violation of, give rise to a termination right or a default under, result
in the acceleration of performance under (whether or not after the giving of
notice or lapse of time or both), any mortgage, lien, lease, agreement, note,
bond, indenture, guarantee or instrument or any license or franchise granted
by or to a third party, in each case, that is material to NCI's Business or
that is referenced in the NCI Disclosure Schedule and that would reasonably
be expected to have a material adverse effect on NCI's Business or financial
condition; (c) conflict with, or result in a violation of, any statute,
regulation, law, ordinance, writ, injunction, order, judgment or decree to
which NCI or any of its assets may be subject; (d) give rise to a declaration
or imposition of any lien, charge, security interest or encumbrance of any
nature whatsoever upon any of the assets of NCI; (e) have a material adverse
effect on any franchise, license, permit or other governmental approval which
is material to NCI's Business or is necessary to enable NCI to carry on its
business as presently conducted or is required of any employee or agent of
NCI to enable it to carry out its duties on behalf of NCI; or (f) require the
consent of any third party.
Section 3.7 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES.
(a) NCI has furnished NAVIO with the balance sheet of NCI as of
February 28, 1997, and the related statements of operations and cash flows
for the two-month period ended February 28, 1997 (the "NCI FINANCIAL
STATEMENTS"). All of such financial statements, including the notes thereto,
(i) are in accordance with the respective books of NCI; (ii) have been
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prepared in accordance with GAAP; (iii) present fairly the financial position
of NCI as of the date thereof and the results of operations and cash flows of
NCI for the respective period indicated therein; and (iv) do not reflect any
material items of nonrecurring income except as stated therein.
(b) NCI has no liabilities of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, that
would be required to be reflected in a balance sheet, or in the notes
thereto, prepared in accordance with GAAP that were not disclosed or provided
for in the NCI Financial Statements or the notes thereto other than
liabilities incurred since February 28, 1997, which were incurred in the
ordinary course of business and are not individually or in the aggregate,
material to NCI's Business. All reserves set forth on the NCI Financial
Statements or the notes thereto were adequate. There are no loss
contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5) that were not adequately provided for in the NCI Financial
Statements or reflected in the notes thereto.
Section 3.8 ABSENCE OF CHANGES. Since February 28, 1997: (a) there has
been no material adverse change in NCI's Business or any development
particular to NCI's business and not generally known to the public that
reasonably could be expected to cause a material adverse change in NCI's
Business; (b) there has been no damage, destruction or loss (whether or not
covered by insurance) which has had a material adverse effect on any assets
material to NCI's Business; (c) there has been no change by NCI in accounting
principles or methods except insofar as may be required by a change in
generally accepted accounting principles; (d) there has been no revaluation
by NCI of any of its assets, including, without limitation, writing down the
value of inventory or writing off notes or accounts receivable; and (e) NCI
has conducted its business only in the ordinary course consistent with past
practice.
Section 3.9 CONTRACTS AND COMMITMENTS.
(a) NCI is not a party or subject to:
(i) Any union contract or collective bargaining agreement
or any employment contract or arrangement, written or oral, providing for
future compensation with any officer, consultant, director or employee that
is not terminable by it on 30 days' notice or less without penalty or
obligation to make payments related to such termination, other than (A) (in
the case of employees other than executive officers) such severance
agreements as are not different from standard arrangements offered to
employees generally in the ordinary course of business consistent with NCI's
past practices, a description of which is set forth in the NCI Disclosure
Schedule and (B) such agreements as may be imposed or implied by law;
(ii) Any plans, contracts or arrangements, written or oral,
which collectively require aggregate payments by NCI in excess of $50,000 for
bonuses, pensions, deferred compensation, severance pay or benefits,
retirement payments, profit-sharing, or the like;
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(iii) Any joint marketing, joint development or joint
venture contract or arrangement or any other agreement that has involved or
is expected to involve a sharing of profits with other persons;
(iv) Any existing OEM agreement, distribution agreement,
volume purchase agreement, or other similar agreement pursuant to which NCI
has granted or received most favored customer provisions or exclusive
marketing rights related to any product, group of products or territory;
(v) Any lease for real or personal property pursuant to
which the amount of payments which NCI is required to make on an annual basis
exceeds $100,000;
(vi) Any agreement, contract, mortgage, indenture, lease,
instrument, license, franchise, permit, concession, arrangement, commitment
or authorization that may be, by its terms, terminated or breached by reason
of the execution of this Agreement, the Merger Certificate or any NCI
Ancillary Agreement, the closing of the Merger, or the consummation of the
transactions contemplated hereby or thereby;
(vii) Except for trade indebtedness incurred in the
ordinary course of business, any instrument evidencing or related in any way
to indebtedness in excess of $50,000 incurred in the acquisition of companies
or other entities or indebtedness in excess of $50,000 for borrowed money by
way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee, indemnification or otherwise;
(viii) Any license agreement, either as licensor or
licensee, excluding End-User Licenses;
(ix) Any contract containing covenants purporting to
limit NCI's freedom to compete in any line of business or in any geographic
area or with any third party;
(x) Any agreement, contract or commitment relating to
capital expenditures and involving future obligations in excess of $50,000; or
(xi) Any other agreement, contract or commitment which is
material to NCI.
(b) Each agreement, contract, mortgage, indenture, plan, lease,
instrument, permit, concession, franchise, arrangement, license and
commitment listed in the NCI Disclosure Schedule is valid and binding on NCI
and is in full force and effect, and neither NCI, nor to the knowledge of NCI
any other party thereto, has breached in any material respect any provision
of, or is in default in any material respect under the terms of, any such
agreement, contract, mortgage, indenture, plan, lease, instrument, permit,
concession, franchise, arrangement, license or commitment.
(c) There is no agreement, judgment, injunction, order or
decree binding upon NCI which has or could reasonably be expected to have the
effect of prohibiting or materially
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impairing any material current business practice of NCI, any acquisition of
material property by NCI or the conduct of business by NCI as currently
conducted or as proposed to be conducted.
Section 3.10 LEGAL PROCEEDINGS. NCI is not in violation of, and has
not received any notice of any violation of: (a) any applicable statute, law,
regulation, ordinance, writ, injunction, order, judgment or decree, the
effect of which violation could, individually or in the aggregate, reasonably
be expected to be materially adverse to NCI's Business; or (b) any provision
of the Certificate of Incorporation or Bylaws of NCI. There is no order,
writ, injunction, judgment or decree outstanding, and no legal,
administrative, arbitration or other proceeding, action, suit or governmental
investigation or inquiry against NCI or its assets or business ("NCI LEGAL
PROCEEDINGS") pending or, to the knowledge of NCI, threatened. To the
knowledge of NCI, there are no claims against NCI or its assets or business,
that could, individually or in the aggregate, have a material adverse effect
on NCI's Business. There is no NCI Legal Proceeding that in any manner
challenges or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated hereby. There are no agreements to provide
indemnification for liabilities of its officers and directors for acts or
omissions by such persons.
Section 3.11 EMPLOYEE MATTERS. NCI is in compliance in all material
respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment
and wages and hours and occupational safety and health and employment
practices, and is not engaged in any unfair labor practice. NCI has not
received any notice from any governmental entity, and to the knowledge of
NCI, there has not been asserted before any governmental entity, any claim
action or proceeding to which NCI is a party, and there is neither pending
nor, to the knowledge of NCI, threatened any investigation or hearing
concerning NCI arising out or based upon any such laws, regulations or
practices. There are no pending claims against NCI under any workers
compensation plan or policy for any long-term disability. NCI has complied in
all material aspects with all applicable provisions of COBRA and has no
material obligations with respect to any former employees or qualifying
beneficiaries thereunder.
Section 3.12 EMPLOYEE BENEFIT PLANS.
(a) NCI has disclosed in Section 3.9(a)(ii) or 3.12 of the NCI
Disclosure Schedule a list of all material employee welfare benefit plans
(as defined in Section 3(1) of ERISA, employee pension benefit plans (as
defined in Section 3(2) of ERISA) and all other bonus, stock option, stock
purchase, benefit, profit sharing, savings, retirement, disability,
insurance, incentive, deferred compensation and other similar fringe or
employee benefit plans, programs or arrangements for the benefit of, or
relating to, any employee of, or independent contractor or consultant to, NCI
or any of its subsidiaries, (TOGETHER THE "NCI EMPLOYEE PLANS").
(b) NCI has made available to NAVIO true and complete copies
of all NCI Employee Plans, as in effect, together with all amendments thereto
that will become effective at a later date, as well as the latest Internal
Revenue Service determination letters obtained with respect to any NCI
Employee Plan qualified under Section 401(a) or 501(a) of the Code. Also
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with respect to each NCI Employee Plan, true and complete copies of the
(i) three most recent annual actuarial valuation reportS, if any, (ii) three
last filed Form 5500 together with Schedule A or B thereto or both,
(iii) summary plan description (as defined in ERISA), if any, and all
modifications thereto communicated to employees, and (iv) three most recent
annual and periodic accountingS of related plan assets, if any, have been, or
will be, made available to NCI and are, or will be, correct in all material
respects.
(c) Neither NCI nor of its directors, officers, employees or
agents, nor, to the best knowledge of NCI, any "party in interest" or
"disqualified person", as such terms are defined in Section 3 of ERISA and
Section 4975 of the Code has, with respect to any NCI Employee Plan, engaged
in or been a party to any "prohibited transaction", as such term is defined
in Section 4975 of the Code or Section 406 of ERISA, which could result in
the imposition of either a penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Code, in each case applicable
to NCI, any of its subsidiaries or any Employee Plan.
(d) All NCI Employee Plans are in compliance in all material
respects with the currently applicable requirements prescribed by all
statutes, orders, or governmental rules or regulations currently in effect
with respect to such NCI Employee Plans, including, but not limited to, ERISA
and the Code and, to the best knowledge of NCI, there are no pending or
threatened claims, lawsuits or arbitrations (other than routine claims for
benefits) which have been asserted or instituted against NCI, any of its
subsidiaries, any NCI Employee Plan or the assets of any trust for any NCI
Employee Plan. Each NCI Employee Plan which is a group health plan (within
the meaning of Section 5000(b)(i) of the Code) complies with and has been
maintained and operated in accordance with each of the requirements of
Section 162(k) of the Code as in effect for years beginning prior to 1989,
Section 4980B of the Code for years beginning after December 31, 1988 and
Part 6 of Subtitle B of Title I of ERISA.
(e) Each NCI Employee Plan intended to qualify under
Section 401(a) of the Code does so qualify, and the trusts created thereunder
are exempt from tax under the provisions of Section 501(a) of the Code. Each
NCI Employee Plan that has been terminated by NCI or any of its subsidiaries
which was intended to qualify under Section 401(a) of the Code has received a
final determination of such qualification from the Internal Revenue Service.
(f) All contributions or payments required to be made or
accrued before the Effective Time under the terms of any NCI Employee Plan
will have been made or accrued by NCI or by its subsidiaries, as applicable,
by the Effective Time.
(g) NCI has no Employee Plan subject to Section 412 of the
Code and no "multiemployer plan" (as defined in Section 3(37) of ERISA).
(h) There have been no changes in the operation or
interpretation of any of the NCI Employee Plans since the most recent annual
report or actuarial report that would have any material effect on the cost of
operating or maintaining such NCI Employee Plans.
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(i) No amounts payable under any NCI Employee Plan as a result
of the transactions contemplated by this Agreement will fail to be deductible
for federal income tax purposes by virtue of Section 280(g) of the Code.
(j) The consummation of the transaction contemplated by this
Agreement will not (i) entitle any current or former employee or officer of
NCI to severance pay or other payment except as expressly provided in this
Agreement; or (ii) accelerate the time of payment or vesting or increase the
amount of compensation due any sick employee or OFFICER.
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Section 3.13 TAXES.
(a) All Returns required to be filed by or on behalf of NCI
have been duly filed on a timely basis and such Returns are true, complete
and correct in all material respects. All Taxes shown to be payable on the
Returns or on subsequent assessments with respect thereto, and all payments
of estimated Taxes required to be made by or on behalf of NCI under Section 6655
of the Code or comparable provisions of state, local or foreign law,
have been paid in full on a timely basis or have been accrued on the NCI
Financial Statements in accordance with GAAP, and no other Taxes are payable
by NCI with respect to items or periods covered by such Returns (whether or
not shown on or reportable on such Returns) or with respect to any other
period prior to the date hereof. NCI has withheld and paid over all Taxes
required to have been withheld and paid over, and complied with all
information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party. There are no liens on any of the assets of NCI with
respect to Taxes, other than liens for Taxes not yet due and payable or for
Taxes that NCI is contesting in good faith through appropriate proceedings
and for which appropriate reserves have been established in accordance with
GAAP.
(b) The amount of NCI's liability for unpaid Taxes for all
periods ending on or before the date of the NCI Financial Statements does
not, in the aggregate, exceed the amount of the current liability accruals
for Taxes (excluding reserves for deferred Taxes) reflected on such NCI
Financial Statements.
(c) NAVIO has been furnished by NCI with true and complete
copies of (i) relevant portions of income tax audit reports, statements of
deficiencies, closing or other agreements received by or on behalf of NCI
relating to Taxes, (ii) all material federal and state income or franchise
tax Returns and state sales, use and property tax Returns for NCI for all
periods since its inception, and (iii) any material elections relating to
Taxes which are not reflected in the Returns described in (ii). NCI does not
do business in or derive income from any state other than states for which
Returns have been duly filed and furnished to NCI.
(d) The Returns of NCI have never been audited by a government
or taxing authority, nor, to the knowledge of NCI, is any such audit in
process, threatened or pending (either in writing or orally, formally or
informally). No deficiencies exist or have been asserted (either in writing
or orally, formally or informally) or are expected to be asserted with
respect to Taxes of NCI, and NCI has not received notice (either in writing
or orally, formally or informally) nor expects to receive notice that it has
not filed a Return or paid Taxes required to be filed or paid by it. NCI is
neither a party to any action or proceeding for assessment or collection of
Taxes, nor has such event been asserted or threatened (either in writing or
orally, formally or informally) against NCI or any of its assets. No waiver
or extension of any statute of limitations is in effect with respect to Taxes
or Returns of NCI. NCI has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial understatement
penalty within the meaning of Section 6662 of the Code.
(e) NCI is not and has never been a party to any tax sharing
agreement.
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(f) NCI is not a party to any safe harbor lease within the
meaning of Section 168(f)(8) of the Code, as in effect prior to amendment by
the Tax Equity and Fiscal Responsibility Act of 1982. NCI is not a
"consenting corporation" under Section 341(f) of the Code. NCI has not
participated in an international boycott as defined in Section 999 of the
Code. NCI has not agreed to, and is not required to make, any adjustment
under Section 481(a) of the Code by reason of a change in accounting method,
and NCI does not otherwise have any income reportable for a period ending
after the Closing Date attributable to a transaction or other event (e.g., an
installment sale) occurring prior to the Closing Date involving in excess of
$10,000.
Section 3.14 INTELLECTUAL PROPERTY.
(a) NCI owns or has the exclusive right to use, make, sell,
license, or sublicense and bring actions for infringement of all NCI Products
(as defined below) and NCI Intellectual Property Rights (as defined below)
developed by or for NCI or that are used in the business of NCI as currently
conducted. All of the NCI Products and NCI Intellectual Property Rights are
owned by NCI free and clear of any rights or claims of any former employees,
consultants, officers and directors of NCI. The source code for the NCI
Products constitutes a trade secret of NCI, and is not part of the public
knowledge or literature, and NCI has taken all reasonable action to protect
such source code as a trade secret. All taxes and fees, including, without
limitation, patent and trademark registration and prosecution fees and all
professional fees in connection therewith pertaining to the NCI Intellectual
Property Rights, due and payable on or before the date hereof, have been paid
by NCI.
(b) NCI's current products and products under development are
listed on the NCI Disclosure Schedule (collectively, the "NCI PRODUCTS"). No
person has a license to use or the right to acquire a license to use any
future version of any NCI Product or any NCI Product that is under
development, and no agreement to which NCI is a party will restrict the
Surviving Corporation from charging customers for any such new version. No
agreement for the support or maintenance of NCI Products obligates NCI, or
would obligate the Surviving Corporation after the Effective Time to provide
any improvement, enhancement, change in functionality or other alteration in
the performance of the NCI Products.
(c) No person has a right to receive a royalty from NCI or
similar payment in respect of any NCI Product or NCI Intellectual Property
Rights or other Intellectual Property Right licensed to NCI whether or not
pursuant to any contractual arrangements entered into by NCI. Except for
End-User Licenses, NCI has no licenses granted, sold or otherwise transferred
by or to it nor other agreements to which it is a party, relating in whole or
in part to any NCI Product or NCI Intellectual Property Rights.
(d) The execution, delivery and performance of this Agreement,
the Merger Certificate and the NCI Ancillary Agreements, the consummation of
the Merger and the consummation of the other transactions contemplated hereby
and thereby (including without limitation the continued conduct by NCI after
the Merger of NCI's Business as presently conducted and the incorporation of
any NCI Product or NCI Intellectual Property Right in any product of the
Surviving Corporation) will not breach, violate or conflict with any
instrument or
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agreement governing any such NCI Product or NCI Intellectual Property Right
necessary or required for, or used in, the conduct of the business of NCI as
presently conducted and will not cause the forfeiture or termination or give
rise to a right of forfeiture or termination of any such NCI Product or NCI
Intellectual Property Right or in any way impair the right of the Surviving
Corporation or any of its subsidiaries to use, sell, license or dispose of,
either as part or all of a NCI Product or subsequent to the Closing as part
or all of a product of the Surviving Corporation, or to bring any action for
the infringement of, any such NCI Product or NCI Intellectual Property Right
or portion thereof.
(e) Neither the development, manufacture, marketing, license,
sale or intended use of any NCI Product violates or could reasonably be
expected to violate any license or agreement to which NCI is a party or
infringes or could reasonably be expected to infringe any Intellectual
Property Right of any other party; provided, that with respect to patent
rights, rights with respect to marks, names or designations and moral rights,
such representation is made only to NCI's knowledge; there is no pending or,
to the knowledge of NCI, threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any NCI
Intellectual Property Right necessary or required for, or used in, the
conduct of the business of NCI as presently conducted nor, to the knowledge
of NCI, is there any basis for any such claim, nor has NCI received any
notice asserting that any such Intellectual Property Right or the proposed
use, sale, license or disposition thereof conflicts or will conflict with the
rights of any other party, nor, to the knowledge of NCI, is there any basis
for any such assertion. To NCI's knowledge, there is no infringement on the
part of any third party of NCI's Intellectual Property Rights.
(f) NCI has taken reasonable and practicable steps (including,
without limitation, entering into confidentiality and non-disclosure
agreements with all officers and employees of and consultants to NCI with
access to or knowledge of NCI's Intellectual Property Rights) to maintain the
secrecy and confidentiality of, and its proprietary rights in, all NCI
Intellectual Property Rights necessary or required for the conduct of NCI's
Business. All employees, consultants, officers, directors and stockholders
of NCI that have had access to any material portion of the NCI Intellectual
Property Rights are parties to a written agreement, under which each such
person or entity (i) is obligated to disclose and transfer to NCI, without
the receipt by such person of any additional value therefor (other than
normal salary or fees for consulting services), all inventions, developments
and discoveries which, during the period of employment (for employees) with
or performance of services for, he makes or conceives of either solely or
jointly with others, that relate to any subject matter with which his or her
work for NCI may be concerned, or relate to or are connected with the
business, products or projects of NCI, or involve the use of the time,
material or facilities of NCI, and (ii) is obligated to maintain the
confidentiality of proprietary information of NCI. To NCI's knowledge, none
of NCI's employees, consultants, officers or directors is obligated under any
contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would conflict with its obligation to promote the
interests of NCI in the NCI Business or that would conflict with the NCI
Business. To NCI's knowledge, it is currently not necessary, nor will it be
necessary for NCI to utilize in the NCI Business nor has NCI utilized in the
NCI Business any inventions of any of such persons or
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entities (or people it currently intends to hire) made or owned prior to
their employment by or affiliation with NCI, nor is it or will it be
necessary to utilize any other assets or rights of any such persons or
entities (or people it currently intends to hire) made or owned prior to
their employment with or engagement by NCI, in violation of any registered
patents, trade names, trademarks or copyrights or any other limitations or
restrictions to which any such person or entity is a party or to which any of
such assets or rights may be subject, except to the extent that such
utilization would not have a material adverse effect on the NCI Business. To
NCI's knowledge, none of NCI's employees, consultants, officers, directors or
stockholders that has had knowledge or access to information relating to
NCI's Business has taken, removed or made use of any proprietary
documentation, manuals, products, materials, or any other tangible item from
his or her previous employer relating to the business as conducted of such
previous employer which has resulted in NCI's access to or use of such
proprietary items in NCI's Business, and NCI will not gain access to or make
use of any such proprietary items in NCI's Business, except to the extent
that any such activities would not have a material adverse effect on NCI's
Business.
(g) The NCI Disclosure Schedule also sets forth a complete list of
all licenses, sublicenses and other agreements as to which NCI is a party and
pursuant to which NCI or any other person is authorized to use, license,
sublicense, sell or distribute any Intellectual Property Right (excluding
End-User Licenses). NCI is not in violation of any license, sublicense or
agreement described on such list except such violations as do not materially
impair NCI's rights under such license, sublicense or agreement. The NCI
Disclosure Schedule separately identifies each exclusive arrangement between
NCI and any third party to use, license, sublicense, sell or distribute any
NCI Intellectual Property Right or any NCI Product.
(h) The NCI Disclosure Schedule contains a complete and accurate list
of all applications, filings and other formal actions made or taken pursuant to
federal, state, local and foreign laws by NCI to perfect or protect its interest
in NCI Intellectual Property Rights, including, without limitation, all patents,
patent applications, trademark registrations, trademark applications, service
mark registrations and copyright registrations. As used herein, the term "NCI
INTELLECTUAL PROPERTY RIGHT" shall mean Intellectual Property Rights owned by or
granted exclusively or nonexclusively to NCI.
Section 3.15 ENVIRONMENTAL MATTERS. Except for failures which will
not have a material adverse effect on NCI, NCI has met, and continues to meet,
all applicable local, state, federal and national environmental regulations and
has disposed of its waste products and effluents and/or has caused others to
dispose of such waste products and effluents, in accordance with all applicable
state, local, federal and national environmental regulations.
Section 3.16 INTERESTS OF OFFICERS AND DIRECTORS. No officer or
director of NCI or any "affiliate" or "associate" (as those terms are defined in
Rule 405 promulgated under the Securities Act) of any such person has, either
directly or indirectly, a material interest in: (a) any person or entity that
purchases from or sells, licenses or furnishes to NCI any goods, property,
technology or intellectual or other property rights or services; (b) any
contract or agreement to which NCI is a party or by which it may be bound; or
(c) any property, real or personal, tangible
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or intangible, used in or pertaining to NCI's Business, including any
interest in the NCI Intellectual Property Rights.
Section 3.17 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
The NCI Disclosure Schedule lists all facilities occupied by NCI since NCI's
incorporation, and indicates the nature of NCI's interest in such facilities.
NCI has good and valid title to, or, in the case of leased properties and
assets, valid leasehold interests in, all of its tangible properties and assets,
real, personal and mixed, used in its business, free and clear of any liens,
charges, pledges, security interests or other encumbrances, except as reflected
in the NCI Financial Statements or except for such imperfections of title and
encumbrances, if any, that are not substantial in character, amount or extent,
and which do not materially detract from the value, or interfere with the
present use, of the property subject thereto or affected thereby.
Section 3.18 GOVERNMENTAL AUTHORIZATIONS AND LICENSES. NCI holds all
Licenses required to operate its business, except as would not have a material
adverse effect on NCI's Business or financial condition. The Licenses are in
full force and effect and NCI is in compliance in all material respects with the
terms of the Licenses.
Section 3.19 INSURANCE. The NCI Disclosure Schedule contains a
complete and accurate list of all policies or binders of fire, liability, title,
worker's compensation, product liability and other forms of insurance maintained
by NCI. NCI is not in default under any of such policies or binders, and has
not failed to give any notice or to present any claim under any such policy or
binder in a due and timely fashion. There are no outstanding unpaid claims
under any such policies or binders. All policies and binders provide sufficient
coverage for the risks insured against, are in full force and effect on the date
hereof and shall be kept in full force and effect through the Effective Time.
Section 3.20 BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement.
Section 3.21 DISCLOSURE. No representation or warranty made by NCI in
this Agreement, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit prepared and furnished or to be
prepared and furnished by NCI or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished. To the knowledge of NCI after reasonable inquiry, there is no event,
fact or condition particular to NCI's Business that is not generally known to
the public that has resulted in, or could reasonably be expected to result in, a
material adverse effect on NCI's Business that has not been set forth in this
Agreement or in the NCI Disclosure Schedule. NCI has complied in all material
respects with the due diligence requests of NAVIO dated March 24, APRIL 7 and
April 14, 1997.
ARTICLE IV
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COVENANTS OF NAVIO
Section 4.1 REGULAR COURSE OF BUSINESS. Except as otherwise
consented to in writing by NCI, prior to the Effective Time NAVIO shall conduct
its business in the ordinary and usual course consistent with past practice and
shall use reasonable efforts to maintain and preserve intact its business
organizations, keep available the services of its officers and employees and
maintain positive relations with licensors, licensees, suppliers, contractors,
distributors, customers and others having business relationships with them.
NAVIO shall promptly notify NCI of any event or occurrence not in the ordinary
course of business and will not enter into or amend any agreement or take any
action that reasonably could be expected to have a material adverse effect on
NAVIO's Business.
Section 4.2 RESTRICTED ACTIVITIES AND TRANSACTIONS. Except as
provided herein or as otherwise consented to in writing by NCI, prior to the
Effective Time, NAVIO will not:
(a) Issue, sell, encumber or deliver, or agree to issue, sell,
encumber or deliver, any shares of any class of capital stock of NAVIO or any
securities convertible into any such shares or convertible into securities in
turn so convertible, or any options, warrants, or other rights calling for the
issuance, sale or delivery of any such shares or convertible securities (other
than options granted to employees of or consultants to NAVIO with per share
exercise prices equal to fair market value determined in good faith by the Board
of Directors of NAVIO and agreed to in writing by NCI, and vesting 25% after one
year and 1/48 of the total grant per month thereafter without acceleration as a
result of the occurrence of any event); or authorize or propose any change in
its equity capitalization, other than the issuance of shares of NAVIO Common
Stock upon the exercise of NAVIO Options; or accelerate, amend or change the
period of exercisability of any rights to purchase securities of NAVIO or change
the vesting period of any restricted stock or options to purchase stock of
NAVIO;
(b) Mortgage or pledge any of its material assets, tangible or
intangible;
(c) Hire any management personnel or terminate (other than for cause
and with a liability to NAVIO of less than $25,000) any employee of NAVIO,
except in the ordinary course of business involving a person with an annual
salary of less than $50,000 and only (in the case of a new hire) pursuant to an
at-will arrangement without any severance benefits; or increase or amend the
compensation to, or the terms of any agreement with, any employee or director;
(d) Except for End-User Licenses granted consistent with past
practices, transfer or license to any person or entity, or otherwise extend,
amend or modify, any rights to the NAVIO Intellectual Property Rights; or
(e) Enter into or amend any agreements pursuant to which any other
party is granted most favored customer status or exclusive marketing,
distribution or other similar rights with respect to any products of NAVIO.
Section 4.3 TAXES; CONSENT. NAVIO shall prepare and timely file all
Returns and amendments thereto required to be filed by it on or before the
Closing Date. NCI shall have a
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reasonable opportunity to review all material Returns and amendments
thereto and to approve such Returns within 15 days of receipt thereof (which
approval shall not be unreasonably withheld). NAVIO shall pay and discharge
all Taxes, assessments and governmental charges upon or against it or any of
its properties or assets, and all liabilities at any time existing, before
the same shall become delinquent and before penalties accrue thereon, except
to the extent and as long as: (a) the same are being contested in good faith
and by appropriate proceedings pursued diligently and in such a manner as not
to cause any material adverse effect upon the condition (financial or
otherwise) or operations of NAVIO or any member of the NAVIO Group; and (b)
NAVIO shall have set aside on its books adequate reserves for such Taxes.
Section 4.4 NEGOTIATION WITH OTHERS. From and after the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, NAVIO shall not: (a) directly or
indirectly, solicit, initiate discussions or engage in negotiations with any
person (whether such negotiations are initiated by NAVIO or otherwise) or take
any other action intended or designed to facilitate the efforts of any person,
other than NCI, relating to the possible acquisition of all of a material
portion of NAVIO (whether by way of merger, purchase of capital stock, purchase
of assets or otherwise); or (b) enter into an agreement with any person, other
than NCI, providing for any of the above.
Section 4.5 PUT/CALL AND VOTING AGREEMENT. Prior to the Closing,
NAVIO will take all reasonable actions to cause holders of one hundred percent
(100%) of the NAVIO capital stock and all holders of options to purchase NAVIO
capital stock to execute and deliver as of the Closing the Put/Call and Voting
Agreement substantially in the form of EXHIBIT 4.5 hereto (the "PUT/CALL AND
VOTING AGREEMENT").
Section 4.6 STOCKHOLDER AGREEMENT. Prior to the Closing, NAVIO will
take all reasonable actions to cause the Stockholder Agreement, substantially in
the form of EXHIBIT 4.6 hereto (the "STOCKHOLDER AGREEMENT"), to be executed and
delivered by the persons listed in Exhibit A thereto.
Section 4.7 STOCKHOLDER APPROVAL. Prior to the Closing Date and at
the earliest practical date, NAVIO will solicit written consents from its
stockholders, or hold a stockholders' meeting, for the purpose of seeking the
approval of this Agreement, the Merger and related matters. If NAVIO holds a
stockholders' meeting, the Board of Directors of NAVIO will solicit proxies
from NAVIO's stockholders to vote such stockholders' shares at the meeting.
In soliciting such written consent or proxies, the Board of Directors of
NAVIO will recommend to the NAVIO stockholders that they approve this
Agreement, the Merger and all related matters and shall take all reasonable
actions to obtain the approval of the NAVIO stockholders entitled to vote on
or consent to this Agreement, the Merger and any related matters in
accordance with the DGCL and NAVIO's Certificate of Incorporation and Bylaws;
provided, however, that the foregoing will not require the Board of Directors
to take any action which is inconsistent with the exercise of its fiduciary
duty. As soon as reasonably practicable, NAVIO will prepare a disclosure
and/or proxy statement, reasonably acceptable to NCI, with respect to the
solicitation of written consents and/or proxies from the stockholders of
NAVIO to approve this Agreement, the Merger and all related matters.
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Section 4.8 DOCUMENTS DELIVERED TO STOCKHOLDERS. NAVIO will take all
reasonable steps necessary to ensure that the description of, and information
relating to, NAVIO, NAVIO's Business and stockholders and the transactions
contemplated by this Agreement contained in the documents delivered to NAVIO
stockholders, to the extent prepared by NAVIO expressly for use in such
documentation, in connection with the Application for Qualification of
Securities by permit under Section 25121 of the California Corporate Securities
law of 1968 (as amended, the "CSL") and related hearing on the fairness of the
Merger pursuant to Section 25142 of the CSL, including any proxy statement and
other disclosure documents, will not contain any untrue statement of a material
fact, and will not omit to state a material fact necessary to make the
statements or facts contained therein not misleading in light of the
circumstances under which they are furnished.
Section 4.9. AMENDMENT TO CERTIFICATE OF INCORPORATION. Prior to the
Effective Time, NAVIO shall take all reasonable efforts to effect the amendment
of its Certificate of Incorporation, pursuant to a Certificate of Amendment
substantially in the form attached as EXHIBIT 4.9 hereto.
Section 4.10 STOCKHOLDER APPROVAL OF EXCESS PARACHUTE PAYMENTS. In
the case of any payments that would constitute "excess parachute payments" under
Section 280G of the Code but for the exception set forth in Sections 280G(b) of
the Code, NAVIO will take all reasonable efforts to obtain stockholder approval
in a manner that complies with the provisions of Section 280G(b)(5)(B) of the
Code and Proposed Regulations Section 1.280G-1, Q&A-7 so that such payments will
not be nondeductible under Section 280G of the Code or subject to the excise tax
imposed under Section 4999 of the Code.
ARTICLE V
COVENANTS OF NCI
Section 5.1 REGULAR COURSE OF BUSINESS. Except as set forth in the
NCI Disclosure Schedule or otherwise consented to in writing by NAVIO, prior to
the Effective Time NCI shall conduct its business in the ordinary and usual
course consistent with past practice and shall use reasonable efforts to
maintain and preserve intact its business organizations, keep available the
services of its officers and employees and maintain positive relations with
licensors, licensees, suppliers, contractors, distributors, customers and others
having business relationships with them. NCI shall promptly notify NAVIO of any
event or occurrence not in the ordinary course of business and will not enter
into or amend any agreement or take any action that reasonably could be expected
to have a material adverse effect on NCI's Business.
Section 5.2 RESTRICTED ACTIVITIES AND TRANSACTIONS. Except as
provided herein or in the NCI Disclosure Schedule, or as otherwise consented to
in writing by NAVIO, prior to the Effective Time, NCI will not:
(a) Issue, sell, encumber or deliver, or agree to issue, sell,
encumber or deliver, any shares of any class of capital stock of NCI or any
securities convertible into any such shares or convertible into securities in
turn so convertible, or any options, warrants, or other
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rights calling for the issuance, sale or delivery of any such shares or
convertible securities (other than options granted to employees of or
consultants to NCI with per share exercise prices equal to fair market value
determined in good faith by the Board of Directors of NCI and agreed to in
writing by NAVIO, and vesting 25% after one year and 1/48 of the total grant
per month thereafter without acceleration as a result of the occurrence of
any event); or authorize or propose any change in its equity capitalization,
other than the issuance of shares of NCI Common Stock upon the exercise of
NCI Options; or accelerate, amend or change the period of exercisability of
any rights to purchase securities of NCI or change the vesting period of any
restricted stock or options to purchase stock of NCI;
(b) Mortgage or pledge any of its material assets, tangible or
intangible;
(c) Hire any management personnel or terminate (other than for cause
and with a liability to NAVIO of less than $25,000) any employee of NCI, except
in the ordinary course of business involving a person with an annual salary of
less than $50,000 and only (in the case of a new hire) pursuant to an at-will
arrangement without any severance benefits; or increase or amend the
compensation to, or the terms of any agreement with, any employee or director;
(d) Except for End-User Licenses granted consistent with past
practices, transfer or license to any person or entity, or otherwise extend,
amend or modify, any rights to the NCI Intellectual Property Rights; or
(e) Enter into or amend any agreements pursuant to which any other
party is granted most favored customer status or exclusive marketing,
distribution or other similar rights with respect to any products of NAVIO.
Section 5.3 DOCUMENTS DELIVERED TO STOCKHOLDERS. NCI will take all
reasonable steps necessary to ensure that the description of, and information
relating to, NCI, NCI's Business and shareholders and the transactions
contemplated by this Agreement contained in the documents delivered to NAVIO
stockholders, to the extent prepared by NCI expressly for use in such
documentation, in connection with the Application for Qualification of
Securities by permit under Section 25121 of the CSL and related hearing on the
fairness of the Merger pursuant to Section 25142 of the CSL, including any proxy
statement and other disclosure documents, will not contain any untrue statement
of a material fact, and will not omit to state a material fact necessary to make
the statements or facts contained therein not misleading in light of the
circumstances under which they are furnished.
Section 5.4 INDEMNIFICATION OF NAVIO DIRECTORS AND OFFICERS. At the
Effective Time, NCI shall assume all obligations of NAVIO under the
Indemnification Agreements between NAVIO and each of its Directors AND CERTAIN
OF ITS OFFICERS, a list of which are set forth in SCHEDULE 5.4 hereto.
Section 5.5 NEGOTIATION WITH OTHERS. From and after the date of
this Agreement until the earlier of the Effective Time or the termination of
this Agreement in accordance with its terms, NCI shall not negotiate to enter
into or enter into any transaction that would have as a
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condition thereto the failure to consummate, or that would otherwise prevent
the consummation of, the transactions contemplated by this Agreement.
Section 5.6 RESTATED CERTIFICATE OF INCORPORATION. Prior to the
Effective Time, NCI shall amend and restate its Restated Certificate of
Incorporation substantially as set forth in EXHIBIT 5.6 hereto.
Section 5.7 CARVE OUT FROM COVENANTS. Notwithstanding any provisions
to the contrary in Sections 5.1 or 5.2 or any other section of this Agreement,
NCI shall have the right to consummate any or all of the transactions described
in Schedules 3.2 and 3.9(a)(iii) to the NCI Disclosure Schedule.
ARTICLE VI
MUTUAL COVENANTS
Section 6.1 CONFIDENTIALITY. Each party agrees to continue to comply
with the terms of the confidentiality agreement dated as of March 16, 1997,
among ORACLE CORPORATION, NETSCAPE , NCI AND NAVIO.
Section 6.2 EXPENSES.Each of NCI and NAVIO will separately bear its
own expenses incurred in connection with this Agreement or any transaction
contemplated hereby.
Section 6.3 PUBLIC ANNOUNCEMENTS. Except as provided for herein, NCI
and NAVIO shall not, from and after the date hereof make, issue or release any
public announcement, press release, statement or acknowledgment of the existence
of, or reveal publicly the terms, conditions and status of, the transactions
provided for herein (including any written communication to employees, customers
or the trade) without the prior written consent of the other party as to the
content and time of release of and the media in which such statement or
announcement is to be made; PROVIDED, HOWEVER, that in the case of
announcements, statements, acknowledgments or revelations which any party is
required by law to make, issue or release, the making, issuing or releasing of
any such announcement, statement, acknowledgment or revelation by the party so
required to do so by law shall not constitute a breach of this Agreement if such
party shall have given, to the extent reasonably possible, not less than one
calendar day prior notice to the other party, and shall have attempted, to the
extent reasonably possible, to clear such announcement, statement,
acknowledgment or revelation with the other party. Each party hereto agrees
that it will not unreasonably withhold any such consent or clearance. The
parties will issue a mutually agreed upon joint press release upon execution and
delivery of this Agreement.
Section 6.4 AGREEMENTS TO COOPERATE. Each party will take all
reasonable actions necessary to comply promptly with all legal requirements
that may be imposed on it with respect to the Merger (including obtaining any
and all necessary third party and governmental consents) and shall take all
reasonable actions necessary to cooperate promptly with and furnish
information to the other party in connection with any such requirements
imposed upon the party in connection with the Merger. The parties hereto
will consult and cooperate with one another,
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and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or on behalf of any party hereto in
connection with proceedings under or relating to the HSR Act or any other
federal or state antitrust or fair trade law.
Section 6.5 STATE STATUTES. If any state anti-takeover law shall
become applicable to the transactions contemplated by this Agreement, NCI and
its Board of Directors or NAVIO and its Board of Directors, as the case may be,
shall use their reasonable efforts to grant such approvals and take such actions
as are necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effects of such state takeover law on
the transactions contemplated by this Agreement.
Section 6.6 FAIRNESS HEARING AND PERMIT. NCI and NAVIO shall prepare
an Application for Qualification of Securities by permit under Section 25121 of
the CSL, a related Notice of Hearing and a proxy statement and other disclosure
materials (the "DISCLOSURE DOCUMENT") to be supplied to the stockholders of
NAVIO in connection with the transactions contemplated hereby (collectively, the
"HEARING DOCUMENTS"). NAVIO and NCI will file the Hearing Documents as promptly
as practicable with the California Department of Corporations and request a
hearing on the fairness of the Merger pursuant to Section 25142 of the CSL.
Section 6.7 ADDITIONAL AGREEMENTS. In case at any time after the
Effective Time of the Merger any further action is reasonably necessary to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of NAVIO, the proper officers and directors of each party to this
Agreement shall take all such necessary action.
Section 6.8 HSR ACT FILING.
(a) Each of NCI and NAVIO shall (i) promptly make or cause to be
made, or in the case of NETSCAPE , NAVIO shall use commercially reasonable
efforts to cause NETSCAPE to make, the filings required of such party or any of
its affiliates or subsidiaries under the HSR Act with respect to the Merger and
the other transactions provided for in this Agreement, (ii) comply at the
earliest practicable date with any request under the HSR Act for additional
information, documents, or other material received by such party or any of its
affiliates or subsidiaries from the Federal Trade Commission or the Department
of Justice or other Governmental Entity in respect of such filings, the Merger,
or such other transactions, and (iii) cooperate with the other party in
connection with any such filing and in connection with resolving any
investigation or other inquiry of any such agency or other Governmental Entity
under any Antitrust Laws (as defined in Section 6.8(b)) with respect to any such
filing, the Merger, or any such other transaction. Each party shall promptly
inform the other party of any material communication with, and any proposed
understanding, undertaking, or agreement with, any Governmental Entity regarding
any such filings, the Merger, or any such other transactions. Neither party
shall participate in any meeting with any Governmental Entity in respect of any
such filings,
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investigation, or other inquiry without giving the other party notice of the
meeting and, to the extent permitted by such Governmental Entity, the
opportunity to attend and participate.
(b) Each of NAVIO and NCI shall use its commercially reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the Merger or any other transactions
provided for in this Agreement under the HSR Act, the Sherman Act, as amended,
the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and
any other federal, state or foreign statutes, rules, regulations, orders, or
decrees that are designed to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade (collectively,
"ANTITRUST LAWS"). In connection therewith, if any administrative or judicial
action or proceeding is instituted (or threatened to be instituted) challenging
the Merger as violative of any Antitrust Law, and, if by mutual agreement, NCI
and NAVIO decide that litigation is in their best interests, each of NCI and
NAVIO shall cooperate and use its best efforts vigorously to contest and resist
any such action or proceeding and to have vacated, lifted, reversed, or
overturned any decree, judgment, injunction, or other order, whether temporary,
preliminary, or permanent (each an "Order"), that is in effect and that
prohibits, prevents, or restricts consummation of the Merger. Each of NCI and
NAVIO shall use commercially reasonable efforts to take such action as may be
required to cause the expiration of the notice periods under the HSR Act or
other Antitrust Laws with respect to the Merger and such other transactions as
promptly as possible after the execution of this Agreement. Notwithstanding
anything to the contrary in this Section 6.8, neither NCI or any of its
affiliates, nor NAVIO or any of its affiliates, shall be required to divest any
of their respective businesses, product lines, or assets, or to take or agree to
take any other action or agree to any limitation that would have a material
adverse effect on their respective businesses, product lines or assets.
(c) To the extent required under the HSR Act, NAVIO shall use all
reasonable efforts to cause (at NAVIO'S EXPENSE) WEI YEN to comply with the HSR
Act in connection with the transactions contemplated by this Agreement on
substantially the same terms as set forth above in this Section 6.8 as
applicable to NAVIO.
Section 6.9 DIVIDENDS AND DISTRIBUTIONS; REPURCHASES. Except as
otherwise consented to in writing by the other party, neither party shall, prior
to the Effective Time, declare or pay any dividend on its capital stock in cash,
stock or property, or not redeem, repurchase or otherwise acquire any shares, or
rights to acquire shares, of its capital stock, other than repurchases of stock
from employees of or consultants to such party under agreements dated prior to
the date of this Agreement.
Section 6.10 CONSENTS, APPROVALS AND FILINGS. Each of NAVIO and NCI
will take all reasonable actions to comply as promptly as practicable with
the governmental requirements specified in Section 2.5 and 3.5 hereof,
respectively, and to obtain on or before the Closing all necessary approvals,
authorizations, consents, licenses, clearances or orders of Governmental
Entities referred to in such section or of other persons referred to in
Section 2.6 or Section 3.6, respectively, or in their respective Disclosure
Schedules.
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Section 6.11 ACCESS TO RECORDS AND PROPERTIES. Each party may, prior
to the Effective Time, through its employees, agents and representatives,
continue to conduct or cause to be conducted a detailed review of the business,
financial condition, properties, assets, books and records of the other party.
Each party agrees to assist the other party in conducting such review and
investigation and will provide, and will use reasonable efforts to cause its
independent public accountants to provide, the other party and its employees,
agents and representatives full access to, and complete information concerning
all aspects of the business of such party, including its books, records
(including Returns filed or in preparation), personnel and premises, the audit
work papers and other records relating to such party of its independent public
accountants. Neither any investigation by a party nor the receipt by a party of
any data or information from the other party, its independent public accountants
and other representatives or advisors will affect the right of a party to rely
on the representations, warranties or covenants of the other party or the right
of such other party to terminate this Agreement as provided in Section 11.1
hereof.
Section 6.12 REORGANIZATION. From and after the date hereof and until
the Effective Time, each party will use its reasonable best efforts to ensure
that the Merger will qualify as a reorganization within the meaning of Section
368(a) of the Code.
Section 6.13 EMPLOYEE BENEFITS. NCI and NAVIO shall cooperate to
determine the appropriate employee benefit arrangements to make available to the
employees of NCI after the Effective Time. NCI and NAVIO acknowledge that the
employees of NCI after the Effective Time will not be eligible to participate in
any benefit programs or plans provided to employees of ORACLE.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
The obligations of the parties under this Agreement to consummate the
Merger will be subject to the satisfaction, or to the waiver by them in the
manner contemplated by Section 12.2, on or before the Closing, of the following
conditions:
Section 7.1 STOCKHOLDER APPROVAL. The stockholders of NAVIO and NCI
will have taken all action required under the DGCL and the CGCL and its
Certificates of Incorporation to effectuate the Merger and the transactions
contemplated by this Agreement.
Section 7.2 HSR. The applicable waiting period under the HSR Act
relating to the Merger shall have expired or been terminated.
Section 7.3 NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger or materially limiting or
restricting the products or operations of NAVIO or NCI after the Merger shall
have been issued, nor shall any proceeding brought by a domestic administrative
agency or commission or other domestic Governmental Entity, seeking any of the
foregoing be pending; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered,
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enforced or deemed applicable to the Merger which makes the consummation of
the Merger illegal.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF NCI
The obligations of NCI under this Agreement to consummate the Merger
will be subject to the satisfaction, or to the waiver by NCI in the manner
contemplated by Section 12.2, on or before the Closing, of the following
conditions:
Section 8.1 PERFORMANCE OF COVENANTS. NAVIO shall have performed
and complied in all material respects with each and every covenant, agreement
and condition set forth in Article IV, VI, VII and VIII of this Agreement
required by this Agreement to be performed or complied with by it prior to or
on the Closing.
Section 8.2 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No
order of any court or administrative agency will be in effect which restrains
or prohibits any transaction contemplated hereby or which would limit or
otherwise affect in a material respect NCI's ownership of NAVIO; no suit,
action, or proceeding by any Governmental Entity or any other third party, or
investigation or inquiry by any Governmental Entity, will be pending or, to
the knowledge of such party threatened against NCI or NAVIO, which challenges
the validity or legality, or seeks to restrain the consummation, of any
transaction contemplated hereby or which seeks to limit or otherwise affect
or challenge NCI's ownership of NAVIO OR NAVIO's (or, upon consummation of
the transactions contemplated hereby, NCI's) rights in or to any NAVIO
Intellectual Property (including any claim of infringement of the
Intellectual Property Rights of any other party); and no written advice shall
have been received by NCI, NAVIO or their respective counsel from any
Governmental Entity or other person or entity, and remain in effect, stating
that an action or proceeding will, if the Merger is consummated or sought to
be consummated, be filed seeking to invalidate or restrain the Merger or
limit or otherwise affect or challenge NCI's ownership of NAVIO; and there
shall not be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger, which would
(a) make the consummation of the Merger illegal, (b) render NCI or NAVIO
unable to consummate the Merger or (c) prohibit NCI's or NAVIO's ownership or
operation of all or any material portion of the business or assets of NAVIO,
as a result of the Merger, or compel NCI or NAVIO to dispose of or hold
separate all or any material portion of the business or assets of NAVIO.
Section 8.3 APPROVALS AND CONSENTS. The approvals of the
stockholders of NAVIO, and all approvals and authorizations of the
Governmental Entities and other third parties set forth in SCHEDULE 8.3
hereto shall have been obtained. NAVIO shall have received the approval of
the holders of NAVIO's Series A Preferred Stock required by the DGCL to amend
its Certificate of Incorporation as contemplated by Section 4.9 and as
required to effect the Merger and the other transactions contemplated by this
Agreement.
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Section 8.4 OPINION OF COUNSEL. NCI shall have received from
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to
NAVIO, an opinion dated the date of the Closing and addressed to NCI,
substantially in the form attached hereto as EXHIBIT 8.4.
Section 8.5 CERTIFICATE. NCI shall have received a certificate
signed by the Chief Executive Officer of NAVIO ON NAVIO's behalf to the
effect that the conditions set forth in Section 8.1 and 8.13 have been met.
Section 8.6 TAX OPINION. NCI shall have received an opinion of
Venture Law Group, a Professional Corporation, to the effect that the Merger
will be treated for federal income tax purposes as a tax-free reorganization
within the meaning of Section 368(a) of the Code. In rendering such opinion,
counsel may rely upon (and, to the extent reasonably required, the parties
and NAVIO's stockholders shall make) reasonable representations and
assumptions related thereto.
Section 8.7 DISSENTING SHARES. The aggregate number of Dissenting
Shares for which demands for payment are filed or may still be filed shall
not be equal to or exceed 10% of the outstanding shares of NAVIO capital
stock immediately prior to the Effective Time.
Section 8.8 FIRPTA. At the Closing, NAVIO shall deliver to NCI a
properly executed statement conforming to the requirements of Treasury
Regulation Sections 1.897-2(h)(l)(i) and 1.445-2(c)(3) and NAVIO further
agrees to provide the notification to the Internal Revenue Service required
pursuant to Treasury Regulation Section 1.897-2(h)(2).
Section 8.9 PUT/CALL AND VOTING AGREEMENT. NCI shall have received
at or prior to the Closing from holders of 90% of NAVIO's capital stock
(calculated on a fully-diluted basis) and rights to acquire NAVIO capital
stock (calculated on a fully-diluted basis) a duly executed Put/Call and
Voting Agreement.
Section 8.10 STOCKHOLDERS AGREEMENT. NCI shall have received at or
prior to the Closing the Stockholders Agreement, duly executed by NETSCAPE ,
WEI YEN and holders of at least a majority of the NAVIO Series A Preferred
Stock.
Section 8.11 FAIRNESS HEARING AND PERMIT. The hearing on the
fairness of the Merger pursuant to Section 25142 of the CSL shall have
occurred, and NCI shall have received a permit relating to the issuance of
the Merger Securities and the other transactions contemplated by this
Agreement, the Stockholders Agreement and the Put/Call and Voting Agreement
from the Department of Corporations of the State of California pursuant to
its Application for Qualification of Securities by permit under Section 25121
of the CSL.
Section 8.12 NETSCAPE WARRANT; NAVIO STOCKHOLDER AGREEMENT; NAVIO
RIGHTS AGREEMENT. . The NETSCAPE Warrant shall terminate unexercised at
the Effective Time. The NAVIO Stockholder Agreement and NAVIO Rights
Agreement shall terminate at the Effective Time.
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Section 8.13 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of NAVIO in Article II of this Agreement were true and correct
in all material respects as of the date of this Agreement.
Section 8.14. AMENDMENT TO CERTIFICATE OF INCORPORATION. NAVIO shall
have amended its Certificate of Incorporation in accordance with Section 4.9.
ARTICLE IX
CONDITIONS TO NAVIO'S OBLIGATIONS
The obligations of NAVIO under this Agreement to consummate the Merger
will be subject to the satisfaction, or to the waiver by NAVIO in the manner
contemplated by Section 12.2, on or before the Closing, of the following
conditions:
Section 9.1 PERFORMANCE OF COVENANT. NCI shall have performed and
complied in all material respects with each and every covenant, agreement and
condition contained in Articles V, VI, VII and IX of this Agreement required
by this Agreement to be performed or complied with by each prior to or at the
Closing.
Section 9.2 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No
order of any court or administrative agency will be in effect which restrains
or prohibits any transaction contemplated hereby or which would limit or
otherwise affect in a material respect NCI's ownership of NAVIO; no suit,
action, or proceeding by any Governmental Entity or any other third party, or
investigation or inquiry by any Governmental Entity, will be pending or, to
the knowledge of such party, threatened against NCI or NAVIO, which
challenges the validity or legality, or seeks to restrain the consummation,
of any transaction contemplated hereby or which seeks to limit or otherwise
affect or challenge NCI's ownership of NAVIO OR NAVIO's (or, upon
consummation of the transactions contemplated hereby, NCI's) rights in or to
any NAVIO Intellectual Property (including any claim of infringement of the
Intellectual Property Rights of any other party); and no written advice shall
have been received by NCI, NAVIO or their respective counsel from any
Governmental Entity or other person or entity, and remain in effect, stating
that an action or proceeding will, if the Merger is consummated or sought to
be consummated, be filed seeking to invalidate or restrain the Merger or
limit or otherwise affect or challenge NCI's ownership of NAVIO; and there
shall not be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger, which would
(a) make the consummation of the Merger illegal, (b) render NCI or NAVIO
unable to consummate the Merger or (c) prohibit NCI's or NAVIO's ownership or
operation of all or any material portion of the business or assets of NAVIO,
as a result of the Merger, or compel NCI or NAVIO to dispose of or hold
separate all or any material portion of the business or assets of NAVIO.
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Section 9.3 APPROVALS AND CONSENTS. The approval of the
stockholders of NAVIO and NCI, and all approvals and authorizations of the
Governmental Entities and other third parties listed in SCHEDULE 9.3 hereto
and in the NAVIO Disclosure Schedule shall have been obtained.
Section 9.4 OPINION OF COUNSEL. NAVIO shall have received from
Venture Law Group, a Professional Corporation, counsel to NCI, an opinion
dated the date of the Closing and addressed to NAVIO and its stockholders,
substantially in the form attached hereto as EXHIBIT 9.4.
Section 9.5 CERTIFICATES. NAVIO shall have received a certificate
signed by the Chief Financial Officer of NCI to the effect that the
conditions set forth in Sections 9.1 and 9.8 have been met.
Section 9.6 TAX OPINION. NAVIO shall have received an opinion of
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to
NAVIO, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code. In rendering such opinion, counsel may rely upon (and, to the extent
reasonably required, the parties and NAVIO's stockholders shall make)
reasonable representations and assumptions related thereto.
Section 9.7 FAIRNESS HEARING AND PERMIT. The hearing on the
fairness of the Merger pursuant to Section 25142 of the CSL shall have
occurred, and NCI shall have received a permit relating to the issuance of
the Merger Securities and the other transactions contemplated by this
Agreement, the Stockholders Agreement and the Put/Call and Voting Agreement
from the Department of Corporations of the State of California pursuant to
its Application for Qualification of Securities by permit under Section 25121
of the CSL.
Section 9.8 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of NCI in Article III of this Agreement were true and correct
in all material respects as of the date of this Agreement.
Section 9.9 RESTATED CERTIFICATE OF INCORPORATION. NCI shall have
amended its Certificate of Incorporation in accordance with Section 5.6.
Section 9.10 STOCKHOLDERS AGREEMENT AND PUT/CALL AND VOTING
AGREEMENT. The Stockholders Agreement and Put/Call and Voting Agreement shall
have been executed by NCI and ORACLE.
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ARTICLE X
[RESERVED]
ARTICLE XI
TERMINATION
Section 11.1 TERMINATION AND ABANDONMENT. This Agreement may be
terminated and the Merger may be abandoned before the Effective Time,
notwithstanding any approval and adoption of this Agreement by the
stockholders of NAVIO or NCI:
(a) By the mutual written consent of the Boards of Directors of
NCI and NAVIO;
(b) By NCI or by NAVIO at any time after July 31, 1997 (or such
later date as shall have been agreed to in writing by them, acting through
their respective Boards of Directors) if the Merger for any reason has not by
such date become effective; PROVIDED, HOWEVER, that this provision shall not
be available to NCI if NAVIO has the right to terminate this Agreement under
Section 11.1(e) or to NAVIO if NCI has the right to terminate this Agreement
under Section 11.1(d); provided further, that such date shall be extended
automatically if the only condition to closing set forth in Articles VII,
VIII and IX which has not been satisfied is the condition set forth in
Section 7.2 of this Agreement (but, in no event, past September 30, 1997
without the written consent of NCI and NAVIO).
(c) By either NCI or NAVIO if a permanent injunction or other
order by any federal or state court would make illegal or otherwise restrain
or prohibit the consummation of the Merger shall have been issued and shall
have become final and nonappealable; or
(d) By NCI if there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of NAVIO and such breach has not been cured within 15 business
days after written notice to NAVIO (PROVIDED, that NCI is not in material
breach of the terms of this Agreement; and PROVIDED FURTHER, that no cure
period shall be required for a breach which by its nature cannot be cured);
and
(e) By NAVIO if there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of NCI and such breach has not been cured within 15 business days
after written notice to NCI (PROVIDED, that NAVIO is not in material breach
of the terms of this Agreement; and PROVIDED FURTHER, that no cure period
shall be required for a breach which by its nature cannot be cured).
The power of termination provided for by this Section 11 may be
exercised for NCI or NAVIO only by their respective Boards of Directors and
will be effective only after written notice thereof, signed on behalf of the
party for which it is given by its Chief Executive Officer or other
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duly authorized officer, shall have been given to the other. If this
Agreement is terminated in accordance with this Section 11.1, the Merger will
be abandoned without further action by NCI or NAVIO.
Section 11.2 EFFECT OF TERMINATION. In the event of termination and
abandonment of the Merger pursuant to Section 11.1, none of NCI or NAVIO
shall have any liability or further obligation to any of the others, except
as a result of any breach of this Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 AMENDMENT AND MODIFICATION. To the fullest extent
provided by applicable law, this Agreement may be amended, modified and
supplemented with respect to any of the terms contained herein by mutual
consent of the respective Boards of Directors of NCI and NAVIO or by their
respective officers duly authorized by such Boards of Directors by an
appropriate written instrument executed at any time prior to the Effective
Time.
Section 12.2 WAIVER OF COMPLIANCE. To the fullest extent permitted
by law, each of NCI and NAVIO may, pursuant to action by its respective Board
of Directors, or its respective officers duly authorized by its Board of
Directors, by an instrument in writing extend the time for or waive the
performance of any of the obligations of the others or waive compliance by
the others with any of the covenants, or waive any of the conditions to its
obligations, contained herein. No such extension of time or waiver will
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
Section 12.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
respective representations and warranties of each party hereto contained
herein will not be deemed to be waived or otherwise affected by any
investigation made by the other party hereto. Such representations and
warranties will be extinguished by and will not survive the Effective Time,
except for remedies that may be available for fraud.
Section 12.4 NOTICES. All notices, requests, demands and other
communications required or permitted hereunder will be in writing and will be
deemed to have been duly given when delivered by hand or when mailed by
registered or certified mail, postage prepaid, or when given by facsimile
transmission (promptly confirmed in writing), as follows:
(a) If to NCI:
Network Computer, Inc.
500 Oracle Parkway
Redwood City, California
Telephone No.: (415) 506-5100
Telecopy No.: (415) 506-7114
Attention: Daniel Cooperman
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with a copy to:
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
Telephone No.: (415) 854-4488
Telecopy No.: (415) 854-1121
Attention: Donald M. Keller, Jr.
or to such other person as NCI designates in writing delivered to NAVIO in
the manner provided in this Section 12.4;
(b) If to NAVIO:
NAVIO COMMUNICATIONS, INC.
4870 WEST MAUDE AVE.
SUNNYVALE, CALIFORNIA 94086
TELEPHONE NO.: (408) 328-9300
TELECOPY NO.: (408) 328-9301
ATTENTION: ROGER ROSS
with copies to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park CA 94025
Telephone No.: (415) 321-2400
Telecopy No.: (415) 321-2800
Attention: Steven M. Spurlock
or to such other person as NAVIO designates in writing, delivered to NCI in
the manner provided in this Section 12.4.
Section 12.5 ASSIGNMENT. This Agreement and all of the provisions
hereof will be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any of the parties hereto without the prior written consent of
the other parties.
Section 12.6 GOVERNING LAW. This Agreement and the legal relations
between the parties hereto will be governed by and construed in accordance
with the laws of the State of California, without giving effect to the choice
of law principles thereof; PROVIDED, HOWEVER, that the law governing the
fiduciary duties of each party hereto and their respective boards of
directors and the law governing any other matters of internal corporate
governance of any of NCI or NAVIO shall be the law of their respective
jurisdictions of incorporation.
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Section 12.7 PARTIES IN INTEREST. Nothing expressed or implied in
this Agreement is intended or will be construed to confer upon or give to any
person, firm or corporation other than the parties hereto any rights or
remedies under or by reason of this Agreement or any transaction contemplated
hereby, except as specifically provided in this Agreement.
Section 12.8 COUNTERPARTS. This Agreement may be executed in two or
more counterparts and by the different parties hereto on separate
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
Section 12.9 HEADINGS AND REFERENCES. The headings of the sections
and articles of this Agreement are inserted for convenience of reference only
and will not by themselves determine the interpretation of this Agreement.
All references herein to sections and articles are to sections and articles
of this Agreement, unless otherwise indicated.
Section 12.10 ENTIRE AGREEMENT. This Agreement, including the NAVIO
Disclosure Schedule and the NCI Disclosure Schedule, the schedules and
exhibits and other documents referred to herein which form a part hereof,
contains the entire understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants, or undertakings with respect to the
subject matter contained herein, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Section 12.11 SEVERABILITY. If any provision of this Agreement, or
the application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such invalid or unenforceable provision of this Agreement
with a valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of the invalid and
unenforceable provision.
Section 12.12 OTHER REMEDIES. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by
law or equity on such party, and the exercise of any one remedy will not
preclude the exercise of any other.
Section 12.13 FURTHER ASSURANCES. Each party agrees to cooperate
fully with the other parties and to execute such further instruments,
documents and agreements and to give such further written assurances as may
be reasonably requested by any other party to evidence and reflect the
transactions described herein and contemplated hereby and to carry into
effect the intents and purposes of this Agreement.
Section 12.14 MUTUAL DRAFTING. This Agreement is the joint product
of NCI and NAVIO, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of NCI and NAVIO, and shall not be
construed for or against any party hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.
NETWORK COMPUTER, INC.
By:
-------------------------------------
Name:
Title:
NAVIO COMMUNICATIONS, INC.
By:
-------------------------------------
Name:
Title:
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EXHIBIT 1.7
(PROCEDURES FOR ISSUING MERGER SECURITIES)
1. Prior to the Effective Time, NCI will appoint an agent that is
reasonably satisfactory to NAVIO to act as Exchange Agent (the "EXCHANGE
AGENT") hereunder or agree to serve as its own Exchange Agent. If so elected
by NCI, NAVIO consents to NCI acting as Exchange Agent hereunder. As soon as
practicable following the Effective Time, NCI will issue and deliver to the
Exchange Agent certificates ("NEW CERTIFICATES") representing a sufficient
number of shares of NCI Series B Stock and NCI Series C Stock for issuance
pursuant to Section 1.4(a) hereof.
2. As soon as practicable (but in any event within 10 days) after the
Effective Time, the Exchange Agent will send written notice to each record
holder of certificates representing shares of NAVIO capital stock converted
pursuant to Section 1.4(a) hereof ("OLD CERTIFICATES") of the manner and
basis for exchanging Old Certificates for New Certificates.
3. Upon surrender for cancellation to the Exchange Agent of one or
more Old Certificates, accompanied by a duly executed letter of transmittal
in proper form, the Exchange Agent will, as promptly as practicable, deliver
to each holder of such surrendered Old Certificates, New Certificates
representing the number of shares of NCI Series B Stock or NCI Series C Stock
to which the holder of NAVIO capital stock is entitled pursuant to Section
1.4(a) hereof, together with checks for payment of cash in lieu of fractional
interests to be issued in respect of the Old Certificates. NCI will deliver
to the Exchange Agent, when required, cash sufficient to settle the payment
for fractional interests.
4. Until Old Certificates have been surrendered and exchanged as
herein provided for New Certificates, each outstanding Old Certificate will
be deemed for all corporate purposes of NCI, other than the payment of
dividends or any distributions to the extent contemplated below, to evidence
ownership of the number of shares of NCI Series B Stock or NCI Series C Stock
into which the number of shares of NAVIO capital stock shown thereon have
been converted pursuant to Section 1.4(a) hereof. No dividends or other
distributions declared on NCI Series B Stock or NCI Series C Stock will be
paid to persons otherwise entitled to receive the same until the Old
Certificates have been surrendered in exchange for New Certificates in the
manner herein provided, but upon such surrender, such dividends or other
distributions will be paid to such persons in accordance with the terms of
such securities. In no event will the persons entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other distributions. From and after the Effective Time, NCI
will, however, be entitled to treat Old Certificates which have not yet been
surrendered for exchange as evidencing the ownership of the number of shares
of NCI Series B Stock or NCI Series C Stock into which the shares of NAVIO
capital stock represented by such Old Certificates will have been converted,
notwithstanding any failure to surrender such Old Certificates.
5. No transfer taxes will be payable by any stockholder of NAVIO in
connection with the exchange of Old Certificates for New Certificates, except
that if any New Certificate is to be issued in a name other than that in
which the Old Certificate surrendered in exchange therefor is
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registered, it will be a condition of such exchange that the person
requesting such exchange will pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of the New Certificate in a name
other than the registered holder of the Old Certificate, or will establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
6. The appointment of the Exchange Agent may be terminated at any time
after one year following the Effective Time. Upon termination of such
appointment, Old Certificates will be surrendered to, and New Certificates
delivered by, NCI or its agent. If outstanding Old Certificates are not
surrendered prior to two years after the Effective Time (or, in any
particular case, prior to such earlier date on which dividends or other
distributions, if any, would otherwise escheat to or become the property of
any governmental unit or agency), the amount of dividends and other
distributions, if any, which have become payable and which thereafter become
payable on Merger Securities evidenced by such Old Certificates as provided
herein will, to the extent permitted by applicable law, become the property
of the Surviving Corporation (and, to the extent not in its possession, will
be paid over to it by NCI), free and clear of all claims or interest of any
person previously entitled thereto.
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Exhibit 3.1
FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
NETWORK COMPUTER, INC.
The undersigned, Mitchell E. Kertzman and Daniel Cooperman, hereby
certify that:
ONE: They are the duly elected, qualified and acting Chief Executive
Officer and Secretary, respectively, of Network Computer, Inc., a Delaware
corporation.
TWO: The Third Amended and Restated Certificate of Incorporation of
this corporation was filed on November 10, 1997 with the Secretary of State of
Delaware, the Second Amended and Restated Certificate of Incorporation of this
corporation was filed on July 28, 1997 with the Secretary of State of Delaware,
the First Amended and Restated Certificate of Incorporation of this corporation
was filed on September 24, 1996 with the Secretary of State of Delaware and the
Certificate of Incorporation of this corporation was originally filed with the
Secretary of State of Delaware on April 24, 1996.
THREE: The Certificate of Incorporation of this corporation shall be
amended and restated to read in full as follows:
ARTICLE I
The name of the corporation is Liberate Technologies.
ARTICLE II
The address of the corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
The purpose of this corporation 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 that the corporation is authorized to issue is
667,249,900 shares, each with a par value of $0.01 per share; 407,500,000 shares
shall be Common Stock and 259,749,900 shares shall be Preferred Stock.
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock authorized by this Restated Certificate of Incorporation may be
issued from time to time in one or more series. The Board of Directors is
authorized to determine and alter the rights,
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preferences, privileges and restrictions granted to and imposed upon any
wholly unissued series of Preferred Stock, and to fix the number of shares of
any series of Preferred Stock and the designation of any such series of
Preferred Stock. The Board of Directors, within the limits and restrictions
stated in any resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series, may increase or decrease
(but not below the number of shares of such series then outstanding) the
number of shares of any series subsequent to the issue of shares of that
series. This corporation shall have seven series of Preferred Stock
designated as follows: "Series A Preferred Stock" consisting of 84,999,900
shares; "Series A-1 Preferred Stock" consisting of 25,500,000 shares; "Series
B Preferred Stock" consisting of 14,000,000 shares; "Series C Preferred
Stock" consisting of 42,500,000 shares; "Series C-1 Preferred Stock"
consisting of 53,500,000 shares; "Series D Preferred Stock" consisting of
8,000,000 shares; and "Series E Preferred Stock" consisting of 31,250,000
shares. The rights, preferences, privileges, and restrictions granted to and
imposed on the each series of Stock are as set forth below in this Article
IV(B). Together, the Series A Preferred Stock, Series A-1 Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series C-1 Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock shall
hereinafter be referred to collectively as the "Preferred Stock."
1. DIVIDEND PROVISIONS. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, the holders of
shares of Series A Preferred Stock, Series A-1 Preferred Stock, Series B
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall 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, Series C
Preferred Stock or Series C-1 Preferred Stock of this corporation, at the rate
of $.10 per share per annum on each outstanding share of Series A Preferred
Stock, $.11 per share per annum on each outstanding share of Series A-1
Preferred Stock and Series B Preferred Stock, $.158 per share per annum on each
outstanding share of Series D Preferred Stock and $.16 per share per annum on
each outstanding share of Series E Preferred Stock, payable quarterly when, as
and if declared by the Board of Directors. Such dividends shall not be
cumulative. In addition, in the event this corporation shall declare a
distribution payable in cash, securities of other persons or this corporation
(payable other than in Common Stock of this corporation), evidences of
indebtedness issued by this corporation or other persons, assets or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each such case the holders of Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of Preferred
Stock were the holders of the number of shares of Common Stock of the
Corporation into which their respective shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution. The
holders of Preferred Stock shall have no right to share in any preferential
distributions made to any other series of Preferred Stock which may hereafter be
issued.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock that may from time to time come into existence, the
holders of the Series A Preferred Stock,
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Series A-1 Preferred Stock, Series B Preferred Stock, Series D Preferred
Stock 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 C Preferred Stock, Series C-1 Preferred Stock and
Common Stock by reason of their ownership thereof, an amount equal to $1.00
per share, $1.10 per share, $1.10 per share, $1.58 per share and $1.60 per
share, respectively, for each share of Series A Preferred Stock, Series A-1
Preferred Stock, Series B Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock then held by them, plus declared but unpaid
dividends on each such share. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series A Preferred
Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then,
subject to the rights of series of Preferred Stock that may from time to time
come into existence, the entire assets and funds of the corporation legally
available for distribution shall be distributed ratably among the holders of
the Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock in proportion to
the preferential amount each such holder is otherwise entitled to receive.
(b) Upon the completion of the distribution required by
Section 2(a) above and any other distribution that may be required with respect
to series of Preferred Stock that may from time to time come into existence, the
holders of the Series C Preferred Stock 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 equal to $.275 per share for each share of Series C
Preferred Stock and Series C-1 Preferred Stock then held by them. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series C Preferred Stock and Series C-1 Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of series of Preferred Stock
that may from time to time come into existence, the entire remaining assets and
funds of the corporation legally available for distribution shall be distributed
ratably among the holders of the Series C Preferred Stock and Series C-1
Preferred Stock in proportion to the preferential amount each such holder is
otherwise entitled to receive.
(c) Upon the completion of the distributions required by
Sections 2(a) and 2(b) above and any other distribution that may be required
with respect to series of Preferred Stock that may from time to time come into
existence, the remaining assets of the corporation available for distribution to
stockholders shall be distributed among the holders of Series A Preferred Stock,
Series A-1 Preferred Stock, Series B Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Common Stock pro rata based on the number of shares
of Common Stock held by each (assuming conversion of all such Series A Preferred
Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock).
(d) For purposes of this Section 2, a liquidation, dissolution
or winding up of this corporation shall be deemed to be occasioned by, or to
include, (i) the acquisition of the corporation by another entity by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation, but excluding any
merger effected exclusively for the purpose of changing the domicile of the
corporation); or (ii) a
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sale of all or substantially all of the assets of the corporation, UNLESS the
corporation's stockholders of record as constituted immediately prior to such
acquisition or sale will, immediately after such acquisition or sale (by
virtue of securities issued as consideration for the corporation's
acquisition or sale or otherwise) hold at least 50% of the voting power of
the surviving or acquiring entity.
(e) In any of the events specified in (d) above, if the
consideration received by the corporation is other than cash, its value will be
deemed its fair market value. Any securities shall be valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or 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;
(B) 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
(C) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined by the
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Preferred Stock.
(ii) 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 (i) (A), (B) or (C) to reflect the approximate fair
market value thereof, as mutually determined by the corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
Preferred Stock.
(iii) In the event the requirements of this
subsection 2(e) are not complied with, this corporation shall forthwith either:
(A) cause such closing to be postponed until such
time as the requirements of this subsection 2(e) have been complied with; or
(B) cancel such transaction, in which event the
rights, preferences and privileges of the holders of the 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(e)(iv) hereof.
(iv) The corporation shall give each holder of record of
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. The first of such notices shall describe the
material
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terms and conditions of the impending transaction and the provisions of this
Section 2, and the 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 the corporation has given the first notice
provided for herein or sooner than ten (10) days after the 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 a majority 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 Preferred Stock shall have
conversion rights as follows (the "CONVERSION RIGHTS"):
(a) RIGHT TO CONVERT. (i) Subject to Section 4(c), each share
of Series C 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 one fully paid and
nonassessable share of Series C-1 Preferred Stock or into the number of shares
of fully paid and nonassessable shares of Series A Common Stock or Series B
Common Stock as is determined by dividing $1.10 for each share of Series C
Preferred Stock by the Conversion Price applicable to each such share of
Series C Preferred Stock, determined as hereafter provided, in effect on the
date the certificate is surrendered for conversion. The initial Conversion
Price for each share of Series C Preferred Stock shall be $1.10.
(ii) Subject to Section 4(c), each share of Series A
Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and
Series C-1 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 Series A Common Stock as is determined by
dividing $1.10 for each share of Series A Preferred Stock, Series A-1 Preferred
Stock, Series B Preferred Stock and Series C-1 Preferred Stock by the Conversion
Price applicable to each such share of each such series of Preferred Stock,
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion. The initial Conversion Price for each share of
Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock
and Series C-1 Preferred Stock shall be $1.10.
(iii) Subject to Section 4(c), each share of Series D
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 Series A Common Stock as is determined by dividing
the price at which such Series D Preferred Stock is first issued and sold by the
Company for each share of Series D Preferred Stock by the Conversion Price
applicable to each such share of Series D Preferred Stock, determined as
hereafter provided, in effect on the date the certificate is surrendered for
conversion. The initial Conversion Price for each share of Series D Preferred
Stock shall be $1.58.
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(iv) Subject to Section 4(c), each share of 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 Series A Common Stock as is determined by dividing
$1.60 by the Conversion Price applicable to each such share of Series E
Preferred Stock, determined as hereafter provided, in effect on the date the
certificate is surrendered for conversion. The initial Conversion Price for
each share of Series E Preferred Stock shall be $1.60.
(v) The initial Conversion Price for each series of
Preferred Stock shall be subject to adjustment as set forth in Section 4(d).
(b) AUTOMATIC CONVERSION. Unless earlier converted pursuant to
Section 4(a)(i), 4(a)(ii), 4(a)(iii) or 4(a)(iv), except as provided below in
Section 4(c), (i) each share of Preferred Stock (other than Series C Preferred
Stock) shall automatically be converted into shares of Series A Common Stock at
the Conversion Price at the time in effect for each such share of Preferred
Stock immediately upon the sale of this corporation's Series A Common Stock in a
firm commitment underwritten public offering pursuant to a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
with net proceeds of greater than $20,000,000 and a price to the public of at
least $2.00 per share (as adjusted for stock splits, stock dividends,
combinations and similar events); (ii) each share of Series C Preferred Stock
shall automatically be converted into shares of Series A Common Stock at the
Conversion Price at the time in effect for each such share of Series C Preferred
Stock immediately upon the sale of this corporation's Series A Common Stock in a
firm commitment underwritten public offering pursuant to a registration
statement under the Securities Act, with net proceeds of greater than
$20,000,000 and a price to the public of at least $2.00 per share (as adjusted
for stock splits, stock dividends, combinations and similar events), provided,
that if the conversion of such shares would result in a filing requirement on
behalf of a holder of Series C Preferred Stock pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), all shares of
Series C Preferred Stock held by such holder shall automatically be converted
into shares of Series B Common Stock; (iii) each share of Series A Preferred
Stock and Series A-1 Preferred Stock shall automatically be converted into
shares of Series A Common Stock at the Conversion Price at the time in effect
for each such share of Preferred Stock on the date specified by written consent
or agreement of the holders of a majority of the then outstanding shares of
Series A Preferred Stock and Series A-1 Preferred Stock, voting together as a
class; and (iv) each share of Series B Preferred Stock, Series C Preferred
Stock, Series C-1 Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock shall automatically be converted into shares of Series A Common
Stock at the Conversion Price at the time in effect for each such share of
Preferred Stock on the date specified by written consent or agreement of the
holders of a majority of the then outstanding shares of Series B Preferred
Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock, voting together as a class, provided, that
no shares of Series B Preferred Stock or of Series E Preferred Stock shall be so
converted without the prior written consent or agreement of eighty-one
percent (81%) of the outstanding shares of the Series B Preferred Stock or
Series E Preferred Stock (excluding shares of Series B Preferred Stock or
Series E Preferred Stock held by Oracle Corporation or its Affiliates (as such
term is defined in Rule 12b-2 promulgated under the Securities Exchange Act of
1934, as amended ("Affiliates")), as the case may be, voting as
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separate classes, and provided, further, that if the conversion of such
shares of Series C Preferred Stock would result in a filing requirement on
behalf of a holder of Series C Preferred Stock pursuant to the HSR Act, all
shares of Series C Preferred Stock held by such holder shall automatically be
converted into shares of Series B Common Stock.
(c) MECHANICS OF CONVERSION. Before any holder of Series C
Preferred Stock shall be entitled to convert the same into shares of Series
C-1 Preferred Stock, and before any holder of Preferred Stock shall be
entitled to convert the same into shares of Series A Common Stock or Series B
Common Stock, as the case may be, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the Preferred Stock, and shall give written notice 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 Series C-1 Preferred Stock, Series
A Common Stock or Series B Common Stock, as applicable, are to be issued.
This corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Preferred Stock or to the nominee or
nominees of such holder, a certificate or certificates for the number of
shares of Series C-1 Preferred Stock, Series A Common Stock or Series B
Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Preferred Stock to
be converted, and the person or persons entitled to receive the shares of
Series C-1 Preferred Stock, Series A Common Stock or Series B Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Series C-1 Preferred Stock, Series A
Common Stock or Series B Common Stock, as applicable, as of such date. If
the conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act, the conversion may, at the option
of any holder tendering Preferred Stock, be conditioned upon the closing with
the underwriters of the sale of securities pursuant to such offering, in
which event the person(s) entitled to receive Series A Common Stock or Series
B Common Stock upon conversion of such Preferred Stock shall not be deemed to
have converted such 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 Price for each
series of Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) (A) If the corporation shall issue, after the date
upon which any shares of Series E Preferred Stock were first issued (the
"Purchase Date"), any Additional Stock (as defined below) without consideration
or for a consideration per share less than the Conversion Price for the Series A
Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock, respectively, in effect immediately
prior to the issuance of such Additional Stock, the Conversion Price for the
Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock as the case may be, in
effect immediately prior to each such issuance shall automatically (except as
otherwise provided in this clause (d)(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 plus the number of shares of Common Stock that the aggregate
consideration received by the corporation
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for such issuance would purchase at such Conversion Price; and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of shares of
such Additional Stock; provided, however, that no adjustment to the
Conversion Price for the Series A Preferred Stock, Series A-1 Preferred
Stock, Series B Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock shall be made if the holders of 81% or more of the then
outstanding shares of the affected series of Preferred Stock (excluding, in
the case of a vote of the holders of the Series B Preferred Stock or Series E
Preferred Stock, any of such series of Preferred Stock held by Oracle
Corporation or its Affiliates), voting separately as single classes, shall
approve the issuance of any Additional Stock, even if such Additional Stock
is issued without consideration or for a consideration per share less than
the Conversion Price for any such series of stock.
However, the foregoing calculation shall not take into account shares
deemed issued pursuant to Section 4(d)(i)(E) on account of options, rights or
convertible or exchangeable securities (or the actual or deemed consideration
therefor), except to the extent (i) such options, rights or convertible or
exchangeable securities have been exercised, converted or exchanged or (ii) the
consideration to be paid upon such exercise, conversion or exchange per share of
underlying Common Stock is less than or equal to the per share consideration for
the Additional Stock which has given rise to the Conversion Price adjustment
being calculated.
(B) No adjustment of the Conversion Price for the
Preferred Stock shall be made in an amount less than one cent 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 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of three years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in Sections (E)(3)
and (E)(4), no adjustment of such Conversion Price pursuant to this
Section 4(d)(i) shall have the effect of increasing the Conversion Price above
the Conversion Price in effect immediately prior to such adjustment.
(C) 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 reasonable 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.
(D) 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 in good
faith by the Board of Directors irrespective of any accounting treatment.
(E) 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 purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this Section 4(d)(i) and Section 4(d)(ii):
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(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
Sections 4(d)(i)(C) and (d)(i)(D)), if any, received by the corporation upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange (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) for 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 (without taking into
account potential antidilution adjustments) 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
Sections 4(d)(i)(C) and (d)(i)(D)).
(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 the Series A Preferred Stock, Series A-1 Preferred Stock,
Series B Preferred Stock, Series D Preferred Stock 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 Conversion Price of the Series A Preferred Stock, Series A-1
Preferred Stock, Series B Preferred Stock, Series D Preferred Stock 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.
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(5) The number of shares of Common Stock
deemed issued and the consideration deemed paid therefor pursuant to
Sections 4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either
Section 4(d)(i)(E)(3) or (4).
(ii) "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)(E)) by this corporation after the Purchase Date) other than:
(A) Common Stock issued pursuant to a transaction
described in Section 4(d)(iii) hereof;
(B) 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, provided, that the issue or exercise price therefor is equal to or
more than the greater of (i) the fair market value of the Series A Common Stock
(as determined by the Board of Directors in good faith) or (ii) 70% of the price
per share of the shares of preferred stock sold by the Company in its most
recent preferred stock financing transaction;
(C) Capital stock, or options or warrants to
purchase capital stock, issued to financial institutions or lessors (including
the issuance of up to 234,309 shares of Series A-1 Preferred Stock upon
conversion of certain promissory notes issued or issuable to Oracle Corporation
pursuant to the Convertible Note Purchase Agreement dated July 23, 1997, between
Oracle Corporation and this corporation (the "Note Agreement")), in connection
with commercial credit arrangements, equipment financings or similar
transactions, the terms of which are approved by at least eighty-one percent
(81%) of both the Series B Preferred Stock and Series E Preferred Stock, each
voting as a separate class (excluding shares of Series B Preferred Stock and
Series E Preferred Stock held by Oracle Corporation or its Affiliates);
(D) Common Stock or Preferred Stock issuable
pursuant to the conversion or exercise of convertible or exercisable securities
that are outstanding as of the date of this Fourth Amended and Restated
Certificate of Incorporation (including Common Stock issued or issuable upon
conversion of the Series A Preferred Stock, Series A-1 Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock, or Series C-1 Preferred Stock
issued or issuable upon conversion of the Series C Preferred Stock) or that are
not outstanding as of the date of this Fourth Amended and Restated Certificate
of Incorporation but which this corporation is contractually obligated to issue
and sell hereafter (including pursuant to the Note Agreement or pursuant to that
certain Convertible Promissory Note Purchase Agreement dated November 12, 1997);
(E) Capital stock or warrants or options to
purchase capital stock issued to persons that are not stockholders of this
corporation or their affiliates or this corporation's affiliates (as such term
is defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934,
as amended) in connection with bona fide acquisitions,
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mergers or similar transactions, the terms of which are approved by all
members of the Board of Directors of this corporation present at the meeting
of the Board at which such transaction is approved by the Board; and
(F) Common Stock issued or issuable in a public
offering prior to or in connection with which all outstanding shares of
Preferred Stock will be automatically converted to Common Stock pursuant to
Section 4(b).
(iii) In the event the corporation should at any time or
from time to time after the Purchase Date 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 each series of Preferred Stock shall be appropriately decreased so
that the number of shares of Common Stock issuable on conversion of each share
of such series of Preferred Stock 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 with the number of shares
issuable with respect to Common Stock Equivalents determined from time to time
in the manner provided for deemed issuances in Section 4(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding
at any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for each series of Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series of Preferred Stock 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)(iii), then,
in each such case for the purpose of this subsection 4(e), the holders of
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 of the corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the 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 Section 2) provision shall be made so that the holders of the
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Preferred Stock the number of shares of stock or other securities or property of
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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
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 Preferred Stock)
shall be applicable after that event and be as nearly equivalent as
practicable.
(g) NO IMPAIRMENT. This corporation will not, by amendment of
its Fourth Amended and Restated 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 Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of 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 Preferred Stock into Common 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 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 any series of 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 such series of Preferred Stock a certificate 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 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 the series of
Preferred Stock held by such holder 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 such series of
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 Preferred Stock, at least 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.
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(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 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 Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of 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 this Fourth Amended and
Restated Certificate of Incorporation.
(k) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if 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.
5. VOTING RIGHTS. Except as otherwise expressly set forth herein,
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, 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;
provided, that holders of Series C Preferred Stock shall not have the right to
vote for or against the election or removal of any director of this corporation.
Fractional votes shall not, however, be permitted and any fractional voting
rights available on an as-converted basis (after aggregating all shares of
Common Stock into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
6. PROTECTIVE PROVISIONS. Subject to the rights of series of
Preferred Stock which may from time to time come into existence:
(a) So long as at least 500,000 shares of Series A Preferred
Stock, Series A-1 Preferred Stock, Series B 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) of the
holders of at least a majority of the then outstanding shares of Series A
Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series
E Preferred Stock, voting together as a class:
(i) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Preferred Stock;
(ii) authorize or designate any other equity security,
including any other security convertible into or exercisable for any equity
security having a right,
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preference, or privilege senior or prior to, or on a parity with, the Series
A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock or
Series E Preferred Stock with respect to voting, dividends, antidilution or
upon liquidation;
(iii) sell, convey, or otherwise dispose of or encumber
all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any other transaction or series of related transactions
in which more than fifty percent (50%) of the voting power of the corporation is
disposed of, provided that this subsection 6(a) shall not apply to a merger
effected exclusively for the purpose of changing the domicile of the
corporation; or
(iv) redeem, purchase or otherwise acquire (or pay into
or set funds aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock; provided, however, that this restriction shall
not apply to the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for this corporation
or any subsidiary pursuant to agreements under which this corporation has the
option to repurchase such shares at cost or at cost upon the occurrence of
certain events, such as the termination of employment.
(b) So long as at least 500,000 shares of Series A Preferred
Stock or Series A-1 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 a majority of the then outstanding shares of
Series A Preferred Stock and Series A-1 Preferred Stock, voting together as a
class, alter or change the rights, preferences or privileges of such shares of
Series A Preferred Stock or Series A-1 Preferred Stock so as to affect adversely
the shares of either such series.
(c) So long as at least 500,000 shares of Series B 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 a majority of the then outstanding shares of Series B Preferred Stock,
voting together as a class,
(i) alter or change the rights, preferences or
privileges of such shares of Series B Preferred Stock so as to affect adversely
the shares of such series; or
(ii) authorize or designate any other equity security
having a right, preference or privilege senior or prior to the Series B
Preferred Stock with respect to voting, dividends, antidilution or upon
liquidation.
(d) So long as at least 500,000 shares of Series C Preferred
Stock or Series C-1 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 a majority of the then outstanding shares of
Series C Preferred Stock and Series C-1 Preferred Stock, voting together as a
class, alter or change the rights, preferences or privileges of such shares of
Series C Preferred Stock or Series C-1 Preferred Stock so as to affect adversely
the shares of either such series.
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(e) So long as at least 500,000 shares of Series E 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 eighty-one percent (81%) of the then outstanding shares of Series E
Preferred Stock (excluding shares of Series E Preferred Stock held by Oracle
Corporation or its Affiliates), voting together as a class,
(i) alter or change the rights, preferences or
privileges of such shares of Series E Preferred Stock so as to affect adversely
the shares of such series; or
(ii) authorize or designate any other equity security
having a right, preference or privilege senior or prior to the Series E
Preferred Stock with respect to voting, dividends, antidilution or upon
liquidation.
7. STATUS OF CONVERTED STOCK. In the event any shares of Preferred
Stock shall be converted pursuant to Section 4 hereof, the shares so converted
shall be canceled and shall not be issuable by the corporation. The Fourth
Amended and Restated Certificate of Incorporation of this corporation shall be
appropriately amended to effect the corresponding reduction in the corporation's
authorized capital stock.
C. COMMON STOCK. This corporation shall have two series of Common Stock
designated as follows: "Series A Common Stock" consisting of 365,000,000 shares;
and "Series B Common Stock" consisting of 42,500,000 shares. Together, the
Series A Common Stock and Series B Common Stock shall hereinafter be referred to
collectively as the "Common Stock;" provided, that if at any time this
corporation shall have no shares of Series C Preferred Stock, and no shares of
Series B Common Stock, issued and outstanding, the Series A Common Stock may be
referred to only as the 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,
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 the 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 the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV.
3. REDEMPTION. The Common Stock is not redeemable.
4. CONVERSION. The holders of the Series B Common Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Subject to subsection 4(c), each share of
Series B Common 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 one fully paid and
nonassessable share of Series A Common Stock.
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(b) AUTOMATIC CONVERSION. Unless earlier converted pursuant to
subsection 4(a), except as provided below in subsection 4(c), each share of
Series B Common Stock shall automatically be converted into one share of
Series A Common Stock immediately upon the sale of this corporation's Series A
Common Stock in a public offering pursuant to a registration statement under the
Securities Act, with net proceeds of greater than $20,000,000; provided, that if
the conversion of such shares would result in a filing requirement on behalf of
a holder of Series B Common Stock pursuant to the HSR Act, such conversion shall
not occur unless and until the expiration or termination of all waiting and
review periods (and any extensions thereof) applicable thereto under the HSR Act
at which time such conversion shall occur.
(c) MECHANICS OF CONVERSION. Before any holder of Series B
Common Stock shall be entitled to convert the same into shares of Series A
Common Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of this corporation or of any transfer
agent for the Common Stock, and shall give written notice 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 Series A Common Stock are to be issued. This corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Series B Common Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Series A Common Stock to
which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series B Common Stock to be converted, and
the person or persons entitled to receive the shares of Series A Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Series A Common Stock, as of such date.
5. 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;
provided, that holders of Series B Common Stock shall not have the right to vote
for or against the election or removal of any director of this corporation.
ARTICLE V
The Board of Directors of the Corporation is authorized to make, alter
or repeal Bylaws of the Corporation. Elections of directors need not be by
written ballot.
ARTICLE VI
A. To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the Director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of Delaware, or (iv) for any
transaction from which the Director derived any improper personal benefit.
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B. Neither any amendment nor repeal of this Article VI, nor the adoption
of any provision of this Corporation's Certificate of Incorporation inconsistent
with this Article VI, shall eliminate or reduce the effect of this Article VI in
respect of any matter occurring, or any action or proceeding accruing or arising
or that, but for this Article VI, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE VII
The Corporation is to have perpetual existence.
ARTICLE VIII
The number of directors which will constitute the whole Board of
Directors of the Corporation shall be designated in the Bylaws of the
Corporation.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any statutory provision) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors in
the Bylaws of the Corporation.
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The foregoing Fourth 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 Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Redwood Shores, California on April __, 1999.
------------------------------------------
Mitchell E. Kertzman
Chief Executive Officer
------------------------------------------
Daniel Cooperman
Secretary
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EXHIBIT 10.2
NETWORK COMPUTER, INC.
1996 STOCK OPTION PLAN
(As amended through February 11, 1999)
1. Purposes of the Plan. The purposes of this 1996 Stock Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonqualified stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Network Computer, Inc., a Delaware corporation.
(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not, provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (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; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or
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from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.
(i) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company, with the
status of employment determined based upon such minimum number of hours or
periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. 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.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the fair market value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the 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;
(ii) 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
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator at the Administrator's discretion. In making any such
determination, the Administrator may elect, but shall not be obligated, to
engage an appraiser or investment banking firm to make the determination of Fair
Market Value and such determination shall be conclusive and binding for all
purposes under the Plan.
(1) "Incentive Stock Option" or "ISO" 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.
(m) "Nonqualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(n) "Option" means a stock option granted pursuant to the Plan.
(o) "Optioned Stock" means the Common Stock subject to an Option.
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(p) "Optionee" means an Employee or Consultant who receives an
Option.
(q) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any successor provision.
(r) "Plan" means this 1996 Stock Option Plan.
(s) "Reporting Person" means an officer, director, or greater than
ten percent 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.
(t) "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 provision.
(u) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(v) "Stock Exchange" means any stock exchange or consolidated stock
price reporting system on which prices for the Common Stock are quoted at any
given time.
(w) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is thirty-five million (35,000,000)(1) shares of Common Stock.
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 that were subject thereto shall,
unless the Plan shall have been terminated, become available for future grant
under the Plan. In addition, any Shares of Common Stock which are retained by
the Company upon exercise of an Option in order to satisfy the exercise or
purchase 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.
4. Administration of the Plan.
(a) Initial Plan Procedure. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a committee appointed by the Board.
- ----------
(1) The Board approved a 5,000,000-share increase on October 15, 1998 to
increase the maximum aggregate number of Shares authorized from 15,000,000 to
20,000,000 Shares. The Board approved a 15,000,000-share increase on February
11, 1999 to increase the maximum aggregate number of Shares authorized from
20,000,000 to 35,000,000 Shares.
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(b) Plan Procedure After the Date, if any, Upon Which the Company
Becomes Subject to the Exchange Act.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, grants under the Plan may be made by different bodies with respect to
directors, non-director officers and Employees or Consultants who are not
Reporting Persons.
(ii) Administration With Respect to Reporting Persons. With
respect to grants of Options to Employees who are Reporting Persons, such grants
shall be made by (A) the Board if the Board may make grants to Reporting Persons
under the Plan in compliance with Rule 16b-3, or B) a committee designated by
the Board to make such grants to the Plan, which committee shall be constituted
in such a manner as to permit grants under the Plan to comply with Rule 16b-3.
Once appointed, such 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 and thereafter directly make grants to Reporting Persons under the
Plan, all to the extent permitted by Rule 16b-3.
(iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options to Employees or Consultants who are
not Reporting Persons, the Plan shall be administered by (A) the Board or (B) a
committee designated by the Board, which committee shall be constituted in such
a manner as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of California corporate and securities
laws, of other applicable corporate and securities laws, of the Code and of any
applicable Stock Exchange (the "Applicable Laws"). Once appointed, such
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 and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
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(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to participants who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs; and
(x) to modify, extend or renew outstanding Options and to
authorize the grant of new Options in substitution thereof, provided that any
such action may not, without the written consent of the Optionee, impair any
rights under any Option previously granted.
(d) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options.
5. Eligibility.
(a) Recipients of Grants. Nonqualified Stock Options may be granted
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if he
or she is otherwise eligible, be granted additional Options.
(b) Type of Option. Each Option shall be designated in the written
option agreement as either an Incentive Stock Option or a Nonqualified Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares with respect to which Options designated
as Incentive Stock Options are exercisable for the first time by any 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
Nonqualified Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in
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<PAGE>
any way with such Optionee's right or the Company's right to terminate his or
her employment or consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Section 18 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 14 of the
Plan.
7. Term of Option. 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 or such shorter term as may be
provided in the Option Agreement or as may be required by local law, and
provided further that, in the case of an Option granted to an Optionee who, at
the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the written option
agreement.
8. Option Exercise Price and Consideration.
(a) 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
Board and set forth in the applicable agreement, but shall be subject to the
following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to a U.S. Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any other U.S. Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonqualified Stock Option that is:
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any other person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
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<PAGE>
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 (y) 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, (5) authorization 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, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any applicable
income or employment taxes, (7) delivery of an irrevocable subscription
agreement for the Shares that irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (8) any combination of the foregoing methods of
payment, or (9) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise Rights; as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator and reflected in the written option
agreement, which may include vesting requirements and/or performance criteria
with respect to the Company and/or the Optionee; provided that such Option shall
become exercisable not less rapidly than twenty-five percent (25%) at the end of
the first year after the date the Option is granted and in equal monthly
increments over the next three (3) years.
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 the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) 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,
not withstanding 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 11 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 exercised.
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<PAGE>
(b) Termination of Employment or Consulting Relationship. Subject to
Section 9(c), in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant with the Company, such Optionee may, but only within
three (3) months (or such other period of time not less than thirty (30) days as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option and not
exceeding three (3) months) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that the Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 9(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.
(c) Disability of Option.
(i) Notwithstanding Section 9(b) above, in the event of
termination of an Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from
the date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an ISO (within the meaning of Section 422 of the Code) within
three (3) months of the date of such termination, the Option will not qualify
for ISO treatment under the Code. To the extent that Optionee was not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within six months (6) from the
date of termination, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within thirty (30) days following termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), by 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 death or, if earlier,
the date of termination of Optionee' s Continuous Status
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<PAGE>
as an Employee or Consultant. To the extent that Optionee was not entitled to
exercise the Option at the date of death or termination, as the case may be, or
if Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to Reporting Persons shall comply
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, or (b) out of Optionee's current
compensation, (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 Optionee for more than six
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than Optionee's marginal tax rate times the
ordinary income recognized, (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option, if any, that number of
Shares having a fair market value equal to the amount required to be withheld,
or (e) as otherwise determined by the Administrator. For this purpose, the fair
market value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date").
Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
All elections by an Optionee 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:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator;
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(d) if the Optionee is a Reporting Person, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee 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 Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
11. Adjustments Upon Changes in Capitalization, Merger or Certain Other
Transactions.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that 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, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Merger or Sale of Assets. In the event of a proposed sale of all
or substantially all of the Company's assets or a merger of the Company with or
into another corporation where the successor corporation issues its securities
to the Company's shareholders, each outstanding Option shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the successor
corporation does not agree to assume the Option or to substitute an equivalent
option or right, in which case such Option shall terminate upon the consummation
of the merger or sale of assets.
(d) 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
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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. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised or purchased
during the lifetime of the Optionee only by the Optionee.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Authority to Amend or Terminate. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 or
with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of any Stock Exchange), the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) Effect of Amendment or Termination. No amendment or termination
of the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the roles and regulations promulgated
thereunder, and the requirements of any Stock Exchange. 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.
16. 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. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability
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in respect of the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in such
form as the Administrator shall approve from time to time.
18. Shareholder Approval. 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 degree and manner required under applicable state and federal law and the
roles of any Stock Exchange upon which the Common Stock is listed. All Options
issued under the Plan shall become void in the event such approval is not
obtained.
19. Information to Optionees and Purchasers. The Company shall provide
financial statements at least annually to each Optionee during the period such
Optionee has one or more Options outstanding. 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.
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WRITTEN CONSENT OF THE STOCKHOLDERS
OF NETWORK COMPUTER, INC. ON OCTOBER 15, 1998
Pursuant to Section 228 of the Delaware General Corporation Law and
the Bylaws of Network Computer, Inc. (the "Corporation"), the undersigned
stockholders of the Corporation do hereby, pursuant to this Written Consent,
vote all shares of the Corporation's outstanding voting stock held of record by
them FOR the adoption and approval of the following resolution, without a formal
meeting and without prior notice:
WHEREAS, the Board of Directors of the Corporation (the "Board")
previously adopted the Corporation's 1996 Stock Option Plan (the "Plan")
as an equity incentive program under which employees of the Corporation or
its subsidiary corporations (including officers), non-employee members of
the Board, and consultants to the Corporation or its subsidiary
corporations may be offered the opportunity to acquire shares of the
Corporation's Common Stock; and
WHEREAS, the Board, subject to the approval of the stockholders of the
Corporation, has amended the Plan to increase the maximum number of shares
of Common Stock authorized for issuance over the term of the Plan by
5,000,000 shares from 15,000,000 to 20,000,000 shares.
NOW, THEREFORE, BE IT RESOLVED that the amendment to the Plan, in
substantially the form approved by the Board and attached hereto as
Exhibit A, be, and it hereby is, approved in its entirety.
This Written Consent may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same written consent.
IN WITNESS WHEREOF the undersigned stockholders of the Corporation,
hereby voting the full number of shares of each class of the Corporation's
outstanding voting stock held of record by them, have executed this Written
Consent and direct that this Written Consent be filed with the minutes of the
proceedings of the Corporation's stockholders and that prompt notice of this
action be given to stockholders of the Corporation who have not executed this
Written Consent.
/s/ Daniel Cooperman Daniel Cooperman
- ----------------------------------------- -----------------------------------
(Signature) (Name--PLEASE PRINT)
Senior Vice President, General
Counsel & Secretary October 20, 1998
- ----------------------------------------- --------------------------
(Title, if applicable) (Date)
<PAGE>
Exhibit A
NETWORK COMPUTER, INC.
1996 STOCK OPTION PLAN
(As amended through October 15, 1998)
1. Purposes of the Plan. The purposes of this 1996 Stock Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonqualified stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Network Computer, Inc., a Delaware corporation.
(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not, provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (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; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or
<PAGE>
from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.
(i) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company, with the
status of employment determined based upon such minimum number of hours or
periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. 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.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the fair market value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the 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;
(ii) 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
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator at the Administrator's discretion. In making any such
determination, the Administrator may elect, but shall not be obligated, to
engage an appraiser or investment banking firm to make the determination of Fair
Market Value and such determination shall be conclusive and binding for all
purposes under the Plan.
(1) "Incentive Stock Option" or "ISO" 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.
(m) "Nonqualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(n) "Option" means a stock option granted pursuant to the Plan.
(o) "Optioned Stock" means the Common Stock subject to an Option.
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(p) "Optionee" means an Employee or Consultant who receives an
Option.
(q) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any successor provision.
(r) "Plan" means this 1996 Stock Option Plan.
(s) "Reporting Person" means an officer, director, or greater than
ten percent 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.
(t) "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 provision.
(u) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(v) "Stock Exchange" means any stock exchange or consolidated stock
price reporting system on which prices for the Common Stock are quoted at any
given time.
(w) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is twenty million (20,000,000)(l) shares of Common Stock. 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 that were subject thereto shall,
unless the Plan shall have been terminated, become available for future grant
under the Plan. In addition, any Shares of Common Stock which are retained by
the Company upon exercise of an Option in order to satisfy the exercise or
purchase 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.
4. Administration of the Plan.
(a) Initial Plan Procedure. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a committee appointed by the Board.
- ----------
(1) The Board approved a 5,000,000-share increase on October 15, 1998 to
increase the maximum aggregate number of Shares authorized from 15,000,000 to
20,000,000 Shares.
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(b) Plan Procedure After the Date if any, Upon Which the Company
Becomes Subject to the Exchange Act.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, grants under the Plan may be made by different bodies with respect to
directors, non-director officers and Employees or Consultants who are not
Reporting Persons.
(ii) Administration With Respect to Reporting Persons. With
respect to grants of Options to Employees who are Reporting Persons, such grants
shall be made by (A) the Board if the Board may make grants to Reporting Persons
under the Plan in compliance with Rule 16b-3, or (B) a committee designated by
the Board to make such grants to the Plan, which committee shall be constituted
in such a manner as to permit grants under the Plan to comply with Rule 16b-3.
Once appointed, such 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 and thereafter directly make grants to Reporting Persons under the
Plan, all to the extent permitted by Rule 16b-3.
(iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options to Employees or Consultants who are
not Reporting Persons, the Plan shall be administered by (A) the Board or (B) a
committee designated by the Board, which committee shall be constituted in such
a manner as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of California corporate and securities
laws, of other applicable corporate and securities laws, of the Code and of any
applicable Stock Exchange (the "Applicable Laws"). Once appointed, such
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 and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
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(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to participants who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs; and
(x) to modify, extend or renew outstanding Options and to
authorize the grant of new Options in substitution thereof, provided that any
such action may not, without the written consent of the Optionee, impair any
rights under any Option previously granted.
(d) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options.
5. Eligibility.
(a) Recipients of Grants. Nonqualified Stock Options may be granted
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if he
or she is otherwise eligible, be granted additional Options.
(b) Type of Option. Each Option shall be designated in the written
option agreement as either an Incentive Stock Option or a Nonqualified Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares with respect to which Options designated
as Incentive Stock Options are exercisable for the first time by any 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
Nonqualified Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in
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<PAGE>
any way with such Optionee's right or the Company's right to terminate his or
her employment or consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Section 18 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 14 of the
Plan.
7. Term of Option. 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 or such shorter term as may be
provided in the Option Agreement or as may be required by local law, and
provided further that, in the case of an Option granted to an Optionee who, at
the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the written option
agreement.
8. Option Exercise Price and Consideration.
(a) 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
Board and set forth in the applicable agreement, but shall be subject to the
following'
(i) In the case of an Incentive Stock Option that is:
(A) granted to a U.S. Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any other U.S. Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonqualified Stock Option that is:
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any other person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
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<PAGE>
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 (y) 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, (5) authorization 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, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any applicable
income or employment taxes, (7) delivery of an irrevocable subscription
agreement for the Shares that irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (8) any combination of the foregoing methods of
payment, or (9) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator and reflected in the written option
agreement, which may include vesting requirements and/or performance criteria
with respect to the Company and/or the Optionee; provided that such Option shall
become exercisable not less rapidly than twenty-five percent (25%) at the end of
the first year after the date the Option is granted and in equal monthly
increments over the next three (3) years.
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 the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) 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,
not withstanding 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 11 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 exercised.
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(b) Termination of Employment or Consulting Relationship. Subject to
Section 9(c), in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant with the Company, such Optionee may, but only within
three (3) months (or such other period of time not less than thirty (30) days as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option and not
exceeding three (3) months) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that the Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 9(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant. '
(c) Disability of Optionee.
(i) Notwithstanding Section 9(b) above, in the event of
termination of an Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from
the date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an ISO (within the meaning of Section 422 of the Code) within
three (3) months of the date of such termination, the Option will not qualify
for ISO treatment under the Code. To the extent that Optionee was not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within six months (6) from the
date of termination, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within thirty (30) days following termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), by 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 death or, if earlier,
the date of termination of Optionee's Continuous Status
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as an Employee or Consultant. To the extent that Optionee was not entitled to
exercise the Option at the date of death or termination, as the case may be, or
if Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to Reporting Persons shall comply
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, or (b) out of Optionee's current
compensation, (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 Optionee for more than six
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than Optionee's marginal tax rate times the
ordinary income recognized, (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option, if any, that number of
Shares having a fair market value equal to the amount required to be withheld,
or (e) as otherwise determined by the Administrator. For this purpose, the fair
market value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date").
Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
All elections by an Optionee 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:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator;
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(d) if the Optionee is a Reporting Person, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee 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 Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
11. Adjustments Upon Changes in Capitalization, Merger or Certain Other
Transactions.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that 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, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) clays prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Merger or Sale of Assets. In the event of a proposed sale of all
or substantially all of the Company's assets or a merger of the Company with or
into another corporation where the successor corporation issues its securities
to the Company's shareholders, each outstanding Option shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the successor
corporation does not agree to assume the Option or to substitute an equivalent
option or right, in which case such Option shall terminate upon the consummation
of the merger or sale of assets.
(d) 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
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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 or Stock Purchase Right to
reflect the effect of such distribution.
12. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised or purchased
during the lifetime of the Optionee only by the Optionee.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Authority to Amend or Terminate. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 or
with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of any Stock Exchange), the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) Effect of Amendment or Termination. No amendment or termination
of the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the roles and regulations promulgated
thereunder, and the requirements of any Stock Exchange. 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.
16. 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. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability
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in respect of the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in such
form as the Administrator shall approve from time to time.
18. Shareholder Approval. 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 degree and manner required under applicable state and federal law and the
roles of any Stock Exchange upon which the Common Stock is listed. All Options
issued under the Plan shall become void in the event such approval is not
obtained.
19. Information to Optionees and Purchasers. The Company shall provide
financial statements at least annually to each Optionee during the period such
Optionee has one or more Options outstanding. 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.
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EXHIBIT 10.3
NAVIO COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
(As amended through March 19, 1997)
1. Purposes of the Plan. The purposes of this 1996 Stock Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Navio Communications, Inc., a Delaware
corporation.
(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(h) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (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; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or
from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.
<PAGE>
(i) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company, with the
status of employment determined based upon such minimum number of hours or
periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment of a director's fee to a
Director shall not be sufficient to constitute "employment" of such Director by
the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the fair market value
of Common Stock determined as follows'
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the 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;
(ii) 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
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "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.
(m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(n) "Option" means a stock option granted pursuant to the Plan.
(o) "Optioned Stock" means the Common Stock subject to an Option.
(p) "Optionee" means an Employee or Consultant who receives an
Option.
(q) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any successor provision.
(r) "Plan" means this 1996 Stock Option Plan, as amended.
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(s) "Reporting Person" means an officer, director, or greater than
ten percent stockholder 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.
(t) "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 provision.
(u) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(v) "Stock Exchange" means any stock exchange or consolidated stock
price reporting system on which prices for the Common Stock are quoted at any
given time.
(w) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares that may be optioned and sold
under the Plan is 10,965,000 shares of Common Stock. 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 that were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan. In
addition, any shares of Common Stock which are retained by the Company upon
exercise of an Option in order to satisfy the exercise or purchase 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. Shares
repurchased by the Company pursuant to any repurchase right which the Company
may have shall not be available for future grant under the Plan.
4. Administration of the Plan.
(a) Initial Plan Procedure. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a committee appointed by the Board.
(b) Plan Procedure After the Date, if any, Upon Which the Company
Becomes Subject to the Exchange Act.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, grants under the Plan may be made by different bodies with respect to
directors, non-director officers and Employees or Consultants who are not
Reporting Persons.
(ii) Administration With Respect to Reporting Persons. With
respect to grants of Options to Employees who are Reporting Persons, such grants
shall be made by (A) the Board if the Board may make grants to Reporting Persons
under the Plan in compliance with Rule 16b-3, or (B) a committee designated by
the Board to make grants to Reporting Persons under the Plan, which committee
shall be constituted in such a manner as to
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permit grants under the Plan to comply with Rule 16b-3. Once appointed, such
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 and thereafter directly
make grants to Reporting Persons under the Plan, all to the extent permitted by
Rule 16b-3.
(iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options to Employees or Consultants who are
not Reporting Persons, the Plan shall be administered by (A) the Board or (B) a
committee designated by the Board, which committee shall be constituted in such
a manner as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of California corporate and securities
laws, of the Code and of any applicable Stock Exchange (the "Applicable Laws").
Once appointed, such 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 and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options or any
combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any option granted hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 9(f) instead of Common Stock;
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(viii) 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;
(ix) to construe and interpret the terms of the Plan and
Options granted under the Plan; and
(x) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to participants who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(d) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options.
5. Eligibility.
(a) Recipients of Grants. Nonstatutory Stock Options may be granted
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if he
or she is otherwise eligible, be granted additional Options.
(b) Type of Option. Each Option shall be designated in the written
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
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(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) Employment Relationship. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with such
Optionee's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders of
the Company as described in Section 18 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 14 of the
Plan.
7. Term of Option. 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 or such shorter term as may be
provided in the Option Agreement. However, in the case of an Option granted to
an Optionee who, at the time the Option is granted, owns stock
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representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.
(B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be required
to avoid a charge to the Company's earnings, and (y) 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, (5) authorization 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, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any applicable
income or employment taxes, (7) delivery of an irrevocable subscription
agreement for the
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Shares that irrevocably obligates the option holder to take and pay for the
Shares not more than twelve months after the date of delivery of the
subscription agreement, (8) any combination of the foregoing methods of payment,
or (9) such other consideration and method of payment for the issuance of Shares
to the extent permitted under Applicable Laws. In making its determination as to
the type of consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable 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; provided that such Option shall become exercisable at the rate of
at least twenty percent (20%) per year over five (5) years from the date the
Option is granted.
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 the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) 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 stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly 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 11 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
exercised.
(b) Termination of Employment or Consulting Relationship. Subject to
Section 9(c), in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant with the Company, such Optionee may, but only within
ninety (90) days (or such other period of time not less than thirty (30) days as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option and not
exceeding ninety (90) days) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that the Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur
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and this Section 9(b) shall not apply if (i) the Optionee is a Consultant who
becomes an Employee; or (ii) the Optionee is an Employee who becomes a
Consultant.
(c) Disability of Optionee.
(i) Notwithstanding Section 9(b) above, in the event of
termination of an Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from
the date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within ninety (90) days of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within six
months (6) from the date of termination, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within thirty (30) days following termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), by 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 death or, if earlier,
the date of termination of Optionee's Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) Rule 16b-3. Options granted to Reporting Persons shall comply
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and
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conditions as the Administrator shall establish and communicate to the Optionee
at the time that such offer is made.
10. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, or (b) out of Optionee's current
compensation, (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 Optionee for more than six
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than Optionee's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option, if any, that number of
Shares having a fair market value equal to the amount required to be withheld.
For this purpose, the fair market value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").
Any surrender by a Reporting Person of previously owned Shares to satisfy
tax withholding obligations arising upon exercise of this Option must comply
with the applicable provisions of Rule 16b-3.
All elections by an Optionee 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:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
In the event the election to have Shares withheld is made by an Optionee
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 Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such Optionee
shall be unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.
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11. Adjustments Upon Changes in Capitalization, Merger or Certain Other
Transactions.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that 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, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Merger or Sale of Assets. In the event of a proposed sale of all
or substantially all of the Company's assets or a merger of the Company with or
into another corporation where the successor corporation issues its securities
to the Company's stockholders, each outstanding Option shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the successor
corporation does not agree to assume the Option or to substitute an equivalent
option, in which case such Option shall terminate upon the consummation of the
merger or sale of assets.
(d) Certain Distributions. In the event of any distribution to the
Company's stockholders 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. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised or purchased
during the lifetime of the Optionee only by the Optionee.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option,
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or such other date as is determined by the Board; 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 date of commencement of the Optionee's employment
relationship with the Company. Notice of the determination shall be given to
each Employee or Consultant to whom an Option is so granted within a reasonable
time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Authority to Amend or Terminate. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 or
with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of any Stock Exchange), the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) Effect of Amendment or Termination. No amendment or termination
of the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any Stock Exchange.
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.
16. 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. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in such
form as the Administrator shall approve from time to time.
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<PAGE>
18. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any Stock Exchange upon which the Common Stock is listed. All Options
issued under the Plan shall become void in the event such approval is not
obtained.
19. Information and Documents to Optionees. The Company shall provide
financial statements at least annually to each Optionee during the period such
Optionee 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. In
addition, at the time of issuance of any securities under the Plan, the Company
shall provide to the Optionee a copy of the Plan and a copy of any agreement(s)
pursuant to which securities granted under the Plan are issued.
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<PAGE>
NAVIO COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
______________________
______________________
______________________
You have been granted an option to purchase Common Stock ("Common Stock")
of Navio Communications, Inc. (the "Company") as follows:
Board Approval Date: _______________________________
Date of Grant (Later of Board
Approval Date or
Commencement of
Employment/Consulting): _______________________________
Vesting Commencement Date: _______________________________
Exercise Price Per Share: _______________________________
Total Number of Shares Granted: _______________________________
Total Exercise Price: _______________________________
Type of Option: ______ Incentive Stock Option ("ISO")
______ Nonstatutory Stock Option ("NSO")
Term/Expiration Date: _______________________________
Vesting Schedule: This Option may be exercised, in whole
or in part, in accordance with the
following schedule:____________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
<PAGE>
Termination Period: Option may be exercised for ninety (90)
days after termination of employment or
consulting relationship except as set
out in Sections 6 and 7 of the Stock
Option Agreement (but in no event later
than the Expiration Date).
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1996 Stock Option Plan and the Stock Option
Agreement, both of which are attached and made a part of this document.
___________: Navio Communications, Inc.:
_____________________________ By:________________________________
Signature
_____________________________ ___________________________________
Print Name Print Name and Title
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<PAGE>
NAVIO COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
1. Grant of Option. Navio Communications, Inc., a Delaware corporation
(the "Company"), hereby grants to ________________________________ ("Optionee")
an option (the "Option") to purchase a total number of shares of Common Stock
(the "Shares") set forth in the Notice of Stock Option Grant, at the exercise
price per share set forth in the Notice of Stock Option Grant (the "Exercise
Price") subject to the terms, definitions and provisions of the Navio
Communications, Inc. 1996 Stock Option Plan (the "Plan") adopted by the Company,
which is incorporated herein by reference. Unless otherwise defined herein, the
terms defined in the Plan shall have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to
qualify as an Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its Term in
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
and with the provisions of Section 9 of the Plan as follows:
(a) Right to Exercise.
(i) This Option may be exercised in whole or in part at any
time after the Date of Grant, as to Shares which have not yet vested under the
vesting schedule indicated on the Notice of Stock Option Grant; provided,
however, that Optionee shall execute as a condition to such exercise of this
Option, the Early Exercise Notice and Restricted Stock Purchase Agreement
attached hereto as Exhibit A (the "Early Exercise Agreement"). If Optionee
chooses to exercise this Option solely as to Shares which have vested under the
vesting schedule indicated on the Notice of Stock Option Grant, Optionee shall
complete and execute the form of Exercise Notice and Restricted Stock Purchase
Agreement attached hereto as Exhibit B (the "Exercise Agreement").
Notwithstanding the foregoing, the Company may in its discretion prescribe or
accept a different form of notice of exercise and/or stock purchase agreement if
such forms are otherwise consistent with this Agreement, the Plan and
then-applicable law.
(ii) This Option may not be exercised for a fraction of a
share.
(iii) In the event of Optionee's death, disability or other
termination of employment or consulting relationship, the exercisability of the
Option is governed by Sections 5, 6 and 7 below, subject to the limitation
contained in Section 2(a)(iv) below.
(iv) In no event may this Option be exercised after the date
of expiration of the Term of this Option as set forth in the Notice of Stock
Option Grant.
<PAGE>
(b) Method of Exercise. This Option shall be exercisable by
execution and delivery of the Early Exercise Agreement or the Exercise
Agreement, whichever is applicable, or of any other written notice approved for
such purpose by the Company which shall state the election to exercise the
Option, the number of Shares in respect of which the Option is being exercised,
and such other representations and agreements as to the holder's investment
intent with respect to such shares of Common Stock as may be required by the
Company pursuant to the provisions of the Plan. Such written notice shall be
signed by Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The written notice shall be accompanied by payment of
the Exercise Price. This Option shall be deemed to be exercised upon receipt by
the Company of such written notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of
applicable law, including the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to Optionee on the date on which the
Option is exercised with respect to such Shares.
3. Method of Payment. Payment of the Exercise Price shall be by any of the
following, or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) subject to Section 153 of the Delaware General Corporation Law,
a promissory note in the form attached to this Agreement as Exhibit C, or in any
other form approved by the Company.
4. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the stockholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
5. Termination of Relationship. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
exercise this Option during the Termination Period set forth in the Notice of
Stock Option Grant. To the extent that Optionee was not entitled to exercise
this Option at such Termination Date, or if Optionee does not exercise this
Option within the Termination Period, the Option shall terminate.
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<PAGE>
6. Disability of Optionee.
(a) Notwithstanding the provisions of Section 5 above, in the event
of termination of Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (as defined in Section
22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the
Termination Date (but in no event later than the Expiration Date set forth in
the Notice of Stock Option Grant and in Section 9 below), exercise this Option
to the extent he or she was entitled to exercise it at such Termination Date. To
the extent that Optionee was not entitled to exercise the Option Termination
Date, or if Optionee does not exercise such Option to the extent so entitled
within the time specified in this Section 6(a), the Option shall terminate.
(b) Notwithstanding the provisions of Section 5 above, in the event
of termination of Optionee's consulting relationship or Continuous Status as an
Employee as a result of a disability not constituting a total and permanent
disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but
only within six (6) months from the Termination Date (but in no event later than
the Expiration Date set forth in the Notice of Stock Option Grant and in Section
9 below), exercise the Option to the extent Optionee was entitled to exercise it
as of such Termination Date; provided, however, that if this is an Incentive
Stock Option and Optionee fails to exercise this Incentive Stock Option within
ninety (90) days from the Termination Date, this Option will cease to qualify as
an Incentive Stock Option (as defined in Section 422 of the Code) and Optionee
will be treated for federal income tax purposes as having received ordinary
income at the time of such exercise in an amount generally measured by the
difference between the Exercise Price for the Shares and the fair market value
of the Shares on the date of exercise. To the extent that Optionee was not
entitled to exercise the Option at the Termination Date, or if Optionee does not
exercise such Option to the extent so entitled within the time specified in this
Section 6(b), the Option shall terminate.
7. Death of Optionee. In the event of the death of Optionee (a) during the
Term of this Option and while an Employee or Consultant of the Company and
having been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, or (b) within thirty (30) days after Optionee's Termination
Date, the Option may be exercised at any time within six (6) months following
the date of death (but in no event later than the Expiration Date set forth in
the Notice of Stock Option Grant and in Section 9 below), by 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 Termination Date.
8. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him or her. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
9. Term of Option. This Option may be exercised only within the Term set
forth in the Notice of Stock Option Grant, subject to the limitations set forth
in Section 7 of the Plan.
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<PAGE>
10. Tax Consequences. Set forth below is a brief summary as of the date of
this Option of certain of the federal and California tax consequences of
exercise of this Option and disposition of the Shares under the laws in effect
as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of Incentive Stock Option. If this Option qualifies as
an Incentive Stock Option, there will be no regular federal or California income
tax liability upon the exercise of the Option, although the excess, if any, of
the fair market value of the Shares on the date of exercise over the Exercise
Price will be treated as an adjustment to the alternative minimum tax for
federal tax purposes and may subject Optionee to the alternative minimum tax in
the year of exercise.
(b) Exercise of Nonstatutory Stock Option. If this Option does not
qualify as an Incentive Stock Option, there may be a regular federal income tax
liability and a California income tax liability upon the exercise of the Option.
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
(c) Disposition of Shares. In the case of a Nonstatutory Stock
Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
and California income tax purposes. In the case of an Incentive Stock Option, if
Shares transferred pursuant to the Option are held for at least one year after
exercise and are disposed of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. If Shares purchased
under an Incentive Stock Option are disposed of within such one-year period or
within two years after the Date of Grant, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the difference between the Exercise Price and the lesser of (i) the
fair market value of the Shares on the date of exercise, or (ii) the sale price
of the Shares.
(d) Notice of Disqualifying Disposition of Incentive Stock Option
Shares. If the Option granted to Optionee herein is an Incentive Stock Option,
and if Optionee sells or otherwise disposes of any of the Shares acquired
pursuant to the Incentive Stock Option on or before the later of (i) the date
two years after the Date of Grant, or (ii) the date one year after the date of
exercise, Optionee shall immediately notify the Company in writing of such
disposition. Optionee acknowledges and agrees that he or she may be subject to
income tax withholding by the Company on the compensation income recognized by
Optionee from the early disposition by payment in cash or out of the current
earnings paid to Optionee.
-4-
<PAGE>
11. Withholding Tax Obligations. Optionee understands that, upon
exercising a Nonstatutory Stock Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the Exercise Price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). If Optionee is
an employee, the Company will be required to withhold from Optionee's
compensation, or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income.
Additionally, Optionee may at some point be required to satisfy tax withholding
obligations with respect to the disqualifying disposition of an Incentive Stock
Option. Optionee shall satisfy his or her tax withholding obligation arising
upon the exercise of this Option by one or some combination of the following
methods: (a) by cash payment, (b) out of Optionee's current compensation, (c) if
permitted by the Administrator, in its discretion, by surrendering to the
Company Shares which (i) in the case of Shares previously acquired from the
Company, have been owned by Optionee for more than six months on the date of
surrender, and (ii) have a fair market value on the date of surrender equal to
or greater than Optionee's marginal tax rate times the ordinary income
recognized, or (d) by electing to have the Company withhold from the Shares to
be issued upon exercise of the Option that number of Shares having a fair market
value equal to the amount required to be withheld. For this purpose, the fair
market value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date").
If Optionee is subject to Section 16 of the Exchange Act (an "Insider"),
any surrender of previously owned Shares to satisfy tax withholding obligations
arising upon exercise of this Option must comply with the applicable provisions
of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3").
All elections by Optionee 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:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
12. Market Standoff Agreement. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Optionee hereby agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing
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<PAGE>
underwriters and to execute an agreement reflecting the foregoing as may be
requested by the underwriters at the time of the public offering.
[Signature Page Follows]
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<PAGE>
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
document.
Navio Communications, Inc.
By:__________________________________
Name:________________________________
(print)
Title:_______________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated:_____________________ ____________________________________
Signature
____________________________________
Print Name
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<PAGE>
EXHIBIT A
NAVIO COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
EARLY EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") is made as of _________, by and between Navio
Communications, Inc., a Delaware corporation (the "Company"), and _____________
("Purchaser"). To the extent any capitalized terms used in this Agreement are
not defined, they shall have the meaning ascribed to them in the 1996 Stock
Option Plan.
1. Exercise of Option. Subject to the terms and conditions hereof,
Purchaser hereby elects to exercise his or her option to purchase
_______________ shares of the Common Stock (the "Shares") of the Company under
and pursuant to the Company's 1996 Stock Option Plan (the "Plan") and the Stock
Option Agreement dated _______________ (the "Option Agreement"). Of these
Shares, Purchaser has elected to purchase _______________ of those Shares which
have become vested as of the date hereof under the Vesting Schedule set forth in
the Notice of Stock Option Grant (the "Vested Shares") and _______________
Shares which have not yet vested under such Vesting Schedule (the "Unvested
Shares"). The purchase price for the Shares shall be _______________ per Share
for a total purchase price of $_______________. The term "Shares" refers to the
purchased Shares and all securities received in replacement of the Shares or as
stock dividends or splits, all securities received in replacement of the Shares
in a recapitalization, merger, reorganization, exchange or the like, and all
new, substituted or additional securities or other properties to which Purchaser
is entitled by reason of Purchaser's ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under
this Agreement shall occur at the principal office of the Company simultaneously
with the execution and delivery of this Agreement in accordance with the
provisions of Section 2(b) of the Option Agreement. On such date, the Company
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
purchase price therefor by Purchaser by (a) check made payable to the Company,
(b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the
Option Agreement, (d) subject to Section 153 of the Delaware General Corporation
Law, delivery of a promissory note in the form attached as Exhibit C to the
Option Agreement (or in any form acceptable to the Company), or (e) by a
combination of the foregoing. If Purchaser delivers a promissory note as partial
or full payment of the purchase price, Purchaser will also deliver a Pledge and
Security Agreement in the form attached to Exhibit D to the Option Agreement (or
in any form acceptable to the Company).
3. Limitations on Transfer. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below),
<PAGE>
except as provided below. After any Shares have been released from such
Repurchase Option, Purchaser shall not assign, encumber or dispose of any
interest in such Shares except in compliance with the provisions below and
applicable securities laws.
(a) Repurchase Option.
(i) In the event of the voluntary or involuntary termination
of Purchaser's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "Termination Date") have an irrevocable,
exclusive option (the "Repurchase Option") for a period of 60 days from such
date to repurchase all or any portion of the Unvested Shares held by Purchaser
as of the Termination Date which have not yet been released from the Company's
Repurchase Option at the original purchase price per Share specified in Section
1 (adjusted for any stock splits, stock dividends and the like).
(ii) The Repurchase Option shall be exercised by the Company
by written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by delivery to Purchaser or Purchaser's executor with such notice of
a check in the amount of the purchase price for the Shares being purchased, or
(B) in the event Purchaser is indebted to the Company, by cancellation by the
Company of an amount of such indebtedness equal to the purchase price for the
Shares being repurchased, or (C) by a combination of (A) and (B) so that the
combined payment and cancellation of indebtedness equals such purchase price.
Upon delivery of such notice and payment of the purchase price in any of the
ways described above, the Company shall become the legal and beneficial owner of
the Shares being repurchased and all rights and interest therein or related
thereto, and the Company shall have the right to transfer to its own name the
number of Shares being repurchased by the Company, without further action by
Purchaser.
(iii) One hundred percent (100%) of the Unvested Shares shall
initially be subject to the Repurchase Option. The Unvested Shares shall be
released from the Repurchase Option in accordance with the Vesting Schedule set
forth in the Notice of Stock Option Grant until all Shares are released from the
Repurchase Option. Fractional shares shall be rounded to the nearest whole
share.
(b) Right of First Refusal. Before any Shares held by Purchaser or
any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
(i) Notice of Proposed Transfer. The Holder of the Shares
shall deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the terms and conditions of each proposed sale or transfer. The
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<PAGE>
Holder shall offer the Shares at the same price (the "Offered Price") and upon
the same terms (or terms as similar as reasonably possible) to the Company or
its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price")
for the Shares purchased by the Company or its assignee(s) under this Section
3(b) shall be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash consideration shall
be determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section 3(b), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 60 days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section 3 shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to the
Proposed Transferee, a new Notice shall be given to the Company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section 3(b) notwithstanding, the transfer of any or
all of the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's immediate family or a trust for the benefit of
Purchaser's immediate family shall be exempt from the provisions of this Section
3(b). "Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
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<PAGE>
(c) Involuntary Transfer.
(i) Company's Right to Purchase upon Involuntary Transfer. In
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding a transfer to Immediate Family as set forth in Section 3(b)(vi) above)
of all or a portion of the Shares by the record holder thereof, the Company
shall have an option to purchase all of the Shares transferred at the greater of
the purchase price paid by Purchaser pursuant to this Agreement or the fair
market value of the Shares on the date of transfer. Upon such a transfer, the
person acquiring the Shares shall promptly notify the Secretary of the Company
of such transfer. The right to purchase such Shares shall be provided to the
Company for a period of thirty (30) days following receipt by the Company of
written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock
to be transferred pursuant to Section 3(c)(i), the price per Share shall be a
price set by the Board of Directors of the Company that will reflect the current
value of the stock in terms of present earnings and future prospects of the
Company. The Company shall notify Purchaser or his or her executor of the price
so determined within thirty (30) days after receipt by it of written notice of
the transfer or proposed transfer of Shares. However, if the Purchaser does not
agree with the valuation as determined by the Board of Directors of the Company,
the Purchaser shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(d) Assignment. The right of the Company to purchase any part of the
Shares may be assigned in whole or in part to any stockholder or stockholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the parent or a 100% owned subsidiary
of the Company, must pay the Company, upon assignment of such right, cash equal
to the difference between the original purchase price and fair market value, if
the original purchase price is less than the fair market value of the Shares
subject to the assignment.
(e) Restrictions Binding on Transferees. All transferees of Shares
or any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Company's option to repurchase under Section 3(a). Any sale or transfer of the
Company's Shares shall be void unless the provisions of this Agreement are
satisfied.
(f) Termination of Rights. The right of first refusal granted the
Company by Section 3(b) above and the option to repurchase the Shares in the
event of an involuntary transfer granted the Company by Section 3(c) above shall
terminate upon the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act. Upon
termination of the right of first refusal described in Section 3(b) and the
expiration or exercise of the Company's repurchase option described in Section
3(a) above, a new certificate or
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<PAGE>
certificates representing the Shares not repurchased shall be issued, on
request, without the legend referred to in Section 6(a)(ii) herein and delivered
to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the enforcement
of the provisions of Section 3 above, Purchaser agrees, immediately upon receipt
of the certificate(s) for the Shares subject to the Company's Repurchase Option
described in Section 3(a), to deliver such certificate(s), together with an
Assignment Separate from Certificate in the form attached to this Agreement as
Attachment A executed by Purchaser and by Purchaser's spouse (if required for
transfer), in blank, to the Secretary of the Company, or the Secretary's
designee, to hold such certificate(s) and Assignment Separate from Certificate
in escrow and to take all such actions and to effectuate all such transfers
and/or releases as are in accordance with the terms of this Agreement. Purchaser
hereby acknowledges that the Secretary of the Company, or the Secretary's
designee, is so appointed as the escrow holder with the foregoing authorities as
a material inducement to make this Agreement and that said appointment is
coupled with an interest and is accordingly irrevocable. Purchaser agrees that
said escrow holder shall not be liable to any party hereof (or to any other
party). The escrow holder may rely upon any letter, notice or other document
executed by any signature purported to be genuine and may resign at any time.
Purchaser agrees that if the Secretary of the Company, or the Secretary's
designee, resigns as escrow holder for any or no reason, the Board of Directors
of the Company shall have the power to appoint a successor to serve as escrow
holder pursuant to the terms of this Agreement.
5. Investment and Taxation Representations. In connection with the
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Purchaser is purchasing these securities for investment for his or her own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the
securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser further acknowledges and understands that the Company is under no
obligation to register the securities. Purchaser understands that the
certificate(s) evidencing the securities will be imprinted with a legend which
prohibits the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate
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<PAGE>
of such issuer), in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of issuance of the securities, such issuance will be exempt from
registration under the Securities Act. In the event the Company becomes subject
to the reporting requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the securities exempt under Rule 701 may be resold by the Purchaser
ninety (90) days thereafter, subject to the satisfaction of certain of the
conditions specified by Rule 144, including, among other things: (1) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, and the amount of
securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), if applicable. Notwithstanding this
paragraph (d), Purchaser acknowledges and agrees to the restrictions set forth
in paragraph (f) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the securities may be resold by the Purchaser in certain
limited circumstances subject to the provisions of Rule 144, which requires,
among other things: (1) the availability of certain public information about the
Company; (2) the resale occurring not less than one year after the party has
purchased, and made full payment of (within the meaning of Rule 144), the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than two years, (3) the sale being made through
a broker in an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934) and the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable. PURCHASER
UNDERSTANDS THAT PAYMENT FOR THE SHARES WITH A PROMISSORY NOTE IS NOT DEEMED TO
BE FULL PAYMENT UNDER RULE 144 UNLESS THE NOTE IS SECURED BY ASSETS OTHER THAN
THE SHARES.
(e) Purchaser further understands that at the time he or she wishes
to sell the securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the securities
under Rule 144 or 701 even if the one-year minimum holding period had been
satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
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<PAGE>
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. The certificate or certificates representing the Shares
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES 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 DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE THE TERMS OF AN AGREEMENT
BETWEEN COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS
ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. No Employment Rights. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
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<PAGE>
8. Section 83(b) Election. Purchaser understands that Section 83(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
for a nonstatutory stock option and as alternative minimum taxable income for an
incentive stock option the difference between the amount paid for the Shares and
the fair market value of the Shares as of the date any restrictions on the
Shares lapse. In this context, "restriction" means the right of the Company to
buy back the Shares pursuant to the Repurchase Option set forth in Section 3(a)
of this Agreement. Purchaser understands that Purchaser may elect to be taxed at
the time the Shares are purchased, rather than when and as the Repurchase Option
expires, by filing an election under Section 83(b) (an "83(b) Election") of the
Code with the Internal Revenue Service within 30 days from the date of purchase.
Even if the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income and alternative minimum tax treatment under Section 83(a) in the
future. Purchaser understands that failure to file such an election in a timely
manner may result in adverse tax consequences for Purchaser. Purchaser further
understands that an additional copy of such election form should be filed with
his or her federal income tax return for the calendar year in which the date of
this Agreement falls. Purchaser acknowledges that the foregoing is only a
summary of the effect of United States federal income taxation with respect to
purchase of the Shares hereunder, and does not purport to be complete. Purchaser
further acknowledges that the Company has directed Purchaser to seek independent
advice regarding the applicable provisions of the Code, the income tax laws of
any municipality, state or foreign country in which Purchaser may reside, and
the tax consequences of Purchaser's death.
Purchaser agrees that he or she will execute and deliver to the Company
with this executed Agreement a copy of the Acknowledgment and Statement of
Decision Regarding Section 83(b) Election (the "Acknowledgment") attached hereto
as Attachment B. Purchaser further agrees that he or she will execute and submit
with the Acknowledgment a copy of the 83(b) Election attached hereto as
Attachment C (for income tax purposes in connection with the early exercise of a
nonstatutory stock option) or Attachment D (for alternative minimum tax purposes
in connection with the early exercise of an incentive stock option) if Purchaser
has indicated in the Acknowledgment his or her decision to make such an
election.
9. Market Stand-off Agreement. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
10. Miscellaneous.
(a) Governing Law. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and
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<PAGE>
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient when delivered personally or
sent by telegram or fax or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, and addressed
to the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of Purchaser under this
Agreement may only be assigned with the prior written consent of the Company.
(h) California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
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<PAGE>
EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
[Signature Page Follows]
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<PAGE>
The parties have executed this Agreement as of the date first set
forth above.
COMPANY:
NAVIO COMMUNICATIONS, INC.
By:__________________________________
Name:________________________________
(print)
Title:_______________________________
870 W. Maude Avenue
Sunnyvale, CA 94086
PURCHASER:
_____________________________________
(Signature)
_____________________________________
(Print Name)
Address:
_____________________________________
_____________________________________
I, ___________________, spouse of _______________________, have read and hereby
approve the foregoing Agreement. In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in the Agreement, I hereby
agree to be irrevocably bound by the Agreement and further agree that any
community property or other such interest shall hereby by similarly bound by the
Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to any
amendment or exercise of any rights under the Agreement.
_____________________________________
Spouse of ___________________________
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<PAGE>
ATTACHMENT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Early Exercised
Notice and Restricted Stock Purchase Agreement between the undersigned
("Purchaser") and Navio Communications, Inc. (the "Company") dated _________
(the "Agreement"), Purchaser hereby sells, assigns and transfers unto the
Company ______________________ (__________) shares of the Common Stock of the
Company, standing in Purchaser's name on the books of the Company and
represented by Certificate No. ____, and hereby irrevocably appoints
________________________ to transfer said stock on the books of the Company with
full power of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS THERETO.
Dated: _____________________
Signature:
_____________________________________
Optionee
_____________________________________
Spouse of Optionee (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Company to exercise its Repurchase
Option set forth in the Agreement without requiting additional signatures on the
part of Purchaser.
<PAGE>
ATTACHMENT B
ACKNOWLEDGMENT AND STATEMENT OF DECISION
REGARDING SECTION 83(b) ELECTION
The undersigned (which term includes the undersigned's spouse), a
purchaser of _________ shares of Common Stock of Navio Communications, Inc., a
Delaware corporation (the "Company") by exercise of an option (the "Option")
granted pursuant to the Company's 1996 Stock Option Plan (the "Plan"), hereby
states as follows:
1. The undersigned acknowledges receipt of a copy of the Plan relating to
the offering of such shares. The undersigned has carefully reviewed the Plan and
the option agreement pursuant to which the Option was granted.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the
undersigned's own tax advisor, ___________________________,
whose business address is ___________________________,
regarding the federal, state and local tax consequences of
purchasing shares under the Plan, and particularly regarding
the advisability of making elections pursuant to Section 83(b)
of the Internal Revenue Code of 1986, as amended (the "Code")
and pursuant to the corresponding provisions, if any, of
applicable state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check
as applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code, and
is submitting to the Company, together with the undersigned's
executed Early Exercise Notice and Restricted Stock Purchase
Agreement, an executed form entitled "Election Under Section
83(b) of the Internal Revenue Code of 1986;"
(b) ____ to make an election pursuant to Section 83(b) of the Code, and
is submitting to the Company, together with the undersigned's
executed Early Exercise Notice and Restricted Stock Purchase
Agreement, an executed form entitled "Election Under Section
83(b) of the Internal Revenue Code of 1986 for purposes of the
Alternative Minimum Tax"; or
(c) ____ not to make an election pursuant to Section 83(b) of the Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the Company
has made any warranty or representation to the undersigned with respect to the
tax consequences of the undersigned's purchase of shares under the Plan or of
the making or failure to make an election pursuant to Section 83(b) of the Code
or the corresponding provisions, if any, of applicable state law.
Date: ___________________________ _____________________________________
Optionee
Date: ___________________________ _____________________________________
Spouse of Optionee
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<PAGE>
ATTACHMENT C
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: _________________
NAME OF SPOUSE: ___________________
ADDRESS: ________________________________
________________________________
IDENTIFICATION NO. OF TAXPAYER: ________________
IDENTIFICATION NO. OF SPOUSE: __________________
TAXABLE YEAR: ____________
2. The property with respect to which the election is made is described as
follows:
_____________ shares of the Common Stock (the "Shares"), $_____________
par value, of Navio Communications, Inc., a Delaware corporation (the
"Company").
3. The date on which the property was transferred is: _____________
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will never
lapse, of such property is: $_____________
6. The amount (if any) paid for such property: $_____________
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: ___________________________ _____________________________________
Taxpayer
Dated: ___________________________ _____________________________________
Spouse of Taxpayer
<PAGE>
ATTACHMENT D
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
FOR PURPOSES OF THE ALTERNATIVE MINIMUM TAX
The undersigned taxpayer hereby elects, pursuant to the above-referenced
Internal Revenue Code Section, to include in his or her alternative minimum
taxable income for the current taxable year, as compensation for services, the
excess, if any, of the fair market value of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: _________________
NAME OF SPOUSE: ___________________
ADDRESS: ________________________________
________________________________
IDENTIFICATION NO. OF TAXPAYER: ________________
IDENTIFICATION NO. OF SPOUSE: __________________
TAXABLE YEAR: ____________
2. The property with respect to which the election is made is described as
follows:
_____________ shares of the Common Stock (the "Shares"), $_____________
par value, of Navio Communications, Inc., a Delaware corporation (the
"Company").
3. The date on which the property was transferred is: _____________
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will never
lapse, of such property is: $_____________
6. The amount (if any) paid for such property: $_____________
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: ___________________________ _____________________________________
Taxpayer
Dated: ___________________________ _____________________________________
Spouse of Taxpayer
<PAGE>
RECEIPT AND CONSENT
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. ______ for __________ shares of Common Stock of Navio Communications, Inc.
(the "Company").
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Early Exercise
Notice and Restricted Stock Purchase Agreement Purchaser has previously entered
into with the Company. As escrow holder, the Secretary of the Company, or his or
her designee, holds the original of the aforementioned certificate issued in the
undersigned's name.
Dated: _________________________
________________________________________
Signature:
________________________________________
Print Name
<PAGE>
(a) Right of First Refusal. Before any Shares held by Purchaser or
any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(a) (the "Right of First Refusal").
(i) Notice of Proposed Transfer. The Holder of the Shares
shall deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the terms and conditions of each proposed sale or transfer. The Holder
shall offer the Shares at the same price (the "Offered Price") and upon the same
terms (or terms as similar as reasonably possible) to the Company or its
assignee(s).
(ii) Exercise of Right of First Refusal. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price")
for the Shares purchased by the Company or its assignee(s) under this Section
3(a) shall be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash consideration shall
be determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section 3(a), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 60 days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section 3 shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to the
Proposed Transferee, a new Notice shall be given to the Company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
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<PAGE>
(vi) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section 3(a) notwithstanding, the transfer of any or
all of the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this Section
3(a). "Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(b) Involuntary Transfer.
(i) Company's Right to Purchase upon Involuntary Transfer. In
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding a transfer to Immediate Family as set forth in Section 3(a)(vi) above)
of all or a portion of the Shares by the record holder thereof, the Company
shall have an option to purchase all of the Shares transferred at the greater of
the purchase price paid by Purchaser pursuant to this Agreement or the fair
market value of the Shares on the date of transfer. Upon such a transfer, the
person acquiring the Shares shall promptly notify the Secretary of the Company
of such transfer. The right to purchase such Shares shall be provided to the
Company for a period of thirty (30) days following receipt by the Company of
written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock
to be transferred pursuant to Section 3(b)(i), the price per Share shall be a
price set by the Board of Directors of the Company that will reflect the current
value of the stock in terms of present earnings and future prospects of the
Company. The Company shall notify Purchaser or his or her executor of the price
so determined within thirty (30) days after receipt by it of written notice of
the transfer or proposed transfer of Shares. However, if the Purchaser does not
agree with the valuation as determined by the Board of Directors of the Company,
the Purchaser shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(c) Assignment. The right of the Company to purchase any part of the
Shares may be assigned in whole or in part to any stockholder or stockholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the parent or a 100% owned subsidiary
of the Company, must pay the Company, upon assignment of such right, cash equal
to the difference between the original purchase price and fair market value, if
the original purchase price is less than the fair market value of the Shares
subject to the assignment.
(e) Restrictions Binding on Transferees. All transferees of Shares
or any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement. Any sale or transfer of the Company's Shares
shall be void unless the provisions of this Agreement are satisfied.
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<PAGE>
(f) Termination of Rights. The right of first refusal granted the
Company by Section 3(a) above and the option to repurchase the Shares in the
event of an involuntary transfer granted the Company by Section 3(b) above shall
terminate upon the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act. Upon
termination of the right of first refusal described in Section 3(a) above, a new
certificate or certificates representing the Shares not repurchased shall be
issued, on request, without the legend referred to in Section 6(a)(ii) herein
and delivered to Purchaser.
4. Investment and Taxation Representations. In connection with the
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Purchaser is purchasing these securities for investment for his or her own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the
securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser further acknowledges and understands that the Company is under no
obligation to register the securities. Purchaser understands that the
certificate(s) evidencing the securities will be imprinted with a legend which
prohibits the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
securities, such issuance will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the securities
exempt under Rule 701 may be resold by the Purchaser ninety (90) days
thereafter, subject to the satisfaction of certain of the conditions specified
by Rule 144, including, among other things: (1) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934); and, in the case of an affiliate, (2) the availability of certain public
information about the Company, and the amount of securities being sold during
any three month period not exceeding the
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<PAGE>
limitations specified in Rule 144(e), if applicable. Notwithstanding this
paragraph (d), Purchaser acknowledges and agrees to the restrictions set forth
in paragraph (f) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the securities may be resold by the Purchaser in certain
limited circumstances subject to the provisions of Rule 144, which requires,
among other things: (1) the availability of certain public information about the
Company; (2) the resale occurring not less than one year after the party has
purchased, and made full payment of (within the meaning of Rule 144), the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than two years, (3) the sale being made through
a broker in an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934) and the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable. PURCHASER
UNDERSTANDS THAT PAYMENT FOR THE SHARES WITH A PROMISSORY NOTE IS NOT DEEMED TO
BE FULL PAYMENT UNDER RULE 144 UNLESS THE NOTE IS SECURED BY ASSETS OTHER THAN
THE SHARES.
(e) Purchaser further understands that at the time he or she wishes
to sell the securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the securities
under Rule 144 or 701 even if the one-year minimum holding period had been
satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
5. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. The certificate or certificates representing the Shares
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
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<PAGE>
(i) THE SHARES 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 DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
6. No Employment Rights. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
7. Market Stand-off Agreement. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
-6-
<PAGE>
8. Miscellaneous.
(a) Governing Law. This Agreement 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
California, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.
(d) Construction. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient when delivered personally or
sent by telegram or fax or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, and addressed
to the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of Purchaser under this
Agreement may only be assigned with the prior written consent of the Company.
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<PAGE>
(h) California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
-8-
<PAGE>
The parties have executed this Agreement as of the date first set
forth above.
COMPANY:
Navio Communications, Inc.
By:__________________________________
Name:________________________________
(print)
Title:_______________________________
Address:
870 W. Maude Avenue
Sunnyvale, CA 94086
PURCHASER:
_____________________________________
(Signature)
_____________________________________
(Print Name)
Address:
_____________________________________
_____________________________________
I, _______________________, spouse of ________________________, have read and
hereby approve the foregoing Agreement. In consideration of the Company's
granting my spouse the right to purchase the Shares as set forth in the
Agreement, I hereby agree to be irrevocably bound by the Agreement and further
agree that any community property or other such interest shall hereby by
similarly bound by the Agreement. I hereby appoint my spouse as my
attorney-in-fact with respect to any amendment or exercise of any rights under
the Agreement.
_____________________________________
Spouse of ___________________________
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<PAGE>
EXHIBIT D
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement (the "Agreement") is entered into this
____ day of ___________ by and between Navio Communications, Inc., a Delaware
corporation (the "Company") and ("Purchaser").
RECITALS
In connection with Purchaser's exercise of an option to purchase certain shares
of the Company's Common Stock (the "Shares") pursuant to an Option Agreement
dated __________ between Purchaser and the Company, Purchaser is delivering a
promissory note of even date herewith (the "Note") in full or partial payment of
the exercise price for the Shares. The Company requires that the Note be secured
by a pledge of the Shares or the terms set forth below.
AGREEMENT
In consideration of the Company's acceptance of the Note as full or
partial payment of the exercise price of the Shares, and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. The Note shall become payable in full upon the voluntary or involuntary
termination or cessation of employment of Purchaser with the Company, for any
reason, with or without cause (including death or disability).
2. Purchaser shall deliver to the Secretary of the Company, or his or her
designee (hereinafter referred to as the "Pledge Holder"), all certificates
representing the Shares, together with an Assignment Separate from Certificate
in the form attached to this Agreement as Attachment A executed by Purchaser and
by Purchaser's spouse (if required for transfer), in blank, for use in
transferring all or a portion of the Shares to the Company if, as an when
required pursuant to this Agreement. In addition, if Purchaser is married,
Purchaser's spouse shall execute the signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal, extension or
modification of the Note, Purchaser hereby grants to the Company a security
interest in and pledges with and delivers to the Company Purchaser's Shares
(sometimes referred to herein as the "Collateral").
4. In the event that Purchaser prepays all or a portion of the Note, in
accordance with the provisions thereof, Purchaser intends, unless written notice
to the contrary is delivered to the Pledge Holder, that the Shares represented
by the portion of the Note so repaid, including annual interest thereon, shall
continue to be so held by the Pledge Holder, to serve as independent collateral
for the outstanding portion of the Note for the purpose of commencing the
holding period set forth in Rule 144(d) promulgated under the Securities Act of
1933, as amended (the "Securities Act").
<PAGE>
5. In the event of any foreclosure of the security interest created by
this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the establishment
of a public market for the Shares of the Company, the securities laws affecting
sale of the Shares make a public sale of the Shares commercially unreasonable.
The parties further agree that the repurchasing of such Shares by the Company,
or by any person to whom the Company may have assigned its rights under this
Agreement, is commercially reasonable if made at a price determined by the Board
of Directors in its discretion, fairly exercised, representing what would be the
fair market value of the Shares reduced by any limitation on transferability,
whether due to the size of the block of shares or the restrictions of applicable
securities laws.
6. In the event of default in payment when due of any indebtedness under
the Note, the Company may elect than, or at any time thereafter, to exercise all
rights available to a secured party under the California Commercial Code
including the right to sell the Collateral at a private or public sale or
repurchase the Shares as provided above. The proceeds of any sale shall be
applied in the following order:
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy
any remaining indebtedness under Purchaser's Note.
(c) Any remaining proceeds shall be delivered to Purchaser.
7. Upon full payment by Purchaser of all amounts due under the Note,
Pledge Holder shall deliver to Purchaser all Shares in Pledge Holder's
possession belonging to Purchaser, and Pledge Holder shall thereupon be
discharged of all further obligations under this Agreement; provided, however,
that Pledge Holder shall nevertheless retain the Shares as escrow agent if at
the time of full payment by Purchaser said Shares are still subject to a
Repurchase Option in favor of the Company.
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<PAGE>
The parties have executed this Pledge and Security Agreement as of
the date first set forth above.
COMPANY:
NAVIO COMMUNICATIONS, INC.
By: __________________________________
Name: ________________________________
(print)
Title: _______________________________
Address:
870 W. Maude Avenue
Sunnyvale, CA 94086
PURCHASER:
_____________________________________
(Signature)
_____________________________________
(Print Name)
Address:
_____________________________________
_____________________________________
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<PAGE>
ATTACHMENT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("Purchaser") and Navio Communications, Inc.
(the "Company") dated ___________ (the "Agreement"), Purchaser hereby sells,
assigns and transfers unto the Company _________________________
(__________) shares of the Common Stock of the Company, standing in Purchaser's
name on the books of the Company and represented by Certificate No. ____, and
hereby irrevocably appoints __________________________ to transfer said stock on
the books of the Company with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT.
Dated: ______________
Signature:
________________________________________
Optionee:
________________________________________
Spouse of Optionee (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to perfect the security interest of the Company
pursuant to the Agreement.
<PAGE>
EXHIBIT 10.4
NEITHER THIS OPTION NOR ANY OF THE SECURITIES ISSUABLE HEREUNDER HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY
MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO SUCH OPTION OR
SECURITIES UNDER THE ACT, OR DELIVERY OF AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS OPTION 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 THE LAWS OF ANY OTHER STATE. THE
RIGHTS OF THE HOLDER OF THIS OPTION ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
Dated: November 22, 1996
NAVIO COMMUNICATIONS, INC.
NON-QUALIFIED OPTION TO PURCHASE COMMON STOCK
1. Issuance; Number of Shares; Purchase Price. Subject to the terms and
conditions hereinafter set forth, < < Optionee > > (the "Purchaser"), is
entitled to purchase from Navio Communications, Inc., a Delaware corporation
(the "Company"), at any time after the date hereof and on or before the
earlier of (a) the tenth (10th) anniversary of the date hereof (the
"Expiration Date") or (b) thirty (30) days following the earlier of (i) the
termination in writing of Purchaser as a consultant or service provider or
(ii) such time as the Purchaser declines to provide services to the Company
as a consultant or service provider when requested in writing by the Company
(the "Termination Date"), up to < < NoofShares > > fully paid and
non-assessable shares of the Common Stock, par value $.0001 per share, of the
Company (the "Common Stock") at a purchase price of $0.10 per share (as
adjusted pursuant to the terms hereinafter set forth) upon surrender of this
Option at the principal office of the Company and, at the election of the
holder hereof, upon either (x) payment of the aggregate purchase price for
the number of shares for which this Option is to be exercised at said office
in cash or by check, or (y) tender of a notice as provided in the net issue
exercise provisions of Section 6(b) hereof. The purchase price of one share
of Common Stock (or such securities as may be substituted for one share of
Common Stock pursuant to the provisions hereinafter set forth) payable from
time to time upon the exercise of this Option (whether such price be the
price specified above or an adjusted price
<PAGE>
determined as hereinafter set forth) shall be referred to herein as the "Option
Price." Any shares of Common Stock issuable upon exercise of this Option (or
such securities as may be substituted for one share of Common Stock pursuant to
the provisions hereinafter set forth) shall be referred to herein as the
"Shares."
2. Adjustment of Option Price and Number of Shares. The number and kind of
securities issuable upon the exercise of this Option shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) Adjustment for Dividends in Stock or Other Securities or
Property. In case at any time or from time to time on or after the date hereof
the holders of the Common Stock of the Company (or any shares of stock or other
securities at the time issuable upon the exercise of this Option) shall have
received or, on or after the record date fixed for the determination of eligible
stockholders, shall have become entitled to receive, without payment therefor,
other or additional stock or other securities or property (other than cash) of
the Company by way of dividend, then and in each case, the holder of this Option
shall, upon the exercise hereof, be entitled to receive, in addition to the
number of shares of Common Stock receivable thereupon, and without payment of
any additional consideration therefor, the amount of such other or additional
stock or other securities or property (other than cash) of the Company which
such holder would hold on the date of such exercise had it been the holder of
record of such Common Stock 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 to it as aforesaid
during such period, giving effect to all adjustments called for during such
period by paragraphs (b) and (c) of this Section 2.
(b) Adjustment for Reclassification, Reorganization or Merger. 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 Option) or any similar corporate reorganization on or after the date
hereof, then and in each such case the holder of this Option, 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 Option immediately prior thereto, all subject to further adjustment as
provided in paragraphs (a) and (c) of this Section 2, 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 Option after such
consummation.
(c) Stock Splits and Reverse Stock Splits. If at any time on or
after the date hereof the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares, the Option Price in effect
immediately prior to such subdivision shall thereby be proportionately reduced
and the number of shares receivable upon exercise of the Option shall thereby be
proportionately increased; and, conversely, if at any time on or after the date
hereof the outstanding number of shares of Common Stock shall be combined into a
smaller number of
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<PAGE>
shares, the Option Price in effect immediately prior to such combination shall
thereby be proportionately increased and the number of shares receivable upon
exercise of this Option shall thereby be proportionately decreased.
3. 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 pursuant to Section 6(b)(ii)
below.
4. No Stockholder Rights. This Option shall not entitle its holder to any
of the rights of a stockholder of the Company.
5. Reservation of Stock. The Company covenants that during the period this
Option is exercisable, the Company will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the exercise of this Option. The Company agrees that its issuance of
this Option shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the exercise of this Option.
6. Exercise of Option.
(a) Method of Exercise. This Option may be exercised by the holder
hereof, in whole or in part and from time to time, by the surrender of the this
Option (with the applicable notice of exercise form Exhibit A or Exhibit A-1
attached, along with completed and signed Exhibit B, Exhibit C and Exhibit D) at
the principal office of the Company, accompanied by payment to the Company, in
cash or by check, of an amount equal to the then applicable Option Price
multiplied by the number of Shares then being purchased. This Option 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, and the person entitled to
receive the shares of Common Stock issuable upon such exercise shall be treated
for all purposes as the holder of such shares of record as of the close of
business on such date. As promptly as practicable on or after such date and in
any event within five (5) business days thereafter, the Company at its expense
shall issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share as provided above, and, unless this Option has been fully exercised or has
expired, a new Option representing the portion of the shares of Common Stock, if
any, with respect to which this Option shall not have been exercised, shall also
be issued to the holder hereof. The shares of Common Stock issuable upon
exercise hereof shall, upon their issuance, be fully paid and nonassessable.
(b) Net Issue Exercise.
(i) In lieu of exercising this Option in the manner provided
in Section 6(a) above, the holder may elect to receive shares equal to the value
of this Option (or the portion thereof being canceled) by surrender of this
Option at the principal office of the
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<PAGE>
Company together with notice of such election (in the form attached hereto as
Exhibit A-l) 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
holder.
Y = The number of shares of Common Stock that may be
acquired on the exercise of this Option (as adjusted to
the date of such calculation).
A = The fair market value of the Common Stock (at the date
of such calculation).
B = The Option Price (as adjusted to the date of such
calculation).
(ii) For purposes of this Section 6(b), fair market value of
the Common Stock shall mean the average of the closing bid and asked prices of
the Common Stock quoted in the over-the-counter market summary or the closing
price quoted by the Nasdaq National Market or any exchange on which the Common
Stock is listed, whichever is applicable, as published in the Western Edition of
The Wall Street Journal for the business day prior to the date of determination
of fair market value. If the Common Stock is not traded over-the-counter, on the
Nasdaq National Market or on an exchange, the fair market value shall be the
price per share as determined in good faith by the Company's Board of Directors.
7. Certificate of Adjustment. Whenever the Option Price or number or type
of securities issuable upon exercise of this Option is adjusted as herein
provided, the Company shall promptly deliver to the record holder of this Option
a certificate of an officer of the Company setting forth the nature of such
adjustment and a brief statement of the facts requiring such adjustment.
8. Limitations on Transfer. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below), except as provided below.
After any Shares have been released from such Repurchase Option, Purchaser shall
not assign, encumber or dispose of any interest in such Shares except in
compliance with the provisions below and applicable securities laws.
(a) Repurchase Option.
(i) In the event of (A) the termination in writing of the
Purchaser as a consultant or service provider or (B) such time as the Purchaser
declines to provide services to the Company as a consultant or service provider
when requested in writing by the Company, the Company shall have the option (the
"Repurchase Option") exercisable for a period of forty-five
-4-
<PAGE>
(45) days beginning on the Termination Date, to repurchase at a price per share
equal to the Option Price all or any portion of the Shares held by Purchaser
which have not yet been released, pursuant to Section 8(a)(iii) below, from such
Repurchase Option. Purchaser agrees that it will not sell, transfer, pledge, or
encumber any Shares that have not yet been released from the Repurchase Option.
(ii) The Company may exercise the Repurchase Option by sending
written notice to Purchaser along with a check in an amount equal to the number
of Shares being purchased pursuant thereto multiplied by the Option Price. Upon
delivery of such notice and payment of the purchase price as described above,
the Company shall become the legal and beneficial owner of the Shares so
repurchased and all rights and interest therein or related thereto, and the
Company shall have the right to transfer to its own name the number of Shares
being repurchased by the Company pursuant to the Repurchase Option, without
further action by Purchaser.
(iii) One hundred percent (100%) of the Shares shall initially
be subject to the Repurchase Option. On the first anniversary of the date on
which Purchaser was engaged as a consultant or service provider to the Company
(set forth on signature page), twenty-five percent (25%) of the total number of
Shares shall be released from the Repurchase Option, and an additional 1/48 of
the total number of Shares shall be released from the Repurchase Option on the
last day of each calendar month thereafter until all Shares are released from
the Repurchase Option. Fractional shares shall be rounded to the nearest whole
share.
(b) Right of First Refusal. Before any Shares held by Purchaser or
any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 8(b) (the "Right of First Refusal").
(i) Notice of Proposed Transfer. The Holder of the Shares
shall deliver to the Company a written notice (the "Notice") stating: (A) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (B) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(C) the number of Shares to be transferred to each Proposed Transferee; and
(D) the terms and conditions of each proposed sale or transfer. The Holder shall
offer the Shares at the same price (the "Offered Price") and upon the same terms
(or terms as similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price")
for the Shares purchased by the Company or its assignee(s) under this Section
8(b) shall be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of
-5-
<PAGE>
the non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section 8(b), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price; provided that such sale or other
transfer is consummated within sixty (60) days after the date of the Notice; and
provided further that any such sale or other transfer is effected in accordance
with any applicable securities laws and the Proposed Transferee agrees in
writing that the provisions of this Section 8 shall continue to apply to the
Shares in the hands of such Proposed Transferee. If the Shares described in the
Notice are not transferred to the Proposed Transferee within such period, or if
the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee than described in the Notice, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(vi) Exception for Certain Transfers. Anything to the contrary
contained in this Section 8(b) notwithstanding, Permitted Transfers shall be
exempt from the provisions of this Section 8(b). "Permitted Transfers" shall
include (A) the transfer of any or all of the Shares during Purchaser's lifetime
or on Purchaser's death by will or intestacy to Purchaser's Family spouse,
lineal descendant or antecedent, father, mother, brother or sister ("immediate
family") or a trust for the benefit of Purchaser's immediate family and (B) the
transfer of any or all of the Shares to partners or retired partners of a
partnership (including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire the Shares by gift, will or intestate
succession). In such case, the transferee or other recipient shall receive and
hold the Shares so transferred subject to the provisions of this Section, and
there shall be no further transfer of such Shares except in accordance with the
terms of this Section 8.
(c) Involuntary Transfer.
(i) Company's Right to Purchase upon Involuntary Transfer. In
the event, at any time after the date of this Option, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding a transfer to a Permitted Transferee as set forth in Section 8(b)(vi)
above) of all or a portion of the Shares by the record holder thereof, the
Company shall have an option to purchase all of the Shares transferred at the
greater of the purchase price paid by Purchaser pursuant to this Option or the
fair market value of the Shares on the date of transfer. Upon such a transfer,
the person acquiring the Shares shall
-6-
<PAGE>
promptly notify the Secretary of the Company of such transfer. The right to
purchase such Shares shall be provided to the Company for a period of thirty
(30) days following receipt by the Company of written notice by the person
acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock
to be transferred pursuant to Section 8(c)(i), the price per Share shall be
determined by the Board of Directors of the Company in good faith and will
reflect the current value of the stock in terms of present earnings and future
prospects of the Company. The Company shall notify Purchaser or his or her
executor of the price so determined within thirty (30) days after receipt by it
of written notice of the transfer or proposed transfer of Shares. However, if
the Purchaser does not agree with the valuation as determined by the Board of
Directors of the Company, the Purchaser shall be entitled to have the valuation
determined by an independent appraiser to be mutually agreed upon by the Company
and the Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(d) Assignment. The right of the Company to purchase any part of the
Shares may be assigned in whole or in part to any stockholder or stockholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the parent or a wholly-owned
subsidiary of the Company, must pay the Company, upon assignment of such right,
cash equal to the difference between the original purchase price and fair market
value, if the original purchase price is less than the fair market value of the
Shares subject to the assignment.
(e) Restrictions Binding on Transferees. All transferees of Shares
or any interest therein will receive and hold such Shares or interest subject to
the provisions of this Option, including, insofar as applicable, the Company's
option to repurchase under Section 8(a). Any sale or transfer of the Company's
Shares shall be void unless the provisions of this Option are satisfied.
(f) Termination of Rights. The rights granted the Company by this
Section 8 shall terminate upon the first sale of Common Stock of the Company to
the general public pursuant to a registration statement filed with and declared
effective by the Securities and Exchange Commission under the Securities Act.
Upon termination of the rights described in this Section 8, a new certificate or
certificates representing the Shares not repurchased shall be issued, on
request, without the legend referred to in Section 12(a)(ii) herein and
delivered to Purchaser.
9. Escrow of Unvested Shares. For purposes of facilitating the enforcement
of the provisions of Section 8 above, Purchaser agrees, immediately upon receipt
of the certificate(s) for the Shares subject to the Company's Repurchase Option
described in Section 8(a), to deliver such certificate(s), together with an
Assignment Separate from Certificate in the form attached to this Option as
Exhibit A executed by Purchaser and by Purchaser's spouse (if required for
transfer), in blank, to the Secretary of the Company, or the Secretary's
designee, to hold such certificate(s) and Assignment Separate from Certificate
in escrow and to take all such actions and to effectuate all such transfers
and/or releases as are in accordance with the terms of this Option.
-7-
<PAGE>
Purchaser hereby acknowledges that the Secretary of the Company, or the
Secretary's designee, is so appointed as the escrow holder with the foregoing
authorities as a material inducement to make this Option and that said
appointment is coupled with an interest and is accordingly irrevocable.
Purchaser agrees that said escrow holder shall not be liable to any party hereof
(or to any other party). The escrow holder may rely upon any letter, notice or
other document executed by any signature purported to be genuine and may resign
at any time. Purchaser agrees that if the Secretary of the Company, or the
Secretary's designee, resigns as escrow holder for any or no reason, the Board
of Directors of the Company shall have the power to appoint a successor to serve
as escrow holder pursuant to the terms of this Option.
10. Death of Purchaser. If the Purchaser is an individual or a sole
proprietorship, in the event of the death of Purchaser the Option may be
exercised at any time within thirty (30) days following the date of death (but
in no event later than the Expiration Date set forth in Section 1 above), by
Purchaser'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 Termination Date.
11. Investment and Taxation Representations. In connection with the
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Purchaser is purchasing these securities for investment for his or her own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the
securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser further acknowledges and understands that the Company is under no
obligation to register the securities. Purchaser understands that the
certificate(s) evidencing the securities will be imprinted with a legend which
prohibits the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rule 144
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions. In the event the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") the securities
may be resold by the Purchaser in certain limited circumstances subject to the
provisions of Rule 144, which requires, among other things: (1) the availability
of certain public information about the Company; (2) the resale
-8-
<PAGE>
occurring not less than one year after the party has purchased, and made full
payment of (within the meaning of Rule 144), the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than two years, (3) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Exchange Act) and the amount of securities being sold
during any three month period not exceeding the specified limitations stated
therein, if applicable.
(e) Purchaser further understands that at the time he or she wishes
to sell the securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144, and that, in
such event, Purchaser would be precluded from selling the securities under Rule
144 even if the one-year minimum holding period had been satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
are not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
12. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. The certificate or certificates representing the Shares
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES 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 DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
-9-
<PAGE>
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
OPTION BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Option or (ii) to treat as owner of
such Shares or to accord the right to vote or pay dividends to any purchaser or
other transferee to whom such Shares shall have been so transferred.
13. Section 83(b) Election. Purchaser understands that Section 83(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income for a nonstatutory stock option the difference between the amount paid
for the Shares and the fair market value of the Shares as of the date any
restrictions on the Shares lapse. In this context, "restriction" means the right
of the Company to buy back the Shares pursuant to the Repurchase Option set
forth in Section 8(a) of this Option. Purchaser understands that Purchaser may
elect to be taxed at the time the Shares are purchased, rather than when and as
the Repurchase Option expires, by filing an election under Section 83(b) (an
"83(b) Election") of the Code with the Internal Revenue Service within 30 days
from the date of purchase. Even if the fair market value of the Shares at the
time of the execution of this Option equals the amount paid for the Shares, the
election must be made to avoid income and alternative minimum tax treatment
under Section 83(a) in the future. Purchaser understands that failure to file
such an election in a timely manner may result in adverse tax consequences for
Purchaser. Purchaser further understands that an additional copy of such
election form should be filed with his or her federal income tax return for the
calendar year in which the date of this Option falls. Purchaser acknowledges
that the foregoing is only a summary of the effect of United States federal
income taxation with respect to purchase of the Shares hereunder, and does not
purport to be complete. Purchaser further acknowledges that the Company has
directed Purchaser to seek independent advice regarding the applicable
provisions of the Code, the income tax laws of any municipality, state or
foreign country in which Purchaser may reside, and the tax consequences of
Purchaser's death.
Purchaser agrees that he or she will execute and deliver to the Company
with this executed Option a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "Acknowledgment") attached hereto as
Exhibit C. Purchaser further agrees that he or she will execute and submit with
the Acknowledgment a copy of the 83(b) Election attached hereto as Exhibit D
(for income tax purposes in connection with the early exercise of a
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<PAGE>
nonstatutory stock option) if Purchaser has indicated in the Acknowledgment his
or her decision to make such an election.
14. Market Standoff Agreement. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Optionee hereby agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters and to execute an agreement reflecting
the foregoing as may be requested by the underwriters at the time of the public
offering.
15. 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;
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company; or
(d) any public offering of the Company's 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) and no more than ninety (90) days prior to the date specified in such
notice on which any such action is to be taken. The Company shall deliver to
Purchaser a copy of the preliminary prospectus with respect to any public
offering of its Common Stock promptly after it becomes available.
16. Successors and Assigns. This Option shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors and assigns.
17. Miscellaneous. This Option shall be governed by the laws of the state
of California without regard to its conflicts of laws provisions. The headings
in this Option are for purposes of convenience and reference only, and shall not
be deemed to constitute a part hereof. Neither this Option nor any term hereof
may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the Company and the registered holder hereof.
All notices and other communications from the Company to the holder of this
Option shall be mailed by first class registered or certified mail, postage
prepaid, to the address furnished to the
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<PAGE>
Company in writing by the last holder of this Option who shall have furnished an
address to the Company in writing. If any provision of this Option shall be held
to be unenforceable by a court of competent jurisdiction, that provision shall
be limited or eliminated to the minimum extent necessary so this Option shall
otherwise remain in full force and effect and enforceable.
-12-
<PAGE>
ISSUED this 22nd day of November, 1996.
NAVIO COMMUNICATIONS, INC.
By:
---------------------------------
Title:
--------------------------------
ACCEPTED BY:
OPTIONEE
By:
--------------------------------
Title:
--------------------------------
Date of Engagement: < < VestingCommencementDate > >
-13-
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: Navio Communications, Inc.
870 Maude Avenue
Sunnyvale, CA 94086
Attn:
1. The undersigned hereby elects to purchase ________ shares of Common
Stock of Navio Communications, Inc. pursuant to Section 6(a) of the attached
Option, and tenders herewith payment of the purchase price of such shares in
full.
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:
-------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
(Signature)
- ---------------------------
(Date)
<PAGE>
EXHIBIT A-1
NOTICE OF EXERCISE
To: Navio Communications, Inc.
870 Maude Avenue
Sunnyvale, CA 94086
Attn:
1. The undersigned hereby elects to purchase ________ shares of Common
Stock of Navio Communications, Inc. (the "Elected Shares") pursuant to Section
6(b) of the attached Option.
2. Please issue a certificate or certificates representing the Elected
Shares less such number of shares as has an aggregate value equal to the
purchase price of the Elected Shares (as calculated pursuant to Section 6(b) of
the attached Option) in the name of the undersigned or in such other name or
names as are specified below
Name:
----------------------------------
Address:
-------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
(Signature)
- ---------------------------
(Date)
<PAGE>
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that nonqualified option issued
to the undersigned ("Purchaser") by Navio Communications, Inc. (the "Company")
dated __________ (the "Option"), Purchaser hereby sells, assigns and transfers
unto the Company _____________________________ (__________) shares of the Common
Stock of the Company, standing in Purchaser's name on the books of the Company
and represented by Certificate No. ____, and hereby irrevocably appoints
_________________ to transfer said stock on the books of the Company with full
power of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS THERETO.
Dated:
----------------------
Signature:
-----------------------------------------
< < Optionee > >
-----------------------------------------
Spouse of < < Optionee > > (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Company to exercise its Repurchase
Option set forth in the Option without requiring additional signatures on the
part of Purchaser.
<PAGE>
EXHIBIT C
ACKNOWLEDGMENT AND STATEMENT OF DECISION
REGARDING SECTION 83(b) ELECTION
The undersigned (which term includes the undersigned's spouse), a
purchaser of __________ shares of Common Stock of Navio Communications, Inc., a
Delaware corporation (the "Company") by exercise of a nonqualified option (the
"Option), hereby states as follows:
1. The undersigned has carefully reviewed the option agreement pursuant to
which the Option was granted.
2. The undersigned either [check and complete as applicable]:
(a) ______ has consulted, and has been fully advised by, the
undersigned's own tax advisor, _______________________________,
whose business address is _______________________________, regarding
the federal, state and local tax consequences of purchasing shares
under the Plan, and particularly regarding the advisability of
making elections pursuant to Section 83(b) of the Internal Revenue
Code of 1986, as amended (the "Code") and pursuant to the
corresponding provisions, if any, of applicable state law; or
(b) ______ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check
as applicable]:
(a) ______ to make an election pursuant to Section 83(b) of the Code,
and is submitting to the Company, together with the undersigned's
executed Option, an executed form entitled "Election Under Section
83(b) of the Internal Revenue Code of 1986;"
(b) ______ not to make an election pursuant to Section 83(b) of the
Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the Company
has made any warranty or representation to the undersigned with respect to the
tax consequences of the undersigned's purchase of shares or of the making or
failure to make an election pursuant to Section 83(b) of the Code or the
corresponding provisions, if any, of applicable state law.
Date:
------------------- --------------------------
< < Optionee > >
Date:
------------------- --------------------------
Spouse of < < Optionee > >
<PAGE>
EXHIBIT D
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: < < Optionee > >
NAME OF SPOUSE:
-----------------------
ADDRESS: < < OptioneeAddress1 > >
< < OptioneeAddress2 > >
IDENTIFICATION NO. OF TAXPAYER: < < taxpayerid > >
IDENTIFICATION NO. OF SPOUSE:
---------
TAXABLE YEAR:
-------
2. The property with respect to which the election is made is described as
follows:
_________________ shares of the Common Stock (the "Shares"), $0.0001 par
value, of Navio Communications, Inc., a Delaware corporation (the
"Company").
3. The date on which the property was transferred is: ____________
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will never
lapse, of such property is: $____________
6. The amount (if any) paid for such property: $____________
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated:
------------------- --------------------------
< < Optionee > >
Dated:
------------------- --------------------------
Spouse of < < Optionee > >
<PAGE>
LIBERATE TECHNOLOGIES
1999 EQUITY INCENTIVE PLAN
(AS ADOPTED MAY 17, 1999)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Committee Composition. . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Committee Responsibilities . . . . . . . . . . . . . . . . . . . . . 1
2.2 Committee for Non-Officer Grants . . . . . . . . . . . . . . . . . . 1
ARTICLE 3 SHARES AVAILABLE FOR GRANTS . . . . . . . . . . . . . . . . . . . . 2
3.1 Basic Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Annual Increase in Shares. . . . . . . . . . . . . . . . . . . . . . 2
3.3 Additional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 Dividend Equivalents . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 4 ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1 Incentive Stock Options. . . . . . . . . . . . . . . . . . . . . . . 2
4.2 Other Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 5 OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.1 Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . 3
5.2 Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.3 Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.4 Exercisability and Term. . . . . . . . . . . . . . . . . . . . . . . 3
5.5 Effect of Change in Control. . . . . . . . . . . . . . . . . . . . . 3
5.6 Modification or Assumption of Options. . . . . . . . . . . . . . . . 4
5.7 Buyout Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE PAYMENT FOR OPTION SHARES . . . . . . . . . . . . . . . . . . . . . . 4
6.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.2 Surrender of Stock . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.3 Exercise/Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.4 Exercise/Pledge. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.5 Promissory Note. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.6 Other Forms of Payment . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 7 AUTOMATIC OPTION GRANTS TO OUTSIDE DIRECTORS. . . . . . . . . . . . 5
7.1 Annual Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.2 Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.3 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.4 Affiliates of Outside Directors. . . . . . . . . . . . . . . . . . . 5
ARTICLE 8 STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . . 5
8.1 SAR Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
i
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8.2 Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8.3 Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.4 Exercisability and Term. . . . . . . . . . . . . . . . . . . . . . . 6
8.5 Effect of Change in Control. . . . . . . . . . . . . . . . . . . . . 6
8.6 Exercise of SARs . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.7 Modification or Assumption of SARs . . . . . . . . . . . . . . . . . 6
ARTICLE 9 RESTRICTED SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 6
9.1 Restricted Stock Agreement . . . . . . . . . . . . . . . . . . . . . 6
9.2 Payment for Awards . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.3 Vesting Conditions . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.4 Voting and Dividend Rights . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 10 STOCK UNITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
10.1 Stock Unit Agreement. . . . . . . . . . . . . . . . . . . . . . . . 7
10.2 Payment for Awards. . . . . . . . . . . . . . . . . . . . . . . . . 7
10.3 Vesting Conditions. . . . . . . . . . . . . . . . . . . . . . . . . 7
10.4 Voting and Dividend Rights. . . . . . . . . . . . . . . . . . . . . 8
10.5 Form and Time of Settlement of Stock Units. . . . . . . . . . . . . 8
10.6 Death of Recipient. . . . . . . . . . . . . . . . . . . . . . . . . 8
10.7 Creditors' Rights . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 11 PROTECTION AGAINST DILUTION. . . . . . . . . . . . . . . . . . . . 8
11.1 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
11.2 Dissolution or Liquidation. . . . . . . . . . . . . . . . . . . . . 9
11.3 Reorganizations . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 12 DEFERRAL OF AWARDS . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 13 AWARDS UNDER OTHER PLANS . . . . . . . . . . . . . . . . . . . . .10
ARTICLE 14 PAYMENT OF DIRECTOR'S FEES IN SECURITIES . . . . . . . . . . . . .10
14.1 Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . .10
14.2 Elections to Receive NSOs, Restricted Shares or Stock Units . . . .10
14.3 Number and Terms of NSOs, Restricted Shares or Stock Units. . . . .10
ARTICLE 15 LIMITATION ON RIGHTS . . . . . . . . . . . . . . . . . . . . . . .11
15.1 Retention Rights. . . . . . . . . . . . . . . . . . . . . . . . . .11
15.2 Stockholders' Rights. . . . . . . . . . . . . . . . . . . . . . . .11
15.3 Regulatory Requirements . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE 16 WITHHOLDING TAXES. . . . . . . . . . . . . . . . . . . . . . . . .11
16.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
16.2 Share Withholding . . . . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE 17 FUTURE OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . .11
17.1 Term of the Plan. . . . . . . . . . . . . . . . . . . . . . . . . .11
17.2 Amendment or Termination. . . . . . . . . . . . . . . . . . . . . .12
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ARTICLE 18 LIMITATION ON PAYMENTS . . . . . . . . . . . . . . . . . . . . . .12
18.1 Scope of Limitation . . . . . . . . . . . . . . . . . . . . . . . .12
18.2 Basic Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
18.3 Reduction of Payments . . . . . . . . . . . . . . . . . . . . . . .12
18.4 Overpayments and Underpayments. . . . . . . . . . . . . . . . . . .13
18.5 Related Corporations. . . . . . . . . . . . . . . . . . . . . . . .13
ARTICLE 19 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
</TABLE>
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<PAGE>
LIBERATE TECHNOLOGIES
1999 EQUITY INCENTIVE PLAN
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board May 17, 1999 to be effective on the
effective date of the Company's initial public offering of its Common Shares.
The purpose of the Plan is to promote the long-term success of the Company and
the creation of stockholder value by (a) encouraging Employees, Outside
Directors and Consultants to focus on critical long-range objectives,
(b) encouraging the attraction and retention of Employees, Outside Directors and
Consultants with exceptional qualifications and (c) linking Employees, Outside
Directors and Consultants directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for Awards
in the form of Restricted Shares, Stock Units, Options (which may constitute
incentive stock options or nonstatutory stock options) or stock appreciation
rights.
The Plan shall be governed by, and construed in accordance with, the
laws of the State of Delaware (except their choice-of-law provisions).
ARTICLE 2. ADMINISTRATION.
2.1 COMMITTEE COMPOSITION. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of two or more directors of
the Company, who shall be appointed by the Board. In addition, the composition
of the Committee shall satisfy:
(a) Such requirements as the Securities and Exchange Commission
may establish for administrators acting under plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act; and
(b) Such requirements as the Internal Revenue Service may
establish for outside directors acting under plans intended to qualify for
exemption under section 162(m)(4)(C) of the Code.
2.2 COMMITTEE RESPONSIBILITIES. The Committee shall (a) select the
Employees, Outside Directors and Consultants who are to receive Awards under the
Plan, (b) determine the type, number, vesting requirements and other features
and conditions of such Awards, (c) interpret the Plan and (d) make all other
decisions relating to the operation of the Plan. The Committee may adopt such
rules or guidelines as it deems appropriate to implement the Plan. The
Committee's determinations under the Plan shall be final and binding on all
persons.
2.3 COMMITTEE FOR NON-OFFICER GRANTS. The Board may also appoint a
secondary committee of the Board, which shall be composed of one or more
directors of the Company who need not satisfy the requirements of Section 2.1.
Such secondary committee may administer the
<PAGE>
Plan with respect to Employees and Consultants who are not considered
officers or directors of the Company under section 16 of the Exchange Act,
may grant Awards under the Plan to such Employees and Consultants and may
determine all features and conditions of such Awards. Within the limitations
of this Section 2.3, any reference in the Plan to the Committee shall include
such secondary committee.
ARTICLE 3. SHARES AVAILABLE FOR GRANTS.
3.1 BASIC LIMITATION. Common Shares issued pursuant to the Plan may be
authorized but unissued shares or treasury shares. The aggregate number of
Options, SARs, Stock Units and Restricted Shares awarded under the Plan shall
not exceed (a) 2,100,000 plus (b) the additional Common Shares described in
Sections 3.2 and 3.3. The limitations of this Section 3.1 and Section 3.2 shall
be subject to adjustment pursuant to Article 11.
3.2 ANNUAL INCREASE IN SHARES. As of June 1 of each year, commencing
with the year 2000, the aggregate number of Options, SARs, Stock Units and
Restricted Shares that may be awarded under the Plan shall automatically
increase by a number equal to the lesser of (a) 5% of the total number of Common
Shares then outstanding or (b) 3,000,000.
3.3 ADDITIONAL SHARES. If Restricted Shares or Common Shares issued
upon the exercise of Options are forfeited, then such Common Shares shall again
become available for Awards under the Plan. If Stock Units, Options or SARs are
forfeited or terminate for any other reason before being exercised, then the
corresponding Common Shares shall again become available for Awards under the
Plan. If Stock Units are settled, then only the number of Common Shares (if
any) actually issued in settlement of such Stock Units shall reduce the number
available under Section 3.1 and the balance shall again become available for
Awards under the Plan. If SARs are exercised, then only the number of Common
Shares (if any) actually issued in settlement of such SARs shall reduce the
number available under Section 3.1 and the balance shall again become available
for Awards under the Plan. The foregoing notwithstanding, the aggregate number
of Common Shares that may be issued under the Plan upon the exercise of ISOs
shall not be increased when Restricted Shares or other Common Shares are
forfeited.
3.4 DIVIDEND EQUIVALENTS. Any dividend equivalents paid or credited
under the Plan shall not be applied against the number of Restricted Shares,
Stock Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.
ARTICLE 4. ELIGIBILITY.
4.1 INCENTIVE STOCK OPTIONS. Only Employees who are common-law
employees of the Company, a Parent or a Subsidiary shall be eligible for the
grant of ISOs. In addition, an Employee who owns more than 10% of the total
combined voting power of all classes of outstanding stock of the Company or any
of its Parents or Subsidiaries shall not be eligible for the grant of an ISO
unless the requirements set forth in section 422(c)(6) of the Code are
satisfied.
2
<PAGE>
4.2 OTHER GRANTS. Only Employees, Outside Directors and Consultants
shall be eligible for the grant of Restricted Shares, Stock Units, NSOs or SARs.
ARTICLE 5. OPTIONS.
5.1 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms of the Plan and
may be subject to any other terms that are not inconsistent with the Plan. The
Stock Option Agreement shall specify whether the Option is an ISO or an NSO.
The provisions of the various Stock Option Agreements entered into under the
Plan need not be identical. Options may be granted in consideration of a
reduction in the Optionee's other compensation. A Stock Option Agreement may
provide that a new Option will be granted automatically to the Optionee when he
or she exercises a prior Option and pays the Exercise Price in the form
described in Section 6.2.
5.2 NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 11. Options granted to any
Optionee in a single fiscal year of the Company shall not cover more than
750,000 Common Shares, except that Options granted to a new Employee in the
fiscal year of the Company in which his or her service as an Employee first
commences shall not cover more than 1,500,000 Common Shares. The limitations
set forth in the preceding sentence shall be subject to adjustment in accordance
with Article 11.
5.3 EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price under an ISO shall in no event
be less than 100% of the Fair Market Value of a Common Share on the date of
grant and the Exercise Price under an NSO shall in no event be less than 85% of
the Fair Market Value of a Common Share on the date of grant. In the case of an
NSO, a Stock Option Agreement may specify an Exercise Price that varies in
accordance with a predetermined formula while the NSO is outstanding.
5.4 EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify
the date or event when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an ISO shall in no event exceed 10 years from
the date of grant. A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee's death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's service. Options may be awarded in
combination with SARs, and such an Award may provide that the Options will not
be exercisable unless the related SARs are forfeited.
5.5 EFFECT OF CHANGE IN CONTROL. The Committee or the Board may
determine, at the time of granting an Option or thereafter, that such Option
shall become exercisable as to all or part of the Common Shares subject to such
Option in the event that a Change in Control occurs with respect to the Company,
except that in the case of an ISO, the acceleration of exercisability shall not
occur without the Optionee's written consent.
3
<PAGE>
5.6 MODIFICATION OR ASSUMPTION OF OPTIONS. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding options or may
accept the cancellation of outstanding options (whether granted by the Company
or by another issuer) in return for the grant of new options for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option.
5.7 BUYOUT PROVISIONS. The Committee may at any time (a) offer to buy
out for a payment in cash or cash equivalents an Option previously granted or
(b) authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 GENERAL RULE. The entire Exercise Price of Common Shares issued
upon exercise of Options shall be payable in cash or cash equivalents at the
time when such Common Shares are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment
shall be made only pursuant to the express provisions of the applicable
Stock Option Agreement. The Stock Option Agreement may specify that
payment may be made in any form(s) described in this Article 6.
(b) In the case of an NSO, the Committee may allow payment in
any form(s) described in this Article 6, in its sole discretion.
6.2 SURRENDER OF STOCK. To the extent that this Section 6.2 is
applicable, all or any part of the Exercise Price may be paid by surrendering,
or attesting to the ownership of, Common Shares that are already owned by the
Optionee. Such Common Shares shall be valued at their Fair Market Value on the
date when the new Common Shares are purchased under the Plan. The Optionee
shall not surrender, or attest to the ownership of, Common Shares in payment of
the Exercise Price if such action would cause the Company to recognize
compensation expense (or additional compensation expense) with respect to the
Option for financial reporting purposes.
6.3 EXERCISE/SALE. To the extent that this Section 6.3 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to a
securities broker approved by the Company to sell all or part of the Common
Shares being purchased under the Plan and to deliver all or part of the sales
proceeds to the Company.
6.4 EXERCISE/PLEDGE. To the extent that this Section 6.4 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid by delivering (on a form prescribed by the Company) an irrevocable
direction to pledge all or part of the Common Shares being purchased under the
Plan to a securities broker or lender approved by the Company, as security for a
loan, and to deliver all or part of the loan proceeds to the Company.
4
<PAGE>
6.5 PROMISSORY NOTE. To the extent that this Section 6.5 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid by delivering (on a form prescribed by the Company) a full-recourse
promissory note. However, the par value of the Common Shares being purchased
under the Plan, if newly issued, shall be paid in cash or cash equivalents.
6.6 OTHER FORMS OF PAYMENT. To the extent that this Section 6.6 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid in any other form that is consistent with applicable laws, regulations
and rules.
ARTICLE 7. AUTOMATIC OPTION GRANTS TO OUTSIDE DIRECTORS.
7.1 ANNUAL GRANTS. Upon the conclusion of each regular annual meeting
of the Company's stockholders held in the year 2000 or thereafter, each Outside
Director who will continue serving as a member of the Board thereafter shall
receive an NSO covering 5,000 Common Shares (subject to adjustment under Article
11). NSOs granted under this Section 7.1 shall be fully vested on the date of
grant.
7.2 EXERCISE PRICE. The Exercise Price under all NSOs granted to an
Outside Director under this Article 7 shall be equal to 100% of the Fair Market
Value of a Common Share on the date of grant, payable in one of the forms
described in Sections 6.1, 6.2, 6.3 and 6.4.
7.3 TERM. All NSOs granted to an Outside Director under this Article 7
shall terminate on the earlier of (a) the 10th anniversary of the date of grant,
or (b) the date 12 months after the termination of such Outside Director's
service for any reason.
7.4 AFFILIATES OF OUTSIDE DIRECTORS. The Committee may provide that
the NSOs that otherwise would be granted to an Outside Director under this
Article 7 shall instead be granted to an affiliate of such Outside Director.
Such affiliate shall then be deemed to be an Outside Director for purposes of
the Plan, provided that the service-related vesting and termination provisions
pertaining to the NSOs shall be applied with regard to the service of the
Outside Director.
ARTICLE 8. STOCK APPRECIATION RIGHTS.
8.1 SAR AGREEMENT. Each grant of an SAR under the Plan shall be
evidenced by an SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various SAR Agreements entered into under the Plan need not be identical. SARs
may be granted in consideration of a reduction in the Optionee's other
compensation.
8.2 NUMBER OF SHARES. Each SAR Agreement shall specify the number of
Common Shares to which the SAR pertains and shall provide for the adjustment
of such number in accordance with Article 11. SARs granted to any Optionee
in a single calendar year shall in no event pertain to more than 750,000
Common Shares, except that SARs granted to a new Employee in the fiscal year
of the Company in which his or her service as an Employee first
5
<PAGE>
commences shall not pertain to more than 1,500,000 Common Shares. The
limitations set forth in the preceding sentence shall be subject to
adjustment in accordance with Article 11.
8.3 EXERCISE PRICE. Each SAR Agreement shall specify the Exercise
Price. An SAR Agreement may specify an Exercise Price that varies in accordance
with a predetermined formula while the SAR is outstanding.
8.4 EXERCISABILITY AND TERM. Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. An SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may be
awarded in combination with Options, and such an Award may provide that the SARs
will not be exercisable unless the related Options are forfeited. An SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. An SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.
8.5 EFFECT OF CHANGE IN CONTROL. The Committee or the Board may
determine, at the time of granting an SAR or thereafter, that such SAR shall
become partially or fully exercisable as to all Common Shares subject to such
SAR in the event that a Change in Control occurs with respect to the Company.
8.6 EXERCISE OF SARS. Upon exercise of an SAR, the Optionee (or any
person having the right to exercise the SAR after his or her death) shall
receive from the Company (a) Common Shares, (b) cash or (c) a combination of
Common Shares and cash, as the Committee shall determine. The amount of cash
and/or the Fair Market Value of Common Shares received upon exercise of SARs
shall, in the aggregate, be equal to the amount by which the Fair Market Value
(on the date of surrender) of the Common Shares subject to the SARs exceeds the
Exercise Price. If, on the date when an SAR expires, the Exercise Price under
such SAR is less than the Fair Market Value on such date but any portion of such
SAR has not been exercised or surrendered, then such SAR shall automatically be
deemed to be exercised as of such date with respect to such portion.
8.7 MODIFICATION OR ASSUMPTION OF SARS. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of an SAR shall, without the consent of the
Optionee, alter or impair his or her rights or obligations under such SAR.
ARTICLE 9. RESTRICTED SHARES.
9.1 RESTRICTED STOCK AGREEMENT. Each grant of Restricted Shares under
the Plan shall be evidenced by a Restricted Stock Agreement between the
recipient and the Company. Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to
6
<PAGE>
any other terms that are not inconsistent with the Plan. The provisions of
the various Restricted Stock Agreements entered into under the Plan need not
be identical.
9.2 PAYMENT FOR AWARDS. Subject to the following sentence, Restricted
Shares may be sold or awarded under the Plan for such consideration as the
Committee may determine, including (without limitation) cash, cash equivalents,
full-recourse promissory notes, past services and future services. To the
extent that an Award consists of newly issued Restricted Shares, the
consideration shall consist exclusively of cash, cash equivalents or past
services rendered to the Company (or a Parent or Subsidiary) or, for the amount
in excess of the par value of such newly issued Restricted Shares, full-recourse
promissory notes, as the Committee may determine.
9.3 VESTING CONDITIONS. Each Award of Restricted Shares may or may not
be subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Restricted Stock Agreement. A
Restricted Stock Agreement may provide for accelerated vesting in the event of
the Participant's death, disability or retirement or other events. The
Committee or the Board may determine, at the time of granting Restricted Shares
or thereafter, that all or part of such Restricted Shares shall become vested in
the event that a Change in Control occurs with respect to the Company.
9.4 VOTING AND DIVIDEND RIGHTS. The holders of Restricted Shares
awarded under the Plan shall have the same voting, dividend and other rights as
the Company's other stockholders. A Restricted Stock Agreement, however, may
require that the holders of Restricted Shares invest any cash dividends received
in additional Restricted Shares. Such additional Restricted Shares shall be
subject to the same conditions and restrictions as the Award with respect to
which the dividends were paid.
ARTICLE 10. STOCK UNITS.
10.1 STOCK UNIT AGREEMENT. Each grant of Stock Units under the Plan
shall be evidenced by a Stock Unit Agreement between the recipient and the
Company. Such Stock Units shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the Plan.
The provisions of the various Stock Unit Agreements entered into under the Plan
need not be identical. Stock Units may be granted in consideration of a
reduction in the recipient's other compensation.
10.2 PAYMENT FOR AWARDS. To the extent that an Award is granted in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.
10.3 VESTING CONDITIONS. Each Award of Stock Units may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee or
the Board may determine, at the time of granting Stock Units or thereafter, that
all or part of such Stock Units shall become vested in the event that a Change
in Control occurs with respect to the Company.
7
<PAGE>
10.4 VOTING AND DIVIDEND RIGHTS. The holders of Stock Units shall have
no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded
under the Plan may, at the Committee's discretion, carry with it a right to
dividend equivalents. Such right entitles the holder to be credited with an
amount equal to all cash dividends paid on one Common Share while the Stock Unit
is outstanding. Dividend equivalents may be converted into additional Stock
Units. Settlement of dividend equivalents may be made in the form of cash, in
the form of Common Shares, or in a combination of both. Prior to distribution,
any dividend equivalents which are not paid shall be subject to the same
conditions and restrictions as the Stock Units to which they attach.
10.5 FORM AND TIME OF SETTLEMENT OF STOCK UNITS. Settlement of vested
Stock Units may be made in the form of (d) cash, (e) Common Shares or (f) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Common Shares over a series of trading days.
Vested Stock Units may be settled in a lump sum or in installments. The
distribution may occur or commence when all vesting conditions applicable to the
Stock Units have been satisfied or have lapsed, or it may be deferred to any
later date. The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents. Until an Award of Stock Units is
settled, the number of such Stock Units shall be subject to adjustment pursuant
to Article 11.
10.6 DEATH OF RECIPIENT. Any Stock Units Award that becomes payable
after the recipient's death shall be distributed to the recipient's beneficiary
or beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
10.7 CREDITORS' RIGHTS. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.
ARTICLE 11. PROTECTION AGAINST DILUTION.
11.1 ADJUSTMENTS. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a combination
or consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a lesser number of Common Shares, a recapitalization, a spin-off
or a similar occurrence, the Committee shall make such adjustments as it, in its
sole discretion, deems appropriate in one or more of:
8
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(a) The number of Options, SARs, Restricted Shares and Stock
Units available for future Awards under Article 3;
(b) The limitations set forth in Sections 5.2 and 8.2;
(c) The number of NSOs to be granted to Outside Directors under
Article 7;
(d) The number of Common Shares covered by each outstanding
Option and SAR;
(e) The Exercise Price under each outstanding Option and SAR; or
(f) The number of Stock Units included in any prior Award which
has not yet been settled.
Except as provided in this Article 11, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
11.2 DISSOLUTION OR LIQUIDATION. To the extent not previously exercised
or settled, Options, SARs and Stock Units shall terminate immediately prior to
the dissolution or liquidation of the Company.
11.3 REORGANIZATIONS. In the event that the Company is a party to a
merger or other reorganization, outstanding Awards shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for (a) the
continuation of the outstanding Awards by the Company, if the Company is a
surviving corporation, (b) the assumption of the outstanding Awards by the
surviving corporation or its parent or subsidiary, (c) the substitution by the
surviving corporation or its parent or subsidiary of its own awards for the
outstanding Awards, (d) accelerated exercisability or vesting and accelerated
expiration of the outstanding Awards, (e) settlement of the full value of the
outstanding Awards in cash or cash equivalents followed by cancellation of such
Awards or (f) cancellation of such Awards.
ARTICLE 12. DEFERRAL OF AWARDS.
The Committee (in its sole discretion) may permit or require a
Participant to:
(a) Have cash that otherwise would be paid to such Participant
as a result of the exercise of an SAR or the settlement of Stock Units credited
to a deferred compensation account established for such Participant by the
Committee as an entry on the Company's books;
(b) Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR converted into an
equal number of Stock Units; or
9
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(c) Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR or the settlement of
Stock Units converted into amounts credited to a deferred compensation account
established for such Participant by the Committee as an entry on the Company's
books. Such amounts shall be determined by reference to the Fair Market Value
of such Common Shares as of the date when they otherwise would have been
delivered to such Participant.
A deferred compensation account established under this Article 12 may be
credited with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Article 12.
ARTICLE 13. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such
awards may be settled in the form of Common Shares issued under this Plan. Such
Common Shares shall be treated for all purposes under the Plan like Common
Shares issued in settlement of Stock Units and shall, when issued, reduce the
number of Common Shares available under Article 3.
ARTICLE 14. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
14.1 EFFECTIVE DATE. No provision of this Article 14 shall be effective
unless and until the Board has determined to implement such provision.
14.2 ELECTIONS TO RECEIVE NSOS, RESTRICTED SHARES OR STOCK UNITS. An
Outside Director may elect to receive his or her annual retainer payments and/or
meeting fees from the Company in the form of cash, NSOs, Restricted Shares or
Stock Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan. An election
under this Article 14 shall be filed with the Company on the prescribed form.
14.3 NUMBER AND TERMS OF NSOS, RESTRICTED SHARES OR STOCK UNITS. The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.
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ARTICLE 15. LIMITATION ON RIGHTS.
15.1 RETENTION RIGHTS. Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an Employee,
Outside Director or Consultant. The Company and its Parents, Subsidiaries and
Affiliates reserve the right to terminate the service of any Employee, Outside
Director or Consultant at any time, with or without cause, subject to applicable
laws, the Company's certificate of incorporation and by-laws and a written
employment agreement (if any).
15.2 STOCKHOLDERS' RIGHTS. A Participant shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any Common Shares
covered by his or her Award prior to the time when a stock certificate for such
Common Shares is issued or, if applicable, the time when he or she becomes
entitled to receive such Common Shares by filing any required notice of exercise
and paying any required Exercise Price. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to such time,
except as expressly provided in the Plan.
15.3 REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Award prior to the satisfaction of all legal requirements relating to the
issuance of such Common Shares, to their registration, qualification or listing
or to an exemption from registration, qualification or listing.
ARTICLE 16. WITHHOLDING TAXES.
16.1 GENERAL. To the extent required by applicable federal, state,
local or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise in connection with the Plan. The Company shall not
be required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.
16.2 SHARE WITHHOLDING. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Common Shares that otherwise
would be issued to him or her or by surrendering all or a portion of any Common
Shares that he or she previously acquired. Such Common Shares shall be valued
at their Fair Market Value on the date when they are withheld or surrendered.
ARTICLE 17. FUTURE OF THE PLAN.
17.1 TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective on the effective date of the Company's initial public offering of its
Common Shares. The Plan shall remain in effect until it is terminated under
Section 17.2, except that no ISOs shall be granted on or after the
10th anniversary of the later of (a) the date when the Board adopted the Plan or
(b) the date when the Board adopted the most recent increase in the number of
Common Shares available under Article 3 which was approved by the Company's
stockholders.
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17.2 AMENDMENT OR TERMINATION. The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be subject
to the approval of the Company's stockholders only to the extent required by
applicable laws, regulations or rules. No Awards shall be granted under the
Plan after the termination thereof. The termination of the Plan, or any
amendment thereof, shall not affect any Award previously granted under the Plan.
ARTICLE 18. LIMITATION ON PAYMENTS.
18.1 SCOPE OF LIMITATION. This Article 18 shall apply to an Award only
if:
(a) The independent auditors most recently selected by the Board
(the "Auditors") determine that the after-tax value of such Award to the
Participant, taking into account the effect of all federal, state and local
income taxes, employment taxes and excise taxes applicable to the Participant
(including the excise tax under section 4999 of the Code), will be greater after
the application of this Article 18 than it was before the application of this
Article 18; or
(b) The Committee, at the time of making an Award under the Plan
or at any time thereafter, specifies in writing that such Award shall be subject
to this Article 18 (regardless of the after-tax value of such Award to the
Participant).
If this Article 18 applies to an Award, it shall supersede any
contrary provision of the Plan or of any Award granted under the Plan.
18.2 BASIC RULE. In the event that the Auditors determine that any
payment or transfer by the Company under the Plan to or for the benefit of a
Participant (a "Payment") would be nondeductible by the Company for federal
income tax purposes because of the provisions concerning "excess parachute
payments" in section 280G of the Code, then the aggregate present value of all
Payments shall be reduced (but not below zero) to the Reduced Amount. For
purposes of this Article 18, the "Reduced Amount" shall be the amount, expressed
as a present value, which maximizes the aggregate present value of the Payments
without causing any Payment to be nondeductible by the Company because of
section 280G of the Code.
18.3 REDUCTION OF PAYMENTS. If the Auditors determine that any Payment
would be nondeductible by the Company because of section 280G of the Code, then
the Company shall promptly give the Participant notice to that effect and a copy
of the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of notice. If no such election is made by the Participant within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Article 18, present
value shall be determined in accordance with section 280G(d)(4) of the Code.
All determinations
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<PAGE>
made by the Auditors under this Article 18 shall be binding upon the Company
and the Participant and shall be made within 60 days of the date when a
Payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall
pay or transfer to or for the benefit of the Participant such amounts as are
then due to him or her under the Plan and shall promptly pay or transfer to
or for the benefit of the Participant in the future such amounts as become
due to him or her under the Plan.
18.4 OVERPAYMENTS AND UNDERPAYMENTS. As a result of uncertainty in the
application of section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company which should not have been made (an "Overpayment") or that
additional Payments which will not have been made by the Company could have been
made (an "Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Participant which the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount which is subject to taxation under section 4999 of
the Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company
to or for the benefit of the Participant, together with interest at the
applicable federal rate provided in section 7872(f)(2) of the Code.
18.5 RELATED CORPORATIONS. For purposes of this Article 18, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 19. DEFINITIONS.
19.1 "AFFILIATE" means any entity other than a Subsidiary, if the
Company and/or one or more Subsidiaries own not less than 50% of such entity.
19.2 "AWARD" means any award of an Option, an SAR, a Restricted Share or
a Stock Unit under the Plan.
19.3 "BOARD" means the Company's Board of Directors, as constituted from
time to time.
19.4 "CHANGE IN CONTROL" shall mean:
(a) The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate reorganization,
if persons who were not stockholders of the Company immediately prior to
such merger, consolidation or other reorganization own immediately after
such merger, consolidation or other reorganization 50% or more of the
voting power of the
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outstanding securities of each of (i) the continuing or surviving entity
and (ii) any direct or indirect parent corporation of such continuing or
surviving entity;
(b) The sale, transfer or other disposition of all or
substantially all of the Company's assets;
(c) A change in the composition of the Board, as a result
of which fewer than 50% of the incumbent directors are directors who
either (i) had been directors of the Company on the date 24 months prior
to the date of the event that may constitute a Change in Control (the
"original directors") or (ii) were elected, or nominated for election, to
the Board with the affirmative votes of at least a majority of the
aggregate of the original directors who were still in office at the time
of the election or nomination and the directors whose election or
nomination was previously so approved; or
(d) Any transaction as a result of which any person is
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing at least
50% of the total voting power represented by the Company's then
outstanding voting securities. For purposes of this Paragraph (d), the
term "person" shall have the same meaning as when used in sections 13(d)
and 14(d) of the Exchange Act but shall exclude (i) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company
or of a Parent or Subsidiary and (ii) a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of the common stock of the Company.
A transaction shall not constitute a Change in Control if its sole purpose
is to change the state of the Company's incorporation or to create a
holding company that will be owned in substantially the same proportions
by the persons who held the Company's securities immediately before such
transaction. A transaction in itself shall not necessarily constitute a
Change in Control if as a result of the transaction the percentage of
ownership of the Company by Oracle Corporation is reduced to below 50% of
the total voting power represented by the Company's then outstanding
voting securities and/or Oracle Corporation's percentage of ownership of
the Company is later increased to at least 50% of the total voting power
represented by the Company's then outstanding voting securities.
19.5 "CODE" means the Internal Revenue Code of 1986, as amended.
19.6 "COMMITTEE" means a committee of the Board, as described in
Article 2.
19.7 "COMMON SHARE" means one share of the common stock of the Company.
19.8 "COMPANY" means Liberate Technologies, a Delaware corporation.
19.9 "CONSULTANT" means a consultant or adviser who provides bona fide
services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a Consultant shall be considered employment
for all purposes of the Plan, except as provided in Section 4.1.
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19.10 "EMPLOYEE" means a common-law employee of the Company, a Parent, a
Subsidiary or an Affiliate.
19.11 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
19.12 "EXERCISE PRICE," in the case of an Option, means the amount for
which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of an SAR, means an amount, as specified in the applicable SAR Agreement,
which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.
19.13 "FAIR MARKET VALUE" means the market price of Common Shares,
determined by the Committee in good faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in THE WALL STREET JOURNAL. Such determination
shall be conclusive and binding on all persons.
19.14 "ISO" means an incentive stock option described in section 422(b)
of the Code.
19.15 "NSO" means a stock option not described in sections 422 or 423 of
the Code.
19.16 "OPTION" means an ISO or NSO granted under the Plan and entitling
the holder to purchase Common Shares.
19.17 "OPTIONEE" means an individual or estate who holds an Option or
SAR.
19.18 "OUTSIDE DIRECTOR" shall mean a member of the Board who is not an
Employee. Service as an Outside Director shall be considered employment for all
purposes of the Plan, except as provided in Section 4.1.
19.19 "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent
on a date after the adoption of the Plan shall be considered a Parent commencing
as of such date.
19.20 "PARTICIPANT" means an individual or estate who holds an Award.
19.21 "PLAN" means this Liberate Technologies 1999 Equity Incentive Plan,
as amended from time to time.
19.22 "RESTRICTED SHARE" means a Common Share awarded under the Plan.
19.23 "RESTRICTED STOCK AGREEMENT" means the agreement between the
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Share.
19.24 "SAR" means a stock appreciation right granted under the Plan.
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19.25 "SAR AGREEMENT" means the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.
19.26 "STOCK OPTION AGREEMENT" means the agreement between the Company
and an Optionee that contains the terms, conditions and restrictions pertaining
to his or her Option.
19.27 "STOCK UNIT" means a bookkeeping entry representing the equivalent
of one Common Share, as awarded under the Plan.
19.28 "STOCK UNIT AGREEMENT" means the agreement between the Company and
the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.
19.29 "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that
attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
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Exhibit 10.6
LIBERATE TECHNOLOGIES
1999 EMPLOYEE STOCK PURCHASE PLAN
(AS ADOPTED MAY 17, 1999)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. PURPOSE OF THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . 1
(a) Committee Composition . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Committee Responsibilities. . . . . . . . . . . . . . . . . . . . . . 1
SECTION 3. ENROLLMENT AND PARTICIPATION . . . . . . . . . . . . . . . . . . . 1
(a) Offering Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Enrollment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Duration of Participation . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 4. EMPLOYEE CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 2
(a) Frequency of Payroll Deductions . . . . . . . . . . . . . . . . . . . 2
(b) Amount of Payroll Deductions. . . . . . . . . . . . . . . . . . . . . 2
(c) Changing Withholding Rate . . . . . . . . . . . . . . . . . . . . . . 2
(d) Discontinuing Payroll Deductions. . . . . . . . . . . . . . . . . . . 2
(e) Limit on Number of Elections. . . . . . . . . . . . . . . . . . . . . 2
SECTION 5. WITHDRAWAL FROM THE PLAN . . . . . . . . . . . . . . . . . . . . . 2
(a) Withdrawal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Re-Enrollment After Withdrawal. . . . . . . . . . . . . . . . . . . . 3
SECTION 6. CHANGE IN EMPLOYMENT STATUS. . . . . . . . . . . . . . . . . . . . 3
(a) Termination of Employment . . . . . . . . . . . . . . . . . . . . . . 3
(b) Leave of Absence. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 7. PLAN ACCOUNTS AND PURCHASE OF SHARES . . . . . . . . . . . . . . . 3
(a) Plan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Number of Shares Purchased. . . . . . . . . . . . . . . . . . . . . . 3
(d) Available Shares Insufficient . . . . . . . . . . . . . . . . . . . . 4
(e) Issuance of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(f) Unused Cash Balances. . . . . . . . . . . . . . . . . . . . . . . . . 4
(g) Stockholder Approval. . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 8. LIMITATIONS ON STOCK OWNERSHIP . . . . . . . . . . . . . . . . . . 4
(a) Five Percent Limit. . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Dollar Limit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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SECTION 9. RIGHTS NOT TRANSFERABLE. . . . . . . . . . . . . . . . . . . . . . 5
SECTION 10. NO RIGHTS AS AN EMPLOYEE. . . . . . . . . . . . . . . . . . . . . 6
SECTION 11. NO RIGHTS AS A STOCKHOLDER. . . . . . . . . . . . . . . . . . . . 6
SECTION 12. SECURITIES LAW REQUIREMENTS.. . . . . . . . . . . . . . . . . . . 6
SECTION 13. STOCK OFFERED UNDER THE PLAN. . . . . . . . . . . . . . . . . . . 6
(a) Authorized Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Anti-Dilution Adjustments . . . . . . . . . . . . . . . . . . . . . . 6
(c) Reorganizations . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 14. AMENDMENT OR DISCONTINUANCE . . . . . . . . . . . . . . . . . . . 7
SECTION 15. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) "Board" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) "Code". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) "Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) "Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) "Compensation". . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) "Corporate Reorganization". . . . . . . . . . . . . . . . . . . . . . 7
(g) "Eligible Employee" . . . . . . . . . . . . . . . . . . . . . . . . . 7
(h) "Exchange Act". . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(i) "Fair Market Value" . . . . . . . . . . . . . . . . . . . . . . . . . 8
(j) "IPO" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(k) "Offering Period" . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(l) "Participant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(m) "Participating Company" . . . . . . . . . . . . . . . . . . . . . . . 8
(n) "Plan". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(o) "Plan Account". . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(p) "Purchase Price". . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(q) "Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(r) "Subsidiary". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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LIBERATE TECHNOLOGIES
1999 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE OF THE PLAN.
The Plan was adopted by the Board to be effective as of the date of the
IPO. The purpose of the Plan is to provide Eligible Employees with an
opportunity to increase their proprietary interest in the success of the Company
by purchasing Stock from the Company on favorable terms and to pay for such
purchases through payroll deductions. The Plan is intended to qualify under
section 423 of the Code.
SECTION 2. ADMINISTRATION OF THE PLAN.
(a) COMMITTEE COMPOSITION. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of one or more directors of
the Company, who shall be appointed by the Board.
(b) COMMITTEE RESPONSIBILITIES. The Committee shall interpret the Plan
and make all other policy decisions relating to the operation of the Plan. The
Committee may adopt such rules, guidelines and forms as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be
final and binding on all persons.
SECTION 3. ENROLLMENT AND PARTICIPATION.
(a) OFFERING PERIODS. While the Plan is in effect, two Offering
Periods shall commence in each calendar year. The Offering Periods shall
consist of the six-month periods commencing on each April 1 and October 1,
except that the first Offering Period shall commence on the date of the IPO and
end on March 31, 2000.
(b) ENROLLMENT. Any individual who, on the day preceding the first day
of an Offering Period, qualifies as an Eligible Employee may elect to become a
Participant in the Plan for such Offering Period by executing the enrollment
form prescribed for this purpose by the Committee. The enrollment form shall be
filed with the Company at the prescribed location not later than 10 days prior
to the commencement of such Offering Period.
(c) DURATION OF PARTICIPATION. Once enrolled in the Plan, a
Participant shall continue to participate in the Plan until he or she ceases to
be an Eligible Employee, withdraws from the Plan under Section 5(a) or reaches
the end of the Offering Period in which his or her employee contributions were
discontinued under Section 4(d) or 8(b). A Participant who discontinued
employee contributions under Section 4(d) or withdrew from the Plan under
Section 5(a) may again become a Participant, if he or she then is an Eligible
Employee, by following the procedure described in Subsection (b) above. A
Participant whose employee contributions were discontinued automatically under
Section 8(b) shall automatically resume
<PAGE>
participation at the beginning of the earliest Offering Period ending in the
next calendar year, if he or she then is an Eligible Employee.
SECTION 4. EMPLOYEE CONTRIBUTIONS.
(a) FREQUENCY OF PAYROLL DEDUCTIONS. A Participant may purchase shares
of Stock under the Plan solely by means of payroll deductions. Payroll
deductions, as designated by the Participant pursuant to Subsection (b) below,
shall occur on each payday during participation in the Plan.
(b) AMOUNT OF PAYROLL DEDUCTIONS. An Eligible Employee shall designate
on the enrollment form the portion of his or her Compensation that he or she
elects to have withheld for the purchase of Stock. Such portion shall be a
whole percentage of the Eligible Employee's Compensation, but not less than 1%
nor more than 15%.
(c) CHANGING WITHHOLDING RATE. If a Participant wishes to change the
rate of payroll withholding, he or she may do so by filing a new enrollment form
with the Company at the prescribed location at any time. The new withholding
rate shall be effective as soon as reasonably practicable after such form has
been received by the Company. The new withholding rate shall be a whole
percentage of the Eligible Employee's Compensation, but not less than 1% nor
more than 15%.
(d) DISCONTINUING PAYROLL DEDUCTIONS. If a Participant wishes to
discontinue employee contributions entirely, he or she may do so by filing a new
enrollment form with the Company at the prescribed location at any time.
Payroll withholding shall cease as soon as reasonably practicable after such
form has been received by the Company. (In addition, employee contributions may
be discontinued automatically pursuant to Section 8(b).) A Participant who has
discontinued employee contributions may resume such contributions by filing a
new enrollment form with the Company at the prescribed location. Payroll
withholding shall resume as soon as reasonably practicable after such form has
been received by the Company.
(e) LIMIT ON NUMBER OF ELECTIONS. No Participant shall make more than
two elections under Subsection (c) or (d) above during any Offering Period.
SECTION 5. WITHDRAWAL FROM THE PLAN.
(a) WITHDRAWAL. A Participant may elect to withdraw from the Plan by
filing the prescribed form with the Company at the prescribed location at any
time before the last day of an Offering Period. As soon as reasonably
practicable thereafter, payroll deductions shall cease and the entire amount
credited to the Participant's Plan Account shall be refunded to him or her in
cash, without interest. No partial withdrawals shall be permitted.
2
<PAGE>
(b) RE-ENROLLMENT AFTER WITHDRAWAL. A former Participant who has
withdrawn from the Plan shall not be a Participant until he or she re-enrolls in
the Plan under Section 3(c). Re-enrollment may be effective only at the
commencement of an Offering Period.
SECTION 6. CHANGE IN EMPLOYMENT STATUS.
(a) TERMINATION OF EMPLOYMENT. Termination of employment as an
Eligible Employee for any reason, including death, shall be treated as an
automatic withdrawal from the Plan under Section 5(a). (A transfer from one
Participating Company to another shall not be treated as a termination of
employment.)
(b) LEAVE OF ABSENCE. For purposes of the Plan, employment shall not
be deemed to terminate when the Participant goes on a military leave, a sick
leave or another BONA FIDE leave of absence, if the leave was approved by the
Company in writing. Employment, however, shall be deemed to terminate 90 days
after the Participant goes on a leave, unless a contract or statute guarantees
his or her right to return to work. Employment shall be deemed to terminate in
any event when the approved leave ends, unless the Participant immediately
returns to work.
(c) DEATH. In the event of the Participant's death, the amount
credited to his or her Plan Account shall be paid to a beneficiary designated by
him or her for this purpose on the prescribed form or, if none, to the
Participant's estate. Such form shall be valid only if it was filed with the
Company at the prescribed location before the Participant's death.
SECTION 7. PLAN ACCOUNTS AND PURCHASE OF SHARES.
(a) PLAN ACCOUNTS. The Company shall maintain a Plan Account on its
books in the name of each Participant. Whenever an amount is deducted from the
Participant's Compensation under the Plan, such amount shall be credited to the
Participant's Plan Account. Amounts credited to Plan Accounts shall not be
trust funds and may be commingled with the Company's general assets and applied
to general corporate purposes. No interest shall be credited to Plan Accounts.
(b) PURCHASE PRICE. The Purchase Price for each share of Stock
purchased at the close of an Offering Period shall be the lower of:
(i) 85% of the Fair Market Value of such share on the last
trading day in such Offering Period; or
(ii) 85% of the Fair Market Value of such share on the last
trading day before the commencement of such Offering Period or, in the case
of the first Offering Period under the Plan, 85% of the price at which one
share of Stock is offered to the public in the IPO.
(c) NUMBER OF SHARES PURCHASED. As of the last day of each Offering
Period, each Participant shall be deemed to have elected to purchase the number
of shares of Stock calculated
3
<PAGE>
in accordance with this Subsection (c), unless the Participant has previously
elected to withdraw from the Plan in accordance with Section 5(a). The
amount then in the Participant's Plan Account shall be divided by the
Purchase Price, and the number of shares that results shall be purchased from
the Company with the funds in the Participant's Plan Account. The foregoing
notwithstanding, no Participant shall purchase more than 750 shares of Stock
with respect to any Offering Period nor more than the amounts of Stock set
forth in Sections 8(b) and 13(a). The Committee may determine with respect
to all Participants that any fractional share, as calculated under this
Subsection (c), shall be (i) rounded down to the next lower whole share or
(ii) credited as a fractional share.
(d) AVAILABLE SHARES INSUFFICIENT. In the event that the aggregate
number of shares that all Participants elect to purchase during an Offering
Period exceeds the maximum number of shares remaining available for issuance
under Section 13(a), then the number of shares to which each Participant is
entitled shall be determined by multiplying the number of shares available for
issuance by a fraction, the numerator of which is the number of shares that such
Participant has elected to purchase and the denominator of which is the number
of shares that all Participants have elected to purchase.
(e) ISSUANCE OF STOCK. Certificates representing the shares of Stock
purchased by a Participant under the Plan shall be issued to him or her as soon
as reasonably practicable after the close of the applicable Offering Period,
except that the Committee may determine that such shares shall be held for each
Participant's benefit by a broker designated by the Committee (unless the
Participant has elected that certificates be issued to him or her). Shares may
be registered in the name of the Participant or jointly in the name of the
Participant and his or her spouse as joint tenants with right of survivorship or
as community property.
(f) UNUSED CASH BALANCES. Any amount remaining in the Participant's
Plan Account that represents the Purchase Price for a fractional share shall be
carried over in the Participant's Plan Account to the next Offering Period. Any
amount remaining in the Participant's Plan Account that represents the Purchase
Price for whole shares that could not be purchased by reason of Subsection (c)
above, Section 8(b) or Section 13(a) shall be refunded to the Participant in
cash, without interest.
(g) STOCKHOLDER APPROVAL. Any other provision of the Plan
notwithstanding, no shares of Stock shall be purchased under the Plan unless and
until the Company's stockholders have approved the adoption of the Plan.
SECTION 8. LIMITATIONS ON STOCK OWNERSHIP.
(a) FIVE PERCENT LIMIT. Any other provision of the Plan
notwithstanding, no Participant shall be granted a right to purchase Stock under
the Plan if such Participant, immediately after his or her election to purchase
such Stock, would own stock possessing more than 5% of the total combined voting
power or value of all classes of stock of the Company or any parent or
Subsidiary of the Company. For purposes of this Subsection (a), the following
rules shall apply:
4
<PAGE>
(i) Ownership of stock shall be determined after applying the
attribution rules of section 424(d) of the Code;
(ii) Each Participant shall be deemed to own any stock that he or
she has a right or option to purchase under this or any other plan; and
(iii) Each Participant shall be deemed to have the right to
purchase 750 shares of Stock under this Plan with respect to each Offering
Period.
(b) DOLLAR LIMIT. Any other provision of the Plan notwithstanding, no
Participant shall purchase Stock with a Fair Market Value in excess of the
following limit:
(i) In the case of Stock purchased during an Offering Period
that commenced in the current calendar year, the limit shall be equal to
(A) $25,000 minus (B) the Fair Market Value of the Stock that the
Participant previously purchased in the current calendar year (under this
Plan and all other employee stock purchase plans of the Company or any
parent or Subsidiary of the Company).
(ii) In the case of Stock purchased during an Offering Period
that commenced in the immediately preceding calendar year, the limit shall
be equal to (A) $50,000 minus (B) the Fair Market Value of the Stock that
the Participant previously purchased (under this Plan and all other
employee stock purchase plans of the Company or any parent or Subsidiary of
the Company) in the current calendar year and in the immediately preceding
calendar year.
For purposes of this Subsection (b), the Fair Market Value of Stock shall be
determined in each case as of the beginning of the Offering Period in which such
Stock is purchased. Employee stock purchase plans not described in section 423
of the Code shall be disregarded. If a Participant is precluded by this
Subsection (b) from purchasing additional Stock under the Plan, then his or her
employee contributions shall automatically be discontinued and shall resume at
the beginning of the earliest Offering Period ending in the next calendar year
(if he or she then is an Eligible Employee).
SECTION 9. RIGHTS NOT TRANSFERABLE.
The rights of any Participant under the Plan, or any Participant's interest
in any Stock or moneys to which he or she may be entitled under the Plan, shall
not be transferable by voluntary or involuntary assignment or by operation of
law, or in any other manner other than by beneficiary designation or the laws of
descent and distribution. If a Participant in any manner attempts to transfer,
assign or otherwise encumber his or her rights or interest under the Plan, other
than by beneficiary designation or the laws of descent and distribution, then
such act shall be treated as an election by the Participant to withdraw from the
Plan under Section 5(a).
5
<PAGE>
SECTION 10. NO RIGHTS AS AN EMPLOYEE.
Nothing in the Plan or in any right granted under the Plan shall confer
upon the Participant any right to continue in the employ of a Participating
Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Participating Companies or of the
Participant, which rights are hereby expressly reserved by each, to terminate
his or her employment at any time and for any reason, with or without cause.
SECTION 11. NO RIGHTS AS A STOCKHOLDER.
A Participant shall have no rights as a stockholder with respect to any
shares of Stock that he or she may have a right to purchase under the Plan until
such shares have been purchased on the last day of the applicable Offering
Period.
SECTION 12. SECURITIES LAW REQUIREMENTS.
Shares of Stock shall not be issued under the Plan unless the issuance and
delivery of such shares comply with (or are exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange or other
securities market on which the Company's securities may then be traded.
SECTION 13. STOCK OFFERED UNDER THE PLAN.
(a) AUTHORIZED SHARES. The number of shares of Stock available for
purchase under the Plan shall be 833,333 (subject to adjustment pursuant to this
Section 13). On June 1 of each year, commencing with June 1, 2000, the
aggregate number of shares of Stock available for purchase during the life of
the Plan shall automatically be increased by a number equal to the lesser of
(a) 2% of the total number of shares of Stock then outstanding or (b) 833,333
(subject to adjustment pursuant to this Section 13).
(b) ANTI-DILUTION ADJUSTMENTS. The aggregate number of shares of Stock
offered under the Plan, the 750-share limitation described in Section 7(c) and
the price of shares that any Participant has elected to purchase shall be
adjusted proportionately by the Committee for any increase or decrease in the
number of outstanding shares of Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, any other increase
or decrease in such shares effected without receipt or payment of consideration
by the Company, the distribution of the shares of a Subsidiary to the Company's
stockholders or a similar event.
(c) REORGANIZATIONS. Any other provision of the Plan notwithstanding,
immediately prior to the effective time of a Corporate Reorganization, the
Offering Period then in progress shall terminate and shares shall be purchased
pursuant to Section 7, unless the Plan is continued or assumed by the surviving
corporation or its parent corporation. The Plan shall in no event be construed
to restrict in any way the Company's right to undertake a dissolution,
liquidation, merger, consolidation or other reorganization.
6
<PAGE>
SECTION 14. AMENDMENT OR DISCONTINUANCE.
The Board shall have the right to amend, suspend or terminate the Plan at
any time and without notice. Except as provided in Section 13, any increase in
the aggregate number of shares of Stock to be issued under the Plan shall be
subject to approval by a vote of the stockholders of the Company. In addition,
any other amendment of the Plan shall be subject to approval by a vote of the
stockholders of the Company to the extent required by an applicable law or
regulation.
SECTION 15. DEFINITIONS.
(a) "BOARD" means the Board of Directors of the Company, as constituted
from time to time.
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
(c) "COMMITTEE" means a committee of the Board, as described in
Section 2.
(d) "COMPANY" means Liberate Technologies, a Delaware corporation.
(e) "COMPENSATION" means (i) the total compensation paid in cash to a
Participant by a Participating Company, including salaries, wages, bonuses,
incentive compensation, commissions, overtime pay and shift premiums, plus (ii)
any pre-tax contributions made by the Participant under section 401(k) or 125 of
the Code. "Compensation" shall exclude all non-cash items, moving or relocation
allowances, cost-of-living equalization payments, car allowances, tuition
reimbursements, imputed income attributable to cars or life insurance, severance
pay, fringe benefits, contributions or benefits received under employee benefit
plans, income attributable to the exercise of stock options, and similar items.
The Committee shall determine whether a particular item is included in
Compensation.
(f) "CORPORATE REORGANIZATION" means:
(i) The consummation of a merger or consolidation of the Company
with or into any other entity or any other corporate reorganization; or
(ii) The sale, transfer of other disposition of all or
substantially all of the Company's assets or the complete liquidation or
dissolution of the Company.
(g) "ELIGIBLE EMPLOYEE" means any employee of a Participating Company
who meets the following requirements: his or her customary employment is for
more than five months per calendar year and for more than 20 hours per week. The
foregoing notwithstanding, an individual shall not be considered an Eligible
Employee if his or her participation in the Plan is prohibited by the law of any
country which has jurisdiction over him or her or if he or she is subject to a
collective bargaining agreement that does not provide for participation in the
Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
7
<PAGE>
(i) "FAIR MARKET VALUE" means the market price of Stock, determined by
the Committee as follows:
(i) If the Stock was traded on The Nasdaq National Market on the
date in question, then the Fair Market Value shall be equal to the
last-transaction price quoted for such date by The Nasdaq National Market;
(ii) If the Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date; or
(iii) If none of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good faith on
such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in THE WALL STREET JOURNAL or as reported
directly to the Company by Nasdaq or a stock exchange. Such determination shall
be conclusive and binding on all persons.
(j) "IPO" means the initial offering of Stock to the public pursuant to
a registration statement filed by the Company with the Securities and Exchange
Commission.
(k) "OFFERING PERIOD" means a six-month period with respect to which
the right to purchase Stock may be granted under the Plan, as determined
pursuant to Section 3(a).
(l) "PARTICIPANT" means an Eligible Employee who elects to participate
in the Plan, as provided in Section 3(b).
(m) "PARTICIPATING COMPANY" means (i) the Company and (ii) each present
or future Subsidiary designated by the Committee as a Participating Company.
(n) "PLAN" means this Liberate Technologies 1999 Employee Stock
Purchase Plan, as it may be amended from time to time.
(o) "PLAN ACCOUNT" means the account established for each Participant
pursuant to Section 7(a).
(p) "PURCHASE PRICE" means the price at which Participants may purchase
Stock under the Plan, as determined pursuant to Section 7(b).
(q) "STOCK" means the Common Stock of the Company.
(r) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
8
<PAGE>
[LOGO]
EXHIBIT 10.7
October 12, 1998
Mitchell E. Kertzman
55 Avon Avenue
Mill Valley, CA 94941
SENT VIA FACSIMILE: 415-389-6665
Dear Mitch,
We are pleased to offer you employment as President and Chief Executive
Officer for Network Computer, Inc ("NCI" or "the Company"). Your annual
salary will be $300,000 less applicable withholding. You will be eligible for
a target annual bonus of $200,000, based upon goals and objectives as
determined by the Company's Board of Directors and agreed upon by both
parties. Your first year's target annual bonus, so long as you remain
employed, is guaranteed to be $200,000. This bonus is scheduled to be paid
30 days after the first anniversary of your hire date. Your starting date
will be pursuant to discussions with David Roux.
As an employee of Network Computer, Inc., you will be eligible to participate
in a number of Company-sponsored benefits, including health and medical
benefits. Upon Board of Director's approval, the Company will grant you an
option to purchase up to 10,000,000 shares of common stock with an exercise
price equal to fair market value as determined by the Board of Directors. The
option would vest as follows: 25% on the first anniversary of the date of
hire, and monthly thereafter, in equal increments over a period of 36 months.
The option is issued subject to the terms of the Company's standard stock
option plan. However, should the Company experience a change in control (a
change in ownership of at least 50% of the Company), 50% of any unvested
options from this original grant shall be accelerated to vest upon the
effective date of the change in control.
Upon your execution of mutually agreeable documentation, the Company will
loan you up to $1,000,000, secured in a manner agreeable to the Company, for
the sole purpose of your purchasing a home. This offer of a loan remains open
to you through December 31, 1999. If the loan is made to you, it will bear
interest at the current market rate and be payable in full plus interest at
the end of three years from the funding date of the loan. Specific terms for
such a loan would be defined in a separate agreement.
Your employment with the Company is not for a specific term and can be
terminated by you or by the Company at any time for any reason, with or
without cause. We request that all of our employees, to the extent possible,
give us advance notice if they intend to resign. But if your employment is
terminated by the Company for any reason other than gross misconduct, you
agree to accept as severance, in exchange for your execution of a release of
all claims against the Company, one year's base salary. Your employment with
the Company is also contingent upon you executing the Proprietary Information
Agreement, Employment Agreement and upon you providing the Company with the
legally required proof of your identity. The Company also requires proof of
eligibility to work in the United States.
In the event of any dispute or claim relating to or arising out of our
employment relationship, the termination of that relationship, or this
agreement (including, but not limited to, any claims of wrongful termination,
breach of contract or age, sex, race, disability or other discrimination or
harassment), you and the Company agree that all such disputes shall be fully
and finally resolved by binding arbitration conducted by the American
Arbitration Association in Santa Clara County, California, with the
arbitrator exercising all powers and remedies of a judge. By signing this
agreement you and the Company waive your rights to have disputes tried by a
judge or a jury. However, we agree that this arbitration provision shall not
apply to any disputes or claims relating to or arising out of breach or
alleged breach of your Proprietary Information Agreement and Employment
Agreement with the Company.
[LETTERHEAD]
<PAGE>
To confirm your acceptance of this employment agreement, please sign and date
this letter in the spaces provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with other
agreements referred to above, set forth the terms of your employment with the
Company. This agreement supersedes any prior representations or agreements
between you and the Company, whether written or oral, and it may not be
modified or amended except by a document signed by an authorized officer of
the Company and you. This offer, if not accepted, will expire on October 15,
1998.
Sincerely,
/s/ David Roux
Network Computer, Inc.
By: David Roux
Chief Executive Officer
I agree to and accept employment with Network Computer, Inc. on the terms set
forth in this agreement.
/s/ [ILLEGIBLE] 10/21/98
- -------------------------------------------------------------------------------
Signature Date
<PAGE>
Exhibit 10.8
EMPLOYMENT AGREEMENT
October 17, 1997
Dr. Wei Yen
10431 Plum Tree Lane
Cupertino, CA 95014
Dear Dr. Yen:
This letter confirms the terms of your employment with Network Computer,
Inc. (the "Company") on and after the date hereof and supersedes in its
entirety the letter dated June 5, 1997 (other than the provisions of the
second paragraph of Section 7 (relating to your release of claims) of such
letter which paragraph shall remain in effect), which outlined the previous
terms of your employment with the Company. Such employment will be on the
following terms:
1. EMPLOYMENT AND POSITION: You will be an employee and President
("President") of the Company, reporting to the Chief Executive Officer
("CEO") of the Company, and assuming and discharging such responsibilities as
are mutually agreed upon by you and the CEO, commensurate with such office
and position. At a minimum, you will serve as an employee until June 15,
1998. If at any time after February 15, 1998 you determine that you will be
resigning as an employee of the Company after June 15, 1998, and you no
longer wish to serve as President, then you will promptly notify the CEO of
such determination and you and the CEO in consultation with the Board of
Directors of NCI shall mutually agree upon a title other than President to
more accurately reflect your transition status. Thereafter, your primary duty
will be to assist in a mutually agreed manner in the transition of Navio
Communications, Inc. ("Navio") into the Company, including the transition of
client relationships and development projects.
Either you or the Company may terminate your employment upon 30 days
notice to the other party, subject to Sections 6 and 7 hereof.
You will continue to serve on the Company's Board of Directors until
your successor is duly appointed or you terminate your employment with the
Company, whichever comes first.
During the term of your employment with the Company, you will
perform your normal work activities, and you shall perform them faithfully,
diligently and competently, and you shall use your best efforts to further
the business of the Company and its affiliated entities.
2. BASE SALARY: In consideration of your services, you will be paid a
base salary at the rate of $410,000 per year during the term of your
employment, to be paid in installments and in accordance with the Company's
payroll practices. As with other officers of the Company, your annual
compensation, which includes this base salary and bonus, will be reviewed
annually by the Board of Directors of the Company.
<PAGE>
3. BONUS: In addition to the base salary, bonus and other compensation
to which you are or may be entitled under this Agreement, you will receive a
cash bonus (the "Bonus"), to be paid on the dates and in the amounts set
forth below.
<TABLE>
<CAPTION>
DATE BONUS AMOUNT
---- ------------
<S> <C>
March 31, 1998 $70,000
March 31, 2000 $63,000
March 31, 2002 $56,500
</TABLE>
The Company's obligation to pay any installment of the Bonus to you will
be conditioned on your continued employment with the Company on the relevant
payment date; provided, however, that all Bonus payments shall become due and
payable immediately on the terms and subject to the conditions set forth in
Section 7a below.
4. BENEFITS; EXPENSES: You will be entitled to receive the Company's
employee benefits made available to other employees and officers to the full
extent of your eligibility. You shall be reimbursed for all reasonable
business and travel expenses actually incurred by you in the performance of
your services on behalf of the Company, in accordance with the Company's
expense reimbursement policy as from time to time in effect and determined
by the Board of Directors.
5. LOANS: As of the earlier of your last date of employment with the
Company and July 21, 1998, the Company will forgive $560,000 of the loan made
by Navio to you that is secured by your primary residence.
6. REPURCHASE RIGHT:
a. Subject to the provisions of Section 7, in the event of the
termination of your employment with the Company before June 15, 1998, the
Company shall upon the date of such termination (the "Termination Date") have
an irrevocable, exclusive option (the "Repurchase Option") for a period of 90
days from such date to repurchase all or any portion of the Unvested Shares
of Series C Preferred Stock (the "Series C Preferred") of the Company (or
shares of Common Stock received upon conversion of such Series C Preferred).
For purposes of this Section 6, Unvested Shares shall mean one half of the
number of shares of Series C Preferred Stock received by you in the Merger.
One third of such Unvested Shares shall become vested on February 12, 1998.
In addition, one-tenth of one-third of such Unvested Shares shall become
vested for each 500,000 copies of the Company's products distributed in
bundled or unbundled form in accordance with the Company business strategy
(excluding any distribution not for value unless approved in concept by the
Company's Chief Executive Officer or a majority of the Company's Board of
Directors) subject in each case to your continued employment with the Company
on the date any such distribution milestone is achieved. Notwithstanding the
foregoing, if you are an employee of the Company on June 15, 1998, then on
such date all shares of Series C Preferred Stock of the Company (or shares of
Common Stock received upon conversion of such Series C Preferred Stock) shall
be fully vested and the Company shall have no Repurchase Option with respect
to such shares or cash.
-2-
<PAGE>
b. The Repurchase Option may be exercised by the Company by
written notice to you accompanied by delivery of a check payable to you in an
amount equal to the dollar equivalent of the aggregate purchase price paid by
you for the shares of Navio capital stock exchanged for the Unvested Shares
being repurchased (the "Repurchased Shares"). Upon delivery of such notice
and the payment described above, the Company shall become the legal and
beneficial owner of the Repurchased Shares and all rights and interest
therein or related thereto, and the Company shall have the right to transfer
to its own name the Repurchased Shares, without further action by you.
c. The certificate or certificates representing the Unvested
Shares shall bear the following legends (as well as any legends required by
applicable state and federal corporate and securities laws or required to be
placed thereon by the California Commissioner of Corporations):
THE SHARES 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 DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY
AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY
OF THE COMPANY.
You agree that the Unvested Shares may not be transferred while
subject to the Repurchase Option, and that in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate "stop
transfer" instructions to its transfer agent, if any, to prevent any transfer
during such period.
d. The Repurchase Option may be assigned in whole or in part to
any stockholder or stockholders of the Company, including Oracle Corporation,
or other persons or organizations; provided, however, that an assignee, other
than a corporation that is the parent or a 100% owned subsidiary of the
Company, must pay the Company, upon assignment of such right, cash equal to
the difference between the original purchase price and fair market value, if
the original purchase price is less than the fair market value of the
Repurchased Shares subject to the assignment.
e. As security for your faithful performance of this Agreement,
you agree to deliver the stock certificate(s) (or cash amounts) evidencing
the Unvested Shares, together with the stock powers executed by you and by
your spouse, if any (with the date, name of transferee,
-3-
<PAGE>
stock certificate number and number of Unvested Shares left blank), to the
Secretary of the Company or other designee of the Company ("Escrow Holder"),
who is hereby appointed to hold such certificate(s) and stock powers (or
cash) in escrow and to take all such actions and to effectuate all such
transfers and/or releases of such Unvested Shares as are in accordance with
the terms of this Agreement. Any dividends declared and interest accrued on
such Unvested Shares shall accrue and be paid out at the time the Unvested
Shares (or cash amounts) are released from escrow in accordance with the
terms of this Agreement. You and the Company agree that Escrow Holder will
not be liable to any party to this Agreement (or to any other party) for any
actions or omissions unless Escrow Holder is grossly negligent or
intentionally fraudulent in carrying out the duties of Escrow Holder. Escrow
Holder may rely upon any letter, notice or other document executed by any
signature purported to be genuine and may rely on the advice of counsel and
obey any order of any court with respect to the transactions contemplated by
this Agreement. The Unvested Shares will be released from escrow upon
termination of the Repurchase Option.
f. This Section 6 shall replace and supersede Section 3(a) of the
Common Stock Purchase Agreement between you and Navio dated as of July 9,
1996, and such Section 3(a) shall be of no further force and effect.
7. TERMINATION:
a. In the event that (i) before June 15, 1998, your employment is
involuntarily terminated for any reason other than "for cause" (as defined
herein) or Constructively Terminated (as defined below), or (ii) on June 15,
1998, you shall be entitled to the following benefits:
aa. A severance payment equal to $820,000, payable in 24
equal monthly installments;
bb. The termination of the Company's Repurchase Option;
cc. A payment in an amount equal to that portion of the
Bonus payable pursuant to Section 3 above that has not been paid (and in such
event no further Bonus payment shall be required to be made).
b. For purposes of the foregoing, termination "for cause" shall
mean (i) the willful failure by you substantially to perform your material
duties after a written demand for substantial performance is delivered to you
by the CEO or the Board of Directors which specifically identifies the manner
in which the Board of Directors believes that you have not substantially
performed your material duties (including without limitation the failure by
you to follow any reasonable specific directive established by the CEO and of
which you are given notice), which failure to perform continues for 30 days
after such written notice (or, if longer than 30 days is reasonably required
to cure, where such failure to perform continues beyond the end of the period
reasonably required to cure, provided that such extension of the cure period
beyond 30 days will apply only if you diligently seek to cure during such
extension period and further provided that in no event shall the total period
to cure exceed 60 days); (ii) bad faith
-4-
<PAGE>
conduct related to the Company or the performance of your material duties for
the Company; or (iii) the conviction of you of any crime involving the
property or business of the Company or its subsidiaries or Oracle or its
subsidiaries. The fact that the Company does not achieve specified research
and development milestones or financial targets shall not by itself be deemed
to be a basis for termination "for cause," unless the reason that such
milestones or targets were not achieved is directly and materially
attributable to conduct (or lack of conduct) contemplated by clauses (i),
(ii) or (iii) above.
c. For purposes of the foregoing, your employment with the Company
shall be deemed to have been "Constructively Terminated" if there shall occur
(i) a material reduction in base salary (other than a reduction applicable to
all officers), (ii) a material change in responsibility or authority, (iii)
any change in your job location outside the San Francisco Bay Area without
your consent, (iv) your permanent disability, expected to last longer than 180
days, as certified by a medical professional, or (v) the Company's breach of
any of its material obligations to you, including any failure to pay amounts
due or provide benefits to which you are entitled hereunder or under Company
policy.
8. PROPRIETARY INFORMATION AGREEMENT. You agree to be bound by the
terms of the employee proprietary information agreement with the Company in
the form attached hereto as EXHIBIT A. If the provisions of such agreement
conflict with the terms of Section 9(a) of this Agreement, then the terms of
this Agreement shall prevail.
9. NONCOMPETITION AGREEMENT.
a. Prior to the earlier of (i) June 15, 1999 and (ii) the one year
anniversary of termination of your employment with the Company (the
"Restricted Period"), without the prior written consent of the Company, you
agree not to engage as an employee, director, officer, consultant, advisor or
greater than 5% shareholder in any entity ("Restricted Entity") anywhere in
the world that develops, markets or distributes any products or services that
compete with products or services sold or licensed or for which development
is substantially complete by the Company at or before the time of termination
of your employment with the Company (the "Restricted Field") in the
geographic area comprising the entire world (the "Protected Territory").
Notwithstanding the foregoing or any other provision of this Agreement, you
shall be permitted to engage as an employee, director, officer, consultant,
advisor or greater than 5% shareholder in any entity whose primary business
is providing services or developing, marketing or distributing hardware or
software products for graphics, entertainment or electronic commerce purposes
(the "Permitted Activities"); provided, however, that your engagement must be
limited to such Permitted Activities, and such Permitted Activities must not
compete directly with the Company's Consumer Business. The Company
acknowledges that you (or your designee) shall own all right, title and
interest in the intellectual property rights of technology that you develop
while engaged in the Permitted Activities, so long as any such technology
development does not use or infringe any intellectual property rights of the
Company or any of its subsidiaries or Oracle or its subsidiaries.
For the purposes of this Section 9, the term "Restricted Entity" shall
not be deemed to include divisions or business units of a corporation that
are not engaged in activities in the
-5-
<PAGE>
Restricted Field. For purposes of this Section 9, the term "Consumer
Business" shall mean products and related services sold or licensed for the
consumer market as either (i) an integrated package of systems software and
applications software for network computer devices (excluding Apple
Macintosh and personal computers running Windows '95, Windows NT and their
successor versions, and limited purpose consumer devices marketed and used
primarily for executing game software developed for such devices; provided,
however, that the foregoing exclusion shall not include network computing
devices based on WebTV technology or Windows CE) or (ii) server
infrastructure for network computers. The term "systems software" shall
include the following types of component programs: operating systems and
runtime operating systems (e.g., VxWorks, JavaOS, Chorus, Java Virtual
Machine, and PSOS), and audio/visual codecs (e.g., VXtreme and Iterated).
The term "server infrastructure" shall mean any software executed by a server
that performs the following functions: registration and authentication of
users, personalization of content and services, electronic program guide
(EPG), and application and content delivery. A "server" shall mean any
machine that receives and processes requests from client devices.
b. As a separate and independent covenant, during the Restricted
Period, without the prior written consent of the Company, you hereby agree not
to take away or interfere with or attempt to interfere with any custom,
trade, business or patronage of the Company or its subsidiaries, in the
Restricted Field, in each case for the purpose of conducting or engaging in
any business that is operating in the Restricted Field.
c. As a separate and independent covenant, during the Restricted
Period, without the prior written consent of the Company, you hereby agree
not to, in any way, directly or indirectly, irrespective of the Restricted
Field, hire any employee or consultant of the Company or any of its
subsidiaries or Oracle or its subsidiaries, or attempt to induce any employee
or consultant of the Company or any of its subsidiaries or Oracle or its
subsidiaries, to leave the employ of the Company or any of its subsidiaries or
Oracle or its subsidiaries or to violate the terms of their contracts. The
Company acknowledges that the provisions of this paragraph do not restrict
the activities of any entity for which you are acting if such entity acts
without any involvement from you.
d. The Restricted Period shall be extended by the length of any
period during which you are in material breach of the terms of this
Agreement; provided, however, that in no such event shall the Restricted
Period be extended by more than one (1) year.
e. You acknowledge that upon the breach of any of the provisions
of this Section 9 the Company would sustain irreparable harm, and, therefore,
you agree that in addition to any other remedies which the Company may have
under this Agreement or otherwise, the Company shall be entitled to obtain
equitable relief, including specific performance and injunctions restraining
you from committing or continuing any such violation of this Agreement.
-6-
<PAGE>
f. You represent that you are familiar with the covenants
contained in this Section 9, and are fully aware of your obligations
hereunder. You hereby acknowledge that the covenants and agreements set forth
in this Section 9 are an essential element of the Merger and the Option and
that, but for your agreement to comply with these covenants, the Company
would not have entered into this Agreement, the Merger Agreement under which
the Company acquired Navio or the other agreements contemplated by the Merger
Agreement. You acknowledge that the period of restrictions and the geographic
area to which the restrictions imposed in Section 9 hereof shall apply are
fair and reasonable and are reasonably required for the protection of the
Company. If any provision of this Agreement is held to be invalid or
unenforceable by judicial order for any reason, such action shall not affect
the enforceability of the remaining provisions hereof and, without limiting
the foregoing, any such holdings shall in no event preclude the Company from
enforcing the provisions hereof for such term, in such territory and to such
extent non inconsistent with or prohibited by said judicial order. If the
provisions of this Agreement should ever be deemed to exceed the time, scope
or geographic limitations permitted by applicable law, then such provisions
shall be reformed to the maximum time, scope or geographic limitations, as
the case may be, permitted by applicable laws.
10. SUCCESSORS. The Company shall require any successor or assignee, in
connection with any sale, transfer or other disposition of all or
substantially all of the Company assets or business, whether by purchase,
merger, consolidation or otherwise, expressly to assume and agree to perform
the Company's obligations under this agreement in the same manner and to the
same extent that the Company would be required to perform if no such
succession or assignment had taken place. In such event, the term "Company,"
as used in this agreement, shall mean the Company as defined above and any
successor or assignee to the business and assets which by reason hereof
becomes bound by the terms and provisions of this agreement, except that for
purposes of Section 9 (Noncompetition Agreement), the "Company" shall include
only the business and the products and services of the Company in existence
at the time of any such succession or assignment.
11. ARBITRATION. Any claim, dispute or controversy arising out of this
Agreement, the interpretation, validity or enforceability of this Agreement
or the alleged breach thereof shall be submitted by the parties to binding
arbitration by the American Arbitration Association in Santa Clara County,
California; provided, however, that this arbitration provision shall not
preclude either party from seeking injunctive relief from any court having
jurisdiction with respect to any disputes or claims relating to or arising
out of the misuse or misappropriation of the Company's trade secrets or
confidential and proprietary information. All costs and expenses of
arbitration or litigation, including but not limited to attorneys' fees and
other costs and expenses of arbitration or litigation, including but not
limited to attorneys' fees and other costs reasonably incurred by you, shall
be paid by the Company. Judgment may be entered on the award of the
arbitration in any court having jurisdiction.
-7-
<PAGE>
12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto PARTICIPATING to the subject matter hereof, and
supersedes any and all other prior written or oral agreements existing
between the parties hereto, including without limitation the letter dated
June 5, 1997 (other than the provisions of the second paragraph of Section 7
of such letter which paragraph shall remain in effect) from the Company to
you and the letter agreement dated May 16, 1997 from the Company to you. The
Employment Agreement dated July 9, 1996 between you and Navio shall be deemed
terminated and superseded by this Agreement and, except as specifically set
forth in this Agreement, you shall not be entitled to any of the benefits set
forth in Section 7(a) of such Employment Agreement. The foregoing
notwithstanding, the parties may agree to amend the terms of this Agreements
and enter into new business arrangements by mutual written consent.
13. GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to agreements
made and to be performed entirely within such state.
-8-
<PAGE>
Wei, we are excited about having you as a leader of the Company team. Please
acknowledge acceptance of this offer by signing and returning the enclosed
copy of this letter, whereupon it shall become a binding agreement.
Very truly yours,
NETWORK COMPUTER, INC.
/s/ Jerry Baker
--------------------------------------
Jerry Baker, Chief Executive Officer
Accepted and agreed to by:
/s/ Wei Yen
- --------------------------------------
Wei Yen
SIGNATURE PAGE TO EMPLOYMENT AGREEMENT
-9-
<PAGE>
EXHIBIT A
NETWORK COMPUTER, INC.
PROPRIETARY INFORMATION AND
ASSIGNMENT OF INVENTIONS AGREEMENT
In exchange for my becoming employed (or my employment being continued)
by or retained as a consultant (or my consulting relationship being
continued) by Network Computers, Inc., or its subsidiaries, affiliates, or
successors (hereinafter referred to collectively as the "Company"), I hereby
agree as follows:
1. I will perform for the Company such duties as may be designated by
the Company from time to time. During my period of employment or consulting
relationship with the Company, I will devote my beset efforts to the
interests of the Company and will not engage in other employment or in any
activities detrimental to the best interests of the Company without the prior
written consent of the Company. I agree that my employment or consulting
arrangement with the Company is on an "at will" basis, and may be terminated
by me or the Company at any time, with or without cause.
2. As used in this Agreement, the term "Inventions" means designs,
trademarks, discoveries, formulae, processes, manufacturing techniques, trade
secrets, inventions, improvements, ideas, business plans or strategies, or
copyrightable works, including all rights to obtain, register, perfect and
enforce these proprietary interests; provided that the term "Inventories"
shall not be deemed to include those inventions, if any, listed on EXHIBIT A
attached to this Agreement.
3. As used in this Agreement, the term "Confidential Information"
means information pertaining to any aspects of the Company's business which
is either information not known by actual or potential competitors of the
Company or is proprietary information of the Company or its customers or
supporters, whether relating to the Company's technology, business
relationships, customers or otherwise. The term "Confidential Information"
shall not, however, include any information described in the last sentence of
the first paragraph of Section 9.a. of the Employment Agreement.
4. Without further compensation, I hereby agree promptly to disclose
to the Company, and I hereby assign and agree to assign to the Company or its
designee, my entire right, title, and interest in and to all Inventions which
I may solely or jointly develop or reduce to practice during the period of my
employment or consulting relationship with the Company (a) which pertain to
any line of business activity of the Company, (b) which are aided by the use
of time, material or facilities of the Company, whether or not during working
hours; or (c) which relate to any of my work during the period of my
employment or consulting relationship with the Company, whether or not during
normal working hours. No rights are hereby conveyed in Inventions, if any,
made by me prior to my employment or consulting relationship with the Company
which are identified in a sheet attached to and made a part of this
Agreement, if any (which attachment contains no confidential information).
5. I agree to perform during and after my employment or consulting
relationship, all acts deemed necessary or desirable by the Company to permit
and assist it, at its expense, in obtaining and enforcing the full benefits,
enjoyment, rights and title throughout the world in the Inventions hereby
assigned to the Company as set forth in paragraph 4 above. Such acts may
include, but are not limited to, execution of documents and assistance or
cooperation in legal proceedings.
<PAGE>
6. If the Company is unable for any reason to secure my signature to
apply for or to pursue any application for any United States or foreign
letters patent or mask work or copyright registration covering inventions,
ask works or original works or authorship assigned to the Company as above,
then I hereby irrevocably designate and appoint the Company and its duly
authorized officers and agents as my agent and attorney in fact, to act for
and in my behalf and stead to execute and file any such applications and to
do all other lawfully permitted acts to further the prosecution and issuance
of letters patent and mask work or copyright registrations thereon with the
same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which
I now or may hereafter have for infringement of any patents, mask works or
copyrights resulting from any such application for letters patent or mask
work or copyright registrations assigned hereunder to the Company.
7. I agree to hold in confidence and not directly or indirectly to use
or disclose, either during or after termination of my employment or
consulting relationship with the Company, any Confidential Information I
obtain or create during the period of my employment or consulting
relationship, whether or not during working hours, except to the extent
authorized by the Company until such Confidential Information becomes
generally known. I agree not to make copies of such Confidential Information
except as authorized by the Company. Upon termination of my employment or
consulting relationship or upon an earlier request of the Company, I will
return or deliver to the Company all tangible forms of such Confidential
Information in my possession or control, including but not limited to
drawings, specifications, documents, records, devices, models or any other
material and copies or reproductions thereof.
8. I represent that my performance of all the terms of this Agreement
and as an employee of or consultant to the Company does not and will not
breach any agreement to keep in confidence proprietary information, knowledge
or data acquired by me in confidence or in trust prior to my becoming an
employee or consultant of the Company, and I have not previously and will not
at any future time disclose to the Company, or induce the Company to use,
any confidential or proprietary information or material belonging to any
previous employer or others. I agree not to enter into any agreement either
written or oral in conflict with the provisions of this Agreement, and I
certify that, to the best of my knowledge, I am not a party to any other
agreement which will interfere with my full compliance with this Agreement.
9. Without limiting any other provisions of this Agreement, I agree
that for one (1) year after the date of termination of my employment by the
Company I will not (i) induce any employee of the Company to leave the employ
of the Company or (ii) solicit the business of any client or customer of the
Company (other than on behalf of the Company) in a manner competitive with
the Company. However, in the event that this Section 9 conflicts with or is
more restrictive than Section 9.c. of the Employment Agreement, then Section
9.c. of the Employment Agreement shall control and prevail.
10. This Agreement (a) shall survive my employment by or consulting
relationship with the Company, (b) does not in any way restrict my right or
the right of the Company to terminate my employment or consulting
relationship, (c) inures to the benefit of successors and assigns of the
Company, and (d) is binding upon my heirs and legal representatives.
11. Because my services are personal and unique and because I may have
access to and become acquainted with the Confidential Information of the
Company, the Company shall have the right to enforce this Agreement and any
of its provisions by injunction, specific
<PAGE>
performance or other equitable relief, without prejudice to any other rights
and remedies that the Company may have for a breach of this Agreement.
12. If one or more of the provisions in this Agreement are deemed
unenforceable by law, then the remaining provisions will continue in full
force and effect.
13. This Agreement does not apply to an Invention which qualifies fully
under the provisions of Section 2870 of the Labor Code, a copy of which is
attached hereto as EXHIBIT B. I agree to disclose all Inventions made by me
in confidence to the Company to permit a determination as to whether or not
the Inventions should be the property of the Company.
14. The provisions of this Agreement shall apply to the entire term of
my employment or consulting relationship with the Company, including all such
periods prior to the date of this Agreement.
15. I certify and acknowledge that I have carefully read all of the
provisions of this Agreement and that I understand and will fully and
faithfully comply with such provisions.
Dated: 4/30/98 EMPLOYEE
----------------------------
/s/ Wei Yen
---------------------------------------
Signature
Wei Yen
---------------------------------------
Printed Name
NETWORK COMPUTER, INC.
By: [ILLEGIBLE]
------------------------------------
Title: CEO
---------------------------------
<PAGE>
EXHIBIT A
If none, initial here: _________
Otherwise, list inventions below:
All "Inventions" described in the last sentence of the first paragraph of
Section 9.a. of the Employment Agreement dated October 17, 1998, as amended
February 27, 1998 ("Employment Agreement") between the Company and me shall
NOT be deemed "Inventions" for purposes of this Agreement and shall be
excluded from the definition thereof.
<PAGE>
EXHIBIT B
Section 2870 of the California Labor Code is as follows:
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the
employer's equipment, supplies, fees or trade secret information except for
those inventions that either:
(1) Relate at the time of inception or reduction to practice of
the invention to the employer's business, or actual or demonstrated anticipated
research or development of the employer.
(2) Result from any [ILLEGIBLE] by the employee for the employer.
(b) To the extent a provision [ILLEGIBLE] agreement purports to require
an employee to assign an invention [ILLEGIBLE] being required to be assigned
under subdivision (a), the provision is against the [ILLEGIBLE] policy of this
state and is unenforceable.
-2-
<PAGE>
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
This Amendment No. 1 (the "AMENDMENT") is entered into as of February
27, 1998 between Network Computer, Inc., a Delaware corporation (the
"COMPANY") and Wei Yen, and amends that certain Employment Agreement (the
"AGREEMENT") entered into as of October 17, 1997 between the Company and Wei
Yen. Capitalized terms used herein have the meanings provided in the
Agreement.
RECITALS
WHEREAS, Wei Yen voluntarily resigned his position as President of NCI,
effective February 24, 1998, approximately three months prior to the
June 15, 1998 date contemplated in the Agreement;
WHEREAS, Wei Yen shall continue to serve as a Director of the Company;
WHEREAS, Wei Yen acknowledges that the payment schedule of the
Promissory Note, dated July 9, 1996 (the "Promissory Note"), in the
amount of $150,000.00, shall be accelerated as a result of the
termination of his employment with the Company; and
WHEREAS, the Company has agreed to accelerate the vesting of certain of
the severance benefits provided for in the Agreement in exchange for a
release of all claims relating to Wei Yen's employment relationship with
the Company pursuant to a Settlement Agreement and Release of All Claims
(the "Settlement Agreement").
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements, representations, warranties and covenants set forth below, Wei
Yen and the Company agree as follows:
SECTION 1 Date Change.
------------
All references to the date "June 15, 1998" in the Agreement hereby
are amended to be "February 24, 1998".
SECTION 2 Director.
---------
The third paragraph of Section 1 of the Agreement is hereby amended
and restated in its entirety to read as follows:
"You will continue to serve on the Company's Board of Directors until
your successor is duly appointed, or until your earlier resignation or
removal."
SECTION 2 Loans.
------
Section 5 of the Agreement hereby is amended and restated in its
entirety to read as follows:
"As of the earlier of your last date of employment with the Company and
July 21, 1998, the Company will forgive $560,000 of the loan made by
Navio to you that is secured by your primary residence (the "Primary
Residence Loan"); provided that you understand that forgiveness of the
Primary Residence Loan is treated as compensation for tax purposes. The
Company shall be entitled to offset (i) any tax withholding obligations
related to the forgiveness of the Primary Residence Loan and any
outstanding principal or accrued interest due on the Promissory Note
against (ii) any severance payment that may be owed to you pursuant to
Section 7(a)(aa)."
SECTION 3 Proprietary Information Agreement.
----------------------------------
You agree to be bound by the terms of the employee proprietary
information agreement with the Company in the form attached hereto as Exhibit
A. If the provisions of such agreement conflict with the terms of Section
9(a) of the Agreement, then the terms of the Agreement shall prevail.
SECTION 4 Cross Default.
--------------
Any default under the Settlement Agreement shall be a default under
the Agreement, as amended by this Amendment.
[SIGNATURE PAGE FOLLOWS]
-2-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
by the parties hereto as of the date first above written.
Network Computer, Inc.
/s/ DAVID J. ROUX
By: ---------------------------
David J. Roux
CHIEF EXECUTIVE OFFICER
[ILLEGIBLE]
-3-
<PAGE>
Exhibit 10.9
SETTLEMENT AGREEMENT AND RELEASE OF ALL CLAIMS
This Settlement Agreement and Release of All Claims (hereinafter "Agreement")
is made and entered into by and between: Wei Yen and his heirs,
administrators, agents, representatives, executors, successors and assigns
(hereinafter collectively referred to as "Yen"); and Network Computer, Inc.
("NCI") and Oracle Corporation, and each of their officers, administrators,
agents, representatives, shareholders, directors, employees, executors,
successors, assigns, subsidiaries, parent companies, predecessor or successor
companies, or any other individuals or entities related thereto or
potentially liable with respect to Yen's claims (hereinafter collectively
referred to as the "Company").
1. Yen was employed by the Company in the position of President of NCI.
Yen's position as President of NCI and his employment with the Company
ended with his resignation on February 24, 1998.
2. Potential disputes may arise between the Company and Yen relating to
Yen's employment relationship with the Company, the changes in his
employment status, Yen's compensation, the termination of the
employment relationship between him and the Company and the
circumstances attendant thereto.
3. Yen and the Company desire now to settle completely and for all time
their potential disputes and any and all other disputes or differences
between them regarding any matter related to Yen's employment
relationship with the Company, the changes in his employment status,
Yen's compensation and the termination of the employment relationship
between him and the Company.
4. Therefore, in consideration of the covenants and promises herein
contained and for other valuable consideration, receipt of which is
hereby acknowledged, the following Agreement is entered into by the
undersigned parties.
5. This Agreement, and compliance with this Agreement, shall not be
construed as an admission of liability on the part of either party.
Such liability being expressly denied, the parties' intent in this
Agreement is to avoid litigation. Yen hereby represents that he has
neither filed nor caused to be filed any pending charges, suits,
claims, grievances or other action (hereinafter referred to as
"claims") related to Yen's employment relationship with the Company,
the changes in his employment status, Yen's compensation, the
termination of the employment relationship between the Company
and Yen or any other conduct of the Company occurring prior to
the execution of this Agreement. Notwithstanding the above, Yen
agrees that he shall dismiss any claims which have been filed.
6. Yen agrees not to file, pursue or cooperate in the filing or pursuit
by anyone else of any claims which are against or involve the Company
and which are in any way related to Yen's employment relationship with
the Company, the changes in his employment status, Yen's compensation,
the termination of the employment relationship between the Company and
Yen or any other conduct of the Company relating to any of the
foregoing occurring prior to the execution of this Agreement. Yen
agrees that should he learn of any such claims being pursued on his
behalf, he
<PAGE>
will use his best efforts to cause such claims to be withdrawn,
dismissed or otherwise terminated with prejudice.
7. In exchange for Yen's execution of this Agreement, the Company agrees
to amend Yen's October 17, 1997 Employment Agreement to provide that
Yen is eligible for certain benefits thereunder notwithstanding his
February 24, 1998 resignation date. Yen agrees that the consideration
set forth herein constitutes full complete and final settlement of any
and all Yen's claims, including but not limited to any claims arising
under the Age Discrimination in Employment Act of 1967 as amended,
actual or potential, known or unknown, which in any way arise from or
are related to Yen's employment relationship with the Company, the
changes in his employment status, Yen's compensation, the termination
of the employment relationship between the Company and Yen or any other
conduct of the Company occurring prior to the execution of this
Agreement.
8. Beginning on February 25, 1998, Yen has the opportunity, under the
terms and conditions of COBRA, to continue medical insurance at his
own expense.
9. Yen acknowledges his continuing obligations to the Company with
respect to the Proprietary Information Agreement. Yen agrees to
continue abiding by the terms and conditions of the Proprietary
Information Agreement.
Yen further acknowledges his obligations to the Company during the
"Restricted Period" as that term is defined and discussed in the
Employment Agreement dated October 17, 1997.
10. Yen voluntarily waives the provision of Section 1542 of the California
Civil Code, and any other provision or statute of like effect, which
provides:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by
him must have materially affected his settlement with the
debtor.
Yen warrants that he has read and understands the aforesaid Section 1542
and he has had the opportunity to consult with and be advised by
counsel regarding its meaning and effect and he voluntarily waives its
provisions and any other provision or statute of like effect.
11. Having so waived the provisions of Section 1542, and any other
provision or statute of like effect, Yen releases the Company from any
and all claims of any kind, whether known or unknown, actual or
potential, which he now has or may have at any time which in any way
relate to Yen's employment relationship with the Company, the changes
in his employment status, Yen's compensation, the termination of the
employment relationship between the Company and Yen and any other
conduct of the parties relating to Yen's employment and occurring prior
to the execution of this Agreement.
<PAGE>
12. Yen warrants that he has not assigned, transferred nor purported to
assign or transfer any claim against the Company that arose prior to
the execution of this Agreement and that he will not assign or transfer
or purport to assign or transfer hereafter any such claim.
13. Yen acknowledges that he is hereby advised to consult with and
warrants that he has had the opportunity to be represented by legal
counsel regarding his claims, other potential claims, and this
Agreement. Yen freely and voluntarily enter into this Agreement.
14. Each party shall pay their own attorneys' fees, if any, incurred in
connection with the negotiation and drafting of this Agreement. Each
party shall release and forever hold the other harmless from any
liability to their attorneys for payment of such fees pursuant to any
agreement or understanding between each party and their attorneys.
15. The parties warrants that in agreeing to the terms of this Agreement,
they have not relied in any way upon any representations or statements
of the other party regarding the subject matter hereof or the basis or
effect of this Agreement other than those representations or statements
contained herein.
16. This Agreement shall be governed by the laws of California.
17. Any legal action or legal proceeding relating to this Agreement shall
be instituted in any state or federal court in San Francisco or San
Mateo County, California. The parties agree to submit to the
jurisdiction of and agree that venue is proper in the aforesaid courts
in any such action or proceeding.
18. If any part of this Agreement shall be determined to be illegal,
invalid or unenforceable, the remaining part shall not be affected
thereby, and the illegal, unenforceable or invalid parts shall be
deemed not to be a part of this Agreement.
19. This Agreement sets forth the entire Agreement between the parties
thereto and supersedes any and all prior agreements or understandings,
written or oral, between the parties pertaining to the subject matter
hereof. No other promises or agreements shall be binding upon the
parties with respect to this subject matter unless contained herein or
separately agreed to in writing by the parties.
20. In the event that legal proceedings are initiated for the purpose of
enforcing the terms of this Agreement, the prevailing party in any
such proceeding shall be entitled to an award of reasonable
attorneys' fees and costs incurred in bringing or defending such
action. It is further agreed that the prevailing party shall be
entitled to an award or reasonable attorneys' fees and costs incurred
in collecting any judgment which results from any proceeding brought
to enforce the terms of this Agreement.
21. The Company, after reasonable inquiry, is not currently aware of any
claims and does not anticipate any claims against Yen.
<PAGE>
22. Notwithstanding any other provision of this Agreement, nothing in this
Agreement shall be deemed to preclude Yen or his designee from
enforcing or establishing, or limiting Yen's or his designee's ability
to enforce or establish, including as against the Company, any of
Yen's or his designee's rights relating to ownership, exploitation or
precluding infringement of Yen's or his designee's right, title and
interest in and to the intellectual property rights relating to
technology that Yen has developed or will develop while engaged in
"Permitted Activities" (as defined in Section 9.a. of Yen's October
17, 1997 Employment Agreement, as amended ("Employment Agreement")).
23. The offer to Yen set forth in the Agreement remains open for
twenty-one days, during which time he may review and consider this
Agreement. Further Yen has until seven days following the execution of
this Agreement to revoke it, in which case its terms shall be
ineffective and unenforceable. Revocation can be made by delivering a
written notice of revocation to:
Office of the General Counsel
Network Computer, Inc.
5000 Oracle Parkway, MS 659507
Redwood Shores, CA 94065
/s/ Wei Yen /s/ David Roux
- ------------------------------- --------------------------------
Wei Yen Network Computer, Inc.
By: David Roux
-----------------------------
Title: CEO
-------------------------
Dated: 10/8/98 Dated: 10/2/98
------------------------- ------------------------
<PAGE>
[LETTERHEAD]
FEBRUARY 24, 1998
Board of Directors
Network Computer, Inc.
1000 Bridge Parkway
Redwood Shores, CA 94065
To the Board of Directors:
I hereby resign as President of Network Computer, Inc., effective
February 24, 1998.
Sincerely,
/s/ Wei Yen
-------------------------
Wei Yen
<PAGE>
[LETTERHEAD]
APRIL 1, 1998
Board of Directors
Network Computer, Inc.
1000 Bridge Parkway
Redwood Shores, CA 94065
To the Board of Directors:
I hereby resign as Director of Network Computer, Inc., effective
April 1, 1998.
Sincerely,
/s/ Wei Yen
-------------------------
Wei Yen
<PAGE>
EXHIBIT 10.10
SETTLEMENT AGREEMENT AND GENERAL RELEASE OF ALL CLAIMS
This Settlement Agreement and General Release of All Claims (hereinafter
"Agreement") is made and entered into by and between: Jerry Baker and his
heirs, administrators, agents, representatives, executors, successors and
assigns (hereinafter collectively referred to as "Baker"); and Oracle
Corporation and Network Computer, Inc., and each of their current and former
officers, administrators, agents, representatives, shareholders, directors,
employees, executors, successors, assigns, subsidiaries, parent companies,
predecessor or successor companies, or any other individuals or entities
related thereto or potentially liable with respect to Baker's claims
(hereinafter collectively referred to as "the Companies").
1. Baker's position as President and CEO of Network Computer, Inc. and his
employment ended February 13, 1998.
2. Potential disputes may arise between the Companies and Baker relating to
Baker's employment relationship with the Companies, the changes in his
employment status, Baker's compensation, the termination of the
employment relationship between him and the Companies and the
circumstances attendant thereto.
3. Baker and the Companies desire now to settle completely and for all
time any and all disputes or differences between them regarding any
matter which arose from or were related to Baker's employment
relationship with the Companies, the changes in his employment status,
Baker's compensation, the termination of the employment relationship
between him and the Companies and the circumstances attendant thereto.
4. Therefore, in consideration of the following covenants and promises and
for other valuable consideration, this Agreement is entered into by the
undersigned parties.
5. This Agreement, and compliance with this Agreement, shall not be
construed as an admission of liability on the part of either party. Such
liability being expressly denied, the parties' intent in this Agreement
is to avoid litigation. Baker hereby represents that he has neither
filed nor caused to be filed any pending charges, suits, claims,
grievances or other action (hereinafter referred to as "claims") which
in any way arise from or relate to his employment relationship with the
Companies, the changes in his employment status, Baker's compensation,
the termination of the employment relationship or any other conduct of
the Companies occurring prior to the execution of this Agreement.
Notwithstanding the above, Baker agrees that he shall dismiss any claims
which have been filed.
6. Baker agrees not to file, pursue or cooperate in the filing or pursuit
by anyone else of any claims which are against or involve the Companies
and which in any way arise from or relate to Baker's employment
relationship with the Companies, the changes in his employment status,
Baker's compensation, the termination of the employment relationship
between him and the Companies or any other conduct of the Companies
occurring prior to the execution of
Page 1
<PAGE>
this Agreement. Baker agrees that should he learn of any such claims
being pursued on his behalf, he will use his best efforts to cause such
claims to be withdrawn, dismissed or otherwise terminated with prejudice.
7. Seven days following Baker's execution of this Agreement, the Companies
shall transmit to Baker a gross lump sum severance payment of
$180,000.00 (six months' base salary) less ordinary payroll deductions
including state, federal and local tax and less compensation received by
Baker for the period February 16, 1998 through February 27, 1998. In
addition, Baker shall receive payment for all vacation accrued during
his employment at Network Computer, Inc. Baker agrees that the foregoing
severance payment constitutes full, complete and final settlement of any
and all Baker's claims, including but not limited to any claims arising
under the Age Discrimination in Employment Act of 1967 as amended,
actual or potential, known or unknown, which in any way arise from or
are related to Baker's employment relationship with the Companies, the
changes in his employment status, Baker's compensation, the termination
of the employment relationship between him and the Companies or any
other conduct of the Companies occurring prior to the execution of this
Agreement.
8. Baker agrees and acknowledges that as of February 13, 1998, all
unvested stock options granted to him under all Oracle Corporation
incentive stock options and nonqualified stock option grants, including
but not limited to Oracle Stock Option Grant Nos. 002645, 002646,
002913, 004417 and all unvested stock options granted to Baker under the
Network Computer, Inc. 1996 Stock Option Plan will cease to continue to
vest in accordance with the terms of the applicable stock option plans
and the underlying agreements. All Oracle Corporation and Network
Computer, Inc. stock options not vested as of February 13, 1998 are
canceled. Baker shall have the right to exercise vested Oracle
Corporation and Network Computer, Inc. options at any time up to and
including three months after his February 13, 1998 termination of
employment, but not later than the stock option expiration date.
9. Baker's insurance coverage for medical and dental care benefits provided
under Network Computer, Inc.'s employee insurance plans ended February
13, 1998 unless Baker elects COBRA coverage within sixty days of
February 13, 1998. If Baker elects COBRA, Baker will receive Network
Computer, Inc.-sponsored COBRA coverage for six months, through August 13,
1998. Beginning on August 14, 1998, Baker will have the opportunity,
under the terms and conditions of COBRA, to continue medical insurance
at his own expense.
10. Baker acknowledges his continuing obligations to the Companies with
respect to the Proprietary Information Agreements he signed with the
Companies. Baker agrees to continue abiding by the terms and conditions
of the Companies' Proprietary Information Agreements. Baker agrees to
cooperate with the Companies to effectuate the management transition and
agrees to respond to reasonable requests for related information.
11. Baker voluntarily waives the provision of Section 1542 of the California
Civil Code, and any other statute or common law doctrine of like effect,
which provides:
Page 2
<PAGE>
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his
settlement with the debtor.
Baker warrants that he has read and understands the aforesaid Section
1542 and he has had the opportunity to consult with and be advised by
counsel regarding its meaning and effect and he voluntarily waives its
provisions and those of any other statute or common law doctrine of like
effect.
12. Having so waived the provisions of Section 1542 and those of any other
statute or common law doctrine of like effect, Baker releases the
Companies from any and all claims of any kind, whether known or unknown,
actual or potential, which he now has or may have at any time which in
any way arose from or relate to Baker's employment relationship with the
Companies, the changes in his employment status, Baker's compensation,
the termination of the employment relationship between the Companies and
Baker and any other conduct of the Companies occurring prior to the
execution of this Agreement.
13. Baker warrants that he has not assigned, transferred nor purported to
assign or transfer any claim against the Companies that arose prior to
the execution of this Agreement and that he will not assign or transfer
or purport to assign or transfer hereafter any such claim.
14. Baker warrants that he is hereby advised to and has had the opportunity to
be represented by legal counsel regarding his claims, other potential
claims, and this Agreement. Baker freely and voluntarily entered into
this Agreement.
15. Each party shall pay its own attorneys' fees, if any, incurred in
connection with the negotiation and drafting of this Agreement. Each
party shall release and forever hold the other harmless from any
liability to their attorneys for payment of such fees pursuant to any
agreement or understanding between each party and their attorneys.
16. The parties warrant that in agreeing to the terms of this Agreement,
they have not relied in any way upon any representations or statements
of the other party regarding the subject matter hereof or the basis or
effect of this Agreement other than those representations or statements
contained herein.
17. This Agreement shall be governed by the laws of California.
18. Any legal action or legal proceeding relating to this Agreement shall be
instituted in any state or federal court in San Francisco or San Mateo
County, California. The parties agree to submit to the jurisdiction of
and agree that venue is proper in the aforesaid courts in any such action
or proceeding.
19. If any part of this Agreement shall be determined to be illegal,
invalid or unenforceable, the remaining part shall not be affected
thereby, and the illegal, unenforceable or invalid parts shall be deemed
not to be a part of this Agreement.
Page 3
<PAGE>
20. This Agreement may be changed only by an agreement in writing signed by
Baker and the Companies.
21. In the event that legal proceedings are initiated for the purpose of
enforcing the terms of this Agreement, the prevailing party in any such
proceeding shall be entitled to an award of reasonable attorneys' fees
and costs incurred in bringing or defending such action. It is further
agreed that the prevailing party shall be entitled to an award of
reasonable attorneys' fees and costs incurred in collecting any
judgement which results from any proceeding brought to enforce the terms
of this Agreement.
22. The offer to Baker set forth in the Agreement remains open for
twenty-one days, during which time he may review and consider this
Agreement. Should Baker sign and return the Agreement in less than
twenty-one days, Baker agrees that he does so voluntarily. Further Baker
has until seven days following Baker's execution of this Agreement to
revoke it, in which case its terms shall be ineffective and
unenforceable. Revocation can be made by delivering a written notice of
revocation to:
Juana M. Schurman, Associate General Counsel
Oracle Corporation
500 Oracle Parkway, M/S 5op7
Redwood Shores, CA 94065
/s/ Jerry Baker /s/ Juana M. Schurman
- ---------------------------------- -----------------------------------
Jerry Baker Oracle Corporation
By: Juana M. Schurman
------------------------------
Title: Associate General Counsel
---------------------------
Dated: 3/6/98 Dated: 3/11/98
---------------------------- ---------------------------
-----------------------------------
Network Computer, Inc.
By: /s/ David Boux
------------------------------
David Boux
Title: CEO
---------------------------
Dated: 3/16/98
---------------------------
Page 4
<PAGE>
Exhibit 10.11
[LOGO]
March 10, 1999
Mr. Gordon Yamate
126 Robin Way
Los Gatos, California 95032
Dear Gordon,
We are pleased to offer you employment as Vice President and General Counsel
for Network Computer, Inc. ("NCI" or "the Company"). Your annual salary will
be $200,000 less applicable withholding. You will also be eligible to
participate in the Senior Management Bonus Plan, based upon goals and
objectives as determined by the Chief Executive Officer and agreed upon by
both parties. Details for the bonus plan will be provided to you subsequent
to your start date. Your starting date will be pursuant to discussions with
Mitchell Kertzman.
As an employee of NCI, you will be eligible to participate in a number of
Company-sponsored benefits, including health and medical benefits. Subject to
the Board of Director's approval, the Company will grant you an option to
purchase up to 375,000 shares of the Company's common stock with an exercise
price per share equal to the fair market value per share on the later of the
date of the board action or the date that you commence employment with the
Company. The option will vest as follows: 25% on the first anniversary of the
date of hire, and monthly thereafter, in equal increments upon the completion
of each of the next 36 months of service. The option is granted subject to
the terms of the Company's 1996 Stock Option Plan and its related agreements.
However, should the Company experience a Change in Control within your first
12 months of service, which results in the termination of your employment
without Cause within [12] months of your hire date, you will become vested in
25% of your original option grant, as if you had provided 12 months of
service. For purposes of this letter, a termination of employment without
Cause will include continued employment (or an offer for continued
employment) at a level below that for which you were originally hired.
Change in Control is defined as (i) a proposed sale, transfer or disposition
of all or substantially all of the Company's assets or (ii) the consummation
of a merger or consolidation of the Company with or into another entity or
any other corporate reorganization, if persons who own less than 50% of the
Company immediately prior to such merger, consolidation or other
reorganization own immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the outstanding securities
of each of (A) the continuing or surviving entity and (B) any direct or
indirect parent corporation of such continuing or surviving entity; provided,
however, that a transaction or series of transactions in which Oracle
Corporation sells or otherwise disposes of the securities of the Company,
such that Oracle Corporation holds less than 50% of the Company's aggregate
outstanding securities, shall not in itself be deemed a Change in Control. In
addition, a transaction shall not constitute a Change in Control if its sole
purpose is to change the state of the Company's incorporation or to create a
holding company that will be owned in substantially the same proportions by
the persons who held the Company's securities immediately before such
transaction.
[LETTERHEAD]
<PAGE>
[LOGO]
PAGE 2
MR. GORDON YAMATE
Cause is defined as: (i) the commission of any act of fraud, embezzlement or
dishonesty, (ii) any unauthorized use or disclosure of confidential
information or trade secrets of the Company (or any parent or subsidiary), or
(iii) any other intentional misconduct adversely affecting the business or
affairs of the Company (or any parent or subsidiary) in a material manner.
The foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Company (or any parent or subsidiary) may consider as
grounds for your dismissal or discharge or the discharge of any other person
in the service of the Company (or any parent or subsidiary).
Your employment with the Company is not for a specific term and can be
terminated by you or by the Company at any time for any reason, with or
without cause. We request that all of our employees, to the extent possible,
give us advance notice if they intend to resign. Your employment with the
Company is also contingent upon you executing the Proprietary Information
Agreement, Employment Agreement and upon you providing the Company with the
legally required proof of your identity. The Company also requires proof of
eligibility to work in the United States.
To confirm your acceptance of this employment agreement, please sign and date
this letter in the spaces provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with other
agreements referred to above, set forth the terms of your employment with the
Company. This agreement supersedes any prior representations or agreements
between you and the Company, whether written or oral, and it may not be
modified or amended except by a document signed by an authorized officer of
the Company and you. This offer, if not accepted, will expire on March 14,
1999.
Sincerely,
/s/ Mitchell E. Kertzman
Network Computer Inc.
By: Mitchell E. Kertzman
President and Chief Executive Officer
I agree to and accept employment with Network Computer, Inc. on the terms set
forth in this agreement.
/s/ Gordon Yamate 3/12/99
- -------------------------------------------------------------------------------
Gordon Yamate Date
<PAGE>
[LOGO]
April 6, 1999
Mr. Jim Peterson
P.O. Box 721026
San Jose, CA 95172
Dear Jim,
We are pleased to offer you employment as Vice President of Engineering
Operations for Network Computer, Inc. Your annual salary will be $180,000
less applicable withholding. Your starting date will be pursuant to
discussions with Steve Weinstein.
As an employee of NCI, you will be eligible to participate in a number of
Company-sponsored benefits, including health and medical benefits. The
Company has established a stock option plan, and upon Board of Directors'
approval, the Company will grant you an option to purchase up to 250,000
shares of common stock with an exercise price equal to the fair market value
as determined by the Board of Directors. The option will vest as follows: 25%
on the first anniversary of the date of hire, and monthly thereafter, in
equal increments upon the completion of each of the next 36 months of
service. The option is granted subject to the terms of the Company's 1996
Stock Option Plan and its related agreements. However, should the Company
experience a Change in Control within your first 12 months of service, which
results in the termination of your employment without Cause within 12 months
of your hire date, you will become vested in 25% of your original option
grant, as if you had provided 12 months of service. For purposes of this
letter, a termination of employment without Cause will include continued
employment (or an offer for continued employment) at a level below that for
which you were originally hired.
Change in Control is defined as (i) a proposed sale, transfer or disposition
of all or substantially all of the Company's assets or (ii) the consummation
of a merger or consolidation of the Company with or into another entity or
any other corporate reorganization, if persons who own less than 50% of the
Company immediately prior to such merger, consolidation or other
reorganization own immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the outstanding securities
of each of (A) the continuing or surviving entity and (B) any direct or
indirect parent corporation of such continuing or surviving entity; provided,
however, that a transaction or series of transactions in which Oracle
Corporation sells or otherwise disposes of the securities of the Company,
such that Oracle Corporation holds less than 50% of the Company's aggregate
outstanding securities, shall not in itself be deemed a Change in Control. In
addition, a transaction shall not constitute a Change in Control if its sole
purpose is to change the state of the Company's incorporation or to create a
holding company that will be owned in substantially the same proportions by
the persons who held the Company's securities immediately before such
transaction.
Cause is defined as: (i) non performance of job duties, (ii) the commission
of any act of fraud, embezzlement or dishonesty, (iii) any unauthorized use
or disclosure of confidential information or trade secrets of the Company (or
any parent or subsidiary), or (iv) any other intentional misconduct adversely
affecting the business or affairs of the Company (or any parent or
subsidiary) in a material manner. The foregoing definition shall not be
deemed to be inclusive of all the acts or omissions which the Company (or any
parent or subsidiary) may consider as grounds for your dismissal or discharge
or the discharge of any other person in the service of the Company (or any
parent or subsidiary).
[LETTERHEAD]
<PAGE>
[LOGO]
PAGE 2
Mr. Jim Peterson
Your employment with the Company is not for a specific term and can be
terminated by you or by the Company at any time for any reason, with or
without cause. In the event of termination of your employment for reasons
other than cause, you are entitled to six months salary severance, payable
over the six months. We request that all of our employees, to the extent
possible, give us advance notice if they intend to resign. Your employment
with the company is also contingent upon you executing the Proprietary
Information Agreement, Employment Agreement and upon you providing the
Company with the legally required proof of your identity. The Company also
requires proof of eligibility to work in the United States.
To confirm your acceptance of this employment agreement, please sign and date
this letter in the space provided below and return it to your manager. A
duplicate original is enclosed for your records. This letter, along with
other agreements referred to above, set forth the terms of your employment
with the Company. This agreement supersedes any prior representations or
agreements between you and the Company, whether written or oral, and it may
not be modified or amended except by a document signed by an authorized
officer of the Company and you. This offer, if not accepted, will expire on
April 13, 1999.
Sincerely,
/s/ Mitchell E. Kertzman
Network Computer, Inc.
By: Mitchell E. Kertzman
President and Chief Executive Officer
I agree to and accept employment with Network Computer, Inc. on the terms set
forth in this agreement.
- -------------------------------------------------------------------------------
Jim Peterson Date
<PAGE>
Exhibit 10.13
Certain information in this exhibit has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect
to the omitted portions.
NETWORK COMPUTER, INC.
OEM LICENSE AGREEMENT
This OEM License Agreement ("AGREEMENT") is entered into by and
between Network Computer, Inc., a Delaware corporation, with principal
offices at 1000 Bridge Parkway, Redwood Shores, CA 94065 ("NCI"), and Wind
River Systems, Inc., a Delaware corporation, with principal offices at 1010
Atlantic Avenue, Alameda, California 94501 ("LICENSEE").
RECITAL
The Licensee desires to license from NCI, and NCI desires to license
to the Licensee, the right to access and modify the source code version of
NCI's customized Internet consumer software and duplicate, distribute and
sublicense the object code versions of such modified source code bundled with
certain Licensee Products (defined below), and, subject to the restrictions
described herein, certain specified source code, in all cases in accordance
with the terms and conditions of this Agreement.
AGREEMENT
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
1.1 "ATTACHMENT(S)" means the attachments to this Agreement
which are attached hereto and incorporated herein:
1.1.1 Attachment A (Product(s) and Trademark
Description) which sets forth a description of the NCI Product and NCI
Trademarks licensed hereunder; provided, however, that NCI may add or delete
NCI Trademarks from Attachment A from time to time upon thirty (30) days
notice.
1.1.2 Attachment B (Licensee Product, Licensee
Trademarks, Pricing and Payment Schedules, Territory and Optional
Products/Modules) which sets forth a description of the Licensee Product with
which the NCI Product will be bundled, the Licensee Trademarks licensed
hereunder, the NCI Product pricing and payment schedule, the Territory in
which Licensee may distribute the NCI Product pursuant to the terms and
conditions hereof, and any Optional Products/Modules that may be included in
the NCI Product subject to mutually agreeable terms and availability.
1.1.3 Attachment C (OEM Maintenance and Technical
Support) which sets forth NCI's and Licensee's respective maintenance and
technical support obligations.
<PAGE>
1.1.5 Attachment D (User Interface and Branding
Requirements for Directed Browsing) which sets forth Licensee's obligations
regarding use and inclusion of the NCI logo set forth on Attachment A hereto
("NCI Logo") as part of the user interface for Directed Browsing applications
used with the Bundled Product.
NCI and Licensee may amend Attachments B and E to this
Agreement from time to time, in accordance with the provisions of Section
14.2 below, to include additional NCI Products or Licensee Products
hereunder, and to specify the relevant terms and conditions with respect to
such additional NCI Products or Licensee Products. Unless the parties
clearly specify to the contrary, no such amendment shall have the effect of
modifying, terminating or superseding the relevant terms and conditions
regarding any other NCI Product or Licensee Product hereunder.
1.2. "DERIVATIVE WORK(S)" means a revision, modification,
translation, abridgment, condensation, or expansion of the NCI Product, NCI
Source Code or End User Documentation, as applicable, or any form in which
the NCI Product, NCI Source Code or End User Documentation, as applicable may
be recast, transferred, or adapted, which, if prepared without the consent of
NCI, would be a copyright infringement.
1.3. "DISTRIBUTOR" means any third party appointed by
Licensee pursuant to this Agreement to distribute the Bundled Product to
subdistributors, Customers or End Users in accordance with the terms hereof.
1.4. "EFFECTIVE DATE" means December __, 1997.
1.5. "END USER" means any third party which buys or otherwise
acquires the right to use a product which contains the Bundled Product for
its own use and not for further distribution.
1.6. "LICENSEE PRODUCT" means the specific product or service
offered by Licensee and described on Attachment B hereto that may be bundled
with the NCI Product. As used in this Agreement, the term Licensee Product
shall include any new release or new version of the Licensee Product.
1.7 "DIRECTED BROWSING" means that use specified in
Attachment A hereto. Directed Browsing includes the Embedded Graphics Usage.
1.8 "EMBEDDED GRAPHICS USAGE" means that use specified in
Attachment A hereto.
1.9 "BUNDLED PRODUCT" means one or more products developed
by Licensee that consists of the Licensee Product and any portion of the NCI
Product, provided that use of the NCI Product as incorporated in the Bundled
Product is limited to either Directed Browsing or Embedded Graphics Usage.
-2-
<PAGE>
1.10 "LICENSEE TRADEMARKS" shall include all Licensee
trademarks, logos and designs specified in Attachment B hereto as may be
amended from time to time upon Licensee's written notice to NCI.
1.11. "MAJOR AND MINOR UPDATES" mean updates, if any, to the
NCI Product. Major Updates involve additions of substantial functionality
while Minor Updates do not. Major Updates are designated by a change in the
number to the left of the decimal point of the product release number
appearing after the product name, while Minor Updates are designated by a
change in such number to the right of the decimal point. NCI is the sole
determiner of the availability and designation of an Update as a Major or
Minor Update. Major Updates exclude software releases which are reasonably
designated by NCI as new products. Where used herein "UPDATES" shall mean
Major Updates and Minor Updates.
1.12. "PREPAID LICENSE FEE" means the non-refundable,
non-cancelable licensee fee set forth in Attachment B hereto.
1.13. "PROGRAM ERRORS" means one or more reproducible
deviations in the NCI Product from the End User Documentation.
1.14. "ROYALTY" means the royalty set forth in Attachment B
hereto payable upon licensing or distribution of Bundled Product.
1.15. "SERVICE FEE" means the non-refundable prepaid fees set
forth in Attachment B hereto, which constitute consideration from Licensee to
NCI for the maintenance and technical support services prescribed in
Attachment C.
1.16. "TERRITORY" means the geographic area set forth in
Attachment B.
1.17. "NCI PRODUCT" means the object code version (expressly
excluding the NCI Source Code, as defined below) of NCI's proprietary
software as further described on Attachment A, any Updates thereto as may be
provided by NCI to Licensee pursuant to this Agreement, and any Derivative
Works thereof made by or on behalf of Licensee. The NCI Product expressly
excludes the NCI Source Code and the Excluded Components (each as defined
below).
1.18 "NCI SOURCE CODE" means the mnemonic, high level,
commented version of the NCI Product in human readable form written in a
source programming language.
1.19. "NCI TRADEMARKS" means any and all NCI trademarks, the
NCI logos and designs specified in Attachment A hereto as may be amended from
time to time upon NCI's written notice to Licensee.
1.20. "OPTIONAL PRODUCTS/MODULES" means third party modules
that NCI desire to include in the NCI Product, subject to availability of
source code from the third
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party licensor, which are set forth on Attachment B, as may be amended from
time to time.
1.21. "EXCLUDED COMPONENTS" means the NCI source and object
code for television display, including color correction, anti-flicker, TVBar,
"TV:", and PopTV technology.
1.22. "SPECIFIED PARTIES" means the parties set forth on
Attachment B.
1.23. "REFERENCE PLATFORM" means the NCI NT 150 x 86 based set
top box configured to display on a VGA monitor and any other versions as
amended by NCI from time to time by written notice to Licensee.
1.24. "REFERENCE IMPLEMENTATION" means the object code version
of the NCI Source Code as compiled by NCI for execution on the Reference
Platform.
1.25. "INVENTIONS" means any ideas, concepts, inventions,
procedures, techniques or processes devised by Licensee in the course of
Licensee's exercise of its rights described in Section 2, which is based upon
or derivative of the NCI Source Code, Distributable Source or the NCI Product.
1.26. "CUSTOMER" means an entity that enters into a license
agreement with Licensee (directly or through a Distributor or subdistributor)
pursuant to which the Customer obtains a right to sell products containing
the Bundled Product to End Users.
1.27. "END USER DOCUMENTATION" means the documents and written
material or portions thereof, which are distributed generally by NCI to the
Licensee for delivery to End Users and Customers with the Bundled Product(s),
as may be updated by NCI from time to time.
1.28. "DISTRIBUTABLE SOURCE" means the SDK Source Headers (as
defined below) and the source code for the Windows Manager, the 2D Graphics
Library, and the UI Widget Library components of the NCI Source Code for
Embedded Graphics Usage.
1.29. "SDK SOURCE HEADERS" means the source header files
listed on Attachment A hereto.
2. GRANT OF LICENSES AND RIGHTS
2.1. LICENSES.
2.1.1 LICENSE. Subject to all the terms and conditions of
this Agreement, NCI hereby grants and Licensee hereby accepts:
(i) a paid-up, non-exclusive, perpetual, irrevocable (except as
provided in Section 13), non-transferable, non-assignable right and license
to use the NCI Source Code and the Excluded Components solely in accordance
with the restrictions below and
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solely to (a) modify the NCI Source Code to create Bundled Product; (b)
compile the NCI Source Code to create Bundled Product; (c) maintain Bundled
Product and support Customers and End Users; (d) test the NCI Source Code;
and (e) train the Designated EGU Employees and Designated DB Employees (as
defined below):
(1) the NCI Source Code for Embedded Graphics Usage shall
only be used on a secure source code management system, accessible only
by Licensee's employees who require access to such NCI Source Code for
Embedded Graphics Usage in order for Licensee to exercise the rights
granted to Licensee under this Agreement pertaining to Embedded Graphics
Usage (the "Designated EGU Employees"); and
(2) the NCI Source Code for Directed Browsing and the
Excluded Components shall only be used on a secure source code management
system, accessible by no more than fifty (50) Licensee employees who
require access to such NCI Source Code for Directed Browsing and Excluded
Components in order for Licensee to exercise the rights granted to
Licensee under this Agreement pertaining to Directed Browsing (the
"Designated DB Employees"); provided, however, that, in the event that
Licensee reasonably requires the right to designate more than fifty (50)
Designated DB Employees, the parties will negotiate in good faith an
increase in the foregoing number;
(ii) a paid-up, non-exclusive, perpetual, irrevocable (except
as provided in Section 13), non-transferable, non-assignable right and
license to reproduce, and have reproduced, the NCI Product as incorporated
into the Bundled Product;
(iii) a non-exclusive, perpetual, irrevocable (except as
provided in Section 13), non-transferable, non-assignable right and license,
subject to payment of the Royalties hereunder, to distribute (directly or
indirectly through Distributors) and sublicense (via Distributor Agreements)
the NCI Product and Distributable Source, solely as incorporated in the
Bundled Product, to Customers and Distributors, and to distribute (directly
or indirectly through Distributors) and sublicense the NCI Product and
Distributable Source, solely as incorporated in the Bundled Product, to End
Users, in the Territory and solely for Directed Browsing or Embedded Graphics
Usage. Licensee is expressly prohibited from (a) any marketing and/or
distribution of the NCI Product and any portion thereof unless each copy of
the NCI Product is incorporated into Bundled Product (b) distributing the
Bundled Product outside the Territory, and (c) distributing the Bundled
Product for any use other than Directed Browsing or Embedded Graphics Usage.
In addition to any of the restrictions contained herein, any distribution
and/or sublicense of the Distributable Source by Licensee shall be subject to
the same terms, conditions, and restrictions that Licensee uses when Licensee
distributes and/or licenses its own confidential, proprietary source code.
Licensee shall not distribute the NCI Source Code (except the
Distributable Source) in any way or on any media whatsoever. This license is
non-
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exclusive. Subject to Licensee's rights pursuant to the immediately
following sentence, nothing in this Agreement shall be construed as limiting
in any manner NCI's marketing and distribution activities or its appointment
of other dealers, distributors, licensees or agents in the Territory.
Licensee shall have the exclusive right to sublicense to the Specified
Parties the Derivative Works made by Licensee and NCI shall grant no license
or sublicense directly or indirectly to such Specified Parties. In the event
NCI includes Derivative Works into the NCI Product, the restriction in the
immediately foregoing sentence on NCI's right to license or sublicense such
Derivative Works shall not apply. NCI will in no event use such Derivative
Works to build a competitive embedded real-time operating system.
Notwithstanding anything else in this Agreement or the
attachments and exhibits hereto, Licensee hereby agrees that it shall not
modify the NCI Source Code or the Distributable Source for use with any
device that utilizes a television display (e.g. a display that is commonly
referred to as a television, or supports television formats such as NTSC,
PAL, SECAM, HDTV formats, or other new formats derived therefrom) ("TV
Device") and Licensee will not distribute, and shall restrict Distributors
and Customers from distributing, the Bundled Product in any way such that
they could be used in conjunction with any TV Device. The immediately
preceding sentence shall not apply to Embedded Graphics Usage.
Licensee shall not and shall not permit any Distributor or
Customer to distribute the NCI Product and/or the Bundled Product in
conjunction with or as part of a personal computer or any successor product
to the multipurpose personal computer (including those that function as
servers) or business network computer. Except for the Javascript component of
the Embedded Graphics Usage, the immediately preceding sentence shall not
apply to Embedded Graphics Usage. (For clarification, Licensee is permitted
to distribute the Bundled Product incorporating Embedded Graphics Usage in
conjunction with Licensee Product, IXWorks, on an ancillary processor which
does not use the primary personal computer or network computer display.)
Licensee shall have the right to use the Excluded Components internally
solely for development and internal training purposes. Licensee shall have
no right to distribute the Excluded Components as part of the NCI Product.
Notwithstanding anything to the contrary herein, except as
subject to an assignment pursuant to Section 14.3 hereof, Licensee shall have
no right to distribute or sublicense (directly or indirectly) any Bundled
Product allowing Directed Browsing or incorporating any component of Directed
Browsing (other than Embedded Graphics Usage components in object code form
only), or distribute or sublicense the NCI Source Code or the Distributable
Source in any way, to the following entities: [***] (or any other name under
which such division operates).
[***] CONFIDENTIAL TREATMENT REQUESTED
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2.1.2 DISTRIBUTORS AND CUSTOMERS. Subject to the terms and
conditions of this Agreement, Licensee shall be entitled to appoint
Distributors to distribute directly to Customers and End Users, and shall be
entitled to appoint Customers to distribute directly to End Users, the
Bundled Product and End User Documentation in the Territory solely for
Directed Browsing or Embedded Graphics Usage. Licensee shall not be entitled
to grant to any Distributor or Customer the right to reproduce all or any
portion of the NCI Product and End User Documentation or to sublicense or
distribute the Bundled Product and End User Documentation other then as
permitted hereby. Distributors may appoint subdistributors and Customers
only through written agreements that meet the requirements of Section 3.3.2
and that otherwise ensure compliance with the terms of this Agreement and
such subdistributor shall be deemed a Distributor for the purposes of this
Agreement.
2.1.3 LICENSE RESTRICTIONS. Licensee agrees not to copy
(except as expressly permitted herein), modify, translate, decompile, reverse
engineer, disassemble, or otherwise determine or attempt to determine source
code (or the underlying ideas, algorithms, structure or organization) from
any portion of the NCI Product that was provided to Licensee only in object
code form and not in source code form. Licensee shall restrict, by its
agreements, all third parties, including, without limitation, Distributors
and Customers, from copying (except as expressly permitted herein),
modifying, translating, decompiling, reverse engineering, disassembling, or
otherwise determining or attempting to determine source code (or the
underlying ideas, algorithms, structure or organization) from any portion of
the NCI Product, except to the extent such third party rightfully received
Distributable Source.
2.1.4 LICENSES DEPENDENT ON BUNDLING. The licenses granted in
Section 2.1.1 are conditional upon marketing and bundling each NCI Product as
required therein only in conjunction with the specific Licensee Product and
only in the Territory. If Licensee fails to so bundle the NCI Product, or
Licensee or any Distributor or Customer markets or distributes the NCI
Product or Bundled Product outside of the Territory, the licenses granted
herein may be terminated in accordance with the provisions set forth in
Section 13. For the purposes of this Agreement, the terms "bundle", "bundled"
or "bundling" shall mean that the NCI Product is either (i) packaged together
and licensed concurrently with Licensee Product as an integrated component of
a Bundled Product or (ii) licensed separately to existing licensees of the
Licensee Product but solely for use with previously licensed units of
Licensee Product (e.g., updates to existing Licensee Product to add Directed
Browsing or Embedded Graphics Usage capabilities).
2.1.5 THIRD PARTY LICENSE. If all or any part of the NCI
Product or Updates delivered by NCI to Licensee has been licensed to NCI by a
third party software developer or supplier then, notwithstanding anything to
the contrary contained in this Agreement, Licensee is granted a sublicense to
the third party software that vests in Licensee the same rights (to the
extent licensed under Section 2.1.1 hereof), and subjects Licensee to the
same restrictions, as NCI, to the extent such restrictions are described in
Attachment B as amended from time to time upon written notice to Licensee,
provided
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the terms of such amendments are commercially reasonable. All licenses
granted by NCI under this Agreement are subject to compliance by Licensee
with any applicable license restrictions, payment by Licensee to NCI of
royalties or other fees set forth on Attachment B hereto. In addition, NCI
reserves the right to substitute any third party software in the NCI Product
so long as the new third party software does not materially affect the
functionality of the NCI Product. NCI will deliver to Licensee sixty (60)
days notice of such substituted third party software. A list of third party
code in the NCI Product or Updates and applicable royalties or other fees,
required consents with respect thereto, and applicable restrictions are set
forth in Attachment B hereto (as amended from time to time by NCI to reflect
additional third party code added to or deleted from the NCI Product or
included in any Update).
2.2. EXPORT. Licensee shall comply fully with all then-current
laws, rules and regulations (as promulgated from time to time) relating to
the export of technical data, including, but not limited to the U.S. Foreign
Corrupt Practices Act and any regulations of the United States Office of
Export Administration and other applicable governmental agencies including
any applicable foreign agencies. Licensee acknowledges that, if security
technology is embedded in the NCI Product, Distributable Source or the
Bundled Product, export of such software from the U.S. or import to other
destination countries may not be legal or may be subject to license
requirements. As appropriate, Licensee shall conspicuously mark all
packaging containing any NCI Product or Distributable Source or component
thereof that is not exportable with a "Not For Export" notice. NCI agrees to
cooperate in providing information reasonably requested by Licensee as
necessary to obtain any required licenses and approvals.
Unless Licensee receives the prior, written consent of NCI,
Licensee shall not allow access to any source code provided by NCI under this
Agreement (including any attachment or addenda hereto) to any individual who
is not a citizen or resident alien of the United States. Any breach of this
provision shall be deemed a material breach of this Agreement.
2.3. EUROPEAN COMMUNITY. In the event that any provision of this
Agreement prohibits any activity of Licensee, any Distributor or any Customer
in violation of Article 6 of the Council Directive of 14 May 1991 on the
legal protection of computer programs, and implementing legislation
thereunder (the "Directive"), then, such activity shall be permitted solely
to the extent, if any, that such activity is (i) subject to the jurisdiction
of a Member State of the European Community and (ii) expressly permitted by
the Directive.
2.4. END USER DOCUMENTATION LICENSE. Subject to the terms and
conditions of this Agreement, NCI hereby grants and Licensee hereby accepts a
non-exclusive, non-transferable, non-assignable right and license to use,
modify, and reproduce the End User Documentation, and to distribute to End
Users and Customers by sublicense the End User Documentation directly or
indirectly through Distributors or Customers, solely in conjunction with the
Bundled Product(s).
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3. MARKETING AND DISTRIBUTION
3.1. NON-EXCLUSIVITY. Licensee understands that NCI may enter into
arrangements similar to this Agreement with third parties.
3.2. PUBLIC ANNOUNCEMENTS AND PROMOTIONAL MATERIALS. NCI and
Licensee shall cooperate with each other so that each party may issue a press
release concerning this Agreement within thirty (30) calendar days following
the Effective Date; provided, that each party approve any such press release
prior to its release. Such press release shall include a quote attributable
to an executive officer of each party. NCI shall cooperate with Licensee in
its development of the initial marketing and sales materials used to promote
the distribution of the Bundled Product.
3.3. TERMS RELATING TO DISTRIBUTION.
3.3.1 GOVERNMENT AGENCY RESTRICTIONS. Licensee agrees to
comply with and shall require its Distributors and Customers to comply with
all applicable laws, rules and regulations to preclude the acquisition of
unlimited rights to technical data, software, and End User Documentation
provided with the NCI Product and Distributable Source to a governmental
agency, and ensure the inclusion of the appropriate "Restricted Rights" or
"Limited Rights" notices required by the U.S. Government agencies or other
applicable agencies.
3.3.2 DISTRIBUTOR AGREEMENTS. Prior to the distribution of
any Bundled Product, Distributable Source, or End User Documentation to a
Distributor or Customer, Licensee shall enter into (or shall have already
entered into) an enforceable written agreement with such Distributor or
Customer ("Distributor Agreement") that (i) is sufficient to ensure that such
Distributor or Customer is required to comply with the relevant terms of this
Agreement, (ii) requires each Distributor to enter into a Distributor
Agreement with any subdistributor prior to granting such subdistributor any
rights with respect to the Bundled Product. Licensee shall use commercially
reasonable efforts include in any Distributor Agreements with a Distributor
entered into on or after the Effective Date a provision that expressly names
NCI as an intended third party beneficiary with the right to rely on and to
directly enforce the terms thereof. Without limiting the generality of the
foregoing, each Distributor Agreement shall include terms no less restrictive
than those contained in Sections 2.1.2, 2.1.3, 2.1.4, 2.1.5, 2.2, 2.3, 2.4,
3.3, 3.4, 4.3, 4.4, 7.1, 7.2.1 and 8.1 of this Agreement. Prior to enforcing
its rights under a Distributor Agreement as a third party beneficiary, NCI
will provide fifteen (15) days notice to Licensee of the Distributor's
non-compliance and NCI's intended action. If such non-compliance by the
Distributor is not cured within fifteen (15) days of NCI's notice to
Licensee, NCI shall be entitled to enforce its rights directly against the
Distributor.
3.3.3 SUGGESTED MODIFICATIONS. Licensee agrees to keep NCI
informed as to any problems encountered with NCI Product and Distributable
Source and any resolutions arrived at for those problems, and to communicate
promptly to NCI any and
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all modifications, or improvements of the NCI Product or Distributable Source
suggested by any End User, Distributor, Customer, employee or agent, to the
extent that Licensee is permitted under the law and is not required to pay
such third party(ies) any payment of consideration with respect thereto.
Licensee further agrees that NCI shall have any and all right, title and
interest in and to any such submitted suggested modifications or improvements
to the NCI Product and Distributable Source.
3.3.4 GENERAL OBLIGATIONS AND RESTRICTIONS REGARDING
DISTRIBUTION. Licensee shall use its best efforts, which shall in no event
require Licensee to make any unreasonable efforts, to successfully market and
distribute the Bundled Product in the Territory during the term of this
Agreement. Licensee shall not develop during the term hereof any product
that, in NCI's reasonable discretion, competes with the NCI Product as it
exists on the date NCI delivers the Deliverables to Licensee. The parties
shall participate in mutually agreeable joint marketing programs for the
Bundled Product.
3.4. ENFORCEMENT OF ANCILLARY AGREEMENTS. Licensee shall use best
efforts, which shall in no event require Licensee to make any unreasonable
efforts, to enforce each Distributor Agreement, and shall require each
Distributor and Customer to, use commercially reasonable efforts to enforce
each Distributor Agreement to which it is a party, in each case, with at
least the same degree of diligence used in enforcing similar agreements
governing others, which in any event shall be that sufficient to adequately
enforce such agreements. Licensee shall, and shall require each Distributor
and Customer to, use commercially reasonable efforts to protect NCI's
copyright and trademark rights, and Licensee shall notify NCI, and shall
require each Distributor and Customer to notify Licensee, of any breach of a
material obligation under a Distributor Agreement affecting the NCI Product,
Distributable Source or End User Documentation. In addition, Licensee will
reasonably cooperate with NCI in any legal action to prevent or stop
unauthorized use, reproduction or distribution of the Bundled Product or End
User Documentation, and NCI shall pay all of Licensee's reasonable
out-of-pocket expenses with respect thereto.
3.5 INVENTIONS. All Inventions are and shall remain the sole and
exclusive property of Licensee. Licensee agrees to disclose such Inventions
to NCI and shall grant to NCI a royalty-free, perpetual, paid-up, worldwide,
non-exclusive, sublicenseable (except with respect to the Specified Parties)
license to such Inventions, under all of Licensee's intellectual property
rights, including, without limitation, patent rights, copyrights, and trade
secret rights, to use, modify, distribute, make, have made, and sell NCI
products. Any such disclosure shall be considered Confidential Information
under Section 8.
4. FEES AND PAYMENT
4.1. ROYALTY, ENGINEERING AND SERVICE FEES.
4.1.1 In accordance with the terms set forth in Attachment B
hereto, Licensee shall pay to NCI the non-refundable, noncancelable Prepaid
License Fee, License Fee and Engineering Fees. In addition, Licensee shall
pay to NCI, in accordance
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with the terms of this Agreement, a Royalty in the amount set forth in
Attachment B. Licensee shall pay NCI any Royalties accrued hereunder during
each quarter within twenty-eight (28) days following the end of such quarter
and each such payment shall be accompanied by a quarterly report as described
in Section 4.3 below. For the purposes of this Agreement, the quarters shall
end on the last day of each of the following months January, April, July, and
October.
4.1.2 SERVICE FEE. Licensee shall pay to NCI the
non-refundable Service Fee in the amounts and according to the terms and
conditions set forth in Attachment B hereto, in consideration of the
maintenance and support services described in Attachment C hereto.
4.2. PAYMENT AND TAXES.
4.2.1 PAYMENTS. All payments shall be made in United States
dollars, at NCI's option, (i) at NCI's address as indicated in this Agreement
or at such other address as NCI may from time to time indicate by proper
notice hereunder or (ii) by wire transfer to a bank and account number
designated by NCI. Interest shall be payable at the rate of one percent (1%)
per month or at the maximum rate permitted by law, whichever is less, on all
overdue and unpaid invoices until paid in full.
4.2.2 TAXES. All fees are exclusive of all taxes, duties or
levies, however designated or computed. Licensee shall be responsible for
and pay all taxes based upon the transfer, use, distribution of the NCI
Product, the Bundled Product, and the End User Documentation, or the program
storage media, or upon payments due under this Agreement, including, but not
limited to, sales, use, or value-added taxes, duties, withholding taxes and
other assessments now or hereafter imposed on or in connection with this
Agreement or with any sublicense granted hereunder, exclusive of taxes based
upon NCI's net income, and the amounts invoiced to Licensee with respect to
the Prepaid License Fee, License Fee, Engineering Fees, Royalties and Service
Fees shall be increased to the extent necessary to ensure that such fees are
received by NCI net of any such tax liability. The amount of the Prepaid
License Fee, Licensee Fee, Engineering Fees, Royalties and Service Fees as
set forth in ATTACHMENT A hereto represent the amounts to be invoiced to, and
paid by, Licensee under this Agreement. In lieu thereof, Licensee shall
provide to NCI a tax or other levy exemption certificate acceptable to the
taxing or other levying authority.
4.3. QUARTERLY REPORTS. Licensee shall maintain accurate records of
End Users which Licensee licenses directly and Customers, and Distributors
shall maintain accurate records of Customers reported by zip code (not
including names and addresses), the specific platforms, revision numbers of
each Bundled Product and/or Update distributed to each Customer (and End
User, as applicable) and any further information that may be reasonably
necessary for NCI to ensure compliance with this Agreement. Licensee shall
report to NCI within twenty-eight (28) calendar days after the end of each
quarter, the type of Bundled Product and/or Updates distributed directly or
indirectly to each
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Customer (and End User, as applicable) during such quarter, organized in a
manner to permit a separate review of Bundled Product and Updates, the postal
codes of each such Customer (and End User, as applicable), the number of
copies and type of Bundled Product (by platform) used internally by Licensee
for the first time during such quarter, and such other information as NCI may
from time to time reasonably request.
4.4. AUDIT OF RECORDS. Licensee and each Distributor and Customer
shall keep and maintain full, true, and accurate records containing all data
reasonably required for verification of amounts to be paid. NCI shall have
the right, during normal business hours upon at least fifteen (15) business
days prior notice and not more often than once per calendar year, to audit
and analyze the relevant records of Licensee to verify compliance with the
provisions of this Agreement. The audit shall be conducted by an independent
auditor who is subject to written confidentiality obligations, at NCI's
expense unless there is inadequate record keeping or the results of such
audit establish that inaccuracies in the quarterly reports have resulted in
underpayment to NCI of more than five percent (5%) of the amount actually due
in any quarter, in which case Licensee shall bear the expenses of the audit.
Licensee agrees to promptly pay to NCI the amount of any underpayment
determined by any such audit. NCI agrees to promptly pay to Licensee the
amount of any overpayment determined by any such audit.
5. DELIVERABLES, UPDATES, AND TECHNICAL SUPPORT
5.1. DELIVERABLES. NCI will make reasonable efforts to provide a
preliminary version of the NCI Source Code (which may or may not exclude the
Excluded Components and any third party Optional Products/Modules) to
Licensee by January 10, 1998. NCI shall use best efforts, which shall in no
event require NCI to make any unreasonable efforts, to provide Licensee with
the deliverables set forth on Attachment A hereto, if any, (the
"DELIVERABLES") substantially in accordance with the schedule set forth
therein. All deliveries under this Agreement shall be free on board
("F.O.B.") NCI, Redwood Shores, California. Title to all goods delivered
from NCI to Licensee shall pass at, and Licensee shall be responsible for all
shipping charges from, the F.O.B. location. Shipment of Deliverables is
authorized by Licensee upon execution of this Agreement or supplement hereto.
5.2. UPDATES AND TECHNICAL SUPPORT. In consideration of the payment
by Licensee to NCI of the License Fee and Prepaid License Fee pursuant to
Section 4.1.1, NCI shall provide to Licensee (i) maintenance and technical
support services described in Attachment C hereto, including, without
limitation, all Minor Updates during the first fifteen (15) months of this
Agreement, and (ii) any Major Updates to the NCI Product during the first
twenty-four (24) months of this Agreement. For so long as NCI shall continue
to offer such maintenance and support services to its other general licensees
of the NCI Product, in consideration of the payment by Licensee to NCI of
Service Fees pursuant to Section 4.1.2, NCI shall provide to Licensee, for
the sixteenth month of this Agreement through the end of this Agreement,
maintenance and technical support services described in Attachment C hereto,
including, without limitation, all Minor
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Updates. Any provision by NCI of Major Updates after the end of the first
twenty-four (24) months of the term of this Agreement shall be discussed in
good faith by the parties; provided, however, that in no case will the fee
payable by Licensee for each Major Update exceed $[***]*. NCI will not
be responsible for providing Minor Updates to End Users, Distributors or
Customers and Licensee will be responsible for providing Minor Updates to End
Users which Licensee licenses directly, and to Distributors, and Customers.
If requested in writing by NCI, Licensee will distribute each Minor Update to
End Users which Licensee licenses directly, and to Distributors, and
Customers. To facilitate the provision by NCI of maintenance and technical
support services hereunder, Licensee shall deliver to NCI, free of charge,
the object code (and source code, as necessary to resolve Program Errors)
version of three (3) prototype units of the Licensee Product as may be
necessary to facilitate debugging and reproduction of any Program Error that
may be reported by Licensee during the term of this Agreement ("Prototypes").
Any source code of the Prototypes that Licensee delivers pursuant to this
Section shall be deemed Confidential Information. NCI will return such
source code and all copies thereof after NCI has resolved the Program Errors.
NCI shall have the right to use the Prototypes solely for maintenance and
technical support purposes with respect to NCI's obligations hereunder
concerning the Bundled Product, and not for distribution to third parties.
Such Prototypes are provided on an "AS IS" basis, without any warranty, are
the Confidential Information of Licensee, and may not be reverse engineered,
reverse compiled, or reverse assembled. Delivery of the Prototypes shall be
made prior to the release of the Bundled Product for beta testing.
6. TRADEMARKS AND TRADE NAMES
6.1. LICENSE TO USE NCI TRADEMARKS. Licensee shall use, and is
hereby granted a non-transferable, non-exclusive, non-assignable and
restricted license, during the term of this Agreement, to use (with no right
to sublicense), the NCI Trademarks (a) on any Bundled Product licensed or
sold, and (b) in any advertising, packaging, marketing, technical or other
materials related to such Bundled Product. When used in accordance with the
terms of the preceding sentence, the NCI Trademarks, shall be of a size, and
shall be positioned prominently. Such use shall be in accordance with the
NCI's then-current Corporate Signature Kit attached hereto to Attachment A,
and updated from time to time, by NCI. All Bundled Product shall comply with
the Branding Requirements as set forth in Attachment D, except that the
Branding Requirements shall not apply to the Embedded Graphics Usage. After
translation of the NCI Trademarks by Licensee, Licensee will consult with NCI
so that NCI can help ensure uniformity with their use by NCI or third
parties. Licensee shall clearly indicate NCI's ownership of the NCI
Trademarks. All such usage shall inure to NCI's benefit. Licensee agrees
not to register any NCI Trademarks without NCI's express prior written
consent and to the extent Licensee obtains an agreement with its
Distributors and Customers not to register any of Licensee's trademarks,
Licensee agrees to obtain the agreement of its Distributors, and Customers
not to register any NCI Trademarks without NCI's express prior written
consent. Licensee shall not contest NCI's ownership of, or rights in, the
NCI Trademarks and to the extent Licensee obtains an agreement with its
Distributors and Customers not
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* Confidential Treatment Requested. Confidential portion has been filed with
the Securities and Exchange Commission.
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to contest, Licensee's ownership of, or rights in, Licensee's trademarks,
Licensee agrees to obtain the agreement of its Distributors, and Customers
not to contest, NCI's ownership of, or rights in, NCI's Trademarks. Prior to
the release of the Licensee Product for beta testing, and at any time upon
the reasonable written request of NCI, Licensee will provide NCI with copies
of the Licensee Product and any related goods and marketing materials bearing
the NCI Trademarks solely for NCI's internal use so that NCI can verify that
(i) the quality of the Licensee Product is acceptable to NCI and (ii) the
quality of Licensee's use of the NCI Trademarks is in accordance with the
requirements of this Agreement, the then-current NCI Corporate Signature Kit,
the Branding Requirements and is otherwise comparable to that of NCI's use
thereof. In the event that NCI notifies Licensee that Licensee has failed to
meet the requirements of (i) above, Licensee shall immediately cease
distributing any affected Licensee Products, goods or marketing materials
incorporating, displaying or otherwise bearing the NCI Trademarks; provided,
however, the foregoing shall not relieve Licensee of any of its obligations
with respect to the Branding Requirements. In the event that NCI notifies
Licensee that Licensee has failed to meet the requirements of (i) or (ii)
above with respect to any Bundled Product, goods or marketing materials
incorporating, displaying or otherwise bearing the NCI Trademarks, Licensee
shall suspend distribution of such Bundled Product, goods or marketing
materials until Licensee has satisfied NCI that the foregoing requirements
have been met.
6.2. LICENSE TO USE LICENSEE TRADEMARKS. NCI may use, and is hereby
granted the non-exclusive, non-assignable and restricted license, during the
term of this Agreement, to use (with no right to sublicense), the Licensee
Trademarks in any advertising, packaging, marketing technical or other
materials related to the NCI Product and Distributable Source. Such use
shall be in accordance with any written instructions delivered by Licensee to
NCI from time to time during the term of this Agreement, and any specific use
shall be subject to the prior written consent of Licensee. NCI will clearly
indicate Licensee's ownership of the Licensee Trademarks.
7. PROPRIETARY RIGHTS
7.1. PROPRIETARY RIGHTS. Title to and ownership of all copies of
the NCI Product, the NCI Source Code, the Excluded Components, the Updates,
the Distributable Source, and End User Documentation (and any portion
thereof) whether in machine-readable or printed or displayed form, and
including, without limitation, Derivative Works, compilations, or collective
works thereof and all related technical know-how and all proprietary rights
contained therein (including without limitation rights in patents,
trademarks, copyrights, and trade secrets applicable thereto), are and shall
remain the exclusive property of NCI or its licensors. Within thirty (30)
days of the release of each new version of the Bundled Product, Licensee
shall deliver to NCI a written and digital (in a mutually agreeable format)
copy of all Derivative Works of the NCI Source Code, the Distributable Source
and the End User Documentation. Licensee hereby assigns to NCI all of its
right, title and interest in and to the Derivative Works made by Licensee.
The parties hereby agree to execute any assignments necessary to effectuate
the foregoing
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ownership provision. Neither Licensee, any Distributor, nor any Customer
shall take any action to jeopardize, limit or interfere in any manner with
NCI's ownership of and rights with respect to the NCI Product, Distributable
Source and End User Documentation. Licensee shall have only those rights in
or to the NCI Product, Distributable Source and End User Documentation
granted to it pursuant to this Agreement.
7.2. PROPRIETARY NOTICES.
7.2.1 NO ALTERATION OF NOTICES. Neither Licensee, the
Distributors, nor the Customers, or any of their respective employees or
agents, shall remove or alter any trademark, trade name, copyright, or other
proprietary notices, legends, symbols, or labels appearing on or in copies of
the NCI Product, Distributable Source and End User Documentation and other
materials, including, without limitation, any documentation or user manuals,
delivered to Licensee by NCI and Licensee shall use the same notices,
legends, symbols, or labels in and on copies of such materials, Distributable
Source NCI Product made pursuant to Section 2.1 as are contained in and on
such NCI Product and such materials.
7.2.2 NOTICE. Each portion of the NCI Product, Distributable
Source and End User Documentation reproduced by Licensee shall include the
intellectual property notice or notices appearing in or on the corresponding
portion of such materials as delivered by NCI hereunder. Licensee shall
ensure that all copies of the NCI Product and Distributable Source,
including, without limitation, copies of the Bundled Product and End User
Documentation, made pursuant to this Agreement conspicuously display a notice
substantially in the following form:
-C- 1996-1998 (or other appropriate year(s)), Network
Computer, Inc. All Rights Reserved. Portions -C- 1994-1997
(or other appropriate year(s)), Netscape Communications
Corporation. All Rights Reserved.
If Licensee is unsure of the appropriate year(s), it shall
consult NCI to obtain the correct designation. Such notice shall be on
labels on all media containing the NCI Product and Distributable Source,
including, without limitation, the Bundled Product and the End User
Documentation. The immediately preceding sentence shall not limit Licensee's
right to display Licensee's copyright notices and other proprietary notices
on the Bundled Product and End User Documentation. If the copyright symbol
"-C-" cannot technically be reproduced, Licensee shall use the word
"Copyright" in its place.
8. CONFIDENTIAL INFORMATION AND DISCLOSURE
8.1. CONFIDENTIAL INFORMATION. Each party agrees to maintain all
Confidential Information in confidence to the same extent that it protects
its own similar Confidential Information and to use such Confidential
Information only as permitted under this Agreement. For purposes of this
Agreement "CONFIDENTIAL INFORMATION" shall mean information including,
without limitation, computer programs, code, algorithms, names and expertise
of employees and consultants, know-how, formulas, processes, ideas,
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<PAGE>
inventions (whether patentable or not), schematics and other technical,
business, financial and product development plans, forecasts, strategies and
information marked "Confidential" or, if disclosed verbally, identified as
confidential. Each party agrees to take all reasonable precautions to
prevent any unauthorized disclosure or use of Confidential Information
including, without limitations disclosing Confidential Information only to
its employees (a) with a need to know to further permitted uses of such
information, (b) who are parties to appropriate agreements sufficient to
comply with this Section 8 and (c) who are informed of the
nondisclosure/non-use obligations imposed by this Section 8 and both parties
shall take appropriate steps to implement and enforce such
non-disclosure/non-use obligations. The foregoing restrictions on disclosure
and use shall survive for three (3) years following termination of this
Agreement but shall not apply with respect to any Confidential Information
that (i) was or becomes publicly known through no fault of the receiving
party; (ii) was rightfully known or becomes rightfully known to the receiving
party without confidential or proprietary restriction from a source other
than the disclosing party; (iii) the receiving party can document was
independently developed by the receiving party without the participation of
individuals who have had access to the Confidential Information; (iv) is
approved by the disclosing party for disclosure without restriction in a
written document which is signed by a duly authorized officer of such
disclosing party; or (v) the receiving party is legally compelled to
disclose; provided, however, that prior to any such compelled disclosure, the
receiving party will (a) assert the privileged and confidential nature of the
Confidential Information against the third party seeking disclosure and (b)
cooperate fully with the disclosing party in protecting against any such
disclosure and/or obtaining a protective order narrowing the scope of such
disclosure and/or use of the Confidential Information. In the event that
such protection against disclosure is not obtained, the receiving party will
be entitled to disclose the Confidential Information, but only as and to the
extent necessary to legally comply with such compelled disclosure.
8.2. CONFIDENTIALITY OF AGREEMENT. Unless required by law, and
except to assert its rights hereunder or for disclosures to its own employees
on a "need to know" basis, both parties agree not to disclose to any third
party the terms of this Agreement or matters relating hereto without the
prior written consent of the other party which consent shall not be
unreasonably withheld
8.3 CONFIDENTIALITY OF SOURCE CODE. NCI Source Code and any
Derivative Works thereof shall be Confidential Information under the
foregoing terms of this Agreement and shall in addition be subject to the
terms of this Section 8.3.
8.3.1 Licensee will limit access to the NCI Source Code solely
to Licensee's employees and on-site independent contractors ("Contractors")
with a need to know for purposes of this Agreement.
8.3.2 Notwithstanding any other provision of this Agreement,
this provision shall survive any expiration or termination of this Agreement
and shall remain in full force and effect despite any such expiration or
termination.
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<PAGE>
8.3.3 The receiving party shall have in place a written
confidentiality agreement with each of its employees and Contractors who are
given access to the NCI Source Code, which requires the employee or
Contractor to comply with the requirements of this Agreement. Prior to
disclosing any NCI Source Code to its employees or Contractors as permitted
herein, Licensee shall ensure that all NCI Source Code is marked "NCI
Confidential."
8.3.4 Licensee shall use its best efforts to protect the
confidentiality of the NCI Source Code, including methods of limiting access.
Licensee will use NCI Source Code in a building with restricted access or in
a locked room and only on computer systems with security protection which is
adequate to prevent unauthorized parties from accessing such NCI Source Code.
Licensee shall be liable for the conduct of its employees, agents,
representatives and Contractors who in any way breach this section of this
Agreement.
9. WARRANTIES
9.1. LIMITED WARRANTY. Subject to the limitations set forth in this
Agreement, NCI warrants only to Licensee that the NCI Source Code, when
properly compiled installed, and used, will substantially conform to the
functional specifications published by NCI for the Reference Implementation
in effect when the NCI Product is shipped by NCI to Licensee. NCI's warranty
and obligation shall extend for a period of ninety (90) days ("Warranty
Period") from the date NCI first delivers the NCI Source Code to Licensee.
All warranty claims not made in writing or not received by NCI within the
time period specified above shall be deemed waived. NCI's warranty and
obligation is solely for the benefit of Licensee, who has no authority to
extend this warranty to any other person or entity. NCI MAKES NO WARRANTY
THAT ALL ERRORS OR FAILURES WILL BE CORRECTED.
9.2. EXCLUSIVE WARRANTY. THE EXPRESS WARRANTY SET FORTH IN SECTION
9.1 CONSTITUTES THE ONLY WARRANTY WITH RESPECT TO THE NCI PRODUCT AND
DISTRIBUTABLE SOURCE. NCI MAKES NO OTHER REPRESENTATION OR WARRANTY OR
CONDITION OF ANY KIND WHETHER EXPRESS OR IMPLIED (EITHER IN FACT OR BY
OPERATION OF LAW) WITH RESPECT TO THE NCI PRODUCT AND DISTRIBUTABLE SOURCE.
NCI EXPRESSLY DISCLAIMS ALL WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. NCI DOES NOT WARRANT THAT THE NCI PRODUCT
OR DISTRIBUTABLE SOURCE IS ERROR-FREE OR THAT OPERATION OF THE NCI PRODUCT OR
DISTRIBUTABLE SOURCE WILL BE SECURE OR UNINTERRUPTED AND HEREBY DISCLAIMS ANY
AND ALL LIABILITY ON ACCOUNT THEREOF. NCI EXPRESSLY DISCLAIMS ANY AND ALL
IMPLIED WARRANTIES OF NON-INFRINGEMENT; THE SOLE REMEDY FOR INFRINGEMENT IS
PROVIDED IN
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SECTION 10. This subsection shall be enforceable to the extent allowed by
applicable law.
9.3. DEFECTS NOT COVERED BY WARRANTIES. NCI shall have no
obligations under the warranty provisions set forth in Section 9.1 if any
nonconformance is caused by: (a) the incorporation, attachment or other
engagement of any attachment, feature, program, or device, other than by NCI,
to the NCI Product, or any part thereof; or (b) accident; transportation;
neglect or misuse; alteration, modification, or enhancement of the NCI
Product or Distributable Source other than by NCI; or (c) failure to provide
a suitable installation environment; or (d) use of supplies or materials not
meeting specifications; or (e) use of the NCI Product or Distributable Source
for other than the specific purpose for which it is designed; or (f) use of
the NCI Product on any systems other than the Reference Hardware; or (g)
Licensee's use of defective media (other than defective media provided by NCI
to Licensee) or defective duplication of the NCI Product; or (h) Licensee's
failure to incorporate any Update previously released by NCI which corrects
such nonconformance.
9.4. EXCLUSIVE REMEDY. In the event that Licensee finds what it
believes to be Program Errors in or a failure of the NCI Product, NCI Source
Code and Distributable Source that prevents such code from substantially
conforming to functional specifications published by NCI for the Reference
Implementation in effect when the NCI Product is shipped by NCI to Licensee,
and provides NCI with a written report thereof during the Warranty Period,
NCI will use reasonable efforts to correct promptly, at no charge to
Licensee, any such Program Errors or failures. This is Licensee's sole and
exclusive remedy, and NCI's sole obligation, for any express or implied
warranties hereunder.
9.5. LICENSEE WARRANTY. Licensee hereby warrants that Licensee has
the authority to enter into and be bound by the terms of this Agreement.
10. INDEMNIFICATION
10.1. NCI agrees to indemnify, hold harmless and, at Licensee's
request, defend Licensee from and against any and all claims, liabilities,
losses, damages, expenses and costs (including reasonable attorneys' fees and
costs) arising out of, in connection with or relating to a claim that the NCI
Product, NCI Source Code or Distributable Source infringes any valid patent,
copyright, trademark or trade secret to the extent that such infringement
exists in the Reference Implementation; provided, that Licensee (a) promptly
(within twenty (20) days) notifies NCI in writing of any such claim and NCI
has sole control of the defense and all related settlement negotiations, and
(b) cooperates with NCI, at NCI's expense, in defending or settling such
claim.
10.2. Should the NCI Product, NCI Source Code or Distributable Source
become, or be likely to become in NCI's opinion, the subject of infringement
of such copyright, patent, trademark or trade secret, NCI may (i) procure for
Licensee the right to continue using the same or (ii) replace or modify it to
make it non-infringing. Notwithstanding any characterization of any fees
paid by Licensee hereunder as "non-
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<PAGE>
refundable", in the event that NCI determines that neither (i) or (ii) above
are commercially reasonable, NCI may terminate this Agreement upon thirty
(30) days prior written notice, and refund to Licensee all amounts paid
hereunder reduced on a straight-line pro-rata basis over five (5) years from
the Effective Date. NCI shall have no liability for and Licensee shall
indemnify and hold NCI harmless from and against any claim based upon: (a)
the use of a version of the NCI Product, NCI Source Code or Distributable
Source other than the then current, unaltered version of the NCI Product, NCI
Source Code or Distributable Source (as applicable), except to the extent the
Reference Implementation would also be infringing; (b) use, operation or
combination of the NCI Product, NCI Source Code or Distributable Source with
non-NCI programs, data, method, equipment or documentation, if such
infringement would have been avoided but for such use, operation or
combination; (c) Licensee's, its Distributors', its Customers' or agent's
activities after NCI has notified Licensee that NCI believes such activities
may result in such infringement; (d) compliance with Licensee's designs,
specifications or instructions; (e) any modifications or marking of the NCI
Product, NCI Source Code or Distributable Source not specifically authorized
in writing by NCI; (f) any Derivative Works made by Licensee; (g) Licensee's
use of any trademarks other than the NCI Trademarks pursuant to Section 6
hereof; or (h) third party software except for software developed by
Netscape. The foregoing states the entire liability of NCI and the exclusive
remedy of Licensee with respect to infringement of any intellectual property
rights.
10.3. GENERAL INDEMNIFICATION BY LICENSEE. Licensee agrees to
indemnify, hold harmless and, at NCI's request, defend NCI from and against
any and all claims, liabilities, losses, damages, expenses and costs
(including reasonable attorneys' fees and costs) arising out of, in
connection with or relating to (i) Licensee's or Distributors' failure to
include in each Distributor Agreement the contractual terms required to be
included therein pursuant to Section 3.3.2 or 3.3.3 or (ii) except to the
extent that NCI is responsible for a claim under Section 10.1 and 10.2,
Licensee's, a Distributor's or a Customer's use, distribution or reproduction
of the NCI Product, Distributable Source, End User Documentation and/or
Licensee Products, including, without limitation, any claims, liabilities,
losses, damages, expenses and costs arising out of, in connection with or
relating to defective reproduction of or the use of defective media in the
reproduction of the NCI Product or Distributable Source, breach of warranty
or support obligations or infringement or misappropriation of intellectual
property rights.
11. LIMITATION OF LIABILITY
TO THE EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL EITHER
PARTY OR ITS RESPECTIVE LICENSORS OR SUPPLIERS BE LIABLE UNDER ANY CONTRACT,
NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) ANY
LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF USE OR DATA, INTERRUPTION OF
BUSINESS, OR (II) ANY COST OF PROCUREMENT OF SUBSTITUTE GOODS, SERVICES OR
TECHNOLOGY, OR (III) ANY CLAIM AGAINST THE OTHER PARTY HERETO BY ANY THIRD
PARTY, EXCEPT AS PROVIDED IN THE SECTION ENTITLED
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<PAGE>
"INDEMNIFICATION" IN THIS AGREEMENT. NEITHER PARTY SHALL BE LIABLE FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND, EXCEPT
TO THE EXTENT SUCH DAMAGES ARISE FROM A BREACH OF SECTIONS 2.1 OR SECTION 8,
EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. IN
NO EVENT WILL NCI OR ITS LICENSORS OR SUPPLIERS BE LIABLE FOR (a) ANY
REPRESENTATION OR WARRANTY MADE TO ANY THIRD PARTY BY LICENSEE, ANY
DISTRIBUTOR, ANY CUSTOMER OR ANY OF THEIR RESPECTIVE AGENTS; (b) FAILURE OF
THE NCI PRODUCT TO PROVIDE DATA SECURITY; OR (c) ANY USE OF THE NCI PRODUCT
OR DISTRIBUTABLE SOURCE OR THE RESULTS OR INFORMATION OBTAINED OR DECISIONS
MADE BY END USERS OF THE NCI PRODUCT OR DISTRIBUTABLE SOURCE. THE REMEDIES
PROVIDED IN THIS AGREEMENT ARE THE PARTY'S SOLE AND EXCLUSIVE REMEDIES.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, EACH PARTY'S
ENTIRE LIABILITY TO THE OTHER FOR DAMAGES CONCERNING PERFORMANCE OR
NON-PERFORMANCE BY EITHER PARTY (EXCEPT FOR LICENSEE'S FAILURE TO MAKE ANY
PAYMENT OWED TO NCI HEREUNDER) OR IN ANY WAY RELATED TO THE SUBJECT MATTER OF
THIS AGREEMENT, AND REGARDLESS OF WHETHER THE CLAIM FOR SUCH DAMAGES IS BASED
IN CONTRACT OR IN TORT, SHALL NOT EXCEED THE LESSER OF (i) THE TOTAL FEES
PAID HEREUNDER OR (ii) FIVE HUNDRED THOUSAND DOLLARS (US $500,000).
12. TERM OF AGREEMENT
This Agreement shall commence on the Effective Date and shall continue
until terminated as provided in Section 13.
13. DEFAULT AND TERMINATION
13.1. TERMINATION FOR DEFAULT. In the event (i) either party
materially breaches any of its obligations under this Agreement and fails to
cure such material breach within thirty (30) days following written notice of
such breach from the non-defaulting party or (ii) either party becomes
Bankrupt; the nondefaulting party, at its option shall have the right to
terminate this Agreement by written notice. "Bankrupt" means that a party
ceases to do business in the normal course, becomes or is declared insolvent
or bankrupt, is the subject of any proceeding relating to its liquidation or
insolvency that is not dismissed within ninety (90) calendar days of
commencement, or makes an assignment for the benefit of its creditors.
13.2 TERMINATION OF LICENSES. In the event that (i) Licensee
materially breaches Section 8 or 14.3 or (ii) Licensee breaches Section 8 in
a manner that, by its nature, such breach is not subject to cure; NCI may
immediately terminate this Agreement and/or the
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licenses granted by NCI to Licensee in Section 2.1 hereof. In the event that
Licensee (x) fails to cure a material breach of Section 2.1 or Section 4 and
fails to cure such material breach within thirty (30) days following written
notice of such breach from NCI or (y) becomes Bankrupt; NCI may terminate
this Agreement and/or licenses granted by NCI to Licensee in Section 2.1
hereof by written notice.
13.3. EFFECT ON RIGHTS.
13.3.1 Neither termination of this Agreement by either party
nor termination of the licenses granted in this Agreement by NCI shall act as
a waiver of any breach of this Agreement or as a release of either party from
any liability for breach of such party's obligations under this Agreement.
13.3.2 Except where otherwise specified, the rights and
remedies granted to a party under this Agreement are cumulative and in
addition to, and not in lieu of, any other rights or remedies which the party
may possess at law or in equity, including without limitation rights or
remedies under applicable patent, copyright, trade secrets, or proprietary
rights laws, rules or regulations.
13.4. EFFECT OF TERMINATION.
13.4.1 Within thirty (30) calendar days after termination of
this Agreement by Licensee (for other than an uncured material breach by NCI)
or by NCI under Section 13.2 or Section 14.3, Licensee shall, at NCI's
option, either deliver to NCI or destroy all copies of the NCI Product, the
NCI Source Code and Distributable Source (or the applicable components
thereof for termination pursuant to 14.3), including, without limitation,
copies of the Bundled Product and End User Documentation and any other
materials provided by NCI to Licensee hereunder in its possession or under
its control, and shall furnish to NCI an affidavit signed by an officer of
Licensee certifying that, to the best of its knowledge, such delivery or
destruction has been fully effected. In the event of termination of the
Agreement and/or the licenses granted by NCI to Licensee in Section 2.1, NCI
will return to Licensee any source code received from Licensee under this
Agreement and any copies thereof.
13.4.2 In the event that the licenses hereunder are terminated
for any reason other than by NCI pursuant to Section 13.2 or 14.3, and
provided Licensee fulfills its obligations specified in this Agreement with
respect to such items, Licensee may continue to use and retain copies of the
NCI Product, the NCI Source Code, Distributable Source and End User
Documentation to the extent, but only to the extent, necessary to support and
maintain Bundled Product rightfully distributed to End Users and Customers by
Licensee, directly or indirectly through Distributors or Customers, prior to
termination of this Agreement.
13.5. CONTINUING OBLIGATIONS.
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13.5.1 PAYMENT OF ACCRUED FEES. Within thirty (30) calendar
days of termination of this Agreement, Licensee shall pay to NCI all sums
then due and owing. Any other such sums shall subsequently be promptly paid
as they become due and owing.
13.5.2 CONTINUANCE OF SUBLICENSES. Notwithstanding the
termination of this Agreement, all End User and Customer sublicenses which
have been properly granted by Licensee and Distributors and Customers
pursuant to this Agreement prior to its termination shall survive.
13.5.3 OTHER CONTINUING OBLIGATIONS. The respective rights and
obligations of NCI and Licensee under the provisions of Sections 2.1.1
(subject to Sections 13.2 and 14.3), 2.1.2 (subject to Sections 13.2 and
14.3), 2.4 (subject to Sections 13.2 and 14.3), 2.1.3, 2.2, 2.3, 3.3.1, 3.4,
3.5, 4, 6, 7, 8, 9.2, 9.3, 9.4, 9.5, 10, 11, 13.3, 13.4, 13.5 and 14 shall
survive any termination of this Agreement.
13.6. Consistent with the protection of the rights of the party
seeking injunctive relief as permitted hereunder, any injunctive relief
sought by either party to enforce the obligations of the other party under
this Agreement shall be structured, to the greatest extent possible, in a
manner that will maintain the business operations of the party on which any
such relief is imposed.
14. GENERAL PROVISIONS
14.1. NOTICES. Any notice, request, demand, or other communication
required or permitted hereunder shall be in writing and shall be deemed to be
properly given upon the earlier of (a) actual receipt by the addressee or (b)
five (5) business days after deposit in the mail, postage prepaid, when
mailed by registered or certified airmail, return receipt requested, or two
(2) business days after being sent via private industry courier to the
respective parties at the addresses first set forth above or to such other
person or address as the parties may from time to time designate in a writing
delivered pursuant to this Section 14.1.
14.2. WAIVER AND AMENDMENT. The waiver by either party of a breach
of or a default under any provision of this Agreement, shall not be construed
as a waiver of any subsequent breach of the same or any other provision of
the Agreement, nor shall any delay or omission on the part of either party to
exercise or avail itself of any right or remedy that it has or may have
hereunder operate as a waiver of any right or remedy. No amendment or
modification of any provision of this Agreement shall be effective unless in
writing and signed by a duly authorized signatory of NCI and Licensee.
14.3. ASSIGNMENT. This Agreement and the licenses granted hereunder
are to a specific legal entity or legal person, not including corporate
subsidiaries or affiliates, and are not assignable by NCI or Licensee,
including, assignments that result from the operation of law, nor are the
obligations imposed on NCI or Licensee delegable; provided, however, that
either party shall have the right to assign this Agreement to an acquiror of
all or substantially all of the business, stock or assets of such party (an
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"Acquiror") provided that such assigning party complies with the terms set
forth in this Section.
No consent shall be required for an assignment by NCI to an Acquiror
except in the case where such Acquiror is a Specified Party. In the event
that such Acquiror is a Specified Party, any such assignment shall be subject
to Licensee's prior written consent.
In the event of an assignment by Licensee to an Acquiror, the
following terms shall apply:
(i) Licensee may assign to such Acquiror, without the consent of NCI,
those rights and licenses hereunder that pertain to Embedded Graphics Usage
and may delegate those obligations that pertain to Embedded Graphics Usage.
(ii) if such Acquiror is Microsoft Corporation, WebTV Networks, Inc.,
PlanetWeb, Inc., PowerTV, Inc., OpenTV, Inc., Spyglass, Inc., Intel
Corporation, International Business Machines Corporation, Sun Microsystems,
Inc., Informix Software, Inc., or Sybase, Inc. (collectively, the "Specified
Acquirors") then NCI, at its option may (A) consent to the assignment of
those rights and licenses hereunder that pertain to Directed Browsing and
delegation of those obligations that pertain to Directed Browsing Usage or
(B) withhold consent to the assignment of, and terminate, those rights and
licenses hereunder that pertain to Directed Browsing (including, without
limitation, those licenses pertaining to Source Code for Directed Browsing
and related Derivative Works) and delegation of those obligations that
pertain to Directed Browsing, terminate this Agreement with respect to
Directed Browsing and either (1) provide support to Customers validly
licensed to use Directed Browsing subject to terms mutually agreed by the
parties or (2) negotiate in good faith a license granting to such Acquiror
sufficient rights in the NCI Source Code, Distributable Source and Excluded
Components to allow such Acquiror to provide support to such Customers. In
the event that NCI elects to withhold consent as described in (B) above and
notwithstanding anything to the contrary herein (including, without
limitation, Section 13.4.1), Licensee shall immediately return to NCI all NCI
Source Code, Distributable Source, Excluded Components, End User
Documentation, Derivative Works pertaining to Directed Browsing and any
copies, extracts or summaries thereof and shall ensure that no disclosure of
the foregoing is made to the Acquiror.
(iii) in the event that Licensee is acquired by one of the Specified
Acquirors, Licensee shall pay to NCI the applicable "Assignment Fee"
described below prior to or upon the closing of such acquisition:
<TABLE>
<CAPTION>
==================================================================================
Elapsed time from Assignment Fee Assignment Fee if Assignment Fee if 2
Effective Date 1 Major Update has Major Updates have
been delivered to been delivered to
Licensee prior to Licensee prior to
effective date of effective date of
acquisition acquisition
==================================================================================
<S> <C> <C> <C>
0-180 days $[***]* $[***]* $[***]*
- ----------------------------------------------------------------------------------
- --------------
* Confidential Treatment Requested. Confidential portion has been filed with
the Securities and Exchange Commission.
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- ----------------------------------------------------------------------------------
181-540 days $[***]* $[***]* $[***]*
- ----------------------------------------------------------------------------------
541-900 days $[***]* $[***]* $[***]*
- ----------------------------------------------------------------------------------
After 900 days $[***]* $[***]* $[***]*
==================================================================================
</TABLE>
Any attempt by either party to sublicense (except as expressly permitted
herein) assign or transfer any of the rights (other than NCI's right to
receive payment), duties or obligations under this Agreement in derogation
hereof shall be null and void.
14.4. GOVERNING LAW. This Agreement is entered into in the State of
California, U.S., and this Agreement shall be governed by and construed in
accordance with the laws of the State of California, U.S., without reference
to its conflicts of law provisions. Any dispute regarding this Agreement
shall be subject to the exclusive jurisdiction of the California state courts
in and for Santa Clara County, California (or, if there is exclusive federal
jurisdiction, the United States District Court for the Northern District of
California), and the parties agree to submit to the personal and exclusive
jurisdiction and venue of these courts. This Agreement will not be governed
by the United Nations Convention of Contracts for the International Sale of
Goods, the application of which is hereby expressly excluded.
14.5. RELATIONSHIP OF THE PARTIES. No agency, partnership, joint
venture, or employment is created as a result of this Agreement and neither
Licensee, its Distributors nor its Customers or agents have any authority of
any kind to bind NCI in any respect whatsoever.
14.6. CAPTIONS AND SECTION HEADINGS. The captions and section and
paragraph headings used in this Agreement are inserted for convenience only
and shall not affect the meaning or interpretation of this Agreement.
14.7. SEVERABILITY. If the application of any provision or
provisions of this Agreement to any particular facts of circumstances shall
be held to be invalid or unenforceable by any court of competent
jurisdiction, then (a) the validity and enforceability of such provision or
provisions as applied to any other particular facts or circumstances and the
validity of other provisions of this Agreement shall not in any way be
affected or impaired thereby and (b) such provision or provisions shall be
reformed without further action by the parties hereto to and only to the
extent necessary to make such provision or provisions valid and enforceable
when applied to such particular facts and circumstances.
14.8. FORCE MAJEURE. Either party shall be excused from any delay or
failure in performance hereunder, except the payment of monies by Licensee to
NCI, caused by reason of any occurrence or contingency beyond its reasonable
control, including but not limited to, acts of God, earthquake, labor
disputes and strikes, riots, war, and governmental requirements. The
obligations and rights of the party so excused shall be extended on a
day-to-day basis for the period of time equal to that of the underlying cause
of the delay.
- --------------
* Confidential Treatment Requested. Confidential portion has been filed with
the Securities and Exchange Commission.
-24-
<PAGE>
14.9. ENTIRE AGREEMENT. This Agreement, including the Attachments
hereto, constitutes the entire agreement between the parties concerning the
subject matter hereof and supersedes all prior or contemporaneous proposals
and agreements whether oral or written, and all communications between the
parties relating to the subject matter of this Agreement and all past courses
of dealing or industry custom. If any ambiguity or conflict exists between
the terms of this Agreement and the terms of any Attachment hereto, the terms
of the Attachment shall prevail and shall be conclusively determined to
reflect the intention of the parties with respect to the relevant issues.
The terms and conditions of this Agreement shall prevail, notwithstanding any
variance with any purchase order or other written instrument submitted by
Licensee, whether formally rejected by NCI.
-25-
<PAGE>
14.10. ENGLISH. This Agreement is in the English language only, which
language shall be controlling in all respects, and all versions hereof in any
other language shall not be binding on the parties hereto. All
communications and notices to be made or given pursuant to this Agreement
shall be in the English language.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by duly authorized representatives of the parties as of the
Effective Date.
NETWORK COMPUTER, INC. LICENSEE
By: By:
------------------------- -------------------------
Signature Signature
Name: Name:
----------------------- -----------------------
Print or Type Print or Type
Title: Title:
---------------------- ----------------------
Date: Date:
----------------------- -----------------------
-26-
<PAGE>
ATTACHMENT A
TO OEM LICENSE AGREEMENT
PRODUCT(S) AND TRADEMARK DESCRIPTIONS
NCI Product: NCI eNavigator-TM- Version 1.1 derived from TV
Navigator-TM-
Directed Browsing:
"Directed Browsing" shall be limited to the following functions:
- Directed Browsing shall allow access solely to "Internet-
formatted" content that is digitally signed specifically for
display on the Bundled Product. "Internet-formatted" content shall
mean HTML, Javascript, Java, GIF, JPEG, and other MIME-type data.
- Directed Browsing shall only provide access to those web sites
dedicated to a specific application ("Directed Browsing
Websites").
- Directed Browsing shall provide access only to Direct Browsing
Websites through a single domain name registered to a single
corporate entity ("Designated Domain Name"). All content,
applications or other elements appearing on the Directed Browsing
Websites shall be owned by or licensed to the owner or operator of
the respective Designated Domain Name.
- Directed Browsing specifically excludes the ability to access
directly, or through the use the servers on which the Directed
Browsing Websites reside (e.g. DNS, Proxy), domain names other
than the Designated Domain Name (as defined below) or gain
Internet connectivity by other methods, including, without
limitation, (i) substituting or remapping the Designated Domain
Name to allow access to other domain names, (ii) caching access to
content, applications, web-sites or other elements capable of
display on the Bundled Product outside of the Designated Domain
Name, (iii) caching external web-sites on a proxy server, (iv)
web-wacking data from external web-sites to a local web-server, or
(v) web site mirroring. The source code for the foregoing
components are herein referred to as the NCI Source Code for
Directed Browsing. Neither Directed Browsing nor the servers on
which the Directed Browsing Websites reside shall permit or
provide the ability to circumvent the navigation and access to the
Designated Domain Name. The parties hereby agree that, in the
event that either party determines that the foregoing definition
of Directed Browsing is commercially unreasonable, the parties
will negotiate in good faith a possible amendment to such
definition.
- Directed Browsing includes applications for Embedded Graphics
Usage, but when the function of the HTML rendering engine is
employed in such a way that the application specific user
interface would not be considered to be an example of a "browser
application" (ie., an example of a "browser application" would be
an application that gave access to pre-formatted html content on a
CD that constitutes an interactive tour guide; an example of an
application which would not be considered a "browser
-1-
<PAGE>
application" would be an application that provides access to
user-interface specific functionality for a device such as a
photocopier machine), all branding obligations will be waived.
Embedded Graphics Usage:
- "Embedded Graphics Usage" shall mean any use by Licensee of the
eNavigator Graphics Technology (as defined below), provided that
(a) such use of the eNavigator Graphics Technology is solely in
connection with the creation of a non-Internet application, and
(b) the eNavigator Graphics Technology (as defined below) is not
utilized to create or in conjunction with any product marketed,
distributed or developed by Licensee that is a network browser or
otherwise competes with the NCI Product as it exists on the date
NCI delivers the Deliverables to Licensee. The "eNavigator
Graphics Technology" shall be limited to the following components
of the NCI Product: (i) the Window Manager, (ii) the binary code
for the Javascript engine, (iii) the 2D Graphics library, and
(iii) the UI Widget library, and (iv) the text library. The source
code for the foregoing components are herein referred to as the
NCI Source Code for Embedded Graphics Usage. Notwithstanding
anything in this Agreement to the contrary Licensee shall have no
right to use the Embedded Graphics Usage in conjunction with
televisions with any form of internet access or to create any form
of a television "browser application". Notwithstanding anything
in this Agreement to the contrary, Licensee shall have no rights
to distribute source code for the Javascript engine or the
Bitstream font technology.
SDK Source Headers:
\nci\sdk\include\AppError.h
\nci\sdk\include\AppMsg.h
\nci\sdk\include\assert.h
\nci\sdk\include\Base.h
\nci\sdk\include\cAccntMan.h
\nci\sdk\include\CacheMan.h
\nci\sdk\include\cCacheMan.h
\nci\sdk\include\cErrLog.h
\nci\sdk\include\CharSet.h
\nci\sdk\include\cHwfHandlers.h
\nci\sdk\include\cIspConnect.h
\nci\sdk\include\cNotifier.h
\nci\sdk\include\codeHeader.h
\nci\sdk\include\ctype.h
\nci\sdk\include\DataWrapper.h
\nci\sdk\include\Destroyable.h
\nci\sdk\include\errno.h
\nci\sdk\include\Fetcher.h
\nci\sdk\include\HtmlHandler.h
\nci\sdk\include\iCacheMan.h
-2-
<PAGE>
\nci\sdk\include\int64.h
\nci\sdk\include\Mail.h
\nci\sdk\include\MimeHandler.h
\nci\sdk\include\module.h
\nci\sdk\include\navio.h
\nci\sdk\include\navioBoot.h
\nci\sdk\include\navioErr.h
\nci\sdk\include\navioInit.h
\nci\sdk\include\net.h
\nci\sdk\include\NviParamdef.h
\nci\sdk\include\PlatformInfo.h
\nci\sdk\include\PlatformInfoBitmask.h
\nci\sdk\include\SmartCard.h
\nci\sdk\include\stdarg.h
\nci\sdk\include\stddef.h
\nci\sdk\include\stdio.h
\nci\sdk\include\stdlib.h
\nci\sdk\include\string.h
\nci\sdk\include\stringutil.h
\nci\sdk\include\Text.h
\nci\sdk\include\TextTypes.h
\nci\sdk\include\time.h
\nci\sdk\include\Vec.h
\nci\sdk\include\Virtual.h
\nci\sdk\include\wchar.h
\nci\sdk\include\anim\AnimPlyr.h
\nci\sdk\include\arch\i86\archI86.h
\nci\sdk\include\arch\mips\archMips.h
\nci\sdk\include\arch\mips\r4000.h
\nci\sdk\include\aud\Snd.h
\nci\sdk\include\aud\UiSnd.h
\nci\sdk\include\chat\Chat.h
\nci\sdk\include\gfx\cColor.h
\nci\sdk\include\gfx\Color.h
\nci\sdk\include\gfx\GfxCtx.h
\nci\sdk\include\gfx\GfxPrims.h
\nci\sdk\include\gfx\GfxTypes.h
\nci\sdk\include\gfx\GfxUtil.h
\nci\sdk\include\gfx\GifCond.h
\nci\sdk\include\gfx\Image.h
\nci\sdk\include\gfx\PixMap.h
\nci\sdk\include\gfx\Png.h
\nci\sdk\include\gfx\Rect.h
\nci\sdk\include\gfx\RectList.h
-3-
<PAGE>
\nci\sdk\include\gfx\VBlankClock.h
\nci\sdk\include\intl\Ime.h
\nci\sdk\include\intl\Locale.h
\nci\sdk\include\kernel\ansiTimeExt.h
\nci\sdk\include\kernel\BSem.h
\nci\sdk\include\kernel\cBsem.h
\nci\sdk\include\kernel\cClock.h
\nci\sdk\include\kernel\cCondVar.h
\nci\sdk\include\kernel\cDirectory.h
\nci\sdk\include\kernel\cEvent.h
\nci\sdk\include\kernel\cFile.h
\nci\sdk\include\kernel\cHardwareFault.h
\nci\sdk\include\kernel\Clock.h
\nci\sdk\include\kernel\ClockTypes.h
\nci\sdk\include\kernel\cMemRegion.h
\nci\sdk\include\kernel\cMsgQueue.h
\nci\sdk\include\kernel\cMsgTypes.h
\nci\sdk\include\kernel\cMutex.h
\nci\sdk\include\kernel\CondVar.h
\nci\sdk\include\kernel\cShareLock.h
\nci\sdk\include\kernel\cSysMonitor.h
\nci\sdk\include\kernel\cSystem.h
\nci\sdk\include\kernel\cThread.h
\nci\sdk\include\kernel\cTimer.h
\nci\sdk\include\kernel\Directory.h
\nci\sdk\include\kernel\Event.h
\nci\sdk\include\kernel\File.h
\nci\sdk\include\kernel\iBsem.h
\nci\sdk\include\kernel\iClock.h
\nci\sdk\include\kernel\iCondVar.h
\nci\sdk\include\kernel\iDirectory.h
\nci\sdk\include\kernel\iEvent.h
\nci\sdk\include\kernel\iFile.h
\nci\sdk\include\kernel\iMemRegion.h
\nci\sdk\include\kernel\iMsgQueue.h
\nci\sdk\include\kernel\iMutex.h
\nci\sdk\include\kernel\iShareLock.h
\nci\sdk\include\kernel\iSystem.h
\nci\sdk\include\kernel\iThread.h
\nci\sdk\include\kernel\iTimer.h
\nci\sdk\include\kernel\MemRegion.h
\nci\sdk\include\kernel\Msg.h
\nci\sdk\include\kernel\MsgQueue.h
\nci\sdk\include\kernel\Mutex.h
-4-
<PAGE>
\nci\sdk\include\kernel\Mutex.h
\nci\sdk\include\kernel\ShareLock.h
\nci\sdk\include\kernel\System.h
\nci\sdk\include\kernel\Thread.h
\nci\sdk\include\kernel\Timer.h
\nci\sdk\include\kernel\TimerTypes.h
\nci\sdk\include\liveConn\LiveConnEnabled.h
\nci\sdk\include\media\Conductor.h
\nci\sdk\include\media\iConductor.h
\nci\sdk\include\mime\MimeRequest.h
\nci\sdk\include\reg\cReg.h
\nci\sdk\include\reg\cRegDef.h
\nci\sdk\include\reg\cRegName.h
\nci\sdk\include\scriptSym\DataValue.h
\nci\sdk\include\types\navANSI.h
\nci\sdk\include\types\navArch.h
\nci\sdk\include\types\navCpu.h
\nci\sdk\include\types\navParams.h
\nci\sdk\include\types\navTypes.h
\nci\sdk\include\types\navTypesBase.h
\nci\sdk\include\types\navTypesOld.h
\nci\sdk\include\util\navFlash.h
\nci\sdk\include\util\ScreenSaver.h
\nci\sdk\include\vid\cVid.h
\nci\sdk\include\vid\Tv.h
\nci\sdk\include\widget\Alert.h
\nci\sdk\include\widget\Ascii.h
\nci\sdk\include\widget\Border.h
\nci\sdk\include\widget\CheckBox.h
\nci\sdk\include\widget\Component.h
\nci\sdk\include\widget\Container.h
\nci\sdk\include\widget\Document.h
\nci\sdk\include\widget\Focus.h
\nci\sdk\include\widget\Frame.h
\nci\sdk\include\widget\Grid.h
\nci\sdk\include\widget\Highlight.h
\nci\sdk\include\widget\History.h
\nci\sdk\include\widget\iCheckBox.h
\nci\sdk\include\widget\iPushButton.h
\nci\sdk\include\widget\KeyCodes.h
\nci\sdk\include\widget\Layout.h
\nci\sdk\include\widget\ListBox.h
\nci\sdk\include\widget\Notify.h
\nci\sdk\include\widget\Picture.h
\nci\sdk\include\widget\ProgressBar.h
-5-
<PAGE>
\nci\sdk\include\widget\PushButton.h
\nci\sdk\include\widget\RadioButton.h
\nci\sdk\include\widget\SoftKbd.h
\nci\sdk\include\widget\TextArea.h
\nci\sdk\include\widget\TextEdit.h
\nci\sdk\include\widget\TextField.h
\nci\sdk\include\widget\TvPicture.h
\nci\sdk\include\widget\Widget.h
\nci\sdk\include\widget\WidgetErrorBase.h
\nci\sdk\include\win\Point.h
\nci\sdk\include\win\Win.h
\nci\sdk\include\win\WinEvent.h
\nci\sdk\include\win\WinInput.h
\nci\sdk\include\win\WinManConn.h
Deliverables:
<TABLE>
<CAPTION>
Description Estimated Delivery Date
-----------------------------------------------------------------
<S> <C>
NCI Source Code excluding the
Excluded Components and any third January 30, 1998
party Optional Products/Modules
</TABLE>
NCI Trademarks: NCI, eNavigator
NCI LOGO: The NC logo as set forth on the Corporate Signature Kit
-6-
<PAGE>
ATTACHMENT B
TO OEM LICENSE AGREEMENT
LICENSEE PRODUCT, LICENSEE TRADEMARK, PRICING AND PAYMENT SCHEDULES, TERRITORY
AND OPTIONAL PRODUCTS/MODULES
<TABLE>
<C> <S>
Licensee Product: Licensee's real time embedded operating system
including VxWorks, IxWorks, WiSP, and other real
time embedded operating systems developed and owned
by Licensee
Licensee Trademarks: Wind River Systems, VxWorks, Tornado, IxWorks,
Embedded Internet, WiSP (including the logos)
Specified Parties: Integrated Systems, Inc., Microware Systems Corp.,
Mentor Graphics Corporation RTOS Division, QNX
Software Systems, Ltd., Accelerated Technology,
Inc., the Chorus and Diba divisions of Sun
Microsystems, Inc. (or any other name under which
such divisions operate), and Lynx Real Time Systems,
Inc.
Pricing: All of the following fees are nonrefundable and
noncancelable:
- - License Fee: License Fee of $[***]* (payable as follows:
$[***]* upon execution of the Agreement;
$[***]* due within sixty (60) days following
delivery hereunder of the NCI Source Code).
- - Prepaid License Fee: Prepaid License Fee of $[***]* for prepaid
royalties on Tier II Directed Browsing applications
(as defined below) (payable within sixty (60) days
following delivery hereunder of the NCI Source
Code).
- - Engineering Fees: NCI shall provide to Licensee up to nine (9)
cumulative man-months of engineering effort to
prepare the NCI Source Code for
- --------------
* Confidential Treatment Requested. Confidential portion has been filed with
the Securities and Exchange Commission.
<PAGE>
delivery to Licensee and to support Licensee as
reasonably requested by Licensee. Within sixty
(60) days following delivery hereunder of NCI
Source Code, Licensee shall pay $[***]* for such
engineering effort. For any engineering effort
beyond the effort described above, Licensee will
pay NCI time and materials at a rate of $[***]*
per man-month plus out of pocket expenses.
</TABLE>
- - Royalties:
<TABLE>
<CAPTION>
===================================================================================
PRODUCT ROYALTY/UNIT
- -----------------------------------------------------------------------------------
<S> <C>
Tier I: NCI eNavigator v1.1 for Directed N/A
Browsing (excluding Tier II
applications)
- -----------------------------------------------------------------------------------
Tier II: NCI eNavigator v1.1 for SUBJECT TO SECTION (c) BELOW,
Directed Browsing Applications for Web FOR EACH UNIT OF THE BUNDLED
Phones, Car Navigation Systems, and PRODUCT DISTRIBUTED HEREUNDER
Personal Digital Assistants LICENSEE SHALL PAY THE GREATER
(The first [***]* units distributed OF: [***]*% OF THE FEE RECEIVED
in the twelve month period immediately FOR THE BUNDLED PRODUCT AND
following the first commercial shipment $[***]* FOR ENAVIGATOR V1.X AND
of the first Bundled Product shall be $[***]* FOR V2.0 AND ANY OTHER
royalty-free; the first [***]* units INCLUDED MAJOR UPDATES OF
distributed in each year thereafter ENAVIGATOR.
shall be royalty-free)
- -----------------------------------------------------------------------------------
Embedded Graphics Applications SEE BELOW
===================================================================================
NCI eNavigator v1.1 Source Code Access N/A
===================================================================================
</TABLE>
**At Licensee's request, NCI and Licensee agree to negotiate in good faith
the terms and conditions of a potential NCI server reseller agreement. At
Licensee's request, NCI and Licensee shall negotiate in good faith a
potential license agreement granting Licensee a license to use, modify, and
sublicense the NCI Product for full Internet browsing, including the right to
sublicense Bundled Product for TV-based applications.
Should the royalty fees for Tier II applications detailed above become
unreasonable for either party, the parties agree to negotiate in good faith
towards a mutually agreeable license fee.
b) In the event Licensee elects to include available third party modules,
Licensee agrees to pay optional third party royalties at a [***]* percent
([***]*%) discount off of NCI's list price applicable to such optional
modules provided that such third party module is available from NCI in
source code form. Personal Java will be treated as an optional third
party module if available.
c) Licensee shall make the following payments for distributing units of the
Bundled Product as follows:
For any Bundled Product where the use of the NCI Product is restricted
solely to Embedded Graphics Usage, Licensee shall owe no additional
Royalty hereunder.
- --------------
* Confidential Treatment Requested. Confidential portion has been filed with
the Securities and Exchange Commission.
-2-
<PAGE>
For unit(s) of Bundled Product licensed for any Tier II Application of
Directed Browsing, Licensee shall owe the Royalty set forth in the chart
above upon the earlier of (i) Licensee's receipt of payment for such
unit(s) of Bundled Product (including any prepaid royalties or licensing
fee pertaining thereto) and (ii) Licensee's, Distributors', or Customers'
distribution of such unit(s) of Bundled Product to an End User.
For any Bundled Product licensed for any Tier I Application of Directed
Browsing, Licensee shall owe no additional Royalty hereunder.
Notwithstanding the foregoing, Licensee shall owe no per unit Royalty for
distribution of Bundled Product that is embedded into a device that meets
the following criteria: such device requires the NCI Custom Connect
Server (or a successor NCI product) to operate.
<TABLE>
<C> <S>
- - Service Fee: For the twelve month period commencing on the first
day of the sixteenth month following the Effective
Date hereof, Licensee will pay, in advance, an
annual non-refundable Service Fee equal to the
greater of (x) $[***]* or (y) [***]*% of all
Royalties accrued hereunder for distributions made
during the prior (12) twelve month period.
Thereafter, the parties shall negotiate in good
faith the Service Fee applicable for NCI's
provision of maintenance and support services
described herein in subsequent years.
Territory: Worldwide
Optional Products/Modules: Sound module (includes MIDI, RealAudio)
RSA security module
Additional fonts (Chinese, etc.)
Third Party Code: JPEG, Berkeley DBM, Bitstream
</TABLE>
The following requirements must be met for each Bundled Product distributed
under the attached Agreement
JPEG - All manuals must include the phrase "The [Insert name of Bundled
Product] is based, in part, on the work of the Independent JPEG Group."
BERKELEY DBM - The entire notice below must be included in "THE
DOCUMENTATION AND/OR OTHER MATERIALS PROVIDED WITH THE DISTRIBUTION."
"The portion of [the Bundled Product] that provides the DBM function is
copyright (c) 1990, 1993, 1994 The Regents of the University of
California (the "Regents"). All rights reserved. This code is derived
from software contributed to Berkeley by Margo Seltzer. Redistribution
and use in source and binary forms, with or without modification, are
permitted provided that the following conditions are met:
- --------------
* Confidential Treatment Requested. Confidential portion has been filed with
the Securities and Exchange Commission.
-3-
<PAGE>
1. Redistribution of source code must retain the above copyright notice,
this list of conditions and the following disclaimer.
2. Redistribution in binary form must reproduce the above copyright
notice, this list of conditions and the following disclaimer in the
documentation and/or other materials provided with the distribution.
3. All advertising materials mentioning features or use of this software
must display the following acknowledgment:
This product includes software developed by the University of
California, Berkeley and its contributors.
4. Neither the name of the University nor the names of its contributors
may be used to endorse or promote products derived from this software
without specific prior written permission.
THE SOFTWARE WHICH PROVIDES THE DBM FUNCTION IS PROVIDED BY THE REGENTS
AND CONTRIBUTORS "AS IS" AND ANY EXPRESS OR IMPLIED WARRANTIES,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE ARE DISCLAIMED. IN NO EVENT SHALL
THE REGENTS OR CONTRIBUTORS BE LIABLE FOR ANY DIRECT, INDIRECT,
INCIDENTAL, SPECIAL, EXEMPLARY, OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT
NOT LIMITED TO, PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES; LOSS OF USE,
DATA, OR PROFITS; OR BUSINESS INTERRUPTION) HOWEVER CAUSED AND ON ANY
THEORY OF LIABILITY, WHETHER IN CONTRACT, STRICT LIABILITY, OR TORT
(INCLUDING NEGLIGENCE OR OTHERWISE) ARISING IN ANY WAY OUT OF THE USE OF
THIS SOFTWARE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGE."
BITSTREAM SOFTWARE - Licensee must reproduce each Bitstream copyright,
trademark and/or patent notice, as applicable in its entirety on each
copy of the Bundled Product, in the same location as it appears, in
electronic or printed form, on the NCI Product as delivered to Licensee.
OFFER TO PURCHASE SERVICES AND LICENSES SEPARATELY
THE CONSULTING SERVICES AND THE LICENSES CONTAINED HEREIN ARE PROPOSED
SEPARATELY. LICENSEE MAY ACQUIRE THE LICENSES CONTAINED HEREIN WITHOUT
ACQUIRING NCI CONSULTING SERVICES, AND LICENSEE MAY ACQUIRE THE LICENSES
CONTAINED HEREIN SEPARATELY AT THE FEES STATED IN THIS AGREEMENT.
-4-
<PAGE>
ATTACHMENT C
TO OEM LICENSE AGREEMENT
MAINTENANCE AND TECHNICAL SUPPORT
1. MAINTENANCE/MINOR UPDATES. In consideration of the Service Fee set
forth in Attachment B, NCI will provide to Licensee any Minor Updates made
generally available to similarly situated licensees of NCI Product during the
one (1) year term of this Maintenance and Technical Support Agreement. NCI
will not be responsible for providing Minor Updates to End Users,
Distributors or Customers and Licensee will be responsible for providing
Minor Updates to End Users which Licensee licenses directly, and to
Distributors, and Customers. If requested in writing by NCI, Licensee will
distribute each Minor Update to Distributors, Customers and End Users which
Licensee licenses directly. Such Minor Updates may be distributed via modem
or tangible medium, at the discretion of NCI. The expenses of any such
distribution will be paid by Licensee. Licensee and NCI agree to discuss
monthly support issues and processes.
2. TECHNICAL SUPPORT. In consideration of Service Fee set forth in
Attachment B, NCI will provide Licensee with NCI's backend technical support
services, as further described herein.
a) BACK-END SUPPORT. NCI will provide back-end support to Licensee
for Program Errors not resolved by Licensee pursuant to Licensee's
support policies and in accordance with subsection (b) below. This
support includes efforts to identify defective source code and to provide
corrections, workarounds and/or patches to correct Program Errors. NCI
will provide Licensee with a telephone number and an e-mail address which
Licensee may use to report Program Errors during NCI's local California
business hours (8am-5pm Pacific Time). For priority 1 or 2 failures,
Licensee agrees to notify NCI via both telephone and e-mail. Licensee
will identify one (1) member of its customer support staff and an
alternate to act as the primary technical liaisons responsible for all
communications with NCI's technical support representatives. Such
liaisons will have sufficient technical expertise, training and/or
experience for Licensee to perform its obligations hereunder. Within one
(1) week after the Effective Date, Licensee will designate its
liaison(s). Notification will be in writing and/or e-mail to NCI.
Licensee may substitute contacts at any time by providing to NCI one (1)
week's prior written and/or electronic notice thereof.
NCI will make reasonable efforts to correct significant Program Errors
that Licensee identifies, classifies and reports to NCI and that NCI
substantiates. NCI may reclassify Program Errors if it reasonably
believes that Licensee's classification is incorrect. Licensee will
provide sufficient information to enable NCI to duplicate the Program
Error before NCI's response obligations will commence. NCI will not be
required to correct any Program Error caused by (a) Licensee's
incorporation or attachment of a feature, program, or device to the NCI
Product, or any part thereof; (b) any nonconformance caused by accident,
transportation, neglect, misuse, alteration, modification, or enhancement
of the NCI Product; (c) the failure to provide a suitable installation
environment; (d) use of the NCI Product for other than the specific
purpose for which the NCI Product are designed; (e) Licensee's use of
defective media other than defective media provided by NCI to Licensee or
defective duplication of the NCI Product; or (f) Licensee's failure to
incorporate any Minor Update previously released by NCI which corrects
such Program Errors.
Provided Program Error reports are received by NCI during NCI's local
California business hours (8am-5pm Pacific Time), NCI will use its
commercially reasonable efforts to communicate with Licensee about the
Program Error via telephone or e-mail within the following targeted
response times:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Priority Failure Description Response Time
----------------------------------------------------------------------------
<C> <S> <C>
--
<PAGE>
----------------------------------------------------------------------------
1 Severe Impact (functionality disabled): 4 working hours
errors which result in a lack of
application functionality or cause
intermittent system failure
----------------------------------------------------------------------------
2 Degraded Operations: errors causing 2 working days
malfunction of non-critical functions
----------------------------------------------------------------------------
3 Minimal Impact attributes and/or options to 5 working days
utility programs do not operate as stated
----------------------------------------------------------------------------
4 Enhancement Request 5 working days
----------------------------------------------------------------------------
</TABLE>
Provided that Licensee provides to NCI the necessary assistance and
deliverables in order for NCI to perform NCI's technical support
obligations, including, without limitation, providing the Prototypes to
NCI, NCI will use reasonable commercial efforts to provide a timely
response based upon Licensee's characterization of such Program Error,
and to resolve each significant Program Error by providing either a
reasonable workaround, an object code patch, or a specification plan for
how NCI will address the problem and an estimate of how long it will take
to rectify the defect. Except with respect to Program Errors found in
the Excluded Components, NCI reserves the right to charge Licensee
additional fees at its then-standard rates for services performed in
connection with reported Program Errors which are later determined to
have been due to hardware or software not supplied by NCI, including
without limitation, Program Errors which are not present in the Reference
Implementation. Such additional charges shall be charged against the
$200,000 of Engineering Fees paid by Licensee to NCI for up to nine (9)
cumulative man-months of engineering effort as set forth in Attachment B.
Notwithstanding the foregoing, NCI has no obligation to perform services
in connection with Program Errors (i) resulting from hardware or software
not supplied by NCI; or (ii) which occur in the NCI Product release which
is not the then-current release.
b) FRONT-LINE SUPPORT. Licensee, and not NCI, will provide front-
line, or first and second level, technical support to its Distributors,
Customers and End Users. Such support includes call receipt, call
screening, installation assistance, problem identification and diagnosis,
efforts to create a repeatable demonstration of the Program Error and, if
applicable, the replacement of any defective media or distribution of
Minor updates. Licensee agrees that any End User Documentation
distributed by Licensee will clearly and conspicuously state that
Customers should call Licensee for technical support for the NCI Product.
NCI will have no obligation to furnish any assistance, information or End
User Documentation with respect to the NCI Product, to any Distributor,
Customer or End User. If NCI customer support representatives are being
contacted by a significant number of Licensee's Distributors, Customers
or End Users then, upon NCI's request, Licensee and NCI will cooperate to
minimize such contact.
-2-
<PAGE>
ATTACHMENT D
TO OEM LICENSE AGREEMENT
USER INTERFACE AND BRANDING REQUIREMENTS FOR DIRECTED BROWSING
In all cases the color, positioning, trademarks and fonts used with the NCI
Logo in conjunction with the NCI Product or Bundled Product will adhere to
the NCI Signature Guidelines. Due to the limited nature of the screen
real-estate used with embedded devices the following logo size requirements
will replace general size requirements found in the NCI Signature Guidelines.
For devices using screen sizes from Quarter VGA to Full VGA (320x240 up to
640x480), the NCI Logo shall be no smaller than 20 Pixels in height. (The
height of the logo will define the width base on the standards found in the
NCI Signature Guidelines.) For Devices using screen sizes of full VGA and
above the NCI Logo shall be no smaller than 40 Pixels in height.
On any display Quarter VGA or larger (e.g. 320x240 pixels or 240x320 pixels),
the NCI Logo will be presented in each of the following situations:
1) The NCI Logo will appear on any Navigation menus. A Navigation menu is
defined as any menu, set of buttons, or commands that allow the user to
control the Directed Browsing feature of the NCI Product. Examples of
Navigation menus would include:
- - Pop up menu where the user can input a URL address
- - Menu where forward, back or home buttons are displayed
- - A function menu where directed web applications can be launched (e.g.
mail)
2) The NCI Logo will appear on any Status bar menus. A Status bar menu is
defined as any menu, pop-up window or overlay that reports the status of
a directed browsing function within the NCI Product and/or Bundled
Product. Examples of Status bars would include:
- - Progress bar in drawing a web page
- - Animated downloading icon (eg. Netscape logo in Navigator)
- - Status update when downloading applications, mail or other content
3) If a Directed Browsing application is part of a program "launch" the NCI
Logo will appear as a splash screen on launch.
<PAGE>
Status Bar Example:
[GRAPHIC]
-2-
<PAGE>
Navigation Bar Example
[GRAPHIC]
-3-
<PAGE>
AMENDMENT N0. 1 TO
OEM LICENSE AGREEMENT
BETWEEN NETWORK COMPUTER, INC.
AND WIND RIVER SYSTEMS, INC.
DATED DECEMBER 31, 1997
This Amendment No. 1 ("Amendment No. 1") to the OEM License Agreement dated
December 31, 1997 between Network Computer, Inc. a Delaware corporation ("NCI")
and Wind River Systems, Inc., a Delaware corporation ("Licensee"), as amended
(the "OEM License Agreement"), is made and entered into this 31st day of August,
1998 (the "Amendment 1 Effective Date").
RECITALS
A. Licensee has been granted a license to certain NCI technology
under the terms and subject to the conditions set forth in the OEM
License Agreement.
B. The parties desire to amend the OEM License Agreement as set forth
in this Amendment No. 1.
C. All capitalized terms not defined herein shall have the meanings
given them in the OEM License Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Section 1.9 of the OEM License Agreement is hereby amended by deleting
said Section and replacing it with the following:
"1.9 "BUNDLED PRODUCT" means one or more products
developed by Licensee that consists of the Licensee Product
and any portion of the NCI Product, subject to the
applicable limitations set forth in this Agreement."
2. Section 1.26 of the OEM License Agreement is hereby amended by deleting
said Section and replacing it with the following:
"1.26. "CUSTOMER" means a third party entity that enters
into a Distributor Agreement (as defined below), excluding
the Excluded Accounts (as defined below) only in the case
where such third party entity is or intends to license or
distribute TV Products (as defined below)."
3. Section 1 of the OEM License Agreement is hereby amended by adding the
following subsections to the end of said Section:
"1.30 "Excluded Accounts" shall mean internet service
providers, pay television operators (including, without
limitation, cable companies and satellite television
companies) and Specified Accounts.
1.31 "Specified Accounts" shall mean those third parties
set forth on Exhibit A hereto which the parties acknowledge
and agree (i) NCI shall retain an exclusive relationship
with, and (ii) Licensee shall not distribute the Bundled
Products to or through."
1.32 "TV Products shall mean products that contain all or
part of TV
1
<PAGE>
Navigator, DTV Navigator and/or eNavigator where the intended
use of such products is for television display."
4. Section 2.1.1(iii) of the OEM License Agreement is hereby amended by
deleting the entire third paragraph of said Section (which begins,
"Notwithstanding anything else in this Agreement or the attachments and
exhibits hereto, Licensee hereby agrees that it shall not modify the NCI
Source Code...") and replace it with the following:
"Licensee may modify the NCI Source Code and/or
Distributable Source as provided in this Section 2.1.1 to
create a Bundled Product that utilizes a television display
(e.g., a display that is commonly referred to as a
television, or supports television formats such as NTSC,
PAL, SECAM, HDTV formats, or other new formats derived
therefrom), provided such Bundled Product does not present
Enhanced Television. "Enhanced Television" shall be deemed
present if HTML, Javascript, or any portion of the NCI
Product is utilized for any of the purposes below.
(1) Overlay/merging of a video or television signal with
a web application;
(2) Scaling of video (e.g. "Picture in a Picture");
(3) Accessing data located in the VBI, MPEG or other
in/out of band video stream;
(4) Controlling any functions of the television or
television device (including, but not limited to,
tuning the channel, displaying channel information,
IR blasting, One Touch record to a VCR);
(5) Integrating any of the emerging television data
transport protocols with the browser or browser-
based application (including, but not limited to,
Intercast, Wink, ATVEF, DVB, MHEG and ATSC); or
(6) Manipulating any of the television system
information (SI) information, Conditional Access
System, or NVOD, VOD, PPV, and IPPV functions."
5. Section 2.1.1 of the OEM License Agreement is hereby amended by adding
the following subsection to the end of said Section:
"(iv) Notwithstanding anything in the foregoing subsection
2.1.1(iii), a non-exclusive, perpetual, irrevocable (except
as provided in Section 13), non-transferable, non-
assignable right and license, subject to payment of the
Royalties hereunder, to distribute (directly or indirectly
through Distributors) and sublicense (via Distributor
Agreements) the NCI Product and Distributable Source,
solely as incorporated in the Bundled Product, to Customers
and Distributors, and to distribute (directly or indirectly
through Distributors) and sublicense the NCI Product and
Distributable Source, solely as incorporated in the Bundled
Product, to End Users, in the Territory for Full Web
Browsing purposes. "Full Web Browsing" shall mean Web
Browsing and Directed Browsing. "Web Browsing" shall mean
any mechanism that is used to display HTML or other
Internet data via a network connection using standard
Internet connection protocols such as HTTP or other current
or future Internet protocols as defined by the W3C from
time to time. "WC3" is an organization that is generally
accepted by the industry as the authority for internet
standards.
All versions of the Bundled Product enabling Full Web
Browsing will contain the following elements to enable
NCI's Custom Connect Server, including any subsequent
versions and updates thereto ("Custom Connect Server") to
manage
2
<PAGE>
the client. The API's necessary to enable this functionality
are found in three key areas:
- HTTP based protocols;
- Javascript functions; and
- mime types.
These API's enable the device to be administered by and to
store data on trusted servers. These include, but are not
limited to, the following protocols, mime types and
functions:
- Obtaining, verifying and using trust rules (i.e.,
the rules that determine which distinguished hosts
can be trusted for which function) No host or object
that is not certified by the trust rules may access
those functions. The functions that require trust
information include, but are not limited by:
- Providing trusted content (i.e.,
content that may execute restricted
Javascript functions or mime types
- Signing updates of the eNavigator
system software
- Signing eNavigator application
software
- Making an HTTP/SSL connection;
- Setting the current time, local time zone, and
daylight savings time information;
- Uploading client error information to be logged on
the server;
- Discovering and downloading new software versions
that are available on the server;
- Accessing and storing server resident persistent
storage;
- Accessing and storing client resident persistent
storage;
- Periodic and automatic dialing and getting of URLs;
- Changing the user context of the client device;
- Setting the contact information for the device --
phone numbers, PPP login and passwords, DNS
addresses, well-known URLs;
- Uploading of device usage information to a trusted
server;
- Recognizing the client as a derivative product of a
particular version of TV Navigator using a special
form of the HTTP User Agent string; and
- Recognizing the client as being produced for a
particular original equipment manufacturer ("OEM").
This allows OEM-specific content to be easily sent
to that client. This can be done by acquiring an
OEM ID from NCI to be inserted in the HTTP User
Agent string.
Each Bundled Product enabling Full Web Browsing shall
contain the complete set of functionality, including the
functionality listed above, provided in the applicable NCI
Product ("Certification Functionality"), if technically
feasible. Each release of the Bundled Product enabling Full
Web Browsing provided by Licensee must pass the NCI
Certification Process. Licensee shall not remove, disable
or modify the Certification Functionality in the NCI
Products and shall ensure that the Certification
Functionality cannot be removed, disabled or modified by
any third party."
The NCI Certification Process consists of:
3
<PAGE>
(a) Compatibility with:
- Specified versions of the Custom Connect Server
- Well known public Web sites specified by NCI
- A set of canned test pages
(b) Licensee shall certify that the Bundled Product
enabling Full Web Browsing is certified with the same
version of the Custom Connect Server, well known public Web
sites specified by NCI and canned test pages, as the
applicable NCI Product (from which such Bundled Product
enabling Full Web Browsing was derived) was certified. NCI
will provide only to Licensee technical support services in
connection with the Certification Process which shall
include reasonable installation assistance, initial
training, and other reasonable mutually agreed upon
technical support services in order for Licensee to setup
and perform Certification Testing of Bundled Products
enabling Web Browsing.
(c) As part of the NCI Certification Process, NCI will make
available to Licensee, with each release of an NCI Product:
- A reasonable number of free copies of the
production versions of the Custom Connect
Server and associated documentation (not to
exceed five (5) copies)
- Copies of NCI test pages and URLs of the well known
public Web sites specified by NCI
Compatibility testing for the Bundled Product enabling Full
Web Browsing with the production versions of Custom Connect
Server, well known public Web sites specified by NCI, and
canned test pages shall be performed by Licensee. With
each Bundled Product enabling Full Web Browsing, NCI may
ask to monitor these tests, in which case Licensee will re-
perform the tests in NCI's presence within two (2) weeks of
NCI's request.
6. Section 2.1.2 of the OEM License Agreement is hereby amended by adding
the following to the end of the first sentence: "..., or Full Web
Browsing."
7. Section 2 of the OEM License Agreement is hereby amended by adding the
following subsection to the end of said Section:
"2.5 LICENSE TO DISTRIBUTE NCI TV NAVIGATOR AND NCI DTV
NAVIGATOR. Notwithstanding anything to the contrary
contained in Section 2.1.1(iii) (but subject to all the
other terms and conditions of this Agreement), NCI hereby
grants and Licensee hereby accepts, a non-exclusive, , non-
transferable, non-assignable license for TV Navigator
Period and right in the Territory to (i) to distribute the
object code version of the TV Navigator and DTV Navigator,
solely as incorporated in the Bundled Product to
Customers, (ii) modify solely for porting the NCI TV
Navigator and NCI DTV Navigator to the Licensee Products,
and (iii) to sublicense solely to Customers the right (a)
to reproduce the Bundled Product incorporating TV Navigator
and DTV Navigator, solely in connection with the
reproduction of Customer Bundled Products, and (b)
distribute in the Territory such Customer Bundled Products
directly or indirectly to End Users, provided that Licensee
enters into written Distributor Agreements with such
Customers "Customer Bundled Products" shall mean one or
more products developed by an Customer that consists of
the Bundled Product and such Customer's hardware. The "TV
Navigator Period" shall
4
<PAGE>
commence as of the Amendment 1 Effective Date and shall
continue unless, after a period of four (4) years from the
Amendment 1 Effective Date, either party provides the other
party with one (1) year written notice of termination."
8. Section 2.4 of the OEM License Agreement is hereby amended by adding the
following to the end of said Section:
"Subject to the terms and conditions of this Agreement, NCI
hereby grants and Licensee hereby accepts a paid up, worldwide,
non-exclusive, perpetual, irrevocable (except as provided in
Section 13), non-transferable, non-assignable right and license
(with the right to sublicense solely to Customers the right and
license) to use, modify, and reproduce the End User
Documentation, and to distribute to End Users through Customers
the End User Documentation, solely in conjunction with the
Customer Bundled Products."
9. Section 3.2 of the OEM License Agreement is hereby amended by adding the
following to the end of said Section:
"Licensee shall actively promote the NCI Server Software and
promptly notify NCI of sales leads. NCI shall, upon Licensee's
written request, supply Licensee with a reasonable number of
copies of the applicable product literature and promotional
materials for the NCI Server Software."
10. Section 3 of the OEM License Agreement is hereby amended by adding the
following to the end of said Section:
"3.6 SDKs.
3.6.1 NCI shall consult with Licensee with respect to
specifications for NCI's TV Navigator software development
kit and DTV Navigator software development kit (if and when
available) including Licensee's Tornado development tools
which are released subsequent to the Amendment 1 Effective
Date and NCI shall consult with Licensee with respect to
the implementation of such specifications. Notwithstanding
the foregoing, the parties acknowledge that all final
decisions with respect NCI's TV Navigator software
development kit and DTV Navigator software development kit
shall reside with NCI. The TV Navigator software
development kit that NCI develops pursuant to this Section
3.6.1 shall be the only version of software development kit
containing NCI's TV Navigator software and Licensees'
Tornado development tools that either party will be
permitted to develop during the term of this Agreement."
3.6.2 NCI hereby grants to Licensee a non-exclusive, ,
non-transferable, worldwide right and license for the TV
Navigator Period to, and to sublicense solely to Customers
the right to, use one (1) development seat per TV Navigator
software development kit ("NCI SDK Development Seat") for
the following purposes in accordance with the terms and
conditions set forth herein and in the applicable software
development kit license agreement (a current version of
which is attached as Exhibit B hereto) ("SDK License
Agreements"): to integrate a Customer's hardware with the
Bundled Product. All sublicenses of the TV Navigator
software development kit granted by Licensee to Customers
as provided in this Section shall be pursuant to written
SDK License Agreements. In consideration for such license,
Licensee shall pay to NCI a
5
<PAGE>
license fee of [***]* dollars ($[***]*) per NCI SDK
Development Seat licensed which amount shall be due within
thirty (30) days following the end of the quarter in which the
license fees for such NCI SDK Development Seats are due to
Licensee (which is forty-five (45) days after the date of
Licensee's invoice) ("Licensee Payment Accrual Date"). In the
event that (i) Licensee has paid for a NCI SDK Development
Seat(s), (ii) Licensee does not receive payment from the
Customer(s) for such NCI SDK Development Seat(s), and (iii) has
the NCI SDK returned to Licensee ("Returned SDK Seat") within
forty-five (45) days of the Licensee Payment Accrual Date, NCI
will credit Licensee's account in the amount of such Returned
SDK Seat, which may be applied against future license fees for
NCI SDK Development Seats for a period of one (1) year.
Licensee shall refer any requests for additional NCI SDK
Development Seat licenses and any maintenance and technical
support for the NCI SDK Development Seat to NCI."
11. Section 4.1.1 of the OEM License Agreement is hereby amended by deleting
the third sentence in said Section and replacing it with the following:
"Licensee shall pay NCI any Royalties accrued hereunder
during each quarter (as defined in Section 4.1 of the
Agreement) within thirty (30) days following the end of
such quarter and each such payment shall be accompanied by
a quarterly report as described in Section 4.3 below."
12. Section 4.3 of the OEM License Agreement is hereby amended by deleting
said Section and replacing it with the following:
"Licensee shall report to NCI within thirty (30) calendar
days after the end of each quarter, the type of Bundled
Product and/or Updates distributed directly or indirectly
to each Customer (and End User, as applicable) during such
quarter, organized in a manner to permit a separate review
of Bundled Product and Updates, the postal codes of each
such Customer (and End User, as applicable), the number of
copies and type of Bundled Product (by platform) used
internally by Licensee for the first time during such
quarter, and such other information as NCI may from time to
time reasonably request."
13. Section 13.4 of the OEM License Agreement is hereby amended by adding the
following subsection to the end of said Section:
"13.4.3 In the event that the licenses granted in
Section 2.5 are terminated by either party pursuant to
Section 2.5, and provided Licensee fulfills its obligations
specified in this Agreement with respect to such items,
Licensee may continue to use and retain copies of the
applicable NCI Product and End User Documentation, but only
for a period of five (5) years following the effective date
of such termination and only to the extent, necessary to
support and maintain the Bundled Product rightfully
distributed to End Users and Customers by Licensee,
directly or indirectly through Distributors, prior to
termination of this Agreement. After such five (5) year
period, Licensee shall, at NCI's option, either deliver to
NCI or destroy all copies of the applicable NCI Product and
End User Documentation and any other materials provided by
NCI to Licensee with respect thereto and shall furnish to
NCI an affidavit signed by an officer of Licensee
certifying that, to the best of its knowledge, such
delivery or destruction has been fully effected. For the
avoidance of doubt, termination of the licenses granted in
Section 2.5 shall not terminate this Agreement, but
- --------------
* Confidential Treatment Requested. Confidential portion has been filed with
the Securities and Exchange Commission.
6
<PAGE>
termination of this Agreement shall terminate the licenses
granted in Section 2.5. For the two (2) year period
following the date of termination of the licenses granted
in Section 2.5 and provided Licensee pays to NCI the
applicable Services Fees, NCI will provide the maintenance
and technical support services for the version of the NCI
TV Navigator and NCI DTV Navigator (as applicable) current
as of the date of such termination. In the event that as
of the date of such termination, Licensee's most current
version is an earlier version of the NCI TV Navigator and
NCI DTV Navigator (as applicable), NCI shall only support
such earlier version for two (2) years from Licensee's
receipt of such earlier version."
14. Section 14.3 of the OEM License Agreement is hereby amended by replacing
"Directed Browsing" with "Full Web Browsing" in each instance where it
appears in said Section.
15. Attachment A of the OEM License Agreement is hereby amended by deleting
the definition of NCI Product and replacing it with the following:
<TABLE>
<S> <C>
"NCI Product: NCI eNavigator-TM- Version 1.1 derived
from TV Navigator-TM- ("eNavigator"),
including Updates thereto;
NCI TV Navigator ("TV Navigator"),
including Updates thereto;
NCI DTV Navigator if and when
available ("DTV Navigator"), including
Updates thereto."
</TABLE>
16. Attachment A of the OEM License Agreement is hereby amended by deleting
the definition of Embedded Graphics Usage and replacing it with the
following:
"Embedded Graphics Usage" shall mean any use by Licensee of
the eNavigator Graphics Technology (as defined below),
provided that (a) such use of the eNavigator Graphics
Technology is solely in connection with the creation of a
non-Internet application, and (b) the eNavigator Graphics
Technology (as defined below) is not utilized to create or
in conjunction with any product marketed, distributed or
developed by Licensee that is a network browser or
otherwise competes with the NCI Product as it exists on the
date NCI delivers the Deliverables to Licensee, and (c) any
use of the HTML code is solely for the development of
static (meaning a device that does not permit downloading
of new content or user interfaces from a network),user
interface displays. The HTML code referred to in (c) above
may only be distributed in object code form. The
"eNavigator Graphics Technology" shall be limited to the
following components of the NCI Product: (i) the Window
Manager, (ii) the binary code for the Javascript engine,
(iii) the 2D Graphics library, and (iii) the UI Widget
library, (iv) the text library and (v) the binary HTML code
for the NCI Products. The source code for the foregoing
components are herein referred to as the NCI Source Code
for Embedded Graphics Usage. Notwithstanding anything in
this Agreement to the contrary Licensee shall have no right
to use the Embedded Graphics Usage in conjunction with
televisions with Full Web Browsing or to create any form of
a television "browser application". Notwithstanding
anything in this Agreement to the contrary, Licensee shall
have no rights to distribute source code for the Javascript
engine or the Bitstream font
7
<PAGE>
technology."
17. Attachment A of the OEM License Agreement is hereby amended by adding the
source header files set forth on Exhibit D hereto to the end of the
section entitled "SDK Source Headers".
18. Attachment A of the OEM License Agreement is hereby amended by adding the
following to the end of the section entitled "Deliverables":
<TABLE>
<S> <C>
"Description Estimated Delivery Date
NCI TV Navigator 1.2 within 14 days following the
Amendment 1 Effective Date
DTV Navigator if and when available"
</TABLE>
19. Attachment B of the OEM License Agreement is hereby amended by adding the
following to the end of the Section entitled "Pricing":
<TABLE>
<S> <C>
"Amendment 1
Prepaid Royalty: Licensee shall pay to NCI a
non-refundable, non-cancelable
prepayment of Royalties for
Full Web Browsing in the amount
of $[***]* payable as
follows: $[***]* upon the
Amendment 1 Effective Date,
$[***]* on or before December
31, 1998, and $[***]* on or
before May 15, 1999."
</TABLE>
20. Attachment B of the OEM License Agreement is hereby amended by deleting
the definition of "Prepaid License Fee" and replacing it with the
following:
<TABLE>
<S> <C>
" - Prepaid License Fee: The parties acknowledge and
agree that Licensee has paid to
NCI a prepaid license fee in
the amount of $[***]* for
royalties on Tier II Directed
Browsing applications. The
parties also acknowledge and
agree that such $[***]* is
no longer considered to be a
prepayment of royalties as set
forth in the foregoing sentence
but is hereby deemed to be a
one-time non-refundable, non-
cancelable, non-recoupable
license fee in consideration
for the rights granted herein
with respect to Embedded
Graphics and Directed
Browsing."
</TABLE>
21. Attachment B of the OEM License Agreement is hereby amended by deleting
the definition of "Royalties" and replacing it with the definition set
forth on Exhibit C hereto.
22. This Amendment No. 1 shall be deemed to be incorporated into the OEM
License Agreement and made a part thereof. All references to the OEM
License Agreement in any other document shall be deemed to refer to the
OEM License Agreement as modified by this Amendment No. 1. Except as
modified by this Amendment No. 1, the OEM License Agreement shall remain
in full force and effect and shall be enforceable in accordance with its
terms. In the event that the terms of this Amendment No. 1 conflict with
the terms of the OEM License Agreement, or its exhibits, as amended, the
terms of this Amendment No. 1 shall be deemed to govern.
- --------------
* Confidential Treatment Requested. Confidential portion has been filed with
the Securities and Exchange Commission.
8
<PAGE>
23. This Amendment No. 1 may be executed in counterparts, each of which shall
be deemed an original, but all of which shall constitute one and the same
document.
24. Section 2.1.4 of the OEM License Agreement is hereby amended by adding
the following to the last sentence: between the word "Usage" and
"capabilities" add ", or Full Web Browsing".
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be
duly executed as of the Amendment 1 Effective Date.
"NCI" "Licensee"
Network Computer, Inc. Wind River Systems, Inc.
By: By:
------------------------------- -------------------------------
Print Name: Print Name:
----------------------- -----------------------
Title: Title:
---------------------------- ----------------------------
9
<PAGE>
EXHIBIT A
SPECIFIED ACCOUNTS
"Specified Accounts" shall refer to the entities listed below. NCI will, within
one month following the Amendment 1 Effective Date, provide Licensee with an
updated list of Specified Accounts which will be updated to include certain of
the below listed entities' subsidiaries and which shall amend this Exhibit A.
[***]
If Wind River intends to become involved in a design of a Bundled Product with
one of the Specified Accounts ("Proposed Relationship"), Wind River will notify
NCI in writing (to NCI's General Counsel and Senior Director of OEM Sales)
requesting approval to proceed with the Proposed Relationship prior to
approaching the Specified Account. Such notice shall include the name of the
Specified Account, contact and project information. If NCI is not currently
engaged in business discussions for the same or related projects with the
Specified Account, then NCI's approval shall not be unreasonably withheld. NCI
agrees to respond to such requests for approval within five (5) business days of
NCI's acknowledgement by NCI's Senior Director of OEM Sales of receipt of such a
request, after which the Proposed Relationship will be deemed approved.
[***] CONFIDENTIAL TREATMENT REQUESTED
10
<PAGE>
Exhibit B
NCI TV NAVIGATOR-TM- SDK LICENSE AGREEMENT
The following terms shall apply to any NCI NAVIGATOR SOFTWARE DEVELOPMENT
TOOLKITs licensed to ISP (referred to as "Licensee") hereunder.
REDISTRIBUTION OF THIS SOFTWARE DEVELOPMENT TOOLKIT ("SDK") OR ANY DOCUMENTATION
PROVIDED TO LICENSEE BY NCI IS STRICTLY PROHIBITED. REDISTRIBUTION OF ANY
RESULTS CREATED USING THIS SDK ARE PROHIBITED UNLESS SUCH RIGHT HAS BEEN GRANTED
PURSUANT TO A WRITTEN LICENSE AGREEMENT EXECUTED BY NCI AND LICENSEE (THE
"RESELLER AGREEMENT") AND THEN ONLY AS LICENSED THEREBY.
THE MEDIA CONTAINED IN THIS PACKAGE INCLUDE A NUMBER OF SEPARATE PROGRAMS,
INCLUDING THE TORNADO FOR NCI TV NAVIGATOR, ADD-ON COMPONENTS AND TOOL PROGRAMS
FOR USE WITH TORNADO FOR NCI TV NAVIGATOR, AND THE NCI TV NAVIGATOR SYSTEM
COMPONENTS. LICENSEE IS PERMITTED TO USE ONLY THOSE PROGRAMS FOR WHICH LICENSEE
HAS PAID THE LICENSE FEE AND OBTAINED A PASS KEY FROM NCI ALLOWING LICENSEE
ACCESS TO THE PROGRAM. LICENSEE HAS NOT LICENSED A PROGRAM UNTIL LICENSEE HAS
PAID THE LICENSE FEE AND OBTAINED THE PASS KEY. FURTHERMORE, LICENSEE'S USE OF
THIS SDK IS SUBJECT TO ALL THE TERMS AND CONDITIONS SET FORTH BELOW.
LICENSE.
This SDK is licensed, not sold, to Licensee for use only under the terms of this
agreement, and NCI and its licensors reserve all rights not expressly granted to
Licensee. Licensee owns the media on which this SDK was originally fixed, but
NCI and its licensors retain ownership of all copies of the programs comprising
this SDK (collectively the "Programs"). Licensee (the original licensee of this
SDK) may:
(a) use this SDK on a single computer by one user at a time. Use is limited to
development of the Product or Products as defined in the Reseller Agreement
which may only be performed at the site set forth herein or, if applicable, only
at the location of Licensee's principal office as set forth in the Reseller
Agreement. Furthermore, use is limited to development for a Product or Products
which execute on a single target architecture, as set forth herein or, if
applicable, the target architecture set forth in the Reseller Agreement. The
number of authorized seats may be increased only upon approval of NCI and
payment of additional license fees.
(b) make one copy of Tornado for NCI TV Navigator or Tornado for NCI TV
Navigator Component Program licensed by Licensee or portions thereof except for
the directory "bin", sub directory "h", and the files entitled "makefile" in
directories "config/all" and "config/(target)". Such copy shall be in tangible
object code form only for physical incorporation into a Product or Products as
defined in the Reseller Agreement that Licensee develops using this SDK,
provided that such copy includes a reproduction of any notices appearing in or
on the programs included in this SDK. Such copy shall be used for development
processes only and be accessed only as part of the Target Application and not on
a stand alone or independent basis.
(c) make one copy of any licensed programs in tangible object code form for
purposes of backup; provided that such copy includes a reproduction of any
notices appearing in or on such program.
LICENSE RESTRICTIONS.
(a) Unauthorized copying of this SDK, the Programs or the written materials
included in this package is expressly forbidden. Licensee may be held legally
responsible for any copyright infringement which is caused or encouraged by
Licensee's failure to abide by the terms of this agreement.
(b) Licensee may not market, distribute, or transfer copies of this SDK or the
Program to others or electronically transfer this SDK or the Programs from one
computer to another over a network.
(c) Licensee may not: (i) permit other individuals to use this SDK or the
Programs; (ii) modify, translate, reverse engineer, decompile, disassemble
(except to the extent applicable laws specifically prohibit such restriction),
or create derivative works based on this SDK or the Programs; (iii) copy this
SDK or the Programs (except as expressly provided herein); (iv) rent, lease,
grant a security interest in, or otherwise transfer rights to this SDK or the
Programs; or (v) remove any proprietary notices or labels in or on this SDK or
the Programs.
(d) Licensee understands that NCI and its licensors may update or revise this
SDK and/or the Programs and in so doing incurs no obligation to furnish such
updates to Licensee unless Licensee has purchased current support and
maintenance services from
11
<PAGE>
NCI as described in the section below titled Technical Support.
(e) Use of this SDK and the Programs is subject to proper AND complete
installation of the NCI TV Navigator System Components pursuant to the
instructions and procedures provided to Licensee by NCI.
(f) Upon transfer of this SDK, any Program or any copy thereof, the licensed
granted hereunder shall terminate immediately.
(g) Unless otherwise agreed by the parties in writing, any and all development
by Licensee of device drivers must be performed at NCI's premises.
To the extent European Economic Community ("EEC") law is applicable, the above
restrictions on reverse engineering, decompiling, disassembling or reducing any
machine-readable software or component to human-readable form is limited so that
it prohibits such activity only to the maximum extent such activity may be
prohibited without violating the EEC Directive on the legal protection of
computer programs.
HARDWARE LOANS.
In the event that NCI has provided Licensee any hardware (including, without
limitation, the NCI Reference Platform) for use with the SDK, Licensee shall
return to NCI any such hardware immediately upon the earlier of (i) NCI's
written request to Licensee or (ii) the date agreed upon by the parties in any
separate written agreement for the return of such hardware. NCI shall retain
all right, title and interest in and to such hardware at all times, including,
without limitation, the period while such hardware is located at Licensee's
facilities.
DISCLAIMER OF WARRANTY.
THIS SDK IS PROVIDED ON AN "AS IS" BASIS. NCI AND ITS LICENSORS EXPRESSLY
DISCLAIM ALL EXPRESS AND IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION, THE
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-
INFRINGEMENT. THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THIS SDK AND
ANY RESULTS CREATED USING THIS SDK IS BORNE BY LICENSEE. IN ADDITION, THE
SECURITY MECHANISMS IMPLEMENTED BY THIS SDK AND RESULTS GENERATED THROUGH ITS
USE HAVE INHERENT LIMITATIONS, AND LICENSEE MUST DETERMINE THAT THE SDK AND SUCH
RESULTS SUFFICIENTLY MEET LICENSEE'S SECURITY REQUIREMENTS. THIS DISCLAIMER OF
WARRANTY CONSTITUTES AN ESSENTIAL PART OF THE AGREEMENT. SOME JURISDICTIONS DO
NOT ALLOW EXCLUSIONS OF AN IMPLIED WARRANTY, SO THIS DISCLAIMER MAY NOT APPLY
AND LICENSEE MAY HAVE OTHER LEGAL RIGHTS THAT VARY BY JURISDICTION.
TITLE.
Title, ownership rights, and intellectual property rights in this SDK and the
Programs shall remain in NCI and/or its licensors. This SDK is protected by the
copyright laws and treaties.
CONFIDENTIALITY.
NCI and its licensors consider this SDK and the Programs to contain valuable
trade secrets of NCI and its licensors, the unauthorized disclosure of which
could cause irreparable harm to NCI and/or its licensors. Licensee agrees to
use reasonable efforts not to disclose the Programs to any third parties and not
to use the Programs other than for the purposes authorized by this Agreement.
This confidentiality obligation shall continue after any termination of this
Agreement.
TERMINATION.
This Agreement is effective until terminated. The Sections of this Agreement
titled License Restrictions, Disclaimer of Warranty, Limitation of Liability,
Title, Confidentiality and Miscellaneous shall survive any termination or
expiration of this Agreement. This Agreement will terminate automatically upon
Licensee's failure to comply with any of the limitations described herein or in
the Reseller Agreement by and between NCI and Licensee.
Licensee hereby acknowledges that unless and until Licensee enters into a
Reseller Agreement, Licensee shall use the SDK solely for its internal
evaluation purposes.
On any termination or expiration of this Agreement, Licensee must, at NCI's
option, return or destroy the SDK, any documentation provided by NCI and any
copies thereof and shall return to NCI all hardware (including, without
limitation, the NCI Reference Profile), if any, provided by NCI to Licensee for
use with the SDK.
EXPORT CONTROLS.
12
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None of this SDK or any underlying information or technology may be
downloaded or otherwise exported or reexported (i) into (or to a national or
resident of) Cuba, Iraq, Libya, Yugoslavia, North Korea, Iran, Syria or any
other country to which the U.S. has embargoed goods; or (ii) to anyone on the
U.S. Treasury Department's list of Specially Designated Nationals or the U.S.
Commerce Department's Table of Denial Orders. By using this SDK, Licensee is
agreeing to the foregoing and Licensee is representing and warranting that
Licensee is not located in, under the control of, or a national or resident
of any such country or on any such list.
SUPPORT AND MAINTENANCE.
Upon mutual agreement of the parties and subject to NCI's standard support
and maintenance terms and conditions (including payment of NCI's then-current
support and maintenance fees), NCI shall provide to Licensee support and
maintenance for the SDK licensed hereunder.
LIMITATION OF LIABILITY.
UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY, TORT, CONTRACT, OR
OTHERWISE, SHALL NCI OR ITS LICENSORS BE LIABLE TO LICENSEE OR ANY OTHER
PERSON FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY
CHARACTER INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF GOODWILL, WORK
STOPPAGE, COMPUTER FAILURE OR MALFUNCTION, OR ANY AND ALL OTHER COMMERCIAL
DAMAGES OR LOSSES. IN NO EVENT WILL NCI BE LIABLE FOR ANY DAMAGES IN EXCESS
OF THE AMOUNT NCI RECEIVED FROM LICENSEE FOR A LICENSE TO THIS SDK, EVEN IF
NCI SHALL HAVE BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY
CLAIM BY ANY OTHER PARTY. THIS LIMITATION OF LIABILITY SHALL NOT APPLY TO
LIABILITY FOR DEATH OR PERSONAL INJURY TO THE EXTENT APPLICABLE LAW PROHIBITS
SUCH LIMITATION. FURTHERMORE, SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION
OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THIS LIMITATION AND
EXCLUSION MAY NOT APPLY TO LICENSEE. THE WARRANTY DISCLAIMERS AND LIMITATION
OF LIABILITY ARE FUNDAMENTAL ELEMENTS OF THE BASIS OF THE BARGAIN BETWEEN
LICENSEE AND NCI.
HIGH RISK ACTIVITIES.
The SDK and results created using the SDK are not fault-tolerant and is not
designed, manufactured or intended for use or resale as on-line control
equipment in hazardous environments requiring fail-safe performance, such as
in the operation of nuclear facilities, aircraft navigation or communication
systems, air traffic control, direct life support machines, or weapons
systems, in which the failure of the SDK and results created using the SDK
could lead directly to death, personal injury, or severe physical or
environmental damage ("High Risk Activities"). NCI and its licensors
specifically disclaim any express or implied warranty of fitness for High
Risk Activities.
MISCELLANEOUS.
This Agreement represents the complete agreement concerning this license and
may amended only by a writing executed by both parties. THE ACCEPTANCE OF ANY
PURCHASE ORDER PLACED BY LICENSEE IS EXPRESSLY MADE CONDITIONAL ON LICENSEE'S
ASSENT TO THE TERMS SET FORTH HEREIN, AND NOT THOSE IN LICENSEE'S PURCHASE
ORDER. If any provision of this Agreement is held to be unenforceable, such
provision shall be reformed only to the extent necessary to make it
enforceable and the remaining provisions of this Agreement will not be
affected or impaired in any way. This Agreement shall be governed by
California law without regard to the conflict of laws provisions thereof. The
application the United Nations Convention of Contracts for the International
Sale of Goods is expressly excluded. If any legal action or proceeding is
brought for the enforcement of this Agreement, or because of any alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in
such action or proceeding, in addition to any other relief to which such
party may be entitled.
U.S. GOVERNMENT RESTRICTED RIGHTS.
If this SDK is acquired by or on behalf of a unit or agency of the United
States Government, this provision applies. If the Programs are acquired by or
on behalf of a unit or agency of the United States Government, this provision
applies. The Programs: (a) were developed at private expense, are existing
computer software and no part of them were developed with government funds,
(b) are a trade secret of NCI or its licensors for all purposes of the
Freedom of Information act, (c) are "restricted computer software" submitted
with restricted rights in accordance with subparagraphs (a) through (d) of
the
13
<PAGE>
Commercial Computer Software-Restricted Rights clause at 52.227-19 and its
successors, (d) in all respects are proprietary data belonging solely to NCI
or its licensors, and (e)are unpublished and all rights are reserved under
the copyright laws of the United States. For units of the Department of
Defense (DoD), the programs are licensed only with "Restricted Rights" as
that term is defined in the DoD supplement to the Federal Acquisition
Regulation 252.227-7013 (c)(1)(ii), Rights in Technical Data and Computer
Software and its successors, and use, duplication or disclosure is subject to
restrictions as set forth in subdivision (c)(1)(ii) of the Rights in
Technical Data and Computer Software clause at 252.227-7013 or to NCI's
standard commercial license, as applicable. Contractor/manufacturer is
Network Computer, Inc., 1000 Bridge Parkway, Redwood Shores, CA 94065. If
the Programs are acquired under a GSA Schedule, the Government has agreed to
refrain from changing or removing any insignia or lettering from the Programs
or the documentation as provided or from producing copies of manuals or media
(except for backup purposes).
14
<PAGE>
EXHIBIT C
PRICING
"- Royalties:
a) For Directed Browsing/Embedded Graphics Applications
for eNavigator:
<TABLE>
<CAPTION>
=============================================================================
PRODUCT ROYALTY/UNIT
- -----------------------------------------------------------------------------
<S> <C>
Tier I: NCI eNavigator v1.1 for Directed
Browsing (excluding Tier II applications) NONE
- -----------------------------------------------------------------------------
Tier II: NCI eNavigator v1.1 for Directed
Browsing Applications for Web Phones, Car
Navigation Systems, and Personal Digital
Assistants NONE
- -----------------------------------------------------------------------------
Embedded Graphics Applications SEE BELOW
=============================================================================
NCI eNavigator v1.1 Source Code Access N/A
=============================================================================
</TABLE>
In the event Licensee elects to include available third
party modules, Licensee agrees to pay optional third party
royalties at a [***]* percent ([***]*%) discount off of NCI's
list price applicable to such optional modules provided
that such third party module is available from NCI in
source code form. Personal Java will be treated as an
optional third party module if available.
Licensee shall make the following payments for distributing
units of the Bundled Product as follows:
(i) For any Bundled Product where the use of
eNavigator is restricted solely to Embedded Graphics Usage,
Licensee shall owe no additional Royalty hereunder.
(ii) For any Bundled Product licensed for any Tier
I Application or Tier II Application of Directed Browsing,
Licensee shall owe no additional Royalty hereunder.
b) For Web Browsing:
Licensee shall pay a Royalty on each unit of the
Bundled Product manufactured which includes
eNavigator and which provides Web Browsing
capabilities which shall be (i) at least [***]*% of
Licensee's combined selling price for the Bundled
Product, (ii) at least [***]*% of Licensee's selling
price for eNavigator, and (iii) subject to the
minimum per unit Royalties set forth below. Web
Browsing Royalties shall be due at the end of the
quarter of the applicable Licensee Payment Accrual
Date.
- --------------
* Confidential Treatment Requested. Confidential portion has been filed with
the Securities and Exchange Commission.
15
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
COMMITTED UNIT VOLUME MINIMUM ENAVIGATOR MINIMUM ENAVIGATOR
PER PROJECT Royalties per unit Royalties per unit of
of Bundled Product Bundled Product manufactured
manufactured not utilizing a television
utilizing a television display in any form, but do
display in any form not present Enhanced TV
- ------------------------------------------------------------------------------------------
<S> <C> <C>
First 1000 $[***]* $[***]*
- ------------------------------------------------------------------------------------------
1,001 - 2,499 $[***]* $[***]*
- ------------------------------------------------------------------------------------------
2,500 - 4,999 $[***]* $[***]*
- ------------------------------------------------------------------------------------------
5,000 - 9999 $[***]* $[***]*
- ------------------------------------------------------------------------------------------
10,000 - 24,999 $[***]* $[***]*
- ------------------------------------------------------------------------------------------
25,000 - 49,999 $[***]* $[***]*
- ------------------------------------------------------------------------------------------
50,000 - 99,999 $[***]* $[***]*
- ------------------------------------------------------------------------------------------
100,000 - 249,999 $[***]* $[***]*
- ------------------------------------------------------------------------------------------
250,000 - 499,999 $[***]* $[***]*
- ------------------------------------------------------------------------------------------
500,000 - 999,999 $[***]* $[***]*
- ------------------------------------------------------------------------------------------
1,000,000+ $[***]* $[***]*
- ------------------------------------------------------------------------------------------
</TABLE>
c) For TV and DTV Navigator (if and when available):
Licensee will pay to NCI a royalty which is equal to
[***]* percent ([***]*%) of NCI's then-current price
list for TV Navigator or DTV Navigator (if and when
available), as applicable, per each unit of the
Customer Bundled Product manufactured incorporating
the TV Navigator or the DTV Navigator (if and when
available). TV Navigator and DTV Navigator
Royalties shall be due at the end of the quarter of
the applicable Licensee Payment Accrual Date."
- --------------
* Confidential Treatment Requested. Confidential portion has been filed with
the Securities and Exchange Commission.
16
<PAGE>
EXHIBIT D
SOURCE HEADER FILES
TVNavSDK\include\anim
TVNavSDK\include\AppError.h
TVNavSDK\include\appmod
TVNavSDK\include\AppMsg.h
TVNavSDK\include\arch
TVNavSDK\include\assert.h
TVNavSDK\include\aud
TVNavSDK\include\AudMsg.h
TVNavSDK\include\Base.h
TVNavSDK\include\bootLib.h
TVNavSDK\include\cAccntMan.h
TVNavSDK\include\cacheLib.h
TVNavSDK\include\CacheMan.h
TVNavSDK\include\capabilities.h
TVNavSDK\include\cAud.h
TVNavSDK\include\cCacheMan.h
TVNavSDK\include\cErrLog.h
TVNavSDK\include\CharSet.h
TVNavSDK\include\chat
TVNavSDK\include\cHwfHandlers.h
TVNavSDK\include\cI8042.h
TVNavSDK\include\cIspConnect.h
TVNavSDK\include\classLib.h
TVNavSDK\include\cNotifier.h
TVNavSDK\include\codeHeader.h
TVNavSDK\include\cRemote.h
TVNavSDK\include\ctype.h
TVNavSDK\include\DataWrapper.h
TVNavSDK\include\dbgLib.h
TVNavSDK\include\Destroyable.h
TVNavSDK\include\dir.txt
TVNavSDK\include\dllLib.h
TVNavSDK\include\errno.h
TVNavSDK\include\errnoLib.h
TVNavSDK\include\esf.h
TVNavSDK\include\excLib.h
TVNavSDK\include\fcntl.h
TVNavSDK\include\Fetcher.h
TVNavSDK\include\gfx
TVNavSDK\include\html
TVNavSDK\include\HtmlHandler.h
TVNavSDK\include\iCacheMan.h
TVNavSDK\include\int64.h
TVNavSDK\include\intl
TVNavSDK\include\intLib.h
TVNavSDK\include\ioLib.h
TVNavSDK\include\iosLib.h
TVNavSDK\include\iv.h
TVNavSDK\include\JisKbd.h
TVNavSDK\include\kernel
TVNavSDK\include\limits.h
TVNavSDK\include\liveConn
TVNavSDK\include\logLib.h
TVNavSDK\include\lstLib.h
TVNavSDK\include\Mail.h
17
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TVNavSDK\include\MailNotHandler.h
TVNavSDK\include\math.h
TVNavSDK\include\media
TVNavSDK\include\memLib.h
TVNavSDK\include\mime
TVNavSDK\include\MimeHandler.h
TVNavSDK\include\MiscPlatformDep.h
TVNavSDK\include\module.h
TVNavSDK\include\navio.h
TVNavSDK\include\navioBoot.h
TVNavSDK\include\navioErr.h
TVNavSDK\include\navioInit.h
TVNavSDK\include\net
TVNavSDK\include\net.h
TVNavSDK\include\NviParamdef.h
TVNavSDK\include\objLib.h
TVNavSDK\include\PlatformInfo.h
TVNavSDK\include\PlatformInfoBitmask.h
TVNavSDK\include\portServices.h
TVNavSDK\include\PrintDriver.h
TVNavSDK\include\private
TVNavSDK\include\qClass.h
TVNavSDK\include\qLib.h
TVNavSDK\include\reg
TVNavSDK\include\regs.h
TVNavSDK\include\rngLib.h
TVNavSDK\include\Rtc.h
TVNavSDK\include\scriptSym
TVNavSDK\include\sec
TVNavSDK\include\selectLib.h
TVNavSDK\include\semLib.h
TVNavSDK\include\sioLib.h
TVNavSDK\include\SmartBoot.h
TVNavSDK\include\stdarg.h
TVNavSDK\include\stddef.h
TVNavSDK\include\stdio.h
TVNavSDK\include\stdlib.h
TVNavSDK\include\string.h
TVNavSDK\include\stringutil.h
TVNavSDK\include\sys
TVNavSDK\include\sysLib.h
TVNavSDK\include\taskLib.h
TVNavSDK\include\Text.h
TVNavSDK\include\TextTypes.h
TVNavSDK\include\tickLib.h
TVNavSDK\include\time.h
TVNavSDK\include\ttyLib.h
TVNavSDK\include\tyLib.h
TVNavSDK\include\types
TVNavSDK\include\unistd.h
TVNavSDK\include\USKbd.h
TVNavSDK\include\util
TVNavSDK\include\Vec.h
TVNavSDK\include\vid
TVNavSDK\include\Virtual.h
TVNavSDK\include\vwModNum.h
TVNavSDK\include\vxWorks.h
TVNavSDK\include\wchar.h
TVNavSDK\include\wdLib.h
TVNavSDK\include\widget
TVNavSDK\include\win
18
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TVNavSDK\include\anim\AnimPlyr.h
TVNavSDK\include\appmod\AppModule.h
TVNavSDK\include\arch\i86
TVNavSDK\include\arch\mips
TVNavSDK\include\arch\ppc
TVNavSDK\include\arch\i86\archI86.h
TVNavSDK\include\arch\i86\cacheI86Lib.h
TVNavSDK\include\arch\i86\dbgI86Lib.h
TVNavSDK\include\arch\i86\esfI86.h
TVNavSDK\include\arch\i86\excI86Lib.h
TVNavSDK\include\arch\i86\ivI86.h
TVNavSDK\include\arch\i86\regsI86.h
TVNavSDK\include\arch\mips\archMips.h
TVNavSDK\include\arch\mips\r4000.h
TVNavSDK\include\aud\Aud.h
TVNavSDK\include\aud\cAud.h
TVNavSDK\include\aud\Snd.h
TVNavSDK\include\aud\UiSnd.h
TVNavSDK\include\gfx\cColor.h
TVNavSDK\include\gfx\Color.h
TVNavSDK\include\gfx\FbColor.h
TVNavSDK\include\gfx\FbMemRegion.h
TVNavSDK\include\gfx\GfxCtx.h
TVNavSDK\include\gfx\GfxPrims.h
TVNavSDK\include\gfx\GfxTypes.h
TVNavSDK\include\gfx\GfxUtil.h
TVNavSDK\include\gfx\GifCond.h
TVNavSDK\include\gfx\Image.h
TVNavSDK\include\gfx\PdGfx.h
TVNavSDK\include\gfx\PixMap.h
TVNavSDK\include\gfx\png.h
TVNavSDK\include\gfx\Rect.h
TVNavSDK\include\gfx\RectList.h
TVNavSDK\include\gfx\t9685i2c.h
TVNavSDK\include\gfx\VBlankClock.h
TVNavSDK\include\intl\Locale.h
TVNavSDK\include\kernel\ansiTimeExt.h
TVNavSDK\include\kernel\BSem.h
TVNavSDK\include\kernel\cBsem.h
TVNavSDK\include\kernel\cClock.h
TVNavSDK\include\kernel\cCondVar.h
TVNavSDK\include\kernel\cDirectory.h
TVNavSDK\include\kernel\cEvent.h
TVNavSDK\include\kernel\cFile.h
TVNavSDK\include\kernel\cHwFault.h
TVNavSDK\include\kernel\Clock.h
TVNavSDK\include\kernel\ClockTypes.h
TVNavSDK\include\kernel\cMemRegion.h
TVNavSDK\include\kernel\cMsgQueue.h
TVNavSDK\include\kernel\cMsgTypes.h
TVNavSDK\include\kernel\cMutex.h
TVNavSDK\include\kernel\CondVar.h
TVNavSDK\include\kernel\cShareLock.h
TVNavSDK\include\kernel\cSysMonitor.h
TVNavSDK\include\kernel\cSystem.h
TVNavSDK\include\kernel\cThread.h
TVNavSDK\include\kernel\cTimer.h
TVNavSDK\include\kernel\Directory.h
TVNavSDK\include\kernel\Event.h
TVNavSDK\include\kernel\File.h
TVNavSDK\include\kernel\HwFault.h
19
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TVNavSDK\include\kernel\iBsem.h
TVNavSDK\include\kernel\iClock.h
TVNavSDK\include\kernel\iCondVar.h
TVNavSDK\include\kernel\iDirectory.h
TVNavSDK\include\kernel\iEvent.h
TVNavSDK\include\kernel\iFile.h
TVNavSDK\include\kernel\iHwFault.h
TVNavSDK\include\kernel\iMemRegion.h
TVNavSDK\include\kernel\iMsgQueue.h
TVNavSDK\include\kernel\iMutex.h
TVNavSDK\include\kernel\iShareLock.h
TVNavSDK\include\kernel\iSystem.h
TVNavSDK\include\kernel\iThread.h
TVNavSDK\include\kernel\iTimer.h
TVNavSDK\include\kernel\MemRegion.h
TVNavSDK\include\kernel\Msg.h
TVNavSDK\include\kernel\MsgQueue.h
TVNavSDK\include\kernel\Mutex.h
TVNavSDK\include\kernel\ShareLock.h
TVNavSDK\include\kernel\System.h
TVNavSDK\include\kernel\Thread.h
TVNavSDK\include\kernel\Timer.h
TVNavSDK\include\kernel\TimerTypes.h
TVNavSDK\include\liveConn\LiveConnEnabled.h
TVNavSDK\include\liveConn\LiveConnLoadable.h
TVNavSDK\include\media\Conductor.h
TVNavSDK\include\media\iConductor.h
TVNavSDK\include\mime\MimeRequest.h
TVNavSDK\include\net\uio.h
TVNavSDK\include\private\classLibP.h
TVNavSDK\include\private\eventP.h
TVNavSDK\include\private\funcBindP.h
TVNavSDK\include\private\objLibP.h
TVNavSDK\include\private\semLibP.h
TVNavSDK\include\reg\cReg.h
TVNavSDK\include\reg\cRegDef.h
TVNavSDK\include\reg\cRegName.h
TVNavSDK\include\reg\reg.h
TVNavSDK\include\scriptSym\DataValue.h
TVNavSDK\include\sys\fcntlcom.h
TVNavSDK\include\sys\ioctl.h
TVNavSDK\include\sys\times.h
TVNavSDK\include\sys\types.h
TVNavSDK\include\types\navANSI.h
TVNavSDK\include\types\navArch.h
TVNavSDK\include\types\navCpu.h
TVNavSDK\include\types\navParams.h
TVNavSDK\include\types\navTypes.h
TVNavSDK\include\types\navTypesBase.h
TVNavSDK\include\types\navTypesOld.h
TVNavSDK\include\types\vxANSI.h
TVNavSDK\include\types\vxArch.h
TVNavSDK\include\types\vxCpu.h
TVNavSDK\include\types\vxParams.h
TVNavSDK\include\types\vxTypes.h
TVNavSDK\include\types\vxTypesBase.h
TVNavSDK\include\types\vxTypesOld.h
TVNavSDK\include\util\navFlash.h
TVNavSDK\include\util\navRom.h
TVNavSDK\include\util\ScreenSaver.h
TVNavSDK\include\vid\cVid.h
20
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TVNavSDK\include\vid\Tv.h
TVNavSDK\include\widget\Alert.h
TVNavSDK\include\widget\Ascii.h
TVNavSDK\include\widget\Border.h
TVNavSDK\include\widget\CheckBox.h
TVNavSDK\include\widget\Component.h
TVNavSDK\include\widget\Container.h
TVNavSDK\include\widget\Document.h
TVNavSDK\include\widget\Focus.h
TVNavSDK\include\widget\Frame.h
TVNavSDK\include\widget\Grid.h
TVNavSDK\include\widget\Highlight.h
TVNavSDK\include\widget\History.h
TVNavSDK\include\widget\iCheckBox.h
TVNavSDK\include\widget\Indicator.h
TVNavSDK\include\widget\iPushButton.h
TVNavSDK\include\widget\KeyCodes.h
TVNavSDK\include\widget\Layout.h
TVNavSDK\include\widget\ListBox.h
TVNavSDK\include\widget\Picture.h
TVNavSDK\include\widget\player.h
TVNavSDK\include\widget\ProgressBar.h
TVNavSDK\include\widget\PushButton.h
TVNavSDK\include\widget\RadioButton.h
TVNavSDK\include\widget\SoftKbd.h
TVNavSDK\include\widget\TextArea.h
TVNavSDK\include\widget\TextEdit.h
TVNavSDK\include\widget\TextField.h
TVNavSDK\include\widget\TextLabel.h
TVNavSDK\include\widget\TvPicture.h
TVNavSDK\include\widget\Widget.h
TVNavSDK\include\widget\WidgetErrorBase.h
TVNavSDK\include\win\Point.h
TVNavSDK\include\win\Win.h
TVNavSDK\include\win\WinEvent.h
TVNavSDK\include\win\WinInput.h
TVNavSDK\include\win\WinManConn.h
21
<PAGE>
AMENDMENT N0. 2 TO
OEM LICENSE AGREEMENT
BETWEEN NETWORK COMPUTER, INC.
AND WIND RIVER SYSTEMS, INC.
DATED DECEMBER 31, 1997
This Amendment No. 2 ("Amendment No. 2") to the OEM License Agreement dated
December 31, 1997 between Network Computer, Inc. a Delaware corporation ("NCI")
and Wind River Systems, Inc., a Delaware corporation ("Licensee"), as amended
(the "OEM License Agreement"), is made and entered into this 8th day of
February, 1999 (the "Amendment 2 Effective Date").
RECITALS
A. Licensee has been granted a license to certain NCI technology under
the terms and subject to the conditions set forth in the OEM License
Agreement.
B. The parties desire to amend the OEM License Agreement as set forth in
this Amendment No. 2.
C. All capitalized terms not defined herein shall have the meanings given
them in the OEM License Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Section 2.1 of the OEM License Agreement, as amended, is hereby amended by
adding the following subsection to the end of said Section:
"2.1.6 OPTIONAL SOURCE CODE. NCI may from time to time, but is
not obligated to, deliver to Licensee additional source code that
is not a standard feature in the NCI Products ("Optional Source
Code"). OPTIONAL SOURCE CODE SHALL BE PROVIDED "AS-IS" AND ALL
REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, AND
NON-INFRINGEMENT, ARE HEREBY DISCLAIMED. Optional Source Code shall
be subject to all the terms and restrictions that the NCI Source
Code is subject to; except that the terms in sections 5.1, 9, and
10 and Attachments A and B that apply to NCI Source Code shall not
be applicable to Optional Source Code. The Optional Source Code
shall be provided to Licensee at no additional charge, unless
otherwise agreed in writing by the parties."
2. This Amendment No. 2 shall be deemed to be incorporated into the OEM
License Agreement and made a part thereof. All references to the OEM
License Agreement in any other document shall be deemed to refer to the OEM
License Agreement as modified by this Amendment No. 2. Except as modified
by this Amendment No. 2, the OEM License Agreement shall remain in full
force and effect and shall be enforceable in accordance with its terms. In
the event that the terms of this Amendment No. 2 conflict with the terms of
the OEM License Agreement, or its exhibits, as amended, the terms of this
Amendment No. 2 shall be deemed to govern.
<PAGE>
3. This Amendment No. 2 may be executed in counterparts, each of which shall
be deemed an original, but all of which shall constitute one and the same
document.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be
duly executed as of the Amendment 2 Effective Date.
"NCI" "Licensee"
Network Computer, Inc. Wind River Systems, Inc.
By: By:
-------------------------- --------------------------
Print Name: Print Name:
------------------ ------------------
Title: Title:
----------------------- -----------------------
<PAGE>
Exhibit 10.14
09/08/98
TECHNOLOGY
LICENSE
AGREEMENT
between
ORACLE CORPORATION
and
NETWORK COMPUTER, INC.
SIGNATURE PAGE
This Technology License Agreement (the "Agreement") is made by and between
Oracle Corporation, a Delaware corporation ("Oracle") and Network Computer, Inc.
("NCI"), a Delaware corporation.
AGREEMENT ACKNOWLEDGMENT
The undersigned hereby acknowledge that they have read and that they fully
understand the terms of this Agreement.
The undersigned hereby agree that by signing below they become parties to this
Agreement and agree to be bound by all terms, conditions, and obligations
contained herein.
The Effective Date of this Agreement shall be September 8, 1998.
------------------
ORACLE CORPORATION NETWORK COMPUTER INC.
By: /s/ RAY LANE By: /s/ DAVID ROUST
- -------------------------------- --------------------------------
Name: Ray Lane Name: David Roust
-------------------------- --------------------------
Title: President & CCO Title: CEO
------------------------- -------------------------
EXECUTED IN DUPLICATE
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<PAGE>
RECITALS
A. Oracle designs, develops, markets, licenses and supports information
systems software products with a wide variety of uses, including
database management, applications development, decision support,
programmer management, programmer tools, computer network
communications, end user applications, and office automation.
B. NCI owns all rights, title, and interest in, or has been licensed by
the owner of, the NCI Technology (as hereinafter defined).
C. Oracle desires to promote, market and distribute sublicenses of the NCI
Technology through its worldwide distribution channels to corporations,
governments, institutions and other entities.
D. NCI desires to grant Oracle a license to market and sublicense the NCI
Technology as specified in this Agreement.
Therefore, in consideration of the mutual promises and covenants set forth
below, Oracle and NCI agree as follows:
ARTICLE I
DEFINITIONS
1.1 DISTRIBUTOR
"Distributor" shall mean a third party that is appointed by Oracle or its
Distributor to market and sublicense all or part of the NCI Technology under the
terms of this Agreement, including "ISP Distributor" who are appointed by Oracle
to distribute NCI's Consumer Software and "SI Distributor" who are appointed by
Oracle to distribute NCI's Corporate Software.
1.2 DOCUMENTATION
"Documentation" shall mean the installation guides, user guides and manuals for
use of the NCI Technology in printed and machine-readable form.
1.3 INTELLECTUAL PROPERTY RIGHTS
"Intellectual Property Rights" shall mean all patent, copyright, trade secret,
trademark and other intellectual property rights.
1.4 NCI TECHNOLOGY
"NCI Technology" shall mean the NCI Consumer Software, the NCI Corporate
Software and the NCI SDK Software. Additional software may be added to Exhibit A
(including localized versions of the NCI Technology) upon mutual written
agreement of the parties.
1.5 NCI CONSUMER SOFTWARE
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<PAGE>
"NCI Consumer Software" shall mean the computer software specified as "NCI
Consumer Software" on Exhibit A owned or distributed by NCI and any Updates
thereto. Unless otherwise specified, "NCI Consumer Software" shall include
Object Materials and Documentation.
1.6 NCI CORPORATE SOFTWARE
"NCI Corporate Software" shall mean the computer software specified as "NCI
Corporate Software" on Exhibit A owned or distributed by NCI and any Updates
thereto. Unless otherwise specified, "NCI Corporate Software" shall include
Object Materials and Documentation.
1.7 NCI SDK SOFTWARE
"NCI SDK Software" shall mean the computer software specified as a "Software
Development Kit" on Exhibit A owned or distributed by NCI and any Updates
thereto. Unless otherwise specified, "NCI SDK Software" shall include Object
Materials and Documentation.
1.8 NCI PRICE LIST
"NCI Price List" shall mean NCI's suggested retail price list for the NCI
Technology. A current copy of NCI's Price List is attached hereto as Exhibit C
and may be updated by NCI from time to time by providing sixty days written
notice of such update to Oracle's Vice President of Worldwide Operations. All
prices in the NCI Price List are in U.S. dollars.
1.9 OBJECT MATERIALS
"Object Materials" shall mean materials, in machine-readable form, necessary to
run the NCI Technology, including all computer programming code, substantially
or entirely in binary form, which is directly executable by a computer after
suitable processing but without the intervening steps of compilation or assembly
and all help, message, and overlay files.
1.10 ORACLE
"Oracle" shall mean Oracle Corporation and any Oracle Subsidiary. "Oracle
Subsidiary" shall mean any corporation, partnership or firm, in which Oracle,
directly or indirectly, holds a fifty percent (50%) or more ownership interest.
1.11 SUBLICENSE/SUBLICENSEE
"Sublicense" shall mean any license granted by Oracle or its Distributors for
use of NCI Technology. "Sublicensee" shall be a party who is granted a
Sublicense, either directly by Oracle or indirectly by a Distributor.
1.12 UPDATES
"Updates" shall mean any releases (including any preproduction releases) of NCI
Technology created on or after the Effective Date, including bug fixes,
improvements, enhancements, new versions or releases, and successor products
thereto (including any product that substantially replaces the NCI Technology or
portion thereof in a particular market segment) which NCI provides to Oracle as
a supported licensee of the NCI Technology under NCI's Technical Support
Services policies.
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<PAGE>
1.14 YEARS, QUARTERS
For the purposes of this Agreement, "Quarters" shall be deemed to commence on
the first day of June, September, December and March of each year of this
Agreement and each year of the Agreement shall be determined using the Effective
Date as the first day of the first year.
ARTICLE II
LICENSES GRANTED
2.1 DELIVERY OF NCI TECHNOLOGY
NCI shall deliver to Oracle the NCI Technology, including a complete set of
Object Materials and Documentation for the NCI Technology (except for NC Cards)
on the Effective Date of this Agreement and shall deliver all Updates of the NCI
Technology promptly upon completion, and in no event later than when such
Updates are delivered to any other licensee. In addition, NCI shall deliver
pre-production releases of the NCI Technology ("Beta NCI Technology") to Oracle
promptly upon completion and in no event later than when such Beta NCI
Technology is delivered to any other licensee subject to Oracle's execution of
NCI's standard Beta Agreement.
NCI shall deliver to Oracle the number of NC Cards requested by Oracle as soon
as commercially feasible after receiving a purchase order from Oracle for the NC
Cards.
2.2 DEVELOPMENT AND TECHNICAL SUPPORT LICENSE
NCI grants to Oracle a worldwide, royalty-free, non-exclusive, paid-up right and
license to execute, copy, reproduce, display, perform, develop, create
derivative works based on or otherwise use, change and/or maintain the Object
Materials and Documentation. Oracle shall only port, localize, translate and/or
customize the NCI Technology upon NCI's request under the terms and conditions
of the Services Agreement between Oracle and NCI effective as of the date
hereof.
NCI also grants to Oracle a worldwide, royalty-flee, non-exclusive, paid-up
right and license to use, execute, copy, reproduce, display, and/or perform the
NCI Technology as required to provide technical support services to end users of
the NCI Technology, provided that the foregoing grant shall be subject to any
applicable restrictions on internal use of embedded third party technology which
Oracle receives prior written notice of from NCI and which are imposed by NCI's
license agreements in effect with third party vendors. A current list of third
party restrictions is set forth on Exhibit G and Oracle shall comply with those
restrictions which specifically apply to internal use of the NCI Technology.
NCI also grants to Oracle a worldwide, royalty-flee, non-exclusive, paid-right
and license to use, execute, copy, reproduce, display and/or perform the NCI
Beta Technology for internal evaluation purposes only. Oracle shall have no
right to sublicense the NCI Beta Technology without the prior written approval
of the General Counsel and NCI Oracle Channel Manager (as defined on Exhibit E)
or other NCI designated representative. If such approval is granted, Oracle
shall have the right to sublicense the NCI Beta Technology under the terms and
conditions specified in Section 2.3 below for the NCI Technology.
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<PAGE>
2.3 SUBLICENSING LICENSE
2.3.A SCOPE OF LICENSE.
Subject to the terms set forth herein, NCI hereby grants to Oracle a
worldwide, non-exclusive right and license to market, reproduce,
distribute and grant Sublicenses of the Object Materials and
Documentation of the NCI Technology including all Updates for use the
designated systems specified on NCI's Price List; provided, however,
that Oracle may not sublicense, without NCI's prior consent, the NCI
Technology to any customer listed on Exhibit D. Unless otherwise agreed
by the parties, Oracle and Distributors shall sublicense the NCI
Technology to end users under the applicable NCI standard end user
license agreement attached hereto as Exhibit H (the "NCI License") or
as such agreements are modified by NCI from time to time (which
modifications shall not impose any liability upon Oracle). For example,
the NCI SDK Software shall be sublicensed under the NCI SDK End User
License attached as part of Exhibit H. The NCI Technology provided by
NCI to Oracle under this Agreement shall contain an electronic version
of the applicable NCI License which shall be automatically presented to
the end user for acceptance during the installation process. Oracle
shall have no liability for its distribution of the NCI Technology
under an NCI License.
2.3.B DISTRIBUTORS.
NCI grants Oracle the right to license, sublicense and authorize
Distributors to market and sublicense to end users the Object Materials
and Documentation. of the NCI Technology including all Updates under
the terms of this Agreement, excluding the right to license, sublicense
and authorize other distributors to exercise the same rights unless NCI
has given its prior written approval to grant the Distributor the right
to appoint sub-distributors, which approval shall not be unreasonably
withheld. Except for ISP Distributors, Oracle will appoint Distributors
to grant sublicenses to the NCI Technology under the same terms and
conditions under which Oracle appoints Distributors to sublicense its
own products. A copy of Oracle's current distribution agreement is
attached as Exhibit B hereto. For ISP Distributors, Oracle will appoint
ISP Distributors to grant sublicenses to the NCI Consumer Software
under the same terms and conditions under which Oracle appoints
Distributors to sublicense its own products provided that Oracle shall
also have each ISP Distributor execute an ISP Addendum substantially in
the form attached hereto as Exhibit I.
2.3.C TRADEMARKS.
During the term of the Agreement, NCI hereby grants to Oracle and its
Distributors a nonexclusive, fully paid up license to use in connection
with marketing and distributing the NCI Technology the product name(s)
and trademark(s) used by NCI to identify the NCI Technology, subject to
Oracle's and Distributors' compliance with NCI's Signature Guidelines
attached as Exhibit F hereto, and to use such product names and
trademarks with Oracle trademarks in a manner that identifies such
products as parts of the Oracle product set. Oracle and Distributors
shall attribute all NCI product names and trademarks to NCI in Oracle's
use of such product names and trademarks.
2.4 INTERNAL USE LICENSE
Oracle shall have the perpetual, unrestricted right to reproduce, install and
use the NCI Technology, including Updates for its own internal use at no
additional charge; provided that Oracle's right to reproduce and distribute the
NCI Technology internally shall be limited to the term of this Agreement. This
right of internal use applies only to Oracle and Oracle Subsidiaries, and shall
not be extended to other Distributors and Sublicensees. Oracle will pay a
mutually agreed upon royalty to NCI for such internal use only if: (i)
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<PAGE>
NCI is obligated to pay a third party a royalty for the internal use license
grant to Oracle; and (ii) NCI provides Oracle with advance written notice of
this obligation and the amount of the royalty; and (iii) Oracle agrees in
writing to pay such royalty. If the parties are unable to agree upon such
royalty, Oracle's internal right to use and reproduce the applicable portion of
the NCI Technology requiring a third party royalty will cease. Other than as
specified in the preceding sentence, Oracle's internal use license shall be
fully paid up and royalty free.
2.5 OWNERSHIP AND INTELLECTUAL PROPERTY RIGHTS
NCI further grants to Oracle a worldwide, nonexclusive, nontransferable and
paid-up license to all Intellectual Property Rights necessary to use the NCI
Technology in accordance with the license granted under this Agreement; such
Intellectual Property Rights are included in the licenses granted to Oracle
under this Agreement.
Other than as licensed herein, NCI shall retain all right, title and interest to
NCI Technology and the NCI Beta Technology and any modification, enhancement,
localization or extension of the NCI Technology developed by Oracle under this
Agreement ("Modifications"). Modifications shall exclude any Application
Modifications as defined below. NCI hereby grants to Oracle a non-exclusive,
irrevocable, perpetual, worldwide, royalty free, fully paid-up license to use,
reproduce, modify, create derivative works based on, and sublicense the
Applications Modifications, including the right to sublicense through
distributors.
"Applications Modifications" shall mean any modifications, adaptations or
derivatives to NCI's SDK Software developed by or on behalf of Oracle which are
either (i) solely artwork modifications or (b) HTML or JAvaScript code (not
object) modifications specific to Oracle's Sublicenssee's implementation of the
NCI Technology. The parties shall jointly own all right, title and interest in
and to any Applications Modifications. Each party shall have non-exclusive,
undivided, equal ownership in the Application Modifications. Each party may
exercise any and all rights of ownership and may sublicense such rights in the
Application Modifications as if such rights were solely owned by each such
party, without permission of the other party, royalty-free and without duty to
account. Nothing in this paragraph shall grant to Oracle a license in the
underlying NCI Technology or NCI a license in any pre-existing Oracle programs
of Intellectual Property Rights.
NCI shall have sole responsibility for payment of all royalties and other
charges with respect to third party materials included in the NCI Technology, if
any. Oracle shall have no obligation to pay or account for such royalties or
other charges.
2.6 JOINT MARKETING AND SALES ACTIVITIES
The parties agree to undertake the joint marketing efforts identified on Exhibit
E. Except as specified on Exhibit E, Oracle shall have no obligation to market
the NCI Technology or any products containing the NCI Technology if it so
chooses, shall have full freedom and flexibility in the design and
implementation of its marketing efforts, and may discontinue any marketing
efforts at any time.
2.7 QUARTERLY MEETINGS
The parties agree to hold quarterly review meetings as necessary to review
business opportunities and marketing strategies.
ARTICLE III
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<PAGE>
FEES AND PAYMENTS
3.1 SUBLICENSE FEES
Oracle will pay to NCI a fee equal to seventy percent (70%) of the Net Fees
Oracle receives for Sublicenses of the NCI Technology, excluding NC Cards
("Sublicense Fee"). In no case, however,' shall the Sublicense Fee be less than
forty-nine percent (49%) of the NCI Price List for the NCI Technology which was
sublicensed ("Minimum Sublicense Fee"), except as the parties may agree in
writing on a case by case basis. The Minimum Sublicense Fee shall be calculated
effective the date the NCI Technology is shipped, and shall be calculated based
on the NCI Price List attached as Exhibit C. NCI may amend the NCI Price List no
more than once every six months upon sixty (60) days written notice to Oracle's
Vice President of Worldwide Operations. Notwithstanding any other provision of
this Agreement, if Oracle issues a written Sublicense quote, for a period of
nine months after the date of submission of the quote to the customer, the
Minimum Sublicense Fee applicable to the NCI Technology identified in the quote
shall be based on NCI's Price List in effect on the date the quote was issued.
"Net Fees" shall mean fees received by Oracle from its Sublicensees and from its
Distributors net of any return adjustments for NCI Technology returned within 90
days of shipment, shipping costs, or sales, use or other taxes paid. In the
event that Oracle or its Distributors sublicenses the NCI Technology with other
Oracle products or services for a single price, Net Fees from such Sublicense
shall equal the total Net Fees from the Sublicense multiplied by a fraction
A/(A+B), where A equals the list price of the NCI Technology sublicensed
separately and B equals the list price of the other products or services. If the
NCI Technology is bundled in a site license or package deal, and fees for the
NCI Technology are not distinguishable from fees for other Oracle products that
are part of the site license or package deal, the Net Fees for the NCI
Technology shall be based on the fee allocation agreed to by Oracle and the
Sublicensee for the products specified in the site license or package deal or on
the fee allocation made by Oracle's internal procedures, provided such
allocation reasonably reflects the relative value of the NCI Technology to the
other Oracle products.
Oracle agrees not to sublicense the NCI Technology in a manner which is
inconsistent with Oracle's then current standard pricing structure for products
without the prior written approval of NCI. Oracle agrees not to sublicense the
NCI Technology to a Sublicensee where the number of users/devices of the NCI
Technology is not specified in the Sublicense without NCI's prior written
consent.
NCI warrants to Oracle that the Sublicense Fees and other charges under this
Agreement shall not exceed those offered to others for similar rights, services
or products under similar terms and conditions. NCI agrees that if, while this
Agreement is in effect, NCI offers to any other person or entity equivalent
rights (including license grants), services or products at lesser Sublicense
Fees or charges, thereupon and thereafter NCI shall make available to Oracle
such lesser Sublicense Fees and charges for all such rights, services or
products. NCI agrees to notify Oracle at the time it offers such lesser
Sublicense Fees or charges to others.
Oracle and its Distributors are free to determine unilaterally the pricing of
NCI Technology Sublicenses to their Sublicensees and Distributors; provided,
however, that Oracle will not grant an end user a license discount that is
greater for the NCI Technology than for the most heavily discounted Oracle
program(s) of a like nature included in the same transaction, where the
discounts are calculated as a percentage of Oracle's then-current list license
fees. No Sublicense Fee or other charge shall be payable by Oracle for any use
of
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<PAGE>
the NCI Technology under this Agreement (i) for Oracle's internal use; (ii) for
development, technical support or maintenance activities; (iii) for marketing,
updates, trial Sublicenses (for which Oracle does not receive a license fee from
the Sublicensee), porting, documentation, demonstrations, training, educational
uses, or any other products or services; or (iv) as back-up copies. The
foregoing rights and licenses shall be deemed to be paid-up.
3.2 NC CARD FEES
Oracle shall pay to NCI a fee for each NC Card received from NCI under Section
2.1.B ("NC Cards") above which shall be equal to the amount paid by NCI for such
NC Card. NCI shall invoice Oracle for such NC Card Fees on a monthly basis and
shall provide Oracle with adequate written documentation to support the amount
charged for such NC Cards.
ARTICLE IV
PAYMENT TERMS AND REPORTING
4.1 PAYMENT TERMS
Within forty-five (45) days of the end of each Quarter, Oracle shall pay to NCI
all Sublicense Fees and Technical Support Fees accruing to NCI for that
particular Quarter. Sublicense Fees and Technical Support Fees shall be deemed
to accrue in the Quarter in which the NCI Technology is shipped. All other fees
shall be due and payable forty-five days from the receipt of an invoice from NCI
for such fees. The fees listed in this Agreement do not include taxes; if NCI is
required to pay sales, use, value-added or other similar taxes (excluding taxes
based on NCI's income) based on the licenses granted under this Agreement, then
such taxes shall be billed to and paid by Oracle.
4.2 REPORTING
Within forty-five (45) days of the last day of each Quarter, Oracle shall send
NCI a report detailing, for that Quarter the revenues due to NCI under this
Agreement as a result of Oracle's and its Distributors' Sublicensing activities
under this Agreement.
4.3 RECORDS; INSPECTION
Oracle shall keep accurate books of account and records pertaining to the
Sublicense activities and revenues of Oracle and the Sublicense revenues from
its Distributors to the extent such records are required in the ordinary course
of Oracle's business. No more than once during any twelve (12) month period,
NCI, at NCI's sole expense and based on a good faith belief that the reports
provided by Oracle are in error, shall be entitled to employ an independent
Certified Public Accountant who is not compensated based on the results of the
audit, and who is acceptable to Oracle (which acceptance shall not be
unreasonably withheld), to inspect such books of account and records upon
reasonable notice to Oracle, and at a reasonable time during normal business
hours for the purpose of verifying the Sublicense Fees and Technical Support
Fees payable to NCI pursuant to this Agreement. Unless necessary to establish in
a court of law NCI's right to payment of Sublicense Fees and Technical Support
Fees payable hereunder, NCI's auditor shall hold all information obtained in
strict confidence; shall not disclose such information to any other person or
entity (except NCI's executive officers) or its Board of Directors who shall be
subject to the same obligations of confidentiality as NCI's auditor) without
Oracle's prior written consent; and shall not disclose to NCI any information
regarding Oracle's business other than any noncompliance by Oracle with the fees
payment provisions
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<PAGE>
hereof. If an audit reveals that Oracle has underpaid fees to NCI, NCI shall
invoice Oracle for such underpaid fees and Oracle shall pay any such fees which
are undisputed.
ARTICLE V
TECHNICAL RESPONSIBILITIES
5.1 TECHNICAL SUPPORT SERVICES
Oracle and its Distributors shall provide all technical support to their
Sublicensees and Distributors, including installation assistance, training,
maintenance, and consulting. The parties have negotiated a separate Technical
Support Services Agreement effective as of the date hereof. NCI shall provide
Technical Support to Oracle for the NCI Technology as specified in the Technical
Support Services Agreement.
ARTICLE VI
TERM AND TERMINATION
6.1 INITIAL TERM--3 YEARS
This Agreement shall become effective on the Effective Date set forth on the
Signature Page attached hereto, and unless it is terminated shall be effective
for three (3) years from the Effective Date.
6.2 TERMINATION OF THE AGREEMENT
6.2.A TERMINATION.
Either party may terminate this Agreement at any time upon one hundred
and eighty days written notice; however, termination shall not relieve
Oracle of its obligation to pay all fees that have accrued against
Oracle under this Agreement. Such termination shall not limit either
party's ability to pursue other legal remedies available, including
injunctive relief.
6.2.B BREACH.
Either party may terminate this Agreement upon written notice if the
other party materially breaches the Agreement and (i) fails to commence
bona fide efforts to correct the breach within 90 days following
written notice specifying the breach or (ii) fails to cure the breach
within 180 days following written notice specifying the breach.
6.2.C FORCE MAJEURE.
Neither party shall be liable TO the other for failure or delay in the
performance of a required obligation if such failure or delay is caused
by riot, fire, flood, explosion, earthquake or other natural disaster,
government regulation, or other similar cause beyond such party's
control, provided that such party gives prompt written notice of such
condition and resumes its performance as soon as possible, and provided
further that the other party may terminate this Agreement if such
condition continues for a period of one hundred eighty (180) days.
6.3 RIGHTS UPON TERMINATION
6.3.A CONTINUED RIGHTS.
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The termination of this Agreement shall not affect any paid-up right or
license granted hereunder. In the event of termination of this
Agreement, in whole or in part, any Sublicense granted by Oracle or its
Distributors to an end user prior to such termination or under the
terms of this Article VI, shall survive and continue. Except where NCI
has terminated the Agreement due to Oracle's material breach under
Section 6.2.B above, in the event of termination of expiration of the
Agreement, (i) Oracle may Sublicense and distribute any inventory of
the NCI Technology, including work in process, on hand at the time of
such termination, (ii) Oracle may continue to exercise the rights and
licenses granted hereunder for a period of up to six (6) months after
termination to fill any orders received by Oracle or its Distributors
from Sublicensees prior to the effective date of termination, and
(iii) Oracle may continue to exercise the rights and licenses granted
hereunder as necessary to provide maintenance and technical support for
Sublicensees.
6.3.B SURVIVAL.
In addition to the provisions of Sections 6.3.A and 6.3.B above, the
parties' rights and obligations under Sections 2.3 (Internal Use
License), 2.4 (Intellectual Property Rights), 8.1 (Nondisclosure), 8.3
(Governing Law and Jurisdiction), 8.4 (Assignment), 8.5 (Notice) and
Articles VI (Term and Termination), and VII (Representations and
Warranties) shall survive expiration or termination of this Agreement.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.1 NO CONFLICT
NCI represents and warrants that it is under no obligation or restriction, nor
will it assume any such obligation or restriction, that does or would in any way
adversely affect the performance to be rendered by NCI or the rights and
licenses granted to Oracle herein.
7.2 INTELLECTUAL PROPERTY WARRANTY AND INFRINGEMENT INDEMNITY
NCI will defend and indemnify Oracle against a claim that NCI Technology
infringe a copyright or patent or other intellectual property right, provided
that: (a) Oracle notifies NCI in writing within 30 days of the claim; (b) NCI
has sole control of the defense and all related settlement negotiations; and (c)
Oracle provides NCI with the assistance, information and authority necessary to
perform NCI's obligations under this Section. Reasonable out-of-pocket expenses
incurred by Oracle in providing such assistance will be reimbursed by NCI. NCI
shall have no liability for any claim of infringement (i) based on use of a
superseded or altered release of NCI Technology if the infringement would have
been avoided by the use of a current unaltered release of the NCI Technology
which NCI provides to Oracle; (ii) arising from any use by Oracle or its
Distributors of any product not provided by NCI but used in combination with the
NCI Technology (excluding however, non-NCI software or products necessary or
appropriate to use the NCI Technology, such as a computer or operating system)
if such claim would have been avoided by the exclusive use of the NCI Technology
or (iii) based on use of a version of the NCI Technology which has been modified
by Oracle or its Distributors if the infringement would have been avoided by the
use of the unmodified NCI Technology.
In the event the NCI Technology are held or are believed by NCI to infringe, NCI
shall have the option, at its expense, to (a) modify the NCI Technology to be
noninfringing; or (b) obtain for Oracle a license to continue using the NCI
Technology. If it is not commercially reasonable to perform either of the above
options, then NCI may terminate the license for the infringing NCI Technology
and refund the license fees
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paid for the NCI Technology. This Section 7.2 states NCI's entire liability and
Oracle's exclusive remedy for infringement.
7.3 PRODUCT WARRANTY
NCI warrants for a period o done year from the delivery of the NCI Technology by
Oracle or a Distributor to an end user that the NCI Technology will perform the
functions, and comply in all material respects with the specifications,
described in the Documentation when operated on the appropriate
hardware/operating system environment specified in the Documentation.. In
addition, NCI warrants that the NCI Technology including, without limitation,
any time-and-date-related codes, data entry features and internal subroutines
thereof, is designed (a) to automatically accommodate the change in the dated
from December 31, 1999 to January 1, 2000 without negatively affecting the NCI
Technology's performance, and (b) to accurately accept, reflect and calculate
all dates that are relevant to the NCI Technology's performance, and (b) to
accurately accept, reflect, and calculate all dates that are relevant to the NCI
Technology's performance. THESE WARRANTIES ARE THE EXCLUSIVE PRODUCT WARRANTIES
AND IN LIEU OF ALL OTHER PRODUCT WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT
NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT OR FITNESS
FOR A PARTICULAR PURPOSE, NCI DOES NOT WARRANT THAT THE NCI TECHNOLOGY WILL
OPERATE IN COMBINATIONS OR ON PLATFORMS OR OPERATING SYSTEMS OTHER THAN AS
SPECIFIED IN THE DOCUMENTATION OR THAT THE OPERATION OF THE NCI TECHNOLOGY WILL
BE UNINTERRUPTED OR ERROR FREE.
7.4 LIMITATION OF LIABILITY
In no event shall either party be liable for any indirect, incidental, special
or consequential damages, or damages for loss of profits, revenue, data or use,
incurred by either party or any third party, whether in an action in contract or
tort, even if the other party or any other person has been advised of the
possibility of such damages, Except for claims involving the intellectual
property rights of a party, each party's liability for damages hereunder shall
in no event exceed double the amount of fees paid by Oracle under this
Agreement, and if such damages result from Oracle's or a Sublicensee's sue of
the NCI Technology or services, such liability shall be limited to fees paid for
the relevant NCI Technology or services gibing rise to the liability.
The provisions of this Article VII allocate the risks under this Agreement
between NCI and Oracle and are an intrinsic part of the bargain between the
parties. The fees provided for in this Agreement reflect this allocation of
risks and the limitation of liability specified herein.
ARTICLE VIII
MISCELLANEOUS
8.1 NONDISCLOSURE
It is expected that the parties may disclose to each other certain information
which may be considered confidential and trade secret information ("Confidential
Information"). Confidential Information shall include: (a) the NCI Technology
and Oracle products; (b) Confidential Information disclosed by either party in
writing that is marked as confidential at the time of disclosure; or (c)
Confidential Information disclosed by either party in any other manner and is
identified as confidential at the time of disclosure and is also summarized and
designated as confidential in a written memorandum delivered to the receiving
party within thirty (30) days of the disclosure.
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Confidential information shall not include information which (a) is or becomes a
part of the public domain through no act or omission of the other party; (b) was
in the receiving party's possession before receipt from the party providing such
Confidential Information; (c) is rightfully received by the receiving party from
a third party without any duty of confidentiality; (d) is disclosed to a third
party by the party providing the Confidential Information without a duty of
confidentiality on the third party; (e) is independently developed by the other
party; (f) is disclosed under operation of law; or (g) is disclosed with the
prior written approval of the party providing such Confidential Information.
All Confidential Information owned solely by one party and disclosed to the
other party shall remain solely the property of the disclosing party. The
parties agree, both during the term of this Agreement and for a period of five
(5) years after termination or expiration of this Agreement to hold each other's
Confidential Information in confidence and to protect the disclosed Confidential
Information by using the same degree of care to prevent the unauthorized use,
dissemination or publication of the Confidential Information as they use to
protect their own confidential information of a like nature. The parties agree
not to make each other's Confidential Information available in any form to any
third party or to use each other's Confidential Information for any purpose
other than the implementation of this Agreement. Each party agrees to restrict
disclosure of the Confidential Information to those of its employees who have a
"need to know" and to take all reasonable steps to ensure that Confidential
Information is not disclosed or distributed by its employees in violation of the
provisions of this Agreement.
In addition, notwithstanding the above, each party may use the residuals from
the other party's Confidential Information. The term "residuals" as used in this
paragraph shall mean the Confidential Information in nontangible form (i.e., not
in written or other documentary form, including tape or disk) which may be
retained by those employees of NCI or Oracle who have had access to the other's
Confidential Information including ideas, concepts, know-how, or techniques
contained therein. Neither party shall have any obligation to limit or restrict
the assignment of such employees or to pay royalties for any work resulting from
the use of residuals.
8.2 INDEPENDENT DEVELOPMENT/FREEDOM OF ACTION
Each party acknowledges that the other party is in the software development
business. Nothing in this Agreement shall be construed to preclude either party
from developing, using, marketing, licensing, and/or selling any independently
developed software which has the same or similar functionality as NCI Technology
or Oracle products, or any other products, so long as such activities do not
infringe the Intellectual Property Rights of the other party.
Additionally, nothing in this Agreement shall be construed to limit either
party's right to obtain services or software programs from other sources, to
prohibit either party from acquiring and marketing competitive materials, to
restrict either party from making, having made, using, marketing, leasing,
licensing, selling or otherwise disposing of any products or services
whatsoever, nor to limit either party's right to deal with any other vendors,
suppliers, contractors or customers.
8.3 GOVERNING LAW AND JURISDICTION
This Agreement, and all matters arising out of or relating to this Agreement,
shall be governed by the procedural and substantive laws of the State of
California and shall be deemed to be executed in Redwood City, California. Any
legal action or proceeding relating to this Agreement shall be instituted in a
state or
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federal court in San Francisco or San Mateo County, California. Oracle and NCI
agree to submit to the jurisdiction of, and agree that venue is proper in, these
courts in any such legal action or proceeding.
8.4 ASSIGNMENT
Except for an assignment by Oracle to any parent corporation, Oracle Subsidiary,
or successor in interest to Oracle, neither party may assign any rights, duties,
obligations or privileges under this Agreement without the prior written consent
of the other party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, either party may assign any rights, duties,
obligations or privileges under this Agreement without the prior written consent
of the other party in the event of a merger, acquisition or sale of all or
substantially all of the assigning party's assets.
8.5 NOTICE
All notices required to be given hereunder shall be in writing and shall be
deemed to have been given upon deposit in first class mail, sent through a
nationally recognized courier service, or transmission by confirmed
telefacsimile as follows:
For NCI: Network Computer, Inc.
1000 Bridge Parkway
Redwood Shores, CA 94065
Attn: General Counsel
For Oracle: Oracle Corporation
500 Oracle Parkway
Redwood Shores, CA 94065
Attn: General Counsel
8.6 INTERPRETATION
This Agreement, including any exhibits, addenda, schedules and amendments, has
been negotiated at arm's length and between persons sophisticated and
knowledgeable in the matters dealt with in this Agreement. Each party has been
represented by experienced and knowledgeable legal counsel. Accordingly, any
role of law (including California Civil Code Section 1654) or legal decision
that would require interpretation of any ambiguities in this Agreement against
the party that has drafted it is not applicable and is waived. The provisions of
this Agreement shall be interpreted in a reasonable manner to effect the
purposes of the parties and this Agreement.
8.7 ENTIRE AGREEMENT
Except for the Technical Support Services Agreement between the parties dated
August 12, 1998, this Agreement sets forth the entire agreement between the
parties and supersedes prior proposals, agreements, and representations between
them, whether written or oral, relating to the subject matter contained herein.
This Agreement may be changed only if agreed to in writing and signed by an
authorized signatory of each party.
8.8 EXPORT
The parties agree to comply fully with all laws and regulations to assure that
neither NCI Technology, nor any direct product thereof, is exported, directly or
indirectly, in violation of law. Upon Oracle's request, NCI shall advise Oracle
of all relevant export classifications of the NCI Technology and shall promptly
advise Oracle of any changes with respect to such classification.
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8.9 SEVERABILITY
If any provision or provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.10 COUNTERPARTS
This Agreement may be executed in several counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
8.11 NO WAIVER
The failure of any party to enforce any of the provisions hereof shall not be
construed to be a waiver of the right of such party thereafter to enforce such
provisions.
8.12 FEDERAL GOVERNMENT SUBLICENSES
If Oracle or a Distributor grants a Sublicense to the United States government,
the NCI Technology shall be provided with "Restricted Rights" and Oracle will
place a legend, in addition to applicable copyright notices, on the
documentation, and on the tape or diskette label, substantially similar to the
following:
RESTRICTED RIGHTS LEGEND
"Programs delivered subject to the DOD FAR Supplement are "commercial computer
software" and use, duplication and disclosure of the Programs shall be subject
to the licensing restrictions set forth in the applicable licensing agreement.
Otherwise, Programs delivered subject to the Federal Acquisition Regulations are
"restricted computer software" and use, duplication and disclosure of the
Programs shall be subject to the restrictions in FAR 52..227-14 Rights in Data--
General, including Alternate m (June 1987)."
8.13 PUBLICITY
Neither party shall disclose to any third party any details of this Agreement,
or even the fact of its existence, without the specific prior written approval
of the other party, which approval shall not be unreasonably withheld, or as
required by law in order to enforce its rights under this Agreement.
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EXHIBIT A
NCI TECHNOLOGY
NCI CONSUMER SOFTWARE
Custom Connect Server Suite
Custom Connect Server Deployment License Fees
NCI CORPORATE SOFTWARE
NC Administration Server
NC Desktop Deployment Licenses
NC Smart Card
NCI SDKS
TV Navigator SDK for x86
TV Navigator Customization Kit
TV Navigator Content Development Kit
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EXHIBIT B
"ORACLE LOGO"
ORACLE ALLIANCE AGREEMENT
This Oracle Alliance Agreement (the "Agreement") is between Oracle Corporation
("Oracle") and the Alliance Member identified below. The terms of this Agreement
shall apply to each Program license granted and to all services provided by
Oracle under this Agreement, which will be identified on one or more Order
Forms.
1. DEFINITIONS
1.1 "COMMENCEMENT DATE" means the date on which the Programs are delivered
by Oracle, or if no delivery is necessary, the Effective Date set forth
on the relevant Order Form.
1.2 "DESIGNATED SYSTEM" shall mean the computer hardware and operating system
designated on the relevant Order Form or Sublicense report for use in
conjunction with a Sublicensed Program, Development License, or Marketing
Support License.
1.3 "DOCUMENTATION" means the user guides and manuals for installation and use
of the Program software. Documentation is provided in CD-ROM or bound form,
whichever is generally available.
1.4 "ORDER FORM" shall mean the document in hard copy or electronic form by
which the Alliance Member orders Program licenses, Sublicenses, and
services, and which is agreed to by the parties. The Order Form shall
reference the Effective Date of this Agreement.
1.5 "PROGRAM" shall mean the software in object code form distributed by Oracle
for which the Alliance Member is granted a license or grants a Sublicense
pursuant to this Agreement; and the media, Documentation, and Updates
therefor.
1.6 "SUBLICENSE ADDENDA" shall mean the addenda to this Agreement specifying
additional Sublicense terms and Sublicense rates and fees for the various
types of Sublicenses which may be granted by the Alliance Member.
1.7 "SUBLICENSE" shall mean a nonexclusive, nontransferable right granted by or
through the Alliance Member to an end user to use an object code copy of
the Programs with the Value-Added Package under authority of a Sublicense
Addendum. "Sublicensee" shall mean a third party who is granted a
Sublicense of the Programs with the Value-Added Package for such party's
own internal data processing purposes and not for purposes of any further
distribution.
1.8 "TECHNICAL SUPPORT" means Program support provided under Oracle's policies
in effect on the date Technical Support is ordered.
1.9 "UPDATE" shall mean a subsequent release of a Program which Oracle makes
generally available for Program Licenses at no additional license fee other
than media and handling charges, provided the Alliance Member has ordered
Technical Support for such licenses for the relevant time period. Updates
shall not include any release, option or future product which Oracle
licenses separately.
1.10 "VALUE-ADDED PACKAGE" shall mean the hardware or software products or
services having added value which are developed, sold, and/or licensed with
the Programs to a Sublicense by the Alliance Member, as provided under the
applicable Sublicense Addenda.
2. RIGHTS GRANTED
2.1 DEVELOPMENT LICENSES AND TRIAL LICENSES
A. Oracle grants to the Alliance Member a nonexclusive license to use the
Development Licenses the Alliance Member obtains under this Agreement and
applicable Sublicense Addenda, as follows:
1. to develop or prototype the Value-Added Package on the Designated System
or on a backup system if the Designated System is inoperative, up to any
applicable maximum number of designated Users or other such limitation as
may be applicable;
2. to demonstrate the Programs to potential Sublicensees solely in
conjunction with the Value-Added Package;
3. to provide training and technical support to employees and to customers
solely in conjunction with the Value-Added Package;
4. to use the Documentation provided with the Programs in support of the
Alliance Member's authorized use of the Programs; and 5. to copy the
Programs for archival or backup purposes; no other copies shall be made
without Oracle's prior written consent. All titles, trademarks, and
copyright and restricted rights notices shall be reproduced in such copies.
All archival and backup copies of the Programs are subject to the terms of
this Agreement.
B. The Alliance Member may order temporary trial licenses ("Trial
Licenses") for its evaluation purposes only, and not for development or
prototype purposes, for use during a period specified in the Order Form.
Each Order Form for Trial Licenses shall clearly state the trial period and
shall identify that the order is for a Trial License.
2.2 MARKETING SUPPORT LICENSES
Oracle grants to the Alliance Member a nonexclusive license to use the
Marketing Support Licenses the Alliance Member obtains under this Agreement
and applicable Sublicense Addenda, as follows: A. to demonstrate the
Programs to potential Sublicensees solely in conjunction with the
Value-Added Package, up to any applicable maximum number of designated
Users or other such limitation as may be applicable; B. to develop
customized prototypes of the Value-Added Package for prospective
Sublicensees on the Designated System if the Alliance Member does not
receive any fees related to the development of such customized prototypes;
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C. to use the Documentation provided with the Programs in support of the
Alliance Member's authorized use of the Programs; and
D. to copy the Programs for archival or backup purposes; no other copies
shall be made without Oracle's prior written consent. All titles,
trademarks, and copyright and restricted rights notices shall be reproduced
in such copies. All archival and backup copies of the Programs are subject
to the terms of this Agreement.
2.3 SUBLICENSING
A. LICENSE TO SUBLICENSE PROGRAMS
As further set forth in the applicable Sublicense Addenda, Oracle
hereby grants the Alliance Member a nonexclusive, nontransferable license
to market and grant Sublicenses as set forth in such Sublicense Addenda and
at the rates and fees set forth in such Sublicense Addenda. The Alliance
Member shall only have the right to Sublicense Programs pursuant to an
effective Sublicense Addendum between the parties hereto.
The Alliance Member shall Sublicense the Programs solely through a
written Sublicense agreement as provided under Section 2.3.B. Upon Oracle's
request, the Alliance Member shall provide Oracle with a copy of the
Alliance Member's standard Sublicense agreement
B. SUBLICENSE AGREEMENT
Every Sublicense agreement shall include, at a minimum, contractual
provisions which:
1. Restrict use of the Programs to object code, subject to the restrictions
provided under the applicable Sublicense Addenda and consistent with the
Sublicense fees payable to Oracle;
2. Prohibit (a) transfer of the Programs except for temporary transfer in
the event of computer malfunction; (b) assignment, timesharing and rental
of the Programs; and (c) title to the Programs from passing to the
Sublicensee or any other party;
3. Prohibit the reverse engineering, disassembly or decompilation of the
Programs and prohibit duplication of the Programs except for a single
backup or archival copy;
4. Disclaim, to the extent permitted by applicable law, Oracle's liability
for any damages, whether direct, indirect, incidental or consequential,
arising from the use of the Programs;
5. Require the Sublicensee, at the termination of the Sublicense, to
discontinue use and destroy or return to the Alliance Member all copies of
the Programs and Documentation;
6. Prohibit publication of any results of benchmark tests run on the
Programs;
7. Require the Sublicensee to comply fully with all relevant export laws
and regulations of the United States to assure that neither the Programs,
nor any direct product thereof, are exported, directly or indirectly, in
violation of United States law; and
8. Specify Oracle as a third party beneficiary of the Sublicense agreement
to the extent permitted by applicable law.
C. MARKETING/SUBLICENSING PRACTICES
In marketing and Sublicensing the Programs, the Alliance Member shall:
1. Not engage in any deceptive, misleading, illegal, or unethical practices
that may be detrimental to Oracle or to the Programs;
2. Not make any representations, warranties, or guarantees to Sublicensees
concerning the Programs that are inconsistent with or in addition to those
made in this Agreement or by Oracle; and
3. Comply with all applicable federal, state, and local laws and
regulations in performing its duties with respect to the Programs.
2.4 LIMITATIONS ON USE
The Alliance Member shall not use or duplicate the Programs (including
the Documentation) for any purpose other than as specified in this
Agreement or make the Programs available to unauthorized third parties. The
Alliance Member shall not (a) use the Programs for its internal data
processing or for processing customer data; (b) rent, electronically
distribute, or timeshare the Programs or market the Programs by interactive
cable or remote processing services or otherwise distribute the Programs
other than as specified in this Agreement; or (c) cause or permit the
reverse engineering, disassembly, or decompilation of the Programs, except
to the extent required to obtain interoperability with other independently
created software or as specified by law.
2.5 TITLE
Oracle shall retain all title, copyright, and other proprietary rights in
the Programs and any modifications or translations thereof. The Alliance Member
and its Sublicensees do not acquire any rights in the Programs other than those
specified in this Agreement.
2.6 TRANSFER OF PROGRAMS
The Alliance Member may transfer a Development License or Marketing
Support License within its organization upon notice to Oracle; transfers
are subject to the terms and fees specified in Oracle's transfer policy in
effect at the time of the transfer.
2.7 USE OF PROGRAMS BY THIRD PARTIES
The Alliance Member and each Sublicensee (as the case may be) shall
have the right to allow third parties to use each such party's licensed
Programs for the licensee's operations so long as the applicable licensee
ensures that use of the Programs is in accordance with the terms of this
Agreement or the applicable Sublicense agreement.
3. TECHNICAL SERVICES
3.1 TECHNICAL SUPPORT SERVICES
Technical Support services ordered by the Alliance Member will be
provided under Oracle's Technical Support policies in effect on the date
Technical Support is ordered.
3.2 TRAINING SERVICES
Oracle will provide training services agreed to by the parties under
the terms of this Agreement. For any on-site services requested by the
Alliance Member, the Alliance Member shall reimburse Oracle for actual,
reasonable travel and out-of-pocket expenses incurred.
4. FEES AND PAYMENTS
4.1 LICENSE FEES AND SUBLICENSE FEES
The Alliance Member may order Development Licenses or Marketing
Support Licenses at the standard Program license fees set forth in the
Price List or at the fees otherwise provided in a Sublicense Addendum. For
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each Sublicense granted by the Alliance Member, the Alliance Member
agrees to pay Oracle a Sublicense fee as set forth in the applicable
Sublicense Addenda. The Alliance Member shall not be relieved of its
obligation to pay Sublicense fees owed to Oracle by the nonpayment of such
fees by the Sublicensee.
The Alliance Member is free to determine unilaterally its own license
fees to its Sublicensees. If the Alliance Member or a Sublicensee upgrades
the Programs to a larger computer, transfers the Programs outside the
United States and/or to another operating system, or increases the licensed
number of Users, the Alliance Member will pay additional Sublicense fees to
Oracle as provided under Oracle's transfer policies and rates in effect at
the time the Program is upgraded or transferred.
4.2 TECHNICAL SUPPORT FEES
Technical Support services ordered by the Alliance Member for
Development Licenses and Marketing Support Licenses will be provided under
Oracle's Technical Support policies and rates in effect on the date
Technical Support is ordered.
4.3 GENERAL PAYMENT TERMS
Except as otherwise provided in a Sublicense Addendum, all fees shall
be due and payable 30 days from the invoice date. Fees due by the Alliance
Member shall not be subject to set off for any claims against Oracle. All
payments made shall be in United States currency and shall be made without
deductions based on any taxes or withholdings, except where such deduction
is based on Oracle's gross income. Any amounts payable by the Alliance
Member hereunder which remain unpaid after the due date shall be subject to
a late charge equal to 1.5% per month from the due date until such amount
is paid. The Alliance Member agrees to pay applicable media and shipping
charges. The Alliance Member shall issue a purchase order, or alternative
document acceptable to Oracle, on or before the Effective Date of the
applicable Order Form.
4.4 TAXES
The fees listed in this Agreement do not include taxes; if Oracle is
required to pay sales, use, property, value-added, or other taxes based on
the licenses, Sublicenses or services granted under this Agreement or on
the Alliance Member's or a Sublicensee's use of Programs or services, then
such taxes shall be billed to and paid by the Alliance Member. This shall
not apply to taxes based on Oracle's income.
5. RECORDS
5.1 RECORDS INSPECTION
The Alliance Member shall maintain adequate books and records in
connection with activity under this Agreement. Such records shall include,
without limitation, executed Sublicense agreements, the information
required in or related to the Sublicense reports required under a
Sublicense Addendum, the number of copies of Programs used or Sublicensed
by the Alliance Member, the computers on which the Programs are installed,
and the number of Users using the Programs. Oracle may audit the relevant
books and records of the Alliance Member and Alliance Member's use of the
Programs. Any such audit shall be conducted during regular business hours
at the Alliance Member's offices and shall not interfere unreasonably with
the Alliance Member's business activities. If an audit reveals that the
Alliance Member has underpaid fees to Oracle, the Alliance Member shall be
invoiced for such underpaid fees. Audits shall be made no more than once
annually.
5.2 NOTICE OF CLAIM
The Alliance Member will notify Oracle legal department promptly in
writing of: (a) any claim or proceeding involving the Programs that comes
to its attention; and (b) any material change in the management or control
of the Alliance Member.
6. TERM AND TERMINATION
6.1 TERM
This Agreement shall become effective on the Effective Date and shall
be valid until the expiration or termination of all Sublicense Addenda
hereunder, unless terminated earlier as set forth herein. If not otherwise
specified on the Order Form, each Program license granted under this
Agreement shall remain in effect perpetually under the terms of this
Agreement unless the license or this Agreement is terminated as provided in
this Article 6. The term of each Sublicense Addendum hereunder shall be as
set forth in each such Addendum.
6.2 TERMINATION BY THE ALLIANCE MEMBER
The Alliance Member may terminate any Program license or any
Sublicense Addenda at any time; however, termination shall not relieve the
Alliance Member's obligations specified in Section 6.5.
6.3 TERMINATION BY ORACLE
Oracle may terminate any Program license, any Sublicense Addenda, or
this Agreement upon written notice if the Alliance Member materially
breaches this Agreement and fails to correct the breach within 30 days
following written notice specifying the breach.
6.4 FORCE MAJEURE
Neither party shall be liable to the other for failure or delay in the
performance of a required obligation if such failure or delay is caused by
strike, riot, fire, flood, natural disaster, or other similar cause beyond
such party's control, provided that such party gives prompt written notice
of such condition and resumes its performance as soon as possible, and
provided further that the other party may terminate this Agreement if such
condition continues for a period of one hundred eighty (180) days.
6.5 EFFECT OF TERMINATION
Upon expiration or termination of a Sublicense Addendum or this
Agreement, all of the Alliance Member's rights to market and Sublicense the
Programs as set forth in such Sublicense Addendum or this Agreement shall
cease.
The termination of this Agreement, a Sublicense Addendum, or any
license shall not limit either party from pursuing any other remedies
available to it, including injunctive relief, nor shall such termination
relieve the Alliance Member's obligation to pay all fees that have accrued
or that are owed by the Alliance Member under a Sublicense Addendum or any
Order Form, or that appear in a Sublicense report. The parties rights and
obligations under Sections 2.4, 2.5, 2.6 and Articles 4, 5, 6, 7, and 8
shall survive termination of this Agreement. Upon
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termination, the Alliance Member shall cease using, and shall return or
destroy, all copies of the applicable Programs.
7. INDEMNITY, WARRANTIES, REMEDIES
7.1 INFRINGEMENT INDEMNITY
Oracle will defend and indemnify the Alliance Member against a claim
that Programs infringe a copyright or patent or other intellectual property
right, provided that: (a) the Alliance Member notifies Oracle in writing
within 30 days of the claim; (b) Oracle has sole control of the defense and
all related settlement negotiations; and (c) the Alliance Member provides
Oracle with the assistance, information and authority necessary to perform
Oracle's obligations under this Section. Reasonable out-of-pocket expenses
incurred by the Alliance Member in providing such assistance will be
reimbursed by Oracle. Oracle shall have no liability for any claim of
infringement based on use of a superseded or altered release of Programs if
the infringement would have been avoided by the use of a current unaltered
release of the Programs which Oracle provides to the Alliance Member.
In the event the Programs are held or are believed by Oracle to
infringe, Oracle shall have the option, at its expense, to (a) modify the
Programs to be noninfringing; or (b) obtain for the Alliance Member a
license to continue using the Programs. If it is not commercially
reasonable to perform either of the above options, then Oracle may
terminate the license for the infringing Programs and refund the license
fees paid for those Programs. This Section 7.1 states Oracle's entire
liability and the Alliance Member's exclusive remedy for infringement.
7.2 WARRANTIES AND DISCLAIMERS
A. PROGRAM WARRANTY
Oracle warrants for a period of one year from the Commencement Date
that each unmodified Program will perform the functions described in the
Documentation.
B. MEDIA WARRANTY
Oracle warrants the tapes, diskettes or other media to be free of
defects in materials and workmanship under normal use for 90 days from the
Commencement Date.
C. SERVICES WARRANTY
Oracle warrants that its Technical Support and training services will
be performed consistent with generally accepted industry standards. This
warranty shall be valid for 90 days from performance of service.
D. DISCLAIMERS
THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
ORACLE DOES NOT WARRANT THAT THE PROGRAMS WILL OPERATE IN COMBINATIONS
OTHER THAN AS SPECIFIED IN THE DOCUMENTATION OR THAT THE OPERATION OF THE
PROGRAMS WILL BE UNINTERRUPTED OR ERROR FREE. PRE-PRODUCTION RELEASES OF
PROGRAMS AND COMPUTER-BASED TRAINING PRODUCTS ARE DISTRIBUTED "AS IS."
The Alliance Member shall not make any warranty on Oracle's behalf.
7.3 EXCLUSIVE REMEDIES
For any breach of the warranties contained in Section 7.2 above, the
Alliance Member's exclusive remedy, and Oracle's entire liability, shall
be:
A. FOR PROGRAMS
The correction of Program errors that cause breach of the warranty, or
if Oracle is unable to make the Program operate as warranted, the Alliance
Member shall be entitled to recover the fees paid to Oracle for the Program
license.
B. FOR MEDIA
The replacement of defective media returned within 90 days of the
Commencement Date.
C. FOR SERVICES
The reperformance of the services, or if Oracle is unable to perform
the services as warranted, the Alliance Member shall be entitled to recover
the fees paid to Oracle for the unsatisfactory services.
7.4 INDEMNIFICATION OF ORACLE
The Alliance Member agrees to enforce the terms of its Sublicense
agreements required by this Agreement so as to effect a timely cure of any
Sublicense breach, and to notify Oracle of any known breach of such terms.
The Alliance Member will defend and indemnify Oracle against:
A. All claims and damages to Oracle arising from any use by the Alliance
Member or its Sublicensees of any product not provided by Oracle but used
in combination with the Programs if such claim would have been avoided by
the exclusive use of the Programs; and
B. All claims and damages to Oracle caused by the Alliance Member's failure
to include the required contractual terms set forth in Section 2.3.B hereof
in each Sublicense agreement.
7.5 EQUITABLE RELIEF
The Alliance Member acknowledges that any breach of its obligations
with respect to proprietary rights of Oracle will cause Oracle irreparable
injury for which there are inadequate remedies at law and that Oracle shall
be entitled to equitable relief in addition to all other remedies available
to it.
8. GENERAL TERMS AND CONDITIONS
8.1 NONDISCLOSURE
By virtue of this Agreement, the parties may have access to
information that is confidential to one another ("Confidential
Information"). Confidential Information shall be limited to the Programs,
the terms and pricing under this Agreement, and all information clearly
identified as confidential.
A party's Confidential Information shall not include information that:
(a) is or becomes a part of the public domain through no act or omission of
the other party; (b) was in the other party's lawful possession prior to
the disclosure and had not been obtained by the other party either directly
or indirectly from the disclosing party; (c) is lawfully disclosed to the
other party by a third party without restriction on disclosure; or (d) is
independently developed by the other party. The Alliance Member shall not
disclose the results of any benchmark tests of the Programs to any third
party without Oracle's prior written approval.
The parties agree to hold each other's Confidential Information in
confidence during the term of this Agreement and for a period of two years
after termination of this Agreement. The parties agree, unless required by
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<PAGE>
law, not to make each other's Confidential Information available in any
form to any third party for any purpose other than the implementation of
this Agreement. Each party agrees to take all reasonable steps to ensure
that Confidential Information is not disclosed or distributed by its
employees or agents in violation of the terms of this Agreement.
8.2 COPYRIGHTS
The Programs are copyrighted by Oracle. The Alliance Member shall
retain all Oracle copyright notices on the Programs used by the Alliance
Member under its Development Licenses or Marketing Support Licenses. The
Alliance Member shall include the following on all copies of the Programs
in software Value-Added Packages incorporating the Programs distributed by
the Alliance Member:
A. A reproduction of Oracle's copyright notice; or
B. A copyright notice indicating that the copyright is vested in the
Alliance Member containing the following
1. A "c" in a circle and the word "copyright";
2. The Alliance Member's name;
3. The date of copyright; and
4. The words "All Rights Reserved."
Such notices shall be placed on the Documentation, the sign-on screen
for any software Value-Added Package incorporating the Programs, and the
diskette or tape labels. Notwithstanding any copyright notice by the
Alliance Member to the contrary, the copyright to the Program included in
any such application package shall remain in Oracle. Other than as
specified above, on any reproduction or translation of any Programs,
Documentation, or promotional material, the Alliance Member agrees to
reproduce Oracle's copyright notices intact.
8.3 TRADEMARKS
"Oracle" and any other trademarks and service marks adopted by Oracle
to identify the Programs and other Oracle products and services belong to
Oracle; the Alliance Member will have no rights in such marks except as
expressly set forth herein and as specified in writing from time to time.
The Alliance Member's use of Oracle's trademarks shall be under Oracle's
trademark policies and procedures in effect from time-to-time. The Alliance
Member agrees not to use the trademark "ORACLE," or any mark beginning with
the letters "Ora," or any other mark likely to cause confusion with the
trademark "ORACLE" as any portion of the Alliance Member's tradename,
trademark for the Alliance Member's Value-Added Package, or trademark for
any other products of the Alliance Member. The Alliance Member shall have
the right to use the trademark "ORACLE" and other Oracle trademarks solely
to refer to Oracle's Programs, products and services.
The Alliance Member agrees with respect to each registered trademark
of Oracle, to include in each advertisement, brochure, or other such use of
the trademark, the trademark symbol "circle R" and the following statement:
is a registered trademark of Oracle Corporation,
-----------------------
Redwood City, California
Unless otherwise notified in writing by Oracle, the Alliance Member
agrees, with respect to every other trademark of Oracle, to include in each
advertisement, brochure, or other such use of the trademark, the symbol
"TM" and the following statement:
is a trademark of Oracle Corporation,
-----------------------
Redwood City, California
The Alliance Member shall not market Oracle Programs in any way which
implies that Oracle Programs are the proprietary product of the Alliance
Member or of any party other than Oracle. Oracle shall not have any
liability to the Alliance Member for any claims made by third parties
relating to the Alliance Member's use of Oracle's trademarks.
8.4 RELATIONSHIPS BETWEEN PARTIES
In all matters relating to this Agreement, the Alliance Member will
act as an independent contractor. The relationship between Oracle and the
Alliance Member is that of licensor/licensee. Neither party will represent
that it has any authority to assume or create any obligation, express or
implied, on behalf of the other party, nor to represent the other party as
agent, employee, franchisee, or in any other capacity. Nothing in this
Agreement shall be construed to limit either party's right to independently
develop or distribute software which is functionally similar to the other
party's product, so long as proprietary information of the other party is
not included in such software.
8.5 ASSIGNMENT
The Alliance Member may not assign or otherwise transfer any rights
under this Agreement without Oracle's prior written consent.
8.6 NOTICE
All notices, including notices of address change, required to be sent
hereunder shall be in writing and shall be deemed to have been given when
mailed by first class mail to the first address listed in the relevant
Order Form (if to the Alliance Member) or to Oracle address on the Order
Form (if to Oracle).
To expedite order processing, the Alliance Member agrees that Oracle
may treat documents faxed by the Alliance Member to Oracle as original
documents; nevertheless, either party may require the other to exchange
original signed documents.
8.7 GOVERNING LAW/JURISDICTION
This Agreement, and all matters arising out of or relating to this
Agreement, shall be governed by the substantive and procedural laws of the
State of California and shall be deemed to be executed in Redwood City,
California. The parties agree that any legal action or proceeding relating
to this Agreement shall be instituted in any state or federal court in San
Francisco or San Mateo County, California. Oracle and the Alliance Member
agree to submit to the jurisdiction of, and agree that venue is proper in,
these courts in any such legal action or proceeding.
8.8 SEVERABILITY
In the event any provision of this Agreement is held to be invalid or
unenforceable, the remaining provisions of this Agreement will remain in
full force and effect.
8.9 EXPORT
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The Alliance Member agrees to comply fully with all relevant export
laws and regulations of the United States ("Export Law") to assure that
neither the Programs, nor any direct product thereof, are (a) exported,
directly or indirectly, in violation of Export Laws; or (b) are intended to
be used for any purposes prohibited by the Export Laws, including, without
limitation, nuclear, chemical, or biological weapons proliferation.
8.10 LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES, OR DAMAGES FOR LOSS OF PROFITS, REVENUE,
DATA OR USE, INCURRED BY EITHER PARTY OR ANY THIRD PARTY, WHETHER IN AN
ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY OR ANY OTHER PERSON HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ORACLE'S LIABILITY FOR
DAMAGES HEREUNDER SHALL IN NO EVENT EXCEED THE AMOUNT OF FEES PAID BY THE
ALLIANCE MEMBER UNDER THIS AGREEMENT, AND IF SUCH DAMAGES RESULT FROM THE
ALLIANCE MEMBER'S OR SUBLICENSEE'S USE OF THE PROGRAM OR SERVICES, SUCH
LIABILITY SHALL BE LIMITED TO FEES PAID FOR THE RELEVANT PROGRAM OR
SERVICES GIVING RISE TO THE LIABILITY.
The provisions of this Agreement allocate the risks between Oracle and
the Alliance Member. Oracle's pricing reflects this allocation of risk and
the limitation of liability specified herein.
8.11 FEDERAL GOVERNMENT SUBLICENSES
If the Alliance Member grants a Sublicense to the United States
government, the Programs shall be provided with "Restricted Rights" and the
Alliance Member will place a legend, in addition to applicable copyright
notices, on the documentation, and on the tape or diskette label,
substantially similar to the following:
RESTRICTED RIGHTS LEGEND
"Programs delivered subject to the DOD FAR Supplement are "commercial
computer software" and use, duplication and disclosure of the Programs
shall be subject to the licensing restrictions set forth in the applicable
license agreement. Otherwise, Programs delivered subject to the Federal
Acquisition Regulations are "restricted computer software" and use,
duplication and disclosure of the Programs shall be subject to the
restrictions in FAR 52.227-14, Rights in Data-- General, including
Alternate III (June 1987)."
8.12 WAIVER
The waiver by either party of any default or breach of this Agreement
shall not constitute a waiver of any other or subsequent default or breach.
Except for actions for nonpayment or breach of Oracle's proprietary rights
in the Programs, no action, regardless of form, arising out of this
Agreement may be brought by either party more than two years after the
cause of action has accrued.
8.13 ENTIRE AGREEMENT
This Agreement constitutes the complete agreement between the parties
and supersedes all prior or contemporaneous agreements or representations,
written or oral, concerning the subject matter of this Agreement. This
Agreement may not be modified or amended except in a writing signed by a
duly authorized representative of each party; no other act, document, usage
or custom shall be deemed to amend or modify this Agreement.
It is expressly agreed that the terms of this Agreement and any Order
Form shall supersede the terms in any Alliance Member purchase order or
other ordering document. This Agreement shall also supersede the terms of
any unsigned or "shrinkwrap" license included in any package, media, or
electronic version of Oracle-furnished software and any such software shall
be licensed under the terms of this Agreement, provided that the use
limitations contained in an unsigned ordering document shall be effective
for the specified licenses.
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<PAGE>
The Effective Date of this Agreement shall be
----------------------------------
<TABLE>
<S> <C>
EXECUTED BY THE ALLIANCE MEMBER:
- --------------------------------------------------------- EXECUTED BY ORACLE CORPORATION:
Authorized Signature: Authorized Signature:
------------------------------------ ------------------------------------
Name: Name:
---------------------------------------------------- ----------------------------------------------------
Title: Title:
--------------------------------------------------- ---------------------------------------------------
</TABLE>
Oracle Corporation
500 Oracle Parkway
Redwood Shores, CA 94065
(415) 506-7000
Oracle is a registered trademark of Oracle Corporation.
7-97
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EXHIBIT C
NCI PRICE LIST
(to be provided by NCI)
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<PAGE>
EXHIBIT D
PROHIBITED CUSTOMER LIST
AT&T
Pacific Century Group
Pacific Convergence Corp.
AOL
Cable and Wireless
NTL
TCI
Time Warner Cable
Media One
Comcast
Cox Cable
US West
Rogers Cable
Direct TV
GTE
Sprint
MCI
Bell South
Nynex
Southwest Bell
Ameritech
Bell Canada
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EXHIBIT E
JOINT SALES & MARKETING ACTIVITIES
1. NCI shall provide to Oracle core marketing materials for the NCI Technology
in electronic format as soon as such materials are available but no later
than when such materials are provided to any other distributor of the NCI
Technology. The core marketing materials shall include but not be limited
to data sheets, company brochures and demonstration materials. NCI grants
to Oracle the right to reproduce, modify and integrate (in whole or in
part) these core marketing materials into Oracle marketing materials.
Oracle's use of NCI's trademarks contained in these core marketing
materials shall be subject to NCI's Signature Guidelines, a copy of which
is attached as Exhibit F.
2. NCI shall appoint an Oracle channel management team who will be responsible
for managing the relationship between Oracle and NCI with respect to
Oracle's reselling of the NCI Technology, including appointing a point
person to act as the primary point of contact between Oracle and NCI
related to this Agreement (the "Oracle Channel Manager"). In addition, the
revenue sharing currently specified in the Agreement is predicated upon a
joint sales model. As requested by Oracle, NCI shall provide substantial
sales assistance as requested by Oracle on all transactions of the NCI
Technology. For each sale in which NCI has provided substantial assistance,
Oracle shall use reasonable efforts to notify NCI if Oracle executes a
Sublicense with the particular customer for the NCI Technology.
3. NCI shall use reasonable efforts to provide the necessary hardware to allow
Oracle to demonstrate the NCI Technology to potential customers at
discounted reseller rates.
4. Oracle shall use reasonable efforts to notify NCI of, and allow NCI to
participate in (subject to the Sublicensees consent), any public
announcement of Sublicenses of the NCI Technology by Oracle to end users.
However, nothing contained herein shall require Oracle to obtain NCI's
prior consent before making such a public announcement.
5. NCI shall use reasonable efforts to keep Oracle informed of future product
plans and roadmaps. Where identified as such, this information shall be
considered NCI Confidential Information under section 8.1 of the Agreement
and shall not be disclosed to third parties (including Oracle customers)
without the prior written consent of NCI. Such consent may be provided by
NCI's Oracle Channel Manager or another NCI representative as designated by
NCI.
6. Unless otherwise specified, each party shall bear its own costs for the
marketing and sales activities described above.
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EXHIBIT F
NCI SIGNATURE GUIDELINES
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<PAGE>
EXHIBIT G
THIRD PARTY RESTRICTIONS ON
EMBEDDED NCI TECHNOLOGY
THE FOLLOWING THIRD PARTY RESTRICTIONS APPLY TO THE NCI TECHNOLOGY TO THE EXTENT
THAT THEY INCORPORATE ANY OF THE THIRD PARTY SOFTWARE LISTED BELOW. ANY
CAPITALIZED TERMS THAT ARE NOT DEFINED HEREIN HAVE THE SAME DEFINITION AS IN THE
AGREEMENT.
1. REGARDING BITSTREAM SOFTWARE - IN THE EVENT THAT THE NCI TECHNOLOGY INCLUDE
BITSTREAM SOFTWARE SUBLICENSED FROM NCI, YOU MUST COMPLY WITH THE FOLLOWING
RESTRICTIONS AND OBLIGATIONS.
1.1. LICENSEE MUST REPRODUCE EACH BITSTREAM COPYRIGHT, TRADEMARK AND/OR
PATENT NOTICE, AS APPLICABLE IN ITS ENTIRETY, IN THE SAME LOCATION AS
IT APPEARS, IN ELECTRONIC OR PRINTED FORM, ON THE NCI SOFTWARE OR
SDK(S) AS DELIVERED TO LICENSEE.
2. REGARDING RSA SOFTWARE - IN THE EVENT THAT THE NCI TECHNOLOGY INCLUDES RSA
SOFTWARE SUBLICENSED FROM NCI, YOU MUST COMPLY WITH THE FOLLOWING
RESTRICTIONS AND OBLIGATIONS:
2.1. LICENSEE SHOULD INCLUDE WITHIN THE SPLASH SCREENS, USER DOCUMENTATION,
PRINTED PRODUCT COLLATERAL, PRODUCT PACKAGING AND ADVERTISEMENTS FOR
THE NCI TECHNOLOGY, THE RSA "LICENSEE SEAL" FROM THE FORM ATTACHED
HERETO AS APPENDIX "A" ALONG WITH A STATEMENT THAT THE NCI TECHNOLOGY
CONTAINS THE RSA SOFTWARE. LICENSEE AGREES NOT TO REMOVE OR DESTROY
ANY PROPRIETARY, TRADEMARK OR COPYRIGHT MARKINGS OR NOTICES PLACED
UPON OR CONTAINED WITHIN THE SOFTWARE OR DOCUMENTATION PROVIDED BY
NCI.
2.2. LICENSEE MUST IN ALL PROPOSALS AND AGREEMENTS WITH THE UNITED STATES
GOVERNMENT IDENTIFY AND LICENSE THE NCI TECHNOLOGY, INCLUDING ANY RSA
OBJECT CODE, AS FOLLOWS: (I) FOR ACQUISITION BY OR ON BEHALF OF
CIVILIAN AGENCIES, AS NECESSARY TO OBTAIN PROTECTION AS "COMMERCIAL
COMPUTER SOFTWARE AND RELATED DOCUMENTATION IN ACCORDANCE WITH THE
TERMS OF NCI'S OR LICENSEE'S CUSTOMARY LICENSE, AS SPECIFIED IN 48
C.F.R. 12.212 OF THE FEDERAL ACQUISITION REGULATIONS AND ITS SUCCESSOR
REGULATIONS, OR (II) FOR ACQUISITION BY OR ON BEHALF OF UNITS OF THE
DEPARTMENT OF DEFENSE, AS NECESSARY TO OBTAIN PROTECTION AS
"COMMERCIAL COMPUTER SOFTWARE" AS DEFINED IN 48 C.F.R. 227.7014(A)(1)
OF THE DEPARTMENT OF DEFENSE FEDERAL ACQUISITION REGULATION SUPPLEMENT
(DFARS) AND RELATED DOCUMENTATION IN ACCORDANCE WITH THE TERMS OF
NCI'S OR LICENSEE'S CUSTOMARY LICENSE, AS SPECIFIED IN 4:8 C.F.R.
227.7202.1 OF DFARS AND ITS SUCCESSOR REGULATIONS.
2.3 IN THE EVENT THAT LICENSEE INCLUDES AN "ABOUT BOX" OR SIMILAR
REFERENCE IN THE NCI TECHNOLOGY, LICENSEE AGREES TO INSERT AND
MAINTAIN IN THE "ABOUT BOX" (1) THE RSA "LICENSEE SEAL" INDICATED IN
APPENDIX "A", AND (2) A HYPERTEXT LINK TO RSA'S HOMEPAGE AT AN
RSA-DESIGNATED URL (CURRENTLY WWW. RSA.COM), WHICH LOGO AND POINTER
SHALL APPEAR ON THE FIRST PAGE OF SUCH "ABOUT BOX" AND IN NO LESS
PROMINENT LOCATION AND SIZE THAN ANY OTHER THIRD PARTY LOGO INCLUDED
THEREIN.
2.4. LICENSEE FURTHER AGREES TO INCLUDE IN ANY SECURITY ADVISORY MADE
AVAILABLE TO THIRD PARTIES, WHETHER IN PRINTED OR ELECTRONIC FORMAT,
THE RSA "LICENSEE SEAL" INDICATED IN EXHIBIT "A" AND A BRIEF
DESCRIPTION OF THE RSA SOFTWARE SUBLICENSED HEREUNDER AND ITS RELEVANT
APPLICABILITY TO THE SUBJECT MATTER OF THE SECURITY ADVISORY. FOR THE
PURPOSES OF THE AGREEMENT, "SECURITY ADVISORY" MEANS ANY TUTORIAL, FAQ
OR SIMILAR MANUAL OR INSTRUCTIONAL DOCUMENTATION DESCRIBING DATA
SECURITY USED BY OR AVAILABLE IN THE NCI TECHNOLOGY.
3. REGARDING HEADSPACE SOFTWARE - IN THE EVENT THAT THE NCI TECHNOLOGY INCLUDE
HEADSPACE MIDI SOFTWARE OR MUSIC CONTENT SUBLICENSED FROM NCI, YOU MUST
COMPLY WITH THE FOLLOWING RESTRICTIONS AND OBLIGATIONS:
3.1. IN THE EVENT THAT THE NCI TECHNOLOGY INCLUDES AN "ABOUT BOX" OR
SIMILAR REFERENCE, LICENSEE MUST INCLUDE REFERENCES TO HEADSPACE, INC.
AND THE RMF LOCK), AS WELL AS A LINK TO THE HEADSPACE, INC. WEB SITE,
IN THE AREA DESIGNATED BY LICENSEE FOR SUCH "ABOUT BOX". THE RMF LOGO
IS INCLUDED AS APPENDIX "B", ATTACHED HERETO, AND INCORPORATED HEREIN
BY THIS REFERENCE.
4. REGARDING PROGRESSIVE NETWORKS SOFTWARE - IN THE EVENT THAT THE NCI
TECHNOLOGY INCLUDES PROGRESSIVE NETWORKS SOFTWARE SUBLICENSED FROM NCI, YOU
MUST COMPLY WITH THE FOLLOWING RESTRICTIONS AND OBLIGATIONS:
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<PAGE>
4.1. LICENSEE MUST USE PROGRESSIVE NETWORKS' (PN) MARKS IN ACCORDANCE WITH
PN'S USAGE POLICIES ATTACHED HERETO AS APPENDIX "C" AND INCORPORATED
HEREIN BY THIS REFERENCE. SUCH MARKS MAY BE USED SOLELY IN CONJUNCTION
ON WITH LICENSEE'S ADVERTISING, MARKETING AND DISTRIBUTION OF THE NCI
TECHNOLOGY INCORPORATING PN'S SOFTWARE.
4.2. TO THE EXTENT THE NCI TECHNOLOGY INCLUDES AN IMPLEMENTATION OF AN
"ABOUT BOX" OR SIMILAR REFERENCE, LICENSEE MUST INCLUDE A REFERENCE TO
"PROGRESSIVE NETWORKS" AND "REALNETWORKS" AS FOLLOWS: "THE
REALNETWORKS PLAYER IS INCLUDED UNDER LICENSE FROM PROGRESSIVE
NETWORKS, INC. COPYRIGHT 1995:1997, PROGRESSIVE NETWORKS, INC.
REALNETWORKS AND THE REALNETWORKS LOGO ARE REGISTERED TRADEMARKS OF
PROGRESSIVE NETWORKS, INC. ALL RIGHTS RESERVED."
4.3. LICENSEE ACKNOWLEDGES THAT USE, DUPLICATION OR DISCLOSURE OF THE PN
SOFTWARE BY THE GOVERNMENT IS SUBJECT TO RESTRICTIONS SET FORTH IN
SUBPARAGRAPHS (A) THROUGH (D) OF THE COMMERCIAL COMPUTER-RESTRICTED
RIGHTS CLAUSE AT FAR 52.227.19 WHEN APPLICABLE, OR IN SUBPARAGRAPH
(C)(I)(II) OF THE RIGHTS IN TECHNICAL DATA AND COMPUTER SOFTWARE
CLAUSE AT DFARS 252.227-7013, OR IN SIMILAR CLAUSES IN THE NASA FAR
SUPPLEMENT. CONTRACTOR/MANUFACTURER IS PROGRESSIVE NETWORKS, INC.;
1111 THIRD AVENUE; SUITE 500; SEATTLE, WASHINGTON, 98101.
5.0 REGARDING JAVA SOFTWARE - IN THE EVENT THAT THE NCI TECHNOLOGY INCLUDE JAVA
SOFTWARE FROM SUN MICROSYSTEMS, INC. ("SUN") OR JAVASOFT, YOU MUST COMPLY
WITH THE FOLLOWING RESTRICTIONS AND OBLIGATIONS:
5.1 THE NCI TECHNOLOGY CONTAINING JAVA SOFTWARE THAT YOU DISTRIBUTE SHALL
INCLUDE IN THE DOCUMENTATION, OR IN OTHER TERMS AND CONDITIONS OF
SALE, NOTICES SUBSTANTIALLY SIMILAR TO THOSE CONTAINED ON AND IN THE
NCI SOFTWARE, SDKS AND RELATED DOCUMENTATION. YOU SHALL REQUIRE AN END
USER LICENSE AGREEMENT FOR EACH UNIT OF THE PRODUCT PROVIDING ACCESS
TO THE NCI TECHNOLOGY SHIPPED, INCLUDING WITHOUT LIMITATION, WARRANTY,
LIMITATION OF LIABILITY, RESTRICTED RIGHTS FOR GOVERNMENT, NO TRANSFER
OF TITLE, HIGH RISK ACTIVITIES, ETC. IF YOU USE A PACKAGE DESIGN FOR
THE NCI TECHNOLOGY, SUCH PACKAGE DESIGN SHALL INCLUDE AN
ACKNOWLEDGMENT OF SUN AS THE SOURCE OF THE JAVA SOFTWARE AND SUCH
OTHER NOTICES AS SPECIFIED BELOW.
5.2. JAVA APPLETS IN ANY HYPERTEXT MARKUP LANGUAGE (HTML) OR STANDARD
GENERALIZED MARKUP LANGUAGE (SGML)-BASED BROWSER WHICH IS SHIPPED AS
PART OF THE NCI TECHNOLOGY SHALL USE THE DOCUMENT TYPE DEFINITION
("DTD") AS SPECIFIED BY SUN MICROSYSTEMS.
5.3. THE FOLLOWING DISCLAIMER MUST BE PROVIDED TO EACH USER OF THE NCI
TECHNOLOGY: THIS PRODUCT IS NOT FAULT-TOLERANT AND IS NOT DESIGNED,
MANUFACTURED OR INTENDED FOR USE OR RESALE AS ON-LINE CONTROL
EQUIPMENT IN HAZARDOUS ENVIRONMENTS REQUIRING FAIL SAFE PERFORMANCE,
SUCH AS IN THE OPERATION OF NUCLEAR FACILITIES, AIRCRAFT NAVIGATION OR
COMMUNICATIONS SYSTEMS, AIR TRAFFIC CONTROL, DIRECT LIFE SUPPORT
MACHINES, OR WEAPONS SYSTEMS, IN WHICH THE FAILURE OF THIS PRODUCT
COULD LEAD DIRECTLY TO DEATH, PERSONAL INJURY, OR SEVERE PHYSICAL OR
ENVIRONMENTAL DAMAGE.
5.4. THE FOLLOWING NOTICES AND ACKNOWLEDGMENTS MOST BE PROVIDED TO EACH
USER OF THE NCI TECHNOLOGY AS DESCRIBED BELOW:
5.4.1. ON LICENSEE'S WEB SITE THAT DESCRIBES SUCH NCI TECHNOLOGY,
LICENSEE MUST INCLUDE THE FOLLOWING: JAVA LOCK), JAVA APPLET
INTEROPERABILITY MARK*, AND MESSAGE "POWERED BY JAVA TM FROM
SUN MICROSYSTEMS, INC." WITH A HYPERTEXT LINK TO THE ERROR!
BOOKMARK NOT DEFINED,
5.4.2. IN ANY NCI TECHNOLOGY DOCUMENTATION, SPLASH SCREEN OR OTHER
LOCATION WHERE NOTICES, ATTRIBUTION AND PROPRIETARY MARKINGS
ARE LISTED, LICENSEE MUST INCLUDE THE FOLLOWING: JAVA LOGO,
JAVA APPLET INTEROPERABILITY MARK, THE MESSAGE "POWERED BY
JAVA-TM- TECHNOLOGY FROM SUN MICROSYSTEMS, INC." AND
APPLICABLE COPYRIGHT NOTICES ASSOCIATED WITH A HYPERTEXT
LINK TO THE ERROR! BOOKMARK NOT DEFINED.. THE SPLASH SCREEN,
IF ANY, SHOULD BE A MINIMUM SIZE OF TWELVE (12) SQUARE
INCHES.
5.5. LICENSEE SHALL NOT REMOVE ANY COPYRIGHT NOTICES, TRADEMARK NOTICES OR
OTHER PROPRIETARY LEGENDS OF SUN OR ITS SUPPLIERS CONTAINED ON OR IN
THE SOFTWARE OR ANY DOCUMENTATION PROVIDED BY NCI. LICENSEE SHALL
COMPLY WITH ALL REASONABLE REQUESTS BY SUN TO INCLUDE SUN'S COPYRIGHT
AND/OR OTHER PROPRIETARY RIGHTS NOTICES ON THE NCI TECHNOLOGY,
DOCUMENTATION OR RELATED MATERIALS AS SPECIFIED IN THIS SECTION.
5.6. LICENSEE MUST COMPLY WITH SUN'S STANDARD TRADEMARK AND LOCK) USAGE
POLICIES. SPECIFICALLY, SUN'S MARKS MUST ONLY BE USED IN THE TEXT OF
ANY MATERIALS (NOT IN HEADLINES OR GRAPHICS) AND IN THE SAME TYPESIZE
AND TYPESTYLE AS THE SURROUNDING TEXT; THE MARKS MUST BE USED AS
ADJECTIVES, NOT AS NOUNS' AND SUN'S MARKS MUST BE
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<PAGE>
IDENTIFIED WITH THE APPLICABLE -Registered Trademark- OR -TM-
NOTICES AND ATTRIBUTED TO SUN IN AN APPROPRIATE LOCATION IN ANY
MATERIALS, AS STATED ABOVE. INFORMATION REGARDING SUN'S WEB LOGO
TRADEMARK POLICIES CAN BE FOUND AT.WWW.SUN.COM/LOGCOS/TRADEMARK.HTML.
*The Java Applet Interoperability Mark has not been designed by Sun
Microsystems, Inc., but may include such designation as "Java 1,0
Applet Compatible." Sun may change such logo, message and hypertext
link on reasonable advance notice.
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<PAGE>
APPENDIX "A" TO EXHIBIT G
RSA SEAL AND TRADEMARKS
RSA Licensee Seal: [Logo]
You are also permitted to use the following RSA trademarks, as applicable, in
ads, product packaging, documentation or collateral materials, provided that you
use the correct trademark designator, depicted below, and identify RSA as the
owner of the mark.
RC2-Registered Trademark- Symmetric Block Cipher, RC4-Registered Trademark-
Symmetric Stream Cipher
RC5-TM- Symmetric Block Cipher
BSAFE-TM-, TIPEM-TM-
RSA Public Key Cryptosystem-TM
MD-TM-, MD2-TM-, MD4-TM-, MD5-TM-
RSA has reserved the right to update this Appendix "A' from time to time upon
reasonable notice to you.
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<PAGE>
APPENDIX "B" TO EXHIBIT G
RMF LOGO
[Logo]
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<PAGE>
APPENDIX "C" TO EXHIBIT G
PROGRESSIVE NETWORKS TRADEMARK USAGE POLICY
REALNETWORKS-Registered Trademark- (text form)
PN-Registered Trademark- (text form)
PROGRESSIVE NETWORKS-Register Mark- (text form)
REALMEDIA-Trademark- (textform)
REALVIDEO-Trademark- (text form)
REALPLAYER-Trademark- (text form)
WEBACTIVE-Registered Trademark- (text from)
1. When using a Progressive Networks' trademark ("PN Mark"), use the
registered trademark symbol -Registered Trademark- or the -TM- symbol, as
indicated in the above example, on the most prominent (or if none is
prominent, the first) appearance of a PN Mark. For any PN Mark that is not
registered, the -TM- symbol should be used in place of the registered
trademark symbol -Registered Trademark-. Once marked, it is not normally
necessary to mark subsequent appearances of the trademark in the piece. Every
appearance of PN Logos in stylized form should always appear with the
appropriate -Registered Trademark- or -TM- symbol, and may be used only under
license with PN - unauthorized use is strictly prohibited. Shown above are a
list of current PN Marks that reflects the registration status of the PN
Marks. This list will be updated from time to time.
2. When using a PN Mark, never vary the spelling, add or delete hyphens, make
one word two, or use a possessive or plural form of the PN Mark. PN word marks
must always be used as adjectives followed by a generic term (such as "software"
or "system"), and never as nouns or verbs.
3. Progressive Networks is the owner of all right, title, and interest in the PN
Marks and Licensee agrees that it will not challenge the validity of Progressive
Networks' ownership of the PN Marks. Licensees shall not reproduce or use (or
authorize the reproduction or use of) the PN Marks in any manner other than
expressly authorized by Progressive Networks.
4. Progressive Networks may from time to time modify the PN Marks. Progressive
Networks will use commercially reasonable efforts to give licensees advance
notice of such modifications.
5. In order to assure compliance, you will, upon request from Progressive
Networks, provide samples of any marketing and advertising materials that
include the PN Marks.
6. In any place where they appear together, the PN Marks and any associated text
must be at least as large as the trademark and text of another vendor.
IMPORTANT INFORMATION ABOUT USING THE TEXT FORM
OF THE WORD REALNETWORKS-Registered Trademark-
1. When using the word RealNetworks, use the registered trademark symbol
- -Register Trademark-symbol, as indicated in the above example, on the most
prominent (or if none is prominent, the first) appearance of its use on a
page. For any PN Mark that is not registered, the -TM- symbol should be used
in place of the registered trademark symbol -Registered Trademark-. Once
marked with the -Registered Trademark- symbol, it is not normally necessary
to mark subsequent appearances of the trademark in the piece.
2. When using the word RealNetworks, never vary the spelling, add or delete
hyphens, make one word two, or use a possessive or plural form of the word.
RealNetworks must always be used as an adjective followed by a generic term
(such as "software" or "system"), and never as a noun or verb.
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<PAGE>
EXHIBIT H
NCI END USER LICENSE AGREEMENT
NCI END USER LICENSE AGREEMENT
REDISTRIBUTION NOT PERMITTED
IMPORTANT--READ CAREFULLY. BY CLICKING ON THE "ACCEPT" BUTTON OR OPENING THE
PACKAGE, LICENSEE IS CONSENTING TO BE BOUND BY THIS AGREEMENT. IF LICENSEE DOES
NOT AGREE TO ALL OF THE TERMS OF THIS AGREEMENT, CLICK THE "DO NOT ACCEPT"
BUTTON AND THE INSTALLATION PROCESS WILL NOT CONTINUE, OR, ALTERNATIVELY, RETURN
THE PRODUCT TO THE PLACE OF PURCHASE FOR A FULL REFUND OR CREDIT.
This agreement ("Agreement") is between you ("Licensee") and the party
who provided you the device running this NCI software ("Licensor") for the
license to use such software ("Software") and the related end-user documentation
("Documentation").
1. GRANT OF LICENSES GRANT. Subject to the payment of the applicable license
fees and all the terms and conditions of this Agreement, Licensor grants to
Licensee only a non-exclusive, non-transferable, non-sublicenseable license
to use a single object code copy of the Software, only in accordance with
the applicable Documentation.
2. RESTRICTIONS. Licensee shall not (and Licensee shall not allow a third
party to): modify, translate, or create derivative works based on the
Software; decompile, disassemble, or otherwise reverse engineer the
Software (except to the extent applicable laws specifically prohibit such
restriction); copy the Software (except for one copy made solely for
archival purposes, provided that any such copy must contain all of the
original Software's proprietary notices); rent, lease, grant a security
interest in, ,or permit concurrent use of, or otherwise transfer rights to
the Software. Licensee shall not remove, alter or destroy any form of the
notice, proprietary markings or other labels placed upon or contained
within the Software or Documentation.
3. TITLE/OWNERSHIP. As between the parties, title, ownership rights, and
intellectual property rights in the Software and all copies and portions
thereof, whether or not incorporated into other software, shall remain in
Network Computer, Inc. ("NCI") and/or its suppliers. The Software is
protected by the copyright laws and treaties. Title and related rights in
the content accessed through the Software is the property of the applicable
content owner and may be protected by applicable law. This License does not
give Licensee title or any other rights to Software or the content accessed
through the Software.
4. TERMINATION. The Agreement is effective until terminated. This license will
terminate automatically if Licensee fails to comply with the limitations
described herein. Upon termination' (a) Licensee shall immediately cease
all use of the Software and destroy all copies of the Software and
Documentation; and (b) Except for the license granted in Section 1 and
except as otherwise expressly provided herein, the terms of this Agreement
shall survive termination. Termination is not an exclusive remedy and all
other remedies will be available whether or not the license is terminated.
5. DISCLAIMER OF WARRANTY. SOFTWARE IS PROVIDED ON AN "AS IS" BASIS, WITHOUT
WARRANTY OF ANY KIND, INCLUDING WITHOUT LIMITATION ANY EXPRESSED OR IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-
INFRINGEMENT. FURTHER, LICENSOR, NCI AND THEIR RESPECTIVE LICENSORS AND
SUPPLIERS DO NOT WARRANT, GUARANTEE, OR MAKE ANY REPRESENTATIONS THAT THE
SOFTWARE WILL BE FREE FROM BUGS OR THAT ITS USE WILL BE UNINTERRUPTED OR
REGARDING THE USE, OR THE RESULTS OF THE USE, OF THE SOFTWARE OR WRITTEN
MATERIALS IN TERMS OF CORRECTNESS, ACCURACY, RELIABILITY, OR OTHERWISE. THE
LICENSEE UNDERSTANDS THAT NEITHER LICENSOR NOR NCI IS RESPONSIBLE FOR OR
HAS LIABILITY FOR HARDWARE, SOFTWARE, OR OTHER ITEMS OR ANY SERVICES
PROVIDED BY ANY THIRD PARTY. IN ADDITION, THE SECURITY MECHANISMS
IMPLEMENTED BY OR WITHIN SOFTWARE HAVE INHERENT LIMITATIONS, AND LICENSEE
MUST DETERMINE THAT THE SOFTWARE SUFFICIENTLY MEETS LICENSEE'S
REQUIREMENTS. THIS DISCLAIMER OF WARRANTY CONSTITUTES AN ESSENTIAL PART OF
THE AGREEMENT. SOME JURISDICTIONS
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<PAGE>
DO NOT ALLOW EXCLUSIONS OF AN IMPLIED WARRANTY, SO THIS DISCLAIMER MAY NOT
APPLY TO LICENSEE AND LICENSEE MAY HAVE OTHER LEGAL RIGHTS THAT VARY BY
JURISDICTION. NCI SHALL HAVE THE RIGHT TO ENFORCE THE OBLIGATIONS
HEREUNDER, AND ALL LIMITATIONS AND DISCLAIMERS MADE HEREUNDER SHALL BE ON
BEHALF OF NCI AS WELL AS LICENSOR.
6. EXPORT CONTROLS. None of the Software or any portion thereof, underlying
information or technology or Documentation may be exported or reexported or
provided to (a) Cuba, Iraq, Libya, Sudan, North Korea, Iran, Syria or any
other country to which the U.S. has embargoed goods (or any national or
resident thereof); or (b) anyone on the U.S. Treasury Department's list of
Specially Designated Nationals or the U.S. Commerce Department's Table of
Denial Orders. By using the Software, Licensee is agreeing to the foregoing
and Licensee is representing and warranting that Licensee is not located
in, under the control of, or a national or resident of any such country or
on any such list. NotwithStanding the above, Licensee agrees not to export
or reexport the Software or Documentation without the appropriate U.S. or
foreign government license, if one is required.
In addition, if the licensed Software is identified as a
"not-for-export" product (for example, on the box, media or in the installation
process), then the following applies: EXCEPT FOR EXPORT TO CANADA FOR USE IN
CANADA BY CANADIAN CITIZENS, THE SOFTWARE MAY NOT BE EXPORTED OUTSIDE THE UNITED
STATES OR TO ANY FOREIGN ENTITY OR "FOREIGN PERSON" AS DEFINED BY U.S.
GOVERNMENT REGULATIONS, INCLUDING WITHOUT LIMITATION, ANYONE WHO IS NOT A
CITIZEN, NATIONAL OR LAWFUL PERMANENT RESIDENT OF THE UNITED STATES. BY USING
THE SOFTWARE, LICENSEE IS AGREEING TO THE FOREGOING AND LICENSEE IS WARRANTING
THAT LICENSEE IS NOT A "FOREIGN PERSON" OR UNDER THE CONTROL OF A FOREIGN
PERSON.
7. LIMITATION OF LIABILITY. TO THE MAXIMUM EXTENT ALLOWED BY APPLICABLE LAW,
UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY, TORT (INCLUDING, WITHOUT
LIMITATION, NEGLIGENCE OR STRICT LIABILITY), CONTRACT, OR OTHERWISE, SHALL
LICENSOR, NCI, OR THEIR RESPECTIVE LICENSORS OR SUPPLIERS BE LIABLE TO
LICENSEE OR ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES OF ANY CHARACTER INCLUDING, WITHOUT LIMITATION,
DAMAGES FOR LOSS OF GOODWILL, WORK STOPPAGE OR INTERRUPTION, LOSS OR
INACCURACY OR CORRUPTION OF DATA, COMPUTER FAILURE OR MALFUNCTION, COST OF
PROCUREMENT OF SUBSTITUTE GOODS, SERVICES, OR TECHNOLOGY, OR ANY AND ALL
OTHER COMMERCIAL DAMAGES OR LOSSES. IN NO EVENT WILL LICENSOR OR NCI BE
LIABLE FOR ANY DAMAGES IN EXCESS OF THE AMOUNT LICENSOR RECEIVED FROM
LICENSEE FOR THE LICENSE PERTAINING TO THE SOFTWARE, EVEN IF LICENSOR OR
NCI SHALL HAVE BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY
CLAIM BY ANY OTHER PARTY. THIS LIMITATION OF LIABILITY SHALL NOT APPLY TO
LIABILITY FOR DEATH OR PERSONAL INJURY, TO THE EXTENT APPLICABLE LAW
PROHIBITS SUCH LIMITATION. FURTHERMORE, SOME JURISDICTIONS DO NOT ALLOW THE
EXCLUSION OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THIS
LIMITATION AND EXCLUSION MAY NOT APPLY TO LICENSEE.
8. HIGH RISK ACTIVITIES. The Software is not fault-tolerant and is not
designed, manufactured or intended for use or resale as on-line control
equipment in hazardous environments .requiring fail-safe performance, such
as in the operation of nuclear facilities, aircraft navigation or
communication systems, air traffic control, direct life support machines,
or weapons systems, in which the failure of the Software could lead
directly to death, personal injury, or severe physical or environmental
damage ("High Risk Activities"). Licensor and NCI, and their respective
licensors and suppliers, specifically disclaim any express or implied
warranty of fitness for High Risk Activities.
9. MISCELLANEOUS. This Agreement represents the complete agreement concerning
this license and may amended only by a writing executed by both parties. If
any provision of this Agreement is held to be unenforceable, such provision
shall be reformed only to the extent necessary to make it enforceable. This
Agreement shall be governed by California law, without regard to the
conflicts of law provisions thereof. The application the United Nations
Convention of Contracts for the International Sale of Goods is expressly
excluded.
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<PAGE>
10. U.S. GOVERNMENT END USERS. As defined in FAR section 2.101, the Software
and Documentation licensed in this Agreement are "commercial items" and
according to DFAR section 252.227-7014(a)(1) and (5) are deemed to be
"commercial computer software" and "commercial computer software
documentation." Consistent with DFAR section 227.7202 and FAR section
12.212 (and similar clauses in NASA FAR Supplement and all related
successor rules), any use, modification, reproduction, release,
performance, display, disclosure, or exploitation of the Software and any
accompanying documentation by the US. Government shall be governed solely
by the terms of this Agreement and shall be prohibited except to the extent
expressly permitted by the terms of this Agreement. Contractor/manufacturer
is Network Computer, Inc.
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<PAGE>
SDK LICENSE AGREEMENTS
NCI TV NAVIGATOR-TM- CONTENT DEVELOPMENT KIT
LICENSE AGREEMENT
The following terms shall apply to any NCI NAVIGATOR CONTENT DEVELOPMENT KITs
licensed to ISP (referred to as "You") hereunder.
REDISTRIBUTION OF THIS CONTENT DEVELOPMENT KIT ("CDK") OR ANY DOCUMENTATION
PROVIDED TO YOU BY NETWORK COMPUTER, INC. ("NCI") IS STRICTLY PROHIBITED.
THE MEDIA CONTAINED IN THIS PACKAGE INCLUDE A NUMBER OF SEPARATE PROGRAMS. YOU
ARE PERMITTED TO USE ONLY THOSE PROGRAMS FOR WHICH YOU HAVE PAID THE APPLICABLE
LICENSE FEE TO NCI. FURTHERMORE, YOUR USE OF THIS CDK IS SUBJECT TO ALL THE
TERMS AND CONDITIONS SET FORTH BELOW.
LICENSE.
This CDK is licensed, not sold, to You for use only under the terms of this
Agreement, and NCI and its licensors reserve all rights not expressly granted to
You. You own the media on which this CDK was originally fixed, but NCI and its
licensors retain ownership of all copies of the programs and content comprising
this CDK (collectively the "Programs"), You (the original licensee of this CDK)
may:
(a) use this CDK on a single computer by one user at a time in accordance with
the accompanying documentation. (b) make one copy of the Programs as provided to
You for purposes of backup; provided that such copy includes a reproduction of
any notices appearing in or on such Programs.
LICENSE RESTRICTIONS.
(a) Unauthorized copying of this CDK, the Programs or the written materials
included in this package is expressly forbidden. You may be held legally
responsible for any Copyright infringement which is caused or encouraged by Your
failure to abide by the terms of this agreement.
(b) You may not market, distribute, or transfer copies of this CDK or the
Program to others or electronically transfer this CDK or the Programs from one
computer to another over a network.
(C) You may not: (i) permit other individuals to use this CDK or the Programs;
(ii) modify, translate, reverse engineer, decompile, disassemble (except to the
extent applicable laws specifically prohibit such restriction), or create
derivative works based on this CDK or the Programs; (iii) copy this CDK or the
Programs (except as expressly provided herein); (iv) rent, lease, grant a
security interest in, or otherwise transfer rights to this CDK or the Programs;
or (v) remove any proprietary notices or labels in or on this CDK or the
Programs.
(d) You understand that NCI and its licensors may update or revise this CDK
and/or the Programs and in so doing incurs no obligation to furnish such updates
to You unless You have purchased current support and maintenance services from
NCI as described in the section below titled Technical Support.
(e) Upon transfer of this CDK, any Program or any copy thereof, the licensed
granted hereunder shall terminate immediately.
(f) You shall use this CDK solely for Your internal purposes.
To the extent European Economic Community ("EEC") law is applicable, the above
restrictions on reverse engineering, decompiling, disassembling or reducing any
machine, readable software or component to human-readable form is limited so
that it prohibits such activity only to the maximum extent such activity may be
prohibited without violating the EEC Directive on the legal protection of
computer programs.
HARDWARE LOANS.
In the event that NCI has provided You any hardware (including, without
limitation, the NCI Reference Platform) for use with the CDK, You shall
return to NCI any such hardware immediately upon the earlier of (i) NCI's
written request to You or (ii) the date agreed upon by the parties in any
separate written agreement for the return of such hardware. NCI shall retain
all right, title and interest in and to such hardware at all times,
including, without
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<PAGE>
limitation, the period while such hardware is located at Your facilities.
DISCLAIMER OF WARRANTY.
THIS CDK IS PROVIDED ON AN "AS IS" BASIS. NCI AND ITS LICENSORS EXPRESSLY
DISCLAIM ALL EXPRESS AND IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION, THE
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT. THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THIS CDK
AND ANY RESULTS CREATED USING THIS CDK IS BORNE BY YOU. IN ADDITION, THE
SECURITY MECHANISMS IMPLEMENTED BY THIS CDK AND RESULTS GENERATED THROUGH ITS
USE HAVE INHERENT LIMITATIONS, AND YOU MUST DETERMINE THAT THE CDK AND SUCH
RESULTS SUFFICIENTLY MEET YOUR SECURITY REQUIREMENTS, THIS DISCLAIMER OF
WARRANTY CONSTITUTES AN ESSENTIAL PART OF THE AGREEMENT. SOME JURISDICTIONS DO
NOT ALLOW EXCLUSIONS OF AN IMPLIED WARRANTY, SO THIS DISCLAIMER MAY NOT APPLY
AND YOU MAY HAVE OTHER LEGAL RIGHTS THAT VARY BY JURISDICTION.
TITLE.
Title, ownership rights, and intellectual property rights in this CDK and the
Programs shall remain in NCI and/or its licensors. This CDK is protected by
the copyright laws and treaties.
CONFIDENTIALITY.
NCI and its licensors consider this CDK and the Programs to contain valuable
trade secrets of NCI and its licensors, the unauthorized disclosure of which
could cause irreparable harm to NCI and/or its licensors. You agree to use
reasonable efforts not to disclose the Programs to any third parties and not
to use the Programs other than for the purposes authorized by this Agreement.
This confidentiality obligation shall continue after any termination of this
Agreement.
TERMINATION.
This Agreement is effective until terminated. The Sections of this Agreement
titled License Restrictions, Disclaimer of Warranty, Limitation of Liability,
Title, Confidentiality and Miscellaneous shall survive any termination or
expiration of this Agreement. This Agreement will terminate automatically
upon Your failure to comply with any of the limitations described herein.
Upon any termination or expiration of this Agreement, You must, at NCI's
option, return or destroy the CDK, any documentation provided by NCI and any
copies thereof and shall return to NCI all hardware (including, without
limitation, the NCI Reference Profile), if any, provided by NCI to You for
use with the CDK, if any.
EXPORT CONTROLS.
None of this CDK or any underlying information or technology may be
downloaded or otherwise exported or reexported (i) into (or to a national or
resident of) Cuba, Iraq, Libya, Yugoslavia, North Korea, Iran, Syria or any
other country to which the U.S. has embargoed goods; or (ii) to anyone on the
U.S. Treasury Department's list of Specially Designated Nationals or the U.S.
Commerce Department's Table of Denial Orders. By using this CDK, You are
agreeing to the foregoing and You are representing and warranting that You
are not located in, under the control of, or a national or resident of any
such country or on any such list.
SUPPORT AND MAINTENANCE.
Upon mutual agreement of the parties and subject to NCI's standard support
and maintenance terms and conditions (including payment of NCI's then-current
support and maintenance fees), NCI shall provide to You support and
maintenance for the CDK licensed hereunder.
LIMITATION OF LIABILITY.
UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY, TORT, CONTRACT, OR
OTHERWISE, SHALL NCI OR ITS LICENSORS BE LIABLE TO YOU OR ANY OTHER PERSON
FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY
CHARACTER INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF GOODWILL, WORK
STOPPAGE, COMPUTER FAILURE OR MALFUNCTION, OR ANY AND ALL OTHER COMMERCIAL
DAMAGES OR LOSSES. IN NO EVENT WILL NCI BE LIABLE FOR ANY DAMAGES IN EXCESS
OF THE AMOUNT NCI RECEIVED FROM YOU FOR A LICENSE TO THIS CDK, EVEN IF NCI
SHALL HAVE BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM
BY ANY OTHER PARTY. THIS LIMITATION OF LIABILITY SHALL NOT APPLY TO LIABILITY
FOR DEATH OR PERSONAL INJURY TO THE EXTENT APPLICABLE LAW PROHIBITS SUCH
LIMITATION. FURTHERMORE, SOME
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<PAGE>
JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR
CONSEQUENTIAL DAMAGES, SO THIS LIMITATION AND EXCLUSION MAY NOT APPLY TO YOU.
THE WARRANTY DISCLAIMERS AND LIMITATION OF LIABILITY ARE FUNDAMENTAL ELEMENTS OF
THE BASIS OF THE BARGAIN BETWEEN YOU AND NCI.
HIGH RISK ACTIVITIES.
The CDK and results created using the CDK are not fault-tolerant and is not
designed, manufactured or intended for use or resale as 0n-line control
equipment in hazardous environments requiring fail, safe performance, such as
in the operation of nuclear facilities, aircraft navigation or communication
systems, air traffic control, direct life support machines, or weapons
systems, in which the failure of the CDK and results created using the CDK
could lead directly to death, personal injury, or severe physical or
environmental damage ("High Risk Activities"), NCI and its licensors
specifically disclaim any express or implied warranty of fitness for High
Risk Activities.
MISCELLANEOUS.
This Agreement represents the complete agreement concerning this license and
may amended only by a writing executed by both parties. THE ACCEPTANCE OF ANY
PURCHASE ORDER PLACED BY YOU IS EXPRESSLY MADE CONDITIONAL ON YOUR ASSENT TO
THE TERMS SET FORTH HEREIN, AND NOT THOSE IN YOUR PURCHASE ORDER. If any
provision of this Agreement is held to be unenforceable, such provision shall
be reformed only to the extent necessary to make it enforceable and the
remaining provisions of this Agreement will not be affected or impaired in
any way. This Agreement shall be governed by California law without regard to
the conflict of laws provisions thereof. The application the United Nations
Convention of Contracts for the International Sale of Goods is expressly
excluded. If any legal action or proceeding is brought for the enforcement of
this Agreement, or because of any alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in such action or proceeding, in
addition to any other relief to which such party may be entitled.
U.S. GOVERNMENT RESTRICTED RIGHTS.
If this CDK is acquired by or on behalf of a unit or agency of the United
States Government, this provision applies, if the Programs are acquired by or
on behalf of a unit or agency of the United States Government, this provision
applies. The Programs: (a) were developed at private expense, are existing
computer software and no part of them were developed with government funds,
(b) are a trade secret Of NCI or its licensors for all purposes of the
Freedom of Information act, (c) are "restricted computer software" submitted
with restricted rights in accordance with subparagraphs (a) through (d) of
the Commercial Computer Software, Restricted Rights clause at 52.227-19 and
its successors, (d) in all respects are proprietary data belonging solely to
NCI or its licensors, (c) are unpublished and all rights are reserved under
the copyright laws of the United States. For units of the Department of
Defense (DoD), the programs are licensed only with "Restricted Rights" as
that term is defined in the DoD supplement to the Federal Acquisition
Regulation 252.227-7013 (c)(1)(ii), Rights in Technical Data and Computer
Software and its successors, and use, duplication or disclosure is subject to
restrictions as set forth in subdivision (c)(1)(ii) of the Rights in
Technical Data and Computer Software clause at 252.227-7013 or to NCI's
standard commercial license, as applicable. Contractor/manufacturer is
Network Computer, Inc., 1000 Bridge Parkway, Redwood Shores, CA 94065. If
this CDK or the Programs are acquired under a GSA Schedule, the Government
has agreed to refrain from changing or removing any insignia or lettering
from this CDK, the Programs and any documentation provided (except for backup
purposes).
Should You have any questions concerning this Agreement, or if You wish to
contact NCI for any reason, please write: Network Computer, Inc., Attention:
Customer Service, 1000 Bridge Parkway, Redwood Shores, CA 94065.
Page: 38
<PAGE>
NCI TV NAVIGATOR-Trademark- SDK LICENSE AGREEMENT
The following terms shall apply to any NCI NAVIGATOR SOFTWARE DEVELOPMENT
TOOLKITs licensed to ISP (referred to as "Licensee") hereunder.
REDISTRIBUTION OF THIS SOFTWARE DEVELOPMENT TOOLKIT ("SDK") OR ANY
DOCUMENTATION PROVIDED TO LICENSEE BY NCI IS STRICTLY PROHIBITED.
REDISTRIBUTION OF ANY RESULTS CREATED USING THIS SDK ARE PROHIBITED UNLESS
SUCH RIGHT HAS BEEN GRANTED PURSUANT TO A WRITTEN LICENSE AGREEMENT EXECUTED
BY NCI AND LICENSEE (THE "RESELLER AGREEMENT") AND THEN ONLY AS LICENSED
THEREBY.
THE MEDIA CONTAINED IN THIS PACKAGE INCLUDE A NUMBER OF SEPARATE PROGRAMS,
INCLUDING THE TORNADO FOR NCI TV NAVIGATOR, ADD-ON COMPONENTS AND TOOL
PROGRAMS FOR USE WITH TORNADO FOR NCI TV NAVIGATOR, AND THE NCI TV NAVIGATOR
SYSTEM COMPONENTS. LICENSEE IS PERMITTED TO USE ONLY THOSE PROGRAMS FOR WHICH
LICENSEE HAS PAID THE LICENSE FEE AND OBTAINED A PASS KEY FROM NCI ALLOWING
LICENSEE ACCESS TO THE PROGRAM. LICENSEE HAS NOT LICENSED A PROGRAM UNTIL
LICENSEE HAS PAID THE LICENSE FEE AND OBTAINED THE PASS KEY. FURTHERMORE,
LICENSEE'S USE OF THIS SDK IS SUBJECT TO ALL THE TERMS AND CONDITIONS SET
FORTH BELOW.
LICENSE.
This SDK is licensed, not sold, to Licensee for use only under the terms of
this agreement, and NCI and its licensors reserve all rights not expressly
granted to Licensee. Licensee owns the media on which this SDK was originally
fixed, but NCI and its licensors retain ownership of all copies of the
programs comprising this SDK (collectively the "Programs"). Licensee (the
original licensee of this SDK) may:
(a) use this SDK on a single computer by one user at a time. Use is limited
to development of the Product or Products as defined in the Reseller
Agreement which may only be performed at the site set forth herein or, if
applicable, only at the location of Licensee's principal office as set forth
in the Reseller Agreement. Furthermore, use is limited to development for a
Product or Products which execute on a single target architecture, as set
forth herein or, if applicable, the target architecture set forth in the
Reseller Agreement. The number of authorized seats may be increased only upon
approval of NCI and payment of additional license fees.
(b) make one copy of Tornado for NCI TV Navigator or Tornado for NCI TV
Navigator Component Program licensed by Licensee or portions thereof except
for the directory "bin", sub directory "h", and the files entitled "makefile"
in directories "config/all" and "config/(target)". Such copy shall be in
tangible object code form only for physical incorporation into a Product or
Products as defined in the Reseller Agreement that Licensee develops using
this SDK, provided that such copy includes a reproduction of any notices
appearing in or on the programs included in this SDK. Such copy shall be used
for development processes only and be accessed only as part of the Target
Application and not on a stand alone or independent basis.
(c) make one copy of any licensed programs in tangible object code form for
purposes of backup; provided that such copy includes a reproduction of any
notices appearing in or on such program.
LICENSE RESTRICTIONS.
(a) Unauthorized copying of this SDK, the Programs or the written materials
included in this package is expressly forbidden. Licensee may be held legally
responsible for any copyright infringement which is caused or encouraged by
Licensee's failure to abide by the terms of this agreement.
(b) Licensee may not market, distribute, or transfer copies of this SDK or
the Program to others or electronically transfer this SDK or the Programs
from one computer to another over a network.
(c) Licensee may not: (i) permit other individuals to use this SDK or the
Programs; (ii) modify, translate, reverse engineer, decompile, disassemble
(except to the extent applicable laws specifically prohibit such
restriction), or create derivative works based on this SDK or the Programs;
(iii) copy this SDK or the Programs (except as expressly provided herein);
(iv) rent, lease, grant a security interest in, or otherwise transfer rights
to this SDK or the Programs; or (v) remove any proprietary notices or labels
in or on this SDK or the Programs.
(d) Licensee understands that NCI and its licensors may update or revise this
SDK and/or the Programs and in so doing incurs no obligation to furnish such
updates to Licensee unless Licensee has purchased current support and
maintenance services from NCI as described in the section below titled
Technical Support.
(e) Use of this SDK and the Programs is subject to proper AND complete
installation of the NCI TV Navigator System Components pursuant to the
instructions and procedures provided to Licensee by NCI.
(f) Upon transfer of this SDK, any Program or any copy thereof, the licensed
granted hereunder shall terminate immediately.
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<PAGE>
(g) Unless otherwise agreed by the parties in writing, any and all
development by Licensee of device drivers must be performed at NCI's premises.
To the extent European Economic Community ("EEC") law is applicable, the
above restrictions on reverse engineering, decompiling, disassembling or
reducing any machine-readable software or component to human-readable form is
limited so that it prohibits such activity only to the maximum extent such
activity may be prohibited without violating the EEC Directive on the legal
protection of computer programs.
HARDWARE LOANS.
In the event that NCI has provided Licensee any hardware (including, without
limitation, the NCI Reference Platform) for use with the SDK, Licensee shall
return to NCI any such hardware immediately upon the earlier of (i) NCI's
written request to Licensee or (ii) the date agreed upon by the parties in
any separate written agreement for the return of such hardware. NCI shall
retain all right, title and interest in and to such hardware at all times,
including, without limitation, the period while such hardware is located at
Licensee's facilities.
DISCLAIMER OF WARRANTY.
THIS SDK IS PROVIDED ON AN "AS IS" BASIS. NCI AND ITS LICENSORS EXPRESSLY
DISCLAIM ALL EXPRESS AND IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION,
THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT. THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THIS
SDK AND ANY RESULTS CREATED USING THIS SDK IS BORNE BY LICENSEE. IN ADDITION,
THE SECURITY MECHANISMS IMPLEMENTED BY THIS SDK AND RESULTS GENERATED THROUGH
ITS USE HAVE INHERENT LIMITATIONS, AND LICENSEE MUST DETERMINE THAT THE SDK
AND SUCH RESULTS SUFFICIENTLY MEET LICENSEE'S SECURITY REQUIREMENTS. THIS
DISCLAIMER OF WARRANTY CONSTITUTES AN ESSENTIAL PART OF THE AGREEMENT. SOME
JURISDICTIONS DO NOT ALLOW EXCLUSIONS OF AN IMPLIED WARRANTY, SO THIS
DISCLAIMER MAY NOT APPLY AND LICENSEE MAY HAVE OTHER LEGAL RIGHTS THAT VARY
BY JURISDICTION.
TITLE.
Title, ownership rights, and intellectual property rights in this SDK and the
Programs shall remain in NCI and/or its licensors. This SDK is protected by
the copyright laws and treaties.
CONFIDENTIALITY.
NCI and its licensors consider this SDK and the Programs to contain valuable
trade secrets of NCI and its licensors, the unauthorized disclosure of which
could cause irreparable harm to NCI and/or its licensors. Licensee agrees to
use reasonable efforts not to disclose the Programs to any third parties and
not to use the Programs other than for the purposes authorized by this
Agreement. This confidentiality obligation shall continue after any
termination of this Agreement.
TERMINATION.
This Agreement is effective until terminated, The Sections of this Agreement
titled License Restrictions, Disclaimer of Warranty, Limitation of Liability,
Title, Confidentiality and Miscellaneous shall survive any termination or
expiration of this Agreement. This Agreement will terminate automatically
upon Licensee's failure to comply with any of the limitations described
herein or in the Reseller Agreement by and between NCI and Licensee.
Licensee hereby acknowledges that unless and until Licensee enters into a
Reseller Agreement, Licensee shall use the SDK solely for its internal
evaluation purposes.
On any termination or expiration of this Agreement, Licensee must, at NCI's
option, return or destroy the SDK, any documentation provided by NCI and any
copies thereof and shall return to NCI all hardware (including, without
limitation, the NCI Reference Profile), if any, provided by NCI to Licensee
for use with the SDK.
EXPORT CONTROLS.
None of this SDK or any underlying information or technology may be
downloaded or otherwise exported or reexported (i) into (or to a national or
resident of) Cuba, Iraq, Libya, Yugoslavia, North Korea, Iran, Syria or any
other country to which the U.S. has embargoed goods; or (ii) to anyone on the
U.S. Treasury Department's list of Specially Designated Nationals or the U.S.
Commerce Department's Table of Denial Orders. By using this SDK, Licensee is
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<PAGE>
agreeing to the foregoing and Licensee is representing and warranting that
Licensee is not located in, under the control of, or a national or resident
of any such country or on any such list.
SUPPORT AND MAINTENANCE.
Upon mutual agreement of the parties and subject to NCI's standard support
and maintenance terms and conditions (including payment of NCI's then-current
support and maintenance fees), NCI shall provide to Licensee support and
maintenance for the SDK licensed hereunder.
LIMITATION OF LIABILITY.
UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY, TORT, CONTRACT, OR
OTHERWISE, SHALL NCI OR ITS LICENSORS BE LIABLE TO LICENSEE OR ANY OTHER
PERSON FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY
CHARACTER INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF GOODWILL, WORK
STOPPAGE, COMPUTER FAILURE OR MALFUNCTION, OR ANY AND ALL OTHER COMMERCIAL
DAMAGES OR LOSSES. IN NO EVENT WILL NCI BE LIABLE FOR ANY DAMAGES IN EXCESS
OF THE AMOUNT NCI RECEIVED FROM LICENSEE FOR A LICENSE TO THIS SDK, EVEN IF
NCI SHALL HAVE BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY
CLAIM BY ANY OTHER PARTY. THIS LIMITATION OF LIABILITY SHALL NOT APPLY TO
LIABILITY FOR DEATH OR PERSONAL INJURY TO THE EXTENT APPLICABLE LAW PROHIBITS
SUCH LIMITATION. FURTHERMORE, SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION
OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THIS LIMITATION AND
EXCLUSION MAY NOT APPLY TO LICENSEE. THE WARRANTY DISCLAIMERS AND LIMITATION
OF LIABILITY ARE FUNDAMENTAL ELEMENTS OF THE BASIS OF THE BARGAIN BETWEEN
LICENSEE AND NCI.
HIGH RISK ACTIVITIES.
The SDK and results created using the SDK are not fault-tolerant and is not
designed, manufactured or intended for use or resale as on-line control
equipment in hazardous environments requiring fail-safe performance, such as
in the operation of nuclear facilities, aircraft navigation or communication
systems, air traffic control, direct life support machines, or weapons
systems, in which the failure of the SDK and results created using the SDK
could lead directly to death, personal injury, or severe physical or
environmental damage ("High Risk Activities"). NCI and its licensors
specifically disclaim any express or implied warranty of fitness for High
Risk Activities.
MISCELLANEOUS.
This Agreement represents the complete agreement concerning this license and
may amended only by a writing executed by both parties. THE ACCEPTANCE OF ANY
PURCHASE ORDER PLACED BY LICENSEE IS EXPRESSLY MADE CONDITIONAL ON LICENSEE'S
ASSENT TO THE TERMS SET FORTH HEREIN, AND NOT THOSE IN LICENSEE'S PURCHASE
ORDER. If any provision of this Agreement is held to be unenforceable, such
provision shall be reformed only to the extent necessary to make it
enforceable and the remaining provisions of this Agreement will not be
affected or impaired in any way, This Agreement shall be governed by
California law without regard to the conflict of laws provisions thereof. The
application the United Nations Convention of Contracts for the International
Sale of Goods is expressly excluded. If any legal action or proceeding is
brought for the enforcement of this Agreement, or because of any alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in
such action or proceeding, in addition to any other relief to which such
party may be entitled.
U.S. GOVERNMENT RESTRICTED RIGHTS.
If this SDK is acquired by or on behalf of a unit or agency of the United
States Government, this provision applies. If the Programs are acquired by or
on behalf of a unit or agency of the United States Government, this provision
applies. The Programs: (a) were developed at private expense, are existing
computer software and no part of them were developed with government funds,
(b) are a trade secret of NCI or its licensors for all purposes of the
Freedom of Information act, (c) are "restricted computer software" submitted
with restricted rights in accordance with subparagraphs (a) through (d) of
the Commercial Computer Software-Restricted Rights clause at 52.227-i9 and
its successors, (d) in all respects are proprietary data belonging solely to
NCI or its licensors, and (e)are unpublished and all rights are reserved
under the copyright laws of the United States. For units of the Department of
Defense (DoD), the programs are licensed only with "Restricted Rights" as
that term is defined in the DoD supplement to the Federal Acquisition
Regulation 252,227-7013 (c)(1)(ii), Rights in Technical Data and Computer
Software and its successors, and use, duplication or disclosure is subject to
restrictions as set forth in subdivision (c)(1)(ii) of the Rights in
Technical Data and Computer Software clause at 252.227-7013 or to NCI's
standard commercial license,
Page: 41
<PAGE>
as applicable, Contractor/manufacturer is Network Computer, Inc., 1000 Bridge
Parkway, Redwood Shores, CA 04065. If the Programs are acquired under a GSA
Schedule, the Government has agreed to refrain from changing or removing any
insignia or lettering from the Programs or the documentation as provided or
from producing copies of manuals or media {except for backup purposes).
Page: 42
<PAGE>
EXHIBIT I
ISP ADDENDUM
Page: 43
<PAGE>
INTERNET SERVICE PROVIDER AGREEMENT
This ISP Agreement ("Agreement") is between Network Computer, Inc., a
Delaware corporation, with its principal place of business at 1000 Bridge
Parkway, Redwood Shores, California 94065 ("NCI") and ________________ a
___________corporation, with its principal place of business at 1000 Bridge
Parkway, ________________ ("ISP"). The parties agree as follows:
1. DEFINITIONS
1.1 "DERIVATIVE WORK(S)" shall mean a revision, modification, translation,
abridgment, condensation, or expansion of NCI Products (as defined
below) or any form in which NCI Products may be recast, transferred, or
adapted, which, if prepared without the consent of NCI, would be a
copyright infringement; (ii) any adaptation, subset, addition,
improvement or combination of the NCI Products, which, if prepared
without the consent of NCI, would be a patent infringement; and (iii)
any new material, information or data derived from the NCI Products,
including new material which may be protectable by copyright, patent or
other proprietary rights, which, if prepared without the consent of
NCI, would be trade secret misappropriation or infringement.
1.2 "INTERNET SERVICES" shall mean the Internet applications and services
offered by or through ISP to Subscribers (as defined below), which
applications and services utilize the NCI Server Software and which
applications and/or services are described on Exhibit A.
1.3 "NC CARD" shall mean a card which may be distributed to Subscribers
through which Subscribers are authorized to access the Internet
Services. ISP shall control the look of the NC Cards provided to ISP
provided that such look shall be subject to the review and approval of
NCI consistent with the then-current NCI NC Card (Elements and Usages
guidelines (which approval shall not be unreasonably withheld). ISP
acknowledges that, once activated for a Subscriber, NC Cards may not be
reused and/or reactivated for another Subscriber.
1.4 "NCI APPROVED NETWORK COMPUTER DEVICE" shall mean a network computer
device distributed under a Network Computer Manufacturer's and/or ISP's
label which is approved by NCI as conforming to the applicable NCI
set-top box design standards and contains a validly licensed copy of
the software identified as NCI Client Software on Exhibit A hereto.
1.5 "NCI CLIENT SOFTWARE" shall mean the NCI TV NavigatorTM software.
1.6 "NETWORK COMPUTER MANUFACTURERS" shall mean third parties authorized in
advance by NCI who manufacture and distribute NCI Approved Network
Computer Devices.
1.7 "NCI LOGOS" shall mean for any particular country, the trademarks and
logos set forth on EXHIBIT A hereto and any other trademarks, service
marks, logos or trade names adopted by NCI and supplied to ISP from
time to time under this Agreement.
1.8 "NCI SOFTWARE" shall mean, collectively, the NCI server software (the
"NCI Server Software") described on Exhibit A attached hereto, as may
be amended by the parties from time to time; the user guides and
manuals for use of the software provided to ISP hereunder ("Software
Documentation"); and Updates provided to ISP hereunder. Unless
expressly provided herein, references to the NCI Server Software shall
not include the SDKs or Betas (as defined below).
1.9 "PROGRAM ERRORS" shall mean one or more reproducible deviations in the
NCI Server Software, NCI Client Software Updates or SDKs from the
applicable functional specifications set forth in the Software
Documentation or SDK Documentation, as applicable.
1.10 "SDKS" shall mean, collectively, NCI Custom Connect Server software
development kit, the NCI TV Navigator software development kit, the NCI
TV Content development kit; the user guides and manuals for use of the
SDKs provided to ISP hereunder ("SDK Documentation"); and Updates
provided to ISP hereunder. Unless expressly provided herein, references
to the SDKs shall not include the Betas (as defined below).
1.11 "SUBSCRIBER" shall mean each end user customer of ISP that validly
acquires a Subscription to access the NCI Server Software using the NCI
Client Software through the NC Card and/or through an NCI Approved
Network Computer Device solely as part of the Internet Services. ISP
shall only grant Subscriptions to Subscribers located in the Territory.
1.12 "SUBSCRIPTION" shall mean a nonexclusive, cancelable right granted by
or through ISP to a Subscriber to access the NCI Server Software using
the NCI Client Software through the NC Card and/or through an NCI
Approved Network Computer Device solely as part of the Internet
Services. All Subscriptions are non-transferable and are not permitted
to be transferred from one Subscriber to another Subscriber.
1.13 "TERRITORY" shall mean _________________________.
1.14 "UPDATE" shall mean minor updates of the NCI Server Software, NCI
Client Software, and/or SDKs which are made generally commercially
available by NCI to its customers for no additional fee.
<PAGE>
2. LICENSE GRANT
2.1 LICENSES GRANTED TO ISP
A. SDK LICENSES
Subject to the terms and conditions of this Agreement and in
consideration of the fees specified in Section _______NCI hereby grants
to ISP a license to use _____ (___) NCI Custom Connect Server SDK
developer seats, ______ (___) NCI TV Navigator SDK developer seats, and
the NCI TV Content Development Kit for the following purposes in
accordance with the terms and conditions set forth herein and in the
applicable SDK license agreements (current versions of which are
attached as Exhibit C hereto, and incorporated herein by reference)
making HTML or JavaScript code modifications, such as making
ISP-specific user interface look and feel modifications and creating
code in order to integrate ISP's software or other applications with
the NCI Software and the NCI Client Software Updates. To the extent
that there are any conflicts between the principal terms of this
Agreement and the SDK license agreements, the terms of this Agreement
will prevail.
B. DEPLOYMENT LICENSES
Subject to the terms and conditions of this Agreement and in
consideration of the fees specified in Section _________, NCI hereby
grants to ISP a nonexclusive, nonassignable license in the Territory
to (a) reproduce, install, and use the resulting server and client
created by ISP using the NCI Custom Connect Server SDK, NCI TV
Navigator SDK, the NCI TV Content Development Kit, (b) to grant
Subscriptions to access the NCI Server Software to Subscribers in
the Territory optionally through Smart Cards and as otherwise
limited herein and (c) to reproduce, and distribute NCI Client
Software Updates to Subscribers.
ISP shall be responsible for copying and deploying the NCI Server
Software and the NCI Client Software Updates as part of the Internet
Services.
C. SUBSCRIPTION AGREEMENTS
ISP shall grant Subscriptions to Subscribers in the Territory with
respect to the NCI Software solely through written and enforceable
agreements between ISP and each Subscriber (e.g., written shrinkwrap
or electronic wrapper agreements) as provided in this Section
("Subscription Agreements"). Upon NCI's request, ISP shall provide
NCI with copies of ISP's standard Subscription Agreement. Every
Subscription Agreement shall include, at a minimum, contractual
provisions which:
1. Prohibit title to the NCI Software from passing to the
Subscriber or any other party;
2. Disclaim, to the extent permitted by applicable law, NCI's
liability for any damages, whether direct, indirect, incidental or
consequential, arising from the use of the NCI Software;
3. Prohibit the reverse engineering, disassembly or decompilation
of the NCI Software by either the Subscriber or any other party; and
4. Require the Subscriber, at the termination of the relevant
agreement, to discontinue use of the NCI Software and either destroy
the NCI Software or return the NCI Software to ISP.
5. Contain the following disclaimer: This service/product is not
fault-tolerant and is not designed, manufactured or intended for use
or resale as on-line control equipment in hazardous environments
requiring fail-safe performance, such as in the operation of nuclear
facilities, aircraft navigation or communications systems, air
traffic control, direct life support machines, or weapons systems,
in which the failure of this product could lead directly to death,
personal injury, or severe physical or environmental damage.
ISP shall not grant access to the NCI Server Software through any
process other than Subscription as described herein. D. ENFORCEMENT ISP
shall use best efforts to protect NCI's proprietary rights and to
enforce each Subscription Agreement. ISP shall notify NCI, in writing
of any breach of a material obligation under Subscription Agreement
affecting the NCI Software, NCI Client Software Updates or the Software
Documentation. ISP will reasonably cooperate with NCI in any legal
action to prevent or stop unauthorized use, reproduction or
distribution of the NCI Software, SDKs, or the NCI Client Software
Updates,
2.2 BETA LICENSE
NCI may, at its discretion deliver ISP experimental versions of the NCI
Software or SDKs in the form of beta or pre-release versions ("Betas")
subject to the following terms:
(i) Subject to all restrictions set forth in this Agreement,
NCI grants to ISP a limited, non-exclusive and non-transferable license
to use the Betas solely at address set forth above and only for the
purpose of evaluating and testing such Betas. Except as expressly set
forth herein, the license granted to ISP in this Section 2.2
<PAGE>
("Beta License") shall not be for any other purpose, and any other
use by ISP shall constitute a material breach of this Agreement.
(ii) ISP will supply NCI with an evaluation report every
month, with the first evaluation report due one (1) month after NCI
delivers the applicable Beta (collectively, the "Evaluation Reports").
The Evaluation Reports shall set forth in reasonable detail the tests
performed, the results of those tests, problems or deficiencies
encountered in the testing process, suggested solutions to the problems
and recommended action for modification of the Betas based on ISP's
test results. The Evaluation Reports shall be delivered via electronic
mail to the following email address: [email protected] or as otherwise
agreed to by the parties.
(iii) ISP shall cease using and destroy all copies of any
Betas provided hereunder upon the earlier of (a) NCI's delivery of the
production version of such software; (b) NCI's written notice to ISP;
and (c) termination of this Agreement.
(iv) Betas are considered confidential information of NCI.
2.3 LIMITATIONS ON USE
A. ISP shall not use or duplicate the NCI Software, the SDKs or the
Betas for any purpose other than as specified in this Agreement or make
the NCI Software, the SDKs or the Betas available to unauthorized third
parties. ISP shall not cause or permit the reverse engineering,
disassembly, or decompilation of the NCI Software. ISP may copy the NCI
Server Software, the SDKs and the Betas solely for archival or backup
purposes.
3. TERMINATION
3.1 EFFECT OF TERMINATION
A. Upon expiration of this Agreement or termination by ISP of this
Agreement in accordance with Section ____ regarding termination for
breach, (i) all ISP's rights to market and grant Subscriptions to new
Subscribers for the NCI Software shall cease, and (ii) provided ISP
continues to pay to NCI the Technical Support Fees as set' forth in the
Agreement, all licenses granted herein to ISP shall continue solely for
the purposes of providing the Internet Services to Post Termination
Subscribers for the duration of the term of such Post Termination
Subscribers' Subscription Agreement. A "Post Termination Subscribe('
shall mean a Subscriber who, as of the effective date of such
expiration or termination of this Agreement, has executed, and is not
in breach of, a valid non-renewable Subscription Agreement. Thereafter,
upon the termination of any Subscription Agreement, ISP shall require
the applicable Subscriber to cease using the NCI Software and the NCI
Client Software Updates. After all of the Subscription Agreements have
terminated, all licenses granted herein shall terminate and ISP shall
cease using the NCI Software, the NCI Client Software Updates, the
SDKs, and the Betas and shall either destroy or return to NCI, at NCI's
option, all copies in all forms of the NCI Software, the SDKs, and the
Betas.
B. Upon termination by NCI of this Agreement, in accordance with
Section regarding termination for breach all licenses granted herein
shall terminate and ISP's rights to fulfill, market and grant
Subscriptions for the NCI Software (as set forth in this Agreement)
and to reproduce and distribute the NCI Client Software Updates
shall cease, and ISP shall cease using the NCI Software, the NCI
Client Software Updates, the SDKs, and the Betas and shall require
all Subscribers to cease using the NCI Software and the NCI Client
Software Updates. ISP shall either destroy or return to NCI, at
NCI's option, all copies in all forms of the NCI Software, the NCI
Client Software Updates, the SDKs, and the Betas.
C. The termination of this Agreement or any license shall not limit
either party from pursuing any other remedies available to it,
including injunctive relief, nor shall such termination relieve
ISP's obligation to pay all fees that have accrued or that ISP has
agreed to pay under this Agreement, any ordering document under this
Agreement, or any Subscription Reports required
The parties' rights and obligations under s 2.3, and Articles 3, 4, 5,
6, 7 excluding 7.3, and 8 shall survive termination of this Agreement.
4. INDEMNIFICATION
ISP will defend and indemnify NCI against: (a) all claims and damages
to NCI arising from: any use by ISP and/or Subscribers of any product
or service not provided by NCI but used in combination with the NCI
Software and/or NCI Client Software Updates if such claim would have
been avoided by the exclusive use of the NCI Software and/or the NCI
Client Software Updates; and (b) all claims and damages to NCI caused
by ISP's failure to include the required contractual terms set forth in
the last paragraph of Section 2.2 hereof in each agreement; and (c) all
claims and damages to NCI caused by a Subscriber's breach of any Of the
applicable provisions required by the last paragraph of Section 2.1C
hereof; provided that: (a) NCI notifies ISP in writing within thirty
<PAGE>
(30) days of the claim; (b) ISP has sole control of the defense and
all related settlement negotiations; and (c) NCI provides ISP with
the assistance, information and authority necessary to perform ISP's
obligations under this Section. Reasonable out-of-pocket expenses
incurred by NCI in providing such assistance will be reimbursed by
ISP.
5. WARRANTIES/REMEDIES
5.1 NCI'S SOFTWARE WARRANTY
NCI warrants for a period of ninety (90) days from the Effective Date
that the unmodified NCI Software, NCI Client Software Updates, NCI
Custom Connect Server software development kit, and the NCI TV
Navigator software development kit will perform the functions
substantially as described in the applicable documentation when
operated as described in the software documentation.
5.2 SERVICES WARRANTY
NCI warrants that the services provided hereunder will be performed
consistent with generally accepted industry standards. This warranty
shall be valid for ninety (90) days from performance of the applicable
services.
5.3 EXCLUSIVE REMEDIES
For any breach of the warranties contained in Section 5, ISP's sole and
exclusive remedy, and NCI's entire liability, shall be:
A. FOR THE NCI'S SOFTWARE
In NCI's discretion, either correction of Program Errors that cause
breach of the warranty or a refund of the portion of the fees paid
to NCI with respect to affected NCI Software, the NCI Client
Software Updates, the NCI Custom Connect Server software development
kit or the NCI TV Navigator software development kit.
B. FOR SERVICES
In NCI's discretion, either the reperformance of the services or a
refund of the portion of the fees paid to NCI applicable to such
services.
6. DISCLAIMERS
THE BETAS ARE PROVIDED "AS IS."
7. INTELLECTUAL PROPERTY
7.1 GENERAL
A. NCI shall retain all right, title and interest in and to the NCI
Software, the SDK, Betas, NCI Client Software Updates (collectively,
the "NCI Products"), NCI Logos and Derivative Works. ISP shall have no
ownership interest in and, other than the license specified in this
Agreement, shall acquire no rights in the NCI Products, NCI Logos or
Derivative Works.
In the event that ISP creates any Derivative Works, ISP shall, upon
completion of any such Derivative Works, deliver to NCI a copy of such
Derivative Works. ISP hereby assigns to NCI for no additional
consideration all right, title and interest in and to the Derivative
Works, including the right to any extensions and renewals thereof.
If-so requested by NCI, ISP agrees to execute a written assignment of
the Derivative Works to NCI and to execute any other documents
necessary for NCI to establish, preserve or enforce its right in the
Derivative Works. NCI shall not be obligated to pay ISP any royalties
or sublicense fees for the transfer or assignment of any rights
specified herein.
B. ISP shall retain all right, title and interest in and to the ISP
Logos and any modifications, adaptations or derivatives to the SDKs
which are (i) either (a) solely. artwork modifications or (b) HTML or
JavaScript code (not object) modifications specific to ISP's software
and (ii) are carried out by ISP or by a third party on behalf of ISP
("ISP Application Modifications"). NCI shall have no ownership interest
in and, other than the license specified in this Agreement, shall
acquire no rights in the ISP Application Modifications or the ISP
Logos.
7.2 COPYRIGHTS
The NCI Software, NCI Client Software Updates, the SDKs, and the Betas
are copyrighted by NCI or its licensor(s). ISP shall (i) retain all NCI
copyright notices on the NCI Software, NCI Client Software Updates, the
SDKs, and the Betas used by ISP under the licenses granted hereunder,
and (ii) comply with all third party licensor restrictions, a current
list of which is set forth on Exhibit D hereto. ISP shall include a
reproduction of NCI's copyright notice on all copies of the NCI
Software, NCI Client Software Updates, the SDKs, and the Betas deployed
by ISP in whatever form.
Such notices shall be prominently placed on the introductory splash
screen for the Internet Services.
<PAGE>
Notwithstanding any copyright notice by ISP to the contrary, the
copyright to the NCI Software included in any such Internet Services
shall remain in NCI.
7.3 TRADEMARKS
The NCI Logos belong to NCI; ISP will have no rights in such marks
except as expressly set forth herein and as specified in writing from
time to time. ISP shall use and is hereby granted a non-transferable,
non-exclusive, non-assignable and restricted license during the term of
this Agreement and in the Territory, to use the NCI Logos on all uses
and/or copies of the NCI Software NCI Client Software Updates, and
Software Documentation made in accordance with this Agreement and on
all marketing and promotional materials referencing the NCI Software or
Internet Services, subject to NCI's prior written approval in each
instance. ISP's use of the NCI Logos shall be in accordance with (i)
NCI's signature guidelines in effect at the time as updated from time
to time by NCI and (ii) NCI's branding requirements in effect at the
time as updated from time to time by NCI, a current version of which is
set forth in Exhibit B attached hereto. ISP agrees not to use the NCI
Logos or any other mark likely to cause confusion with the NCI
trademarks as any portion of ISP's tradename, trademark for the NCI
Software, or trademark for any other products of ISP. All such usage
shall inure to NCI's benefit. ISP agrees not to register any NCI Logos
without NCI's express prior written consent. ISP shall not contest
NCI's ownership of, or rights in, the NCI Logos. From time to time, at
NCI's request, ISP shall supply a reasonable number of samples of the
NCI Software, Software Documentation, and all other materials bearing
any of the NCI Logos so that NCI may conduct quality control reviews to
ensure that usage of the NCI Logos complies with the terms of this
Section. In the event that NCI notifies ISP that ISP has failed to
comply as set forth herein, ISP shall suspend distribution and use of
the NCI Software until ISP has satisfied NCI that the foregoing
requirements have been met. ISP agrees with respect to each registered
trademark of NCI, to include in each advertisement, brochure, or other
such use of the trademark, the trademark symbol "circle R" and the
following statement: ______is a registered trademark of Network
Computer, Inc., Redwood Shores, California Unless otherwise notified in
writing by NCI, ISP agrees with respect to the NCI Logos to include in
each advertisement, brochure, or other such use of the trademark, the
symbol "TM" and the following statement: ___ (NCI Logo/trademark) __ is
a trademark of Network Computer, Inc., Redwood Shores, California ISP
shall not market the NCI Software in any way which implies that the NCI
Software is the proprietary product of ISP or of any party other than
NCI. NCI shall not have any liability to ISP for any claims made by
third parties relating to ISP's use of the NCI Logos.
8. GENERAL TERMS
8.1 GOVERNING LAW
This Agreement, and all matters arising out of or relating to this
Agreement, shall be governed by the substantive and procedural laws of
the State of California without regard to the conflicts of laws
provisions thereof and shall be deemed to be executed in Redwood
Shores, California. The parties agree that any legal action or
proceeding relating to this Agreement shall be instituted in any state
or federal court in San Francisco or San Mateo County, California. NCI
and ISP agree to submit to the jurisdiction of, and agree that venue is
proper in, these courts in any such legal action or proceeding.
8.2 EXPORT
ISP agrees to comply fully with all relevant export laws and
regulations of the U.S. and any other applicable jurisdiction, as
promulgated from time to time ("Export Laws") to assure that the NCI
Software, the SDKs, the Betas, and any direct product thereof, are not
(a) exported, directly or indirectly, in violation of Export Laws; and
(b) intended to be used for any purposes prohibited by the Export Laws,
including, without limitation, nuclear, chemical, or biological weapons
proliferation.
The effective date of this Agreement shall be , 1998
----------------------------
(the "Effective Date").
<TABLE>
<S> <C>
Executed by ISP: Executed by NCI:
Authorized Signature: Authorized Signature:
------------------------------------ ------------------------------------
Name: Name:
---------------------------------------------------- ----------------------------------------------------
Title: Title:
--------------------------------------------------- ---------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A
NCI SERVER SOFTWARE:
NCI CUSTOM CONNECT SERVER -TM- software, Version
--------------
Designated System: Sun Solaris
-----------
SDKS:
NCI CUSTOM CONNECT SERVER -TM- SDK Version
--------------
Designated System: Sun Solaris
-----------
Development Seats -
----------
NCI TV Navigator SDK, Version
--------------
Designated System: Windows NT
Development Seats -
----------
NCI TV Content Development Kit
Designated System: Windows NT
----------
INTERNET SERVICES
Internet Services shall' refer to those Internet, and ISP's services (utilizing
the NCI Server Software) and content accessible by Subscribers. ISP hereby
represents and warrants that the Internet Services (and related customer
support) provided to Subscribers by ISP shall be of equal or greater quality,
availability, and responsiveness as all other similar services provided by or on
behalf of ISP (and in no case less than the comparable industry standards) and
(ii) shall be consistent with NCI's reasonable criteria as determined by
periodic quality evaluations performed from time to time by or on behalf of NCI.
NCI LOGO
NCI-TM-
nic design logo
NCI Custom Connect Server-TM-
NCI TV Navigator-TM-
<PAGE>
EXHIBIT B
NCI BRANDING REQUIREMENTS
1. On ISP's default root page, default personalized root page, and bookmark
lists, the NCI nic design logo or other NCI Logo designated by NCI as a
selectable icon shall be placed in a prominent location and shall be visible at
all times without further navigation and, if the background is dynamic, must be
visible for at least 30 seconds each visit or until the user leaves the page. A
prominent location is defined as not requiring the user to scroll or otherwise
navigate in order to see the logo on entrance to the root page.
2. The content provided through the NCI selectable icon or NCI Content Portals
(TV Bar) shall not be blocked or restricted in any fashion except by
user-elected restrictions (e.g. parental control filters).
3. On all NC Cards distributed by ISP targeting an NCI Approved Network Computer
Device, the NC Card will display the NCI nic design logo or other NCI Logo
designated by NCI on the top side of the card in accordance with the
then-current NCI signature guidelines.
4. On all major marketing and communication materials presented by ISP that
specifically target NCI Approved Network Computer Device ISP will include the
NCI nic design logo or other NCI Logo designated by NCI in a prominent location
in accordance with the then-current NCI signature guidelines.
5. Whenever a navigational or application toolbar is displayed in conjunction
with a NCI application, the NCI Logo shall be present on such toolbar. The NCI
Logo that is displayed will be presented in a form that is in accordance with
the NCI signature guidelines.
<PAGE>
EXHIBIT C
SDK LICENSES
NCI TV NAVIGATOR-TM- CONTENT DEVELOPMENT KIT
LICENSE AGREEMENT
The following terms shall apply to any NCI NAVIGATOR CONTENT DEVELOPMENT KITs
licensed to ISP (referred to as "You") hereunder.
REDISTRIBUTION OF THIS CONTENT DEVELOPMENT KIT ("CDK") OR ANY DOCUMENTATION
PROVIDED TO YOU BY NETWORK COMPUTER, INC. ("NCI") IS STRICTLY PROHIBITED.
THE MEDIA CONTAINED IN THIS PACKAGE INCLUDE A NUMBER OF SEPARATE PROGRAMS.
YOU ARE PERMITTED TO USE ONLY THOSE PROGRAMS FOR WHICH YOU HAVE PAID THE
APPLICABLE LICENSE FEE TO NCI. FURTHERMORE, YOUR USE OF THIS CDK IS SUBJECT
TO ALL THE TERMS AND CONDITIONS SET FORTH BELOW.
LICENSE.
This CDK is licensed, not sold, to You for use only under the terms of this
Agreement, and NCI and its licensors reserve all rights not expressly granted
to You. You own the media on which this CDK was originally fixed, but NCI and
its licensors retain ownership of all copies of the programs and content
comprising this CDK (collectively the "Programs"). You (the original licensee
of this CDK) may:
(a) use this CDK on a single computer by one user at a time in accordance
with the accompanying documentation.
(b) make one copy of the Programs as provided to You for purposes of backup;
provided that such copy includes a reproduction of any notices appearing in
or on such Programs.
LICENSE RESTRICTIONS.
(a) Unauthorized copying of this CDK, the Programs or the written materials
included in this package is expressly forbidden. You may be held legally
responsible for any copyright infringement which is caused or encouraged by
Your failure to abide by the terms of this agreement.
(b) You may not market, distribute, or transfer copies of this CDK or the
Program to others or electronically transfer this CDK or the Programs from
one computer to another over a network.
(c) You may not: (i) permit other individuals to use this CDK or the
Programs; (ii) modify, translate, reverse engineer, decompile, disassemble
(except to the extent applicable laws specifically prohibit such
restriction), or create derivative works based on this CDK or the Programs;
(iii) copy this CDK or the Programs (except as expressly provided herein);
(iv) rent, lease, grant a security interest in, or otherwise transfer rights
to this CDK or the Programs; or (v) remove any proprietary notices or labels
in or on this CDK or the Programs.
(d) You understand that NCI and its licensors may update or revise this CDK
and/or the Programs and in so doing incurs no obligation to furnish such
updates to You unless You have purchased current support and maintenance
services from NCI as described in the section below titled Technical Support.
(e) Upon transfer of this CDK, any Program or any copy thereof, the licensed
granted hereunder shall terminate immediately.
(f) You shall use this CDK solely for Your internal purposes.
To the extent European Economic Community ("EEC") law is applicable, the
above restrictions on reverse engineering, decompiling, disassembling or
reducing any machine, readable software or component to human-readable form
is limited so that it prohibits such activity only to the maximum extent such
activity may be prohibited without violating the EEC Directive on the legal
protection of computer programs.
HARDWARE LOANS.
In the event that NCI has provided You any hardware (including, without
limitation, the NCI Reference Platform) for use with the CDK, You shall
return to NCI any such hardware immediately upon the earlier of (i) NCI's
written request to You or (ii) the date agreed upon by the parties in any
separate written agreement for the return of such hardware. NCI shall retain
all right, title and interest in and to such hardware at all times,
including, without limitation, the period while Such hardware is located at
Your facilities.
DISCLAIMER OF WARRANTY.
<PAGE>
THIS CDK IS PROVIDED ON AN "AS IS" BASIS. NCI AND ITS LICENSORS EXPRESSLY
DISCLAIM ALL EXPRESS AND IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION,
THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT. THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THIS
CDK AND ANY RESULTS CREATED USING THIS CDK IS BORNE BY YOU. IN ADDITION, THE
SECURITY MECHANISMS IMPLEMENTED BY THIS CDK AND RESULTS GENERATED THROUGH ITS
USE HAVE INHERENT LIMITATIONS, AND YOU MUST DETERMINE THAT THE CDK AND SUCH
RESULTS SUFFICIENTLY MEET YOUR SECURITY REQUIREMENTS. THIS DISCLAIMER OF
WARRANTY CONSTITUTES AN ESSENTIAL PART OF THE AGREEMENT. SOME JURISDICTIONS
DO NOT ALLOW EXCLUSIONS OF AN IMPLIED WARRANTY, SO THIS DISCLAIMER MAY NOT
APPLY AND YOU MAY HAVE OTHER LEGAL RIGHTS THAT VARY BY JURISDICTION.
TITLE.
Title, ownership rights, and intellectual property rights in this CDK and the
Programs shall remain in NCI and/or its licensors. This CDK is protected by
the copyright laws and treaties.
CONFIDENTIALITY.
NCI and its licensors consider this CDK and the Programs to contain valuable
trade secrets of NCI and its licensors, the unauthorized disclosure of which
could cause irreparable harm to NCI and/or its licensors. You agree to use
reasonable efforts not to disclose the Programs to any third parties and not
to use the Programs other than for the purposes authorized by this Agreement.
This confidentiality obligation shall continue after any termination of this
Agreement.
TERMINATION.
This Agreement is effective until terminated. The Sections of this Agreement
titled License Restrictions, Disclaimer of Warranty, Limitation of Liability,
Title, Confidentiality and Miscellaneous shall survive any termination or
expiration of this Agreement. This Agreement will terminate automatically
upon Your failure to comply with any of the limitations described herein.
Upon any termination or expiration of this Agreement, You must, at NCI's
option, return or destroy the CDK, any documentation provided by NCI and any
copies thereof and shall return to NCI all hardware (including, without
limitation, the NCI Reference Profile), if any, provided by NCI to You for
use with the CDK, if any.
EXPORT CONTROLS.
None of this CDK or any underlying information or technology may be
downloaded or otherwise exported or reexported (i) into (or to a national or
resident of) Cuba, Iraq, Libya, Yugoslavia, North Korea, Iran, Syria or any
other country to which the U.S. has embargoed goods; or (ii) to anyone on the
U.S. Treasury Department's list of Specially Designated Nationals or the U.S.
Commerce Department's Table of Denial Orders. By using this CDK, You are
agreeing to the foregoing and You are representing and warranting that You
are not located in, under the control of, or a national or resident of any
such country or on any such list.
SUPPORT AND MAINTENANCE.
Upon mutual agreement of the parties and subject to NCI's standard support
and maintenance terms and conditions (including payment of NCI's then-current
support and maintenance fees), NCI shall provide to You support and
maintenance for the CDK licensed hereunder.
LIMITATION OF LIABILITY.
UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY, TORT, CONTRACT, OR
OTHERWISE, SHALL NCI OR ITS LICENSORS BE LIABLE TO YOU OR ANY OTHER PERSON
FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY
CHARACTER INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF GOODWILL, WORK
STOPPAGE, COMPUTER FAILURE OR MALFUNCTION, OR ANY AND ALL OTHER COMMERCIAL
DAMAGES OR LOSSES. IN NO EVENT WILL NCI BE LIABLE FOR ANY DAMAGES IN EXCESS
OF THE AMOUNT NCI RECEIVED FROM YOU FOR A LICENSE TO THIS CDK, EVEN IF NCI
SHALL HAVE BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM
BY ANY OTHER PARTY. THIS LIMITATION OF LIABILITY SHALL NOT APPLY TO LIABILITY
FOR DEATH OR PERSONAL INJURY TO THE EXTENT APPLICABLE LAW PROHIBITS SUCH
LIMITATION. FURTHERMORE, SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR
LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THIS LIMITATION AND
EXCLUSION MAY NOT APPLY TO You. THE WARRANTY DISCLAIMERS AND LIMITATION OF
LIABILITY ARE FUNDAMENTAL ELEMENTS OF THE BASIS OF THE BARGAIN BETWEEN YOU
AND NCI.
HIGH RISK ACTIVITIES.
<PAGE>
The CDK and results created using the CDK are not fault-tolerant and is not
designed, manufactured or intended for use or resale as on-line control
equipment in hazardous environments requiring fail, safe performance, such as
in the operation of nuclear facilities, aircraft navigation or communication
systems, air traffic control, direct life support machines, or weapons
systems, in which the failure of the CDK and results created using the CDK
could lead directly to death, personal injury, or severe physical or
environmental damage ("High Risk Activities"). NCI and its licensors
specifically disclaim any express or implied warranty of fitness for High
Risk Activities.
MISCELLANEOUS.
This Agreement represents the complete agreement concerning this license and
may amended only by a writing executed by both parties, THE ACCEPTANCE OF ANY
PURCHASE ORDER PLACED BY YOU IS EXPRESSLY MADE CONDITIONAL ON YOUR ASSENT TO
THE TERMS SET FORTH HEREIN, AND NOT THOSE IN YOUR PURCHASE ORDER. If any
provision of this Agreement is held to be unenforceable, such provision shall
be reformed only to the extent necessary to make it enforceable and the
remaining provisions of this Agreement will not be affected or impaired in
any way. This Agreement shall be governed by California law without regard to
the conflict of laws provisions thereof. The application the United Nations
Convention of Contracts for the International Sale of Goods is expressly
excluded. If any legal action or proceeding is brought for the enforcement of
this Agreement, or because of any alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in such action or proceeding, in
addition to any other relief to which such party may be entitled.
U.S. GOVERNMENT RESTRICTED RIGHTS.
If this CDK is acquired by or on behalf of a unit or agency of the United
States Government, this provision applies, if the Programs are acquired by or
on behalf of a unit or agency of the United States Government, this provision
applies. The Programs: (a) were developed at private expense, are existing
computer software and no part of them were developed with government funds,
(b) are a trade secret of NCI or its licensors for all purposes of the
Freedom of Information act, (c) are "restricted computer software" submitted
with restricted rights in accordance with subparagraphs (a) through (d) of
the Commercial Computer Software-Restricted Rights clause at 52.227-19 and
its successors, (d) in all respects are proprietary data belonging solely to
NCI or its licensors, (c) are unpublished and all rights are reserved under
the copyright laws of the United States. For units of the Department of
Defense (DoD), the programs are licensed only with "Restricted Rights" as
that term is defined in the DoD supplement to the Federal Acquisition
Regulation 252.227-7013 (c)(1)(ii), Rights in Technical Data and Computer
Software and its successors, and use, duplication or disclosure is subject to
restrictions as set forth in subdivision (c)(1)(ii) of the Rights in
Technical Data and Computer Software clause at 252.227-7013 or to NCI's
standard commercial license, as applicable. Contractor/manufacturer is
Network Computer, Inc., 1000 Bridge Parkway, Redwood Shores, CA 94065. If
this CDK or the Programs are acquired under a GSA Schedule, the Government
has agreed to refrain from changing or removing any insignia or lettering
from this CDK, the Programs and any documentation provided (except for backup
purposes).
Should You have any questions concerning this Agreement, or if You wish to
contact NCI for any reason, please write: Network Computer, Inc., Attention:
Customer Service, 1000 Bridge Parkway, Redwood Shores, CA 94065.
<PAGE>
NCI TV NAVIGATOR-TM- SDK LICENSE AGREEMENT
The following terms shall apply to any NCI NAVIGATOR SOFTWARE DEVELOPMENT
TOOLKITs licensed to ISP (referred to as "Licensee") hereunder.
REDISTRIBUTION OF THIS SOFTWARE DEVELOPMENT TOOLKIT ("SDK") OR ANY
DOCUMENTATION PROVIDED TO LICENSEE BY NCI IS STRICTLY PROHIBITED.
REDISTRIBUTION OF ANY RESULTS CREATED USING THIS SDK ARE PROHIBITED UNLESS
SUCH RIGHT HAS BEEN GRANTED PURSUANT TO A WRITTEN LICENSE AGREEMENT EXECUTED
BY NCI AND LICENSEE (THE "RESELLER AGREEMENT") AND THEN ONLY AS LICENSED
THEREBY.
THE MEDIA CONTAINED IN THIS PACKAGE INCLUDE A NUMBER OF SEPARATE PROGRAMS,
INCLUDING THE TORNADO FOR NCI TV NAVIGATOR, ADD-ON COMPONENTS AND TOOL
PROGRAMS FOR USE WITH TORNADO FOR NCI TV NAVIGATOR, AND THE NCI TV NAVIGATOR
SYSTEM COMPONENTS. LICENSEE IS PERMITTED TO USE ONLY THOSE PROGRAMS FOR WHICH
LICENSEE HAS PAID THE LICENSE FEE AND OBTAINED A PASSKEY FROM NCI ALLOWING
LICENSEE ACCESS TO THE PROGRAM. LICENSEE HAS NOT LICENSED A PROGRAM UNTIL
LICENSEE HAS PAID THE LICENSE FEE AND OBTAINED THE PASS KEY. FURTHERMORE,
LICENSEE'S USE OF THIS SDK IS SUBJECT TO ALL THE TERMS AND CONDITIONS SET
FORTH BELOW.
LICENSE.
This SDK is licensed, not sold, to Licensee for use only under the terms of
this agreement, and NCI and its licensors reserve all rights not expressly
granted to Licensee. Licensee owns the media on which this SDK was originally
fixed, but NCI and its licensors retain ownership of all copies of the
programs comprising this SDK (collectively the "Programs"). Licensee (the
original licensee of this SDK) may:
(a) use this SDK on a single computer by one user at a time. Use is limited
to development of the Product or Products as defined in the Reseller
Agreement which may only be performed at the site set forth herein or, if
applicable, only at the location of Licensee's principal office as set forth
in the Reseller Agreement. Furthermore, use is limited to development for a
Product or Products which execute on a single target architecture, as set
forth herein or, if applicable, the target architecture set forth in the
Reseller Agreement. The number of authorized seats may be increased only upon
approval of NCI and payment of additional license fees.
(b) make one copy of Tornado for NCI TV Navigator or Tornado for NCI TV
Navigator Component Program licensed by Licensee or portions thereof except
for the directory "bin", sub directory "h", and the files entitled "make
file" in directories "config/all" and "config/(target)". Such copy shall be
in tangible object code form only for physical incorporation into a Product
or Products as defined in the Reseller Agreement that Licensee develops using
this SDK, provided that such copy includes a reproduction of any notices
appearing in or on the programs included in this SDK. Such copy shall be used
for development processes only and be accessed only as part of the Target
Application and not on a stand alone or independent basis.
(c) make one copy of any licensed programs in tangible object code form for
purposes of backup; provided that such copy includes a reproduction of any
notices appearing in or on such program.
LICENSE RESTRICTIONS.
(a) Unauthorized copying of this SDK, the Programs or the written materials
included in this package is expressly forbidden. Licensee may be held legally
responsible for any copyright infringement which is caused or encouraged by
Licensee's failure to abide by the terms of this agreement.
(b) Licensee may not market, distribute, or transfer copies of this SDK or
the Program to others or electronically transfer this SDK or the Programs
from one computer to another over a network.
(c) Licensee may not: (i) permit other individuals to use this SDK or the
Programs; (ii) modify, translate, reverse engineer, decompile, disassemble
(except to the extent applicable laws specifically prohibit such
restriction), or create derivative works based on this SDK or the Programs;
(iii) copy this SDK or the Programs (except as expressly provided herein);
(iv) rent, lease, grant a security interest in, or otherwise transfer rights
to this SDK or the Programs; or (v) remove any proprietary notices or labels
in or on this SDK or the Programs.
(d) Licensee understands that NCI and its licensors may update or revise this
SDK and/or the Programs and in so doing incurs no obligation to furnish such
updates to Licensee unless Licensee has purchased current support and
maintenance services from NCI as described in the section below titled
Technical Support.
(e) Use of this SDK and the Programs is subject to proper AND complete
installation of the NCI TV Navigator System Components pursuant to the
instructions and procedures provided to Licensee by NCI.
(f) Upon transfer of this SDK, any Program or any copy thereof, the licensed
granted hereunder shall terminate immediately.
(g) Unless otherwise agreed by the parties in writing, any and all
development by Licensee of device drivers must be performed at NCI's premises.
<PAGE>
To the extent European Economic Community ("EEC") law is applicable, the
above restrictions on reverse engineering, decompiling, disassembling or
reducing any machine-readable software or component to human-readable form is
limited so that it prohibits such activity only to the maximum extent such
activity may be prohibited without violating the EEC Directive on the legal
protection of computer programs.
HARDWARE LOANS.
In the event that NCI has provided Licensee any hardware (including, without
limitation, the NCI Reference Platform) for use with the SDK, Licensee shall
return to NCI any such hardware immediately upon the earlier of (i) NCI's
written request to Licensee or (ii) the date agreed upon by the parties in
any separate written agreement for the return of such hardware. NCI shall
retain all right, title and interest in and to such hardware at all times,
including, without limitation, the period while such hardware is located at
Licensee's facilities.
DISCLAIMER OF WARRANTY.
THIS SDK IS PROVIDED ON AN "AS IS" BASIS. NCI AND ITS LICENSORS EXPRESSLY
DISCLAIM ALL EXPRESS AND IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION,
THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT. THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THIS
SDK AND ANY RESULTS CREATED USING THIS SDK IS BORNE BY LICENSEE. IN ADDITION,
THE SECURITY MECHANISMS IMPLEMENTED BY THIS SDK AND RESULTS GENERATED THROUGH
ITS USE HAVE INHERENT LIMITATIONS, AND LICENSEE MUST DETERMINE THAT THE SDK
AND SUCH RESULTS SUFFICIENTLY MEET LICENSEE'S SECURITY REQUIREMENTS. THIS
DISCLAIMER OF WARRANTY CONSTITUTES AN ESSENTIAL PART OF THE AGREEMENT. SOME
JURISDICTIONS DO NOT ALLOW EXCLUSIONS OF AN IMPLIED WARRANTY, SO THIS
DISCLAIMER MAY NOT APPLY AND LICENSEE MAY HAVE OTHER LEGAL RIGHTS THAT VARY
BY JURISDICTION.
TITLE.
Title, ownership rights, and intellectual property rights in this SDK and the
Programs shall remain in NCI and/or its licensors. This SDK is protected by
the copyright laws and treaties.
CONFIDENTIALITY.
NCI and its licensors consider this SDK and the Programs to contain valuable
trade secrets of NCI and its licensors, the unauthorized disclosure of which
could cause irreparable harm to NCI and/or its licensors. Licensee agrees to
use reasonable efforts not to disclose the Programs to any third parties and
not to use the Programs other than for the purposes authorized by this
Agreement. This confidentiality obligation shall continue after any
termination of this Agreement.
TERMINATION.
This Agreement is effective until terminated. The Sections of this Agreement
titled License Restrictions, Disclaimer of Warranty, Limitation of Liability,
Title, Confidentiality and Miscellaneous shall survive any termination or
expiration of this Agreement. This Agreement will terminate automatically
upon Licensee's failure to comply with any of the limitations described
herein or in the Reseller Agreement by and between NCI and Licensee.
Licensee hereby acknowledges that unless and until Licensee enters into a
Reseller Agreement, Licensee shall use the SDK solely for its internal
evaluation purposes.
On any termination or expiration of this Agreement, Licensee must, at NCI's
option, return or destroy the SDK, any documentation provided by NCI and any
copies thereof and shall return to NCI all hardware (including, without
limitation, the NCI Reference Profile), if any, provided by NCI to Licensee
for use with the SDK.
EXPORT CONTROLS.
None of this SDK or any underlying information or technology may be
downloaded or otherwise exported or reexported (i) into (or to a national or
resident of) Cuba, Iraq, Libya, Yugoslavia, North Korea, Iran, Syria or any
other country to which the U.S. has embargoed goods; or (ii) to anyone on the
U.S. Treasury Department's list of Specially Designated Nationals or the U.S.
Commerce Department's Table of Denial Orders. By using this SDK, Licensee is
agreeing to the foregoing and Licensee is representing and warranting that
Licensee is not located in, under the control of, or a national or resident
of any such country or on any such list.
SUPPORT AND MAINTENANCE.
Upon mutual agreement of the parties and subject to NCI's standard support
and maintenance terms and conditions (including
<PAGE>
payment of NCI's then-current support and maintenance fees), NCI shall
provide to Licensee support and maintenance for the SDK licensed hereunder.
LIMITATION OF LIABILITY.
UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY, TORT, CONTRACT, OR
OTHERWISE, SHALL NCI OR ITS LICENSORS BE LIABLE TO LICENSEE OR ANY OTHER
PERSON FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY
CHARACTER INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF GOODWILL, WORK
STOPPAGE, COMPUTER FAILURE OR MALFUNCTION, OR ANY AND ALL OTHER COMMERCIAL
DAMAGES OR LOSSES. IN NO EVENT WILL NCI BE LIABLE FOR ANY DAMAGES IN EXCESS
OF THE AMOUNT NCI RECEIVED FROM LICENSEE FOR A LICENSE TO THIS SDK, EVEN IF
NCI SHALL HAVE BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR: ANY
CLAIM BY ANY OTHER PARTY. THIS LIMITATION OF LIABILITY SHALL NOT APPLY TO
LIABILITY FOR DEATH OR PERSONAL INJURY TO THE EXTENT APPLICABLE LAW PROHIBITS
SUCH LIMITATION. FURTHERMORE, SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION
OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THIS LIMITATION AND
EXCLUSION MAY NOT APPLY TO LICENSEE. THE WARRANTY DISCLAIMERS AND LIMITATION
OF LIABILITY ARE FUNDAMENTAL ELEMENTS OF THE BASIS OF THE BARGAIN BETWEEN
LICENSEE AND NCI.
HIGH RISK ACTIVITIES.
The SDK and results created using the SDK are not fault-tolerant and is not
designed, manufactured or intended for use or resale as on-line control
equipment in hazardous environments requiring fail-safe performance, such as
in the operation of nuclear facilities, aircraft navigation or communication
systems, air traffic control, direct life support machines, or weapons
systems, in which the failure of the SDK and results created using the SDK
could lead directly to death, personal injury, or severe physical or
environmental damage ("High Risk Activities"). NCI and its licensors
specifically disclaim any express or implied warranty of fitness for High
Risk Activities.
MISCELLANEOUS,
This Agreement represents the complete agreement concerning this license and
may amended only by a writing executed by both parties, THE ACCEPTANCE OF ANY
PURCHASE ORDER PLACED BY LICENSEE IS EXPRESSLY MADE CONDITIONAL ON LICENSEE'S
ASSENT TO THE TERMS SET FORTH HEREIN, AND NOT THOSE IN LICENSEE'S PURCHASE
ORDER. If any provision of this Agreement is held to be unenforceable, such
provision shall be reformed only to the extent necessary to make it
enforceable and the remaining provisions of this Agreement will not be
affected or impaired in any way. This Agreement shall be governed by
California law without regard to the conflict of laws provisions thereof. The
application the United Nations Convention of Contracts for the International
Sale of Goods is expressly excluded. If any legal action or proceeding is
brought for the enforcement of this Agreement, or because of any alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in
such action or proceeding, in addition to any other relief to which such
party may be entitled.
U.S. GOVERNMENT RESTRICTED RIGHTS.
If this SDK is acquired by or on behalf of a unit or agency of the United
States Government, this provision applies. If the Programs are acquired by or
on behalf of a unit or agency of the United States Government, this provision
applies. The Programs: (a) were developed at private expense, are existing
computer software and no part of them were developed with government funds,
(b) are a trade secret of NCI or its licensors for all purposes of the
Freedom of Information act, (c) are "restricted computer software" submitted
with restricted rights in accordance with subparagraphs (a) through (d) of
the Commercial Computer Software-Restricted Rights clause at 52.227-19 and
its successors, (d) in all respects are proprietary data belonging solely to
NCI or its licensors, and (e)are unpublished and all rights are reserved
under the copyright laws of the United States. For units of the Department of
Defense (DoD), the programs are licensed only with "Restricted Rights" as
that term is defined in the DoD supplement to the Federal Acquisition
Regulation 252.227-7013 (c)(1)(ii), Rights in Technical Data and Computer
Software and its successors, and use, duplication or disclosure is subject to
restrictions as set forth in subdivision (c)(1)(ii) of the Rights in
Technical Data and Computer Software clause at 252.227-7013 or to NCI's
standard commercial license, as applicable. Contractor/manufacturer is
Network Computer, Inc., 1000 Bridge Parkway, Redwood Shores, CA 94065. If the
Programs are acquired under a GSA Schedule, the Government has agreed to
refrain from changing or removing any insignia or lettering from the Programs
or the documentation as provided or from producing copies of manuals or media
(except for backup purposes).
<PAGE>
EXHIBIT D
THIRD PARTY RESTRICTIONS
The following third party restrictions apply to Internet Services to the
extent that they incorporate any of the third party software listed below.
Any capitalized terms that are not defined herein have the same definition as
in the Agreement.
1. REGARDING BITSTREAM SOFTWARE--In the event that the Internet Services
include Bitstream software sublicensed from NCI, you must comply with the
following restrictions and obligations: 1.1. Licensee must reproduce each
Bitstream copyright, trademark and/or patent notice, as applicable in its
entirety, in the same location as it appears, in electronic or printed
form, on the NCI Software or SDK(s) as delivered to Licensee.
2. REGARDING RSA SOFTWARE--In the event that the Internet Services includes
RSA software sublicensed from NCI, you must comply with the following
restrictions and obligations:
2.1. Licensee should include within the splash screens, user
documentation, printed product collateral, product packaging and
advertisements for the Internet Services, the RSA "Licensee Seal"
from the form attached hereto as Appendix "A" along with a statement
that the Internet Services contains the RSA Software, Licensee agrees
not to remove or destroy any proprietary, trademark or copyright
markings or notices placed upon or contained within the software or
documentation provided by NCI.
2.2 Licensee must in all proposals and agreements with the United States
government identify and license the Internet Services, including any
RSA object Code, as follows: (i) for acquisition by or on behalf of
civilian agencies, as necessary to obtain protection as "commercial
computer software" and related documentation in accordance with the
terms of NCI's or Licensee's customary license, as specified in 48
C.F.R. 12.212 of the Federal Acquisition Regulations and its
successor regulations, or (ii) for acquisition by or on behalf of
units of the Department of Defense, as necessary to obtain protection
as "commercial computer software" as defined in 48 C.F.R.
227.7014(a)(1) of the Department of Defense Federal Acquisition
Regulation Supplement (DFARS) and related documentation in accordance
with the terms of NCI's or Licensee's customary license, as specified
in 48 C.F.R. 227.7202.1 of DFARS and its successor regulations.
2.3. In the event that Licensee includes an "About Box" or similar
reference in the Internet Services, Licensee agrees to insert and
maintain in the "About Box" (1) the RSA "Licensee Seal" indicated in
Appendix "A", and (2) a hypertext link to RSA's homepage at an
RSA-designated URL (currently www.rsa.com), which logo and pointer
shall appear on the first page of such "About Box" and in no less
prominent location and size than any other third party logo included
therein.
2.4. Licensee further agrees to include in any Security Advisory made
available to third parties, whether in printed or electronic format,
the RSA "Licensee Seal" indicated in Exhibit "A" and a brief
description of the RSA software sublicensed hereunder and its
relevant applicability to the subject matter of the Security
Advisory. For the purposes of the Agreement, "Security Advisory"
means any tutorial, FAQ or similar manual or instructional
documentation describing data security used by or available in the
Internet Services.
3. REGARDING HEADSPACE SOFTWARE--In the event that the Internet Services
include Headspace MIDI software or music content sublicensed from NCI, you
must comply with the following restrictions and obligations:
3.1. In the event that the Internet Services includes an "About Box" or
similar reference, Licensee must include references to Headspace,
Inc. and the RMF logo, as well as a link to the Headspace, Inc. web
site, in the area designated by Licensee for such "About Box". The
RMF logo is included as Appendix "B", attached hereto, and
incorporated herein by this reference.
4. REGARDING PROGRESSIVE NETWORKS SOFTWARE--In the event that the Internet
Services includes Progressive Networks software sublicensed from NCI, you
must comply with the following restrictions and obligations:
4.1. Licensee must use Progressive Networks' (PN) marks in accordance with
PN's usage policies attached hereto as Appendix "C" and incorporated
herein by this reference. Such marks may be used solely in Connection
with Licensee's advertising, marketing and distribution of the
Internet Services incorporating PN's software.
4.2. To the extent the Internet Services includes an implementation of an
"About Box" or similar reference, Licensee must include a reference
to "Progressive Networks" and "RealNetworks" as follows: "The
RealNetworks Player is included under license from Progressive
Networks, Inc. Copyright 1995-1997, Progressive Networks, Inc.
RealNetworks and the RealNetworks logo are registered trademarks of
Progressive Networks, Inc. All rights reserved,"
4.3. Licensee acknowledges that use, duplication or disclosure of the PN
software by the Government is subject to restrictions set forth in
subparagraphs (a) through (d) of the Commercial Computer-Restricted
Rights clause at FAR 52.227-19 when applicable, or in subparagraph
(c)(1)(ii) of the Rights in Technical Data and Computer Software
clause at DFARS 252.227- 7013, or in similar clauses in the NASA FAR
supplement. Contractor/manufacturer is Progressive Networks, Inc.;
1111 Third Avenue; Suite 500; Seattle, Washington, 98101.
5. REGARDING JAVA SOFTWARE--In the event that the Internet Services include
Java Software from Sun Microsystems, Inc. ("Sun") or Javasoft, you must
comply with the following restrictions and obligations:
5.1. The Internet Services containing Java software that you distribute
shall include in the documentation, or in other terms and conditions of
sale, notices substantially similar to those contained on and in the NCI
Software, SDKs and related
<PAGE>
APPENDIX "A" TO EXHIBIT D
RSA SEAL AND TRADEMARKS
RSA Licensee Seal: [Logo]
You are also permitted to use the following RSA trademarks, as applicable, in
ads, product packaging, documentation or collateral materials, provided that you
use the correct trademark designator, depicted below, and identify RSA as the
owner of the mark.
RC2-Registered Trademark- Symmetric Block Cipher, RC4-Registered Trademark-
Symmetric Stream Cipher
RC5-TM- Symmetric Block Cipher
BSAFE-TM-, TIPEM-TM-
RSA Public Key Cryptosystem-TM-
MD-TM-, MD2-TM-, MD4-TM-, MD5-TM-
RSA has reserved the right to update this Appendix "A" from time to time upon
reasonable notice to you.
<PAGE>
APPENDIX "B" TO EXHIBIT D
RMF LOGO
[Logo]
<PAGE>
APPENDIX "C" TO EXHIBIT D
PROGRESSIVE NETWORKS TRADEMARK USAGE POLICY
REALNETWORKS-Registered Trademark- (text form)
PN-Register Trademark- (text form)
PROGRESSIVE NETWORKS-Registered Trademark- (text form)
REALMEDIA-TM- (text form)
REALVIDEO-TM- (text form)
REALPLAYER-TM- (text form)
WEBACTIVE -Registered Trademark- (text from)
1. When using a Progressive Networks' trademark ("PN Mark"), use the
registered trademark symbol -Registered Trademark- or the -TM- symbol, as
indicated in the above example, on the most prominent (or if none is
prominent, the first) appearance of a PN Mark. For any PN Mark that is not
registered, the -TM- symbol should be used in place of the registered
trademark symbol -Registered Trademark-. Once marked, it is not normally
necessary to mark subsequent appearances of the trademark in the piece. Every
appearance of PN Logos in stylized form should always appear with the
appropriate -Registered Trademark- or -TM-symbol, and may be used only under
license with PN - unauthorized use is strictly prohibited. Shown above are a
list of current PN Marks that reflects the registration status of the PN
Marks. This list will be updated . from time to time.
2. When using a PN Mark, never vary the spelling, add or delete hyphens, make
one word two, or use a possessive or plural form of the PN Mark. PN word
marks must always be used as adjectives followed by a generic term (such as
"software" or "system"), and never as nouns or verbs.
3. Progressive Networks is the owner of all right, title, and interest in the
PN Marks and Licensee agrees that it will not challenge the validity of
Progressive Networks' ownership of the PN Marks. Licensees shall not
reproduce or use (or authorize the reproduction or use of) the PN Marks in
any manner other than expressly authorized by Progressive Networks.
4. Progressive Networks may from time to time modify the PN Marks.
Progressive Networks will use commercially reasonable efforts to give
licensees advance notice of such modifications.
5. In order to assure compliance, you will, upon request from Progressive
Networks, provide samples of any marketing and advertising materials that
include the PN Marks.
6. In any place where they appear together, the PN Marks and any associated
text must be at least as large as the trademark and text of another vendor.
IMPORTANT INFORMATION ABOUT USING THE TEXT FORM
of the Word RealNetworks -Registered Trademark-
1. When using the word RealNetworks, use the registered trademark symbol
- -Registered Trademark-symbol, as indicated in the above example, on the most
prominent (or if none is prominent, the first) appearance of its use on a
page. For any PN Mark that is not registered, the -TM- symbol should be used
in place of the registered trademark symbol -Registered Trademark-. Once
marked with the -Registered Trademark- symbol, it is not normally necessary
to mark subsequent appearances of the trademark in the piece.
2. When using the word RealNetworks, never vary the spelling, add or delete
hyphens, make one word two, or use a possessive or plural form of the word.
RealNetworks must always be used as an adjective followed by a generic
term'(such as "software" or "system"), and never as a noun or verb.
<PAGE>
[LOGO] NETWORK COMPUTER, INC.
- -------------------------------------------------------------------------------
NCI-TM- RESELLER PRICE LIST
VALID SEPTEMBER 1ST TO NOVEMBER 30, 1998
NCI-TM- CUSTOM CONNECT-TM- SERVER SUITE
CUSTOM CONNECT SERVER SUITE DEVELOPMENT LICENSES
- -------------------------------------------------------------------------------
The Custom Connect development license is sold to service providers who are
developing and installing a Custom Connect system to service NCI clients. The
license entitles the service provider to develop, customize and install the
Custom Connect components and test those components against a defined number of
client devices in a development environment only. By purchasing the license, the
service provider agrees to the following:
1) License is a distribute and use license only
2) Service provider will distribute client software updates online as
required by the OEM
3) Service provider will only update client boxes with NCI-supplied client
software appropriate to the OEM
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
N105 I0 Custom Connect Server Suite for Windows NT $215,000
N10530 Custom Connect Server Suite for Solaris UNIX $215,000
N10540 Custom Connect Server Developer License $35,000
Allows the customer to install and use the SDK tools for Custom Connect
N10550 Custom Connect Server Replication Fee - per server $30,000
Allows the customer to deploy on multiple server systems for scaling and redundancy
</TABLE>
CUSTOM CONNECT SERVER DEPLOYMENT LICENSES
- -------------------------------------------------------------------------------
The deployment license is sold to ISPs who are providing service to the NCI
software. Software for client software updates will be provided through NCI. By
purchasing the license, the ISP must agree to the following:
1) License is a distribute and use license only
2) ISP will distribute client software updates online as needed by the OEM
3) ISP will only update client boxes with the appropriate OEM client
software
CUSTOM CONNECT SERVER DEPLOYMENT LICENSE FEES--MONTHLY PAYMENT
The monthly payment includes all support, maintenance and upgrades (specified)
for the CCS and TV Navigator software.
<TABLE>
<CAPTION>
PRICE PER SUB PER MONTH
--------------------------
PART # DESCRIPTION W/MINORS W/MAJORS
------ ----------- -------- --------
<S> <C> <C> <C>
N10651 0 to 50K license fee per active client $3.00 $3.30
N10652 50,001 to 100K license fee per active client $2.60 $2.85
N10653 100,001 to 250K license fee per active client $2.25 $2.50
N10654 250,001 to 500K license fee per active client $2.00 $2.20
N10655 500,001 to IM license fee per active client $1.75 $1.95
N10656 1M+ license fee per active client $1.40 $1.55
</TABLE>
CUSTOM CONNECT SERVER DEPLOYMENT LICENSE FEES--ONE-TIME PAYMENT
The one-time payment does not include support, maintenance or upgrades that are
purchased through an NCI Support program listed at the end of this price list.
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
------ ----------- -----
<S> <C> <C>
N10751 0 to 50K license fee per activated client $48.00
N10752 50,001 to 100K license fee per activated client $41.00
N10753 100,001 to 250K license fee per activated client $35.00
N10754 250,001 to 500K license fee per activated client $31.00
N10755 500,001 to 1M license fee per activated client $27.00
N10756 IM+ license fee per activated client $23.00
</TABLE>
<PAGE>
[LOGO] NETWORK COMPUTER, INC.
- -------------------------------------------------------------------------------
CUSTOM CONNECT SERVER DEPLOYMENT LICENSE FEES--MULTI-USER, ONE-TIME PAYMENT
Multi-user is defined as more than six users per device (i.e.--kiosk, office
setting, hotel). The multi-user, one-time payment does not include support,
maintenance or upgrades that are purchased through an NCI Support program
listed at the end of this price list.
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
N10851 0 to 250 license fee per activated client $100.00
N10852 251 to 1K license fee per activated client $80.00
N10853 1,001 to 2,500 license fee per activated client $70.00
N10854 2,501 to 5,000 license fee per activated client $62.00
N10855 5,001 to 10,000 license fee per activated client $56.00
N10856 10,001 + license fee per activated client $50.00
</TABLE>
Page 2
<PAGE>
[LOGO] NETWORK COMPUTER, INC.
- -------------------------------------------------------------------------------
NCI-TM- NC ADMINISTRATION SERVER-TM- AND NC DESKTOP-TM-
NC ADMINISTRATION SERVER DEPLOYMENT LICENSES
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
N50600 NC Administration Server for Solaris $995.00
Includes 5 NC Desktop user licenses and 5 NC Cards
N50700 NC Administration Server for Windows NT $995.00
Includes 5 NC Desktop user licenses and 5 NC Cards
</TABLE>
<TABLE>
<CAPTION>
NC DESKTOP DEPLOYMENT LICENSES
- -------------------------------------------------------------------------------
<S> <C> <C>
N50601 0-1,000 client license per unit $149.00
N50602 1,001-2,500 client license per unit $139.00
N50603 2,501-10,000 client license per unit $119.00
N50604 10,000+ NC client license per unit $ 99.00
N10120 Smart card--per unit, 4 color artwork $5, no discount available
</TABLE>
SUPPORT PROVIDED AND PRICED THROUGH ORACLE
Page 3
<PAGE>
[LOGO] NETWORK COMPUTER, INC.
- -------------------------------------------------------------------------------
NCI-TM- DEVELOPMENT TOOLS AND TRAINING
<TABLE>
<CAPTION>
DEVELOPMENT KITS
- -------------------------------------------------------------------------------
<S> <C> <C>
N28900 TV Navigator SDK for x86--40-bit encryption $70,000
This SDK is for customers who need to add or modify functionality
of the applications or drivers provided with the TV Navigator client.
Customer must be proficient in C/C++, HTML and JavaScript.
-- Software, documentation and first user license for SDK and
WindRiver Tornado tools
-- NT150 Hardware Reference Platform unit
N28901 TV Navigator SDK for x86--non-SSL version $70,000
N28905 TV Navigator SDK for x86--additional user license $30,000
-- Additional user license and documentation for SDK, Tornado tools
-- NT150 Hardware Reference Platform unit
N28920 TV Navigator Customization Kit--40-bit encryption $50,000
This kit includes all the tools and content necessary to customize,
test, and deploy new versions of the TV Navigator user
interface. Also enables the creation of new HTML and JavaScript
applications. Customer needs to be proficient in HTML and
JavaScript.
-- Includes software, first user license, NT150 Hardware Reference
Platform, floppy drive kit
N28921 TV Navigator Customization Kit--non-SSL version $50,000
N28922 TV Navigator Customization Kit--128-bit encryption version $50,000
N28925 TV Navigator Customization Kit $20,000
-- Additional user license and NT150 Hardware Reference Platform unit
N28910 TV Navigator Content Development Kit no charge
This kit is for customers who need to modify or create server side HTML and
JavaScript based pages.
N67220 TV Navigator Content Development Kit phone support, per registered user $1,000 per month, up front
</TABLE>
TRAINING
- -------------------------------------------------------------------------------
Training cannot be discounted and is subject to availability. For all
training classes, no credits will be issued for seats not filled in a class.
Customer may cancel up to 5 business days before the class and receive a credit,
otherwise, class fee will be collected and no spot held in the next training
class.
<TABLE>
<S> <C> <C>
N65100 TV Navigator SDK training--1 day training at NCI for up to five
participants $5,000
This course covers the use of the SDK tools as well as setting up
the tool environment (Tornado)
N65200 TV Navigator Customization Kit training--1 day training at NCI for up to five participants $5,000
This course covers how to create/modify applications in the TV Navigator environment
N67100 Custom Connect Server training--2 day training at NCI for up to $8,000
five participants
This course covers how to install and maintain the Custom Connect
Server environment
N68100 NC Administration Server training--2 day training at NCI for up to five participants $8,000
This course covers how to install and maintain the NC Server environment
</TABLE>
Page 4
<PAGE>
[LOGO] NETWORK COMPUTER, INC.
- -------------------------------------------------------------------------------
NCI-TM- RESELLER PRICE LIST- JAPAN ADDENDUM
VALID JUNE 1ST TO AUGUST 31, 1998
Custom Connect Server Deployment License Fees---ONE-TIME PAYMENT
The one-time payment does not include support, maintenance or upgrades that
are purchased through Oracle Support
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
N10751 0 to 50K license fee per activated client $36.00
N10752 50,001 to 100K license fee per activated client $34.00
N10753 100,001 to 250K license fee per activated client $32.00
N10754 250,001 to 500K license fee per activated client $30.00
N10755 500,001 to IM license fee per activated client $28.00
N10756 1M+ license fee per activated client $25.00
NCI-TM- NC ADMINISTRATION SERVER-TM- AND NC DESKTOP-TM-
NC DESKTOP DEPLOYMENT LICENSES
- ----------------------------------------------------------------------------------------
N50701 0-1,000 client license per unit $195.00
N50702 1,001-2,500 client license per unit $169.00
N50703 2,501-10,000 client license per unit $139.00
N50704 10,000+ client license per unit $119.00
</TABLE>
Page 5
<PAGE>
NETWORK COMPUTER INC.
SIGNATURE
NCI IDENTITY GUIDELINES
[LOGO]
<PAGE>
THE CORPORATE SIGNATURE IS THE MOST POWERFUL ELEMENT OF THE NCI CORPORATE
IDENTITY. IT'S EXISTENCE WITHOUT FURTHER EXPLANATION IDENTIFIES A PRODUCT OR
SERVICE WHICH BELONGS TO NCI LIKE YOUR OWN SIGNATURE, ITS CONSISTENT
APPEARANCE IS ESSENTIAL TO PRESERVING ITS INDIVIDUALITY.
THE NCI CORPORATE IDENTITY PROGRAM PROVIDES APPROVED GUIDELINES FOR
USING THE CORPORATE SIGNATURE. PROPER USAGE OF OUR SIGNATURE ALLOWS
CUSTOMERS, PARTNERS, PRESS, ANALYSTS AND THE PUBLIC TO EASILY RECOGNIZE AND
IDENTIFY THE NCI BRAND.
<PAGE>
SIGNATURE ELEMENTS AND USAGE
The NCI corporate signature consists of the logotype--the letters "N" and "C"
centered on either side of a bar with the superscript-TM- always
following and the tagline "Network Computer, Inc." The following guidelines
are designed to help you apply the logotype and tagline properly.
NCI SOFTWARE BRAND
The logo without the tagline is used to denote NO, software. This brand logo
should be used on devices and by manufacturers in promotion of the software.
All signature guidelines apply.
<TABLE>
<CAPTION>
LOGOTYPE TRADEMARK USAGE
- --------------------------- ---------------------------------
<S> <C>
THE NCI LOGOTYPE IS THE THE SUPERSCRIPT -TM- SHOULD
MAIN ELEMENT OF OUR COMPANY ALWAYS FOLLOW THE LOGOTYPE
SIGNATURE. IT SHOULD ALWAYS ALIGNED TO THE TOP RIGHT OF
BE THE DOMINANT ELEMENT OF THE "C': THE -Trademark- SHOULD
THE SIGNATURE. ALWAYS APPEAR WITH THE LOGO.
</TABLE>
[Logo]
<TABLE>
<CAPTION>
TAGLINE TAGLINE USAGE
- ---------------------------- ------------------------------
<S> <C> <C>
THE TAGLINE IS A SECONDARY RED BAR. THE TAGLINE IS NOT THE TAGLINE IS OMITTED WHEN
ELEMENT OF THE SIGNATURE. IT TO BE REPLACED BY, OR USED THE LENGTH OF THE LOGOTYPE IS
SHOULD BE SET IN BANK GOTHIC IN CONJUNCTION WITH OTHER LESS THAN 25 MM (6 PICAS),
MEDIUM AND JUSTIFIED LEFT TAGLINES AND MUST ALWAYS THE STANDARD SIZE FOR MOST
AND RIGHT WITH THE LOGOTYPE, APPEAR IN THE ENGLISH COLLATERAL APPLICATIONS. THE
ITS PLACEMENT IS DETERMINED, LANGUAGE, TAGLINE SHOULD NOT BE USED
AS ABOVE, BY THE HEIGHT OF WHEN THE SIGNATURE IS PLACED
"X," WHICH IS EXACTLY THREE WITHIN AN ADDRESS BLOCK, SUCH
(3) TIMES THE WIDTH OF THE AS ON THE BACK OF BROCHURES.
</TABLE>
<PAGE>
SIGNATURE STAGING
Staging refers to the area directly surrounding the signature. To ensure its
visibility and integrity, the no: signature staging area must be clear of
other elements such as type, images, or other signatures.
[Logo]
<TABLE>
<S> <C>
SIGNATURE
CLEARSPACE
THE CLEARSPACE SURROUNDING
ALL SIDES OF THE SIGNATURE
IS ALWAYS EQUAL TO THE HEIGHT
OF THE RED BAR.
SIGNATURE USAGE WITH PARTNER LOGOS
When combined, the NCI and partner logos must be applied correctly and with
proper respect to each other. The NCI and partner logos should be in similar
size. Examples of partnership logos are shown below.
</TABLE>
<PAGE>
SIGNATURE COLORS
The consistent and correct use of NCI colors is essential to creating and
maintaining a strong worldwide brand identity. The NCI logotype should be
printed only in NCI red and black on a white background, or the letters "N"
and "C" may be reversed to white on a black background. When printing on
backgrounds other than white or black, use NCI, red and black logo on white
background. Please see "SIGNATURE STAGING" for space requirements. Specific
examples are illustrated below.
<TABLE>
<CAPTION>
TWO OR MORE
COLORS
-----------------------------
<S> <C>
WHEN PRINTING WITH TWO OR
[Logo] MORE COLORS, THE LOGOTYPE
IS PRINTED WITH NCI RED
(OR, IF USING PROCESS COLORS,
100 PERCENT MAGENTA AND
100 PERCENT YELLOW). THE
TAGLINE IS PRINTED BLACK
WHEN ON A WHITE OR
[Logo] LIGHT-COLORED BACKGROUND, AND
WHITE WHEN ON A BLACK OR
DARK-COLORED BACKGROUND.
</TABLE>
<TABLE>
<CAPTION>
ONE COLOR
-----------------------------
<S> <C>
WHEN PRINTING WITH ONE
COLOR, THE LOGOTYPE AND
[Logo] TAGLINE ARE PRINTED BLACK
ON A WHITE BACKGROUND, AND
WHITE ON A BLACK BACKGROUND.
[Logo] THE BOXES ON THE LEFT
ARE EXAMPLES OF BACKGROUNDS
ONLY. THE NCI SIGNATURE SHOULD
NOT BE USED IN ANY BOX.
SPECIFICATIONS FOR NCI RED
AND BLUE CAN BE FOUND IN THE
COLOR SECTION OF THIS GUIDE.
</TABLE>
<PAGE>
IMPROPER SIGNATURE USAGE
Examples of established and approved corporate signatures are shown in the
SIGNATURE ELEMENTS section of this style guide. A selection of reproducible
cor-porate signatures is available on the NCI web site at www.nc.com. Below
are examples of improper signature usage.
<TABLE>
<S> <C>
[Logo] SIGNATURE COLORS SHOULD NOT
BE ALTERED IN ANY WAY.
[Logo] THE RELATIONSHIP OF LOGOTYPE TO
TAGLINE SHOULD NOT BE CHANGED.
[Logo] NO PART OF THE SIGNATURE MAY BE
DISTORTED, REDRAWN, OR REDESIGNED.
[Logo] THE TYPEFACE OF THE TAGLINE
SHOULD NOT BE CHANGED.
[Logo] GRAPHIC ELEMENTS SHOULD NOT BE ADDED
TO THE SIGNATURE.
[Logo] SIGNATURE COLORS SHOULD NOT
BE A PERCENTAGE OF A COLOR.
</TABLE>
<PAGE>
SIGNATURE USAGE WITH HARDWARE
For hardware devices, the NCI brand logo--the NCI logotype without the
tagline--should appear. It is importanT that it be represented clearly,
maintaining the required space around the logo. Manufacturers should use the
standard black and NCI red brand logo unless the device color is black. For
black hardware, the optional NCI brand logo which includes "N" and "C" in
white with the NCI red line should be used. Please see SIGNATURE STAGING and
SIGNATURE USAGE WITH PARTNER LOGOS for more specific guidelines. The logo
should never appear smaller than 20mm in width and shall maintain the correct
aspect ratio.
Hardware manufacturers with limitations that
prohibit the recommended placement and usage should
contact an NCI representative. Below are examples
of how the NCI brand logo is represented on various
hardware devices.
LOGO
The Net brand logo should appear on OEM hardware in the same treatment as the
OEM logo. The following display methods are listed in order of preference.
1) A molded, color logo that sits in a depressed area so that the top of the
logo is flush with the face of the device.
2) A molded, color logo that sits on top of the face of the device.
[Logo]
<PAGE>
SIGNATURE USAGE WITH HARDWARE (CONT.)
SET TOP BOX
The NCI. logo shall be placed on thefront bezel of the OEM product.
Recommended position is centered on the horizontal centerline of the
bezel. SEE PREVIOUS PAGE FOR EXAMPLE.
DISPLAYS
The NCI brand logo should be centered at the top of the device.
[Logo]
KEYBOARD AND REMOTE
The NCI logo shall be placed on any remote control or keyboard bundled with
or sold in conjunction with the OEM product. Recommended position is centered
at the top or bottom of the top face of the remote or keyboard.
[Logo]
SMART CARD
The NCI logo shall be placed on the topside of any smart card that is bundled
with or sold in conjunction with the OEM product. The logo shall appear on
the tab of the smart card that extends from the OEM product.
[Logo]
<PAGE>
SIGNATURE USAGE WITH SOFTWARE
When designing for television display, the Net brand logo--the NCI logotype
WITHOUT the tagline--should be used. It should never appear smaller than 47
pixels in width and 18 pixels in height on any display 320 x 240 pixels or
larger.
In order to achieve image stabilization, logo colors may be altered for
television display. We recommend equalizing the NCI logo so that the darkest
black is 90% black and the lightest white is 10% black, In addition, it may
be necessary to alter the NCI logo color to avoid video artifacts such as
chroma crawl, video bleeding, and clamping. If logo colors are changed, they
must be made one color so that the "N ", the bar, and the "C" are all the
same color.
Software vendors with limitations that prohibit the placement and usage
should contact your NCI representative.
Detailed on-screen color guidelines and example NCI brand graphics and logos
are available from NCI.
INITIAL POWER-ON
At initial power-on or after power loss, the NCI logo shall display for no
less than five seconds immediately after the user turns on the OEM Product.
SOFT POWER-ON
An NCI logo shall display for no less than three seconds immediately after
the user turns the O EM Product on from a soft power state (for example,
power has been supplied to the box since last use).
[Logo]
<PAGE>
SIGNATURE USAGE WITH SOFTWARE (CONT.)
STATUS BAR
NCI reserves the right to determine the logo and/or sound byte that shall be
placed on the Status Bar. Note that this requirement applies to NCI
applications or core TV Navigator functionality that use the Status Bar.
[Logo]
MENU BAR
NCI reserves the right to determine the logo that shall be placed on the Menu
Bar.
[Logo]
TV BAR
The NCI logo shall be placed on the TV Bar. In addition, a content portal
frame accessible from the TV Bar allows OEMs and ISP partners to provide a
link to content or applications of their choosing in addition to the provided
NCI link.
[Logo]
SIGNATURE USAGE WITH ISP BRANDING
On the default root page, default personalized root page, and favorite lists,
the NCI logo as a selectable icon shall be placed in a prominent location and
shall be visible at all times without further navigation. If the background
is dynamic, the logo must be visible for at least 30 seconds each visit or
until the user leaves the page. A prominent location is defined as not
requiring the user to scroll or otherwise navigate in order to see the logo
on entrance to the page.
The content provided through the NCI selectable icon or NCI content portal
shall not be blocked or restricted in any fashion except by user-elected
restrictions (e.g., parental control filters).
<PAGE>
SIGNATURE USAGE WITH PROMOTIONAL MATERIALS
AUTO DEMO
The NCI logo will be included in any point of sale auto demo used to sell the
OEM product, The logo will be on-screen for no less than 5 seconds
MARKETING MATERIALS
The Net logo shall be placed on all major marketing or communications
materials created for the OEM product.
PACKAGING
The NCI logo shall be placed on the primary surfaces of all packaging for the
OEM product or peripherals.
NCI USAGE AND TRADEMARK SPECIFICATIONS
In writing about Network Computer, Inc., it is acceptable to use "NO," as the
company name. Use the full company name followed by the abbreviation
- -"Network Computer, Inc. (NCI)"- in the initial reference, and NCI in all
other references.
A trademark is a name, symbol, logotype, or signature that identifies a
company, product, or service. Please use the following guidelines for
trademark usage:
-- The trademark symbol should appear next to the first reference to NCI
and any other name which is a trademark of NCI.
-- "NCI" should be used as a noun, and should not be made plural,
possessive or hyphenated.
For example: NCI develops software for Internet appliances.
-- The Statement "NCI is a trademark of Network Computer, Inc." must be
used as a trademark citation in the appropriate area of the printed
piece, usually at the end of a document or on the copyright page.
-- When referencing other companies' trademarks, the following statement
should be included as a footnote to the text: "All other company and
product names mentioned are used for identification purposes only, and
may be trademarks of their respective owners."
Further information regarding NCI trademarks may be obtained from your NCI
representative,
<PAGE>
TYPOGRAPHY
In order to create and maintain a consistent look throughout our corporate
identity program, the same families/style of typography should be used at all
times. The type fonts used by N =l are Bank Gothic Medium, Adobe Garamond
Regular, and Adobe Garamond Italic. Letter spacing and line spacing (leading)
have been carefully constructed and should not be respaced, reset, or
otherwise altered.
<TABLE>
<CAPTION>
<S> <C>
[Logo] BANK GOTHIC
MEDIUM
-----------------------------
THIS TYPE/FACE IS USED
PREDOMINANTLY IN TITLES AND
HEADINGS. IT IS THE ONLY
MEMBER OF THE BANK GOTHIC
FAMILY THAT IS TO BE USED.
WORDS APPEARING IN THIS
TYPEFACE SHOULD ALWAYS BE
TYPED IN ALL CAPITOL LETTERS.
ITS PROPER USAGE IS SPECIFIED
ACCORDING TO THE APPLICATION.
[Logo] ADOBE GARAMOND
REGULAR
THE USE OF ADOBE GARAMOND REGULAR
VARIES FROM TITLES TO TEXT. THIS
FAMILY OF GARAMOND DIFFERS FROM
OTHER STYLES AND SHOULD BE USED
AT ALL TIMES. ITS PROPER USAGE IS
SPECIFIED ACCORDING TO THE APPLICATION.
[Logo] ADOBE GARAMOND
ITALIC
ADOBE GARAMOND ITALIC GENERALLY
APPEARS IN CAPTIONS TO CHARTS AND IMAGES,
AND TO EMPHASIZE SPECIFIC INFORMATION.
ITS PROPER USAGE IS SPECIFIED ACCORDING TO THE
APPLICATION.
</TABLE>
<PAGE>
COLOR
Color is a very important part of the NCI identity. Its application is
specified for the signature, type, and various other elements used in our
collateral. Properly used, it helps customers, vendors, and employees,
identify NCI quickly and easily,
[Logo]
<TABLE>
<CAPTION>
<S> <C> <C>
NCI RED BLACK NCI BLUE
- ----------------------------------- ----------------------------------- -----------------------------------
NCI RED IS USED MAINLY AS THE BLACK IS USED FOR THE SIGNATURE NCI BLUE IS USED IN A VARIETY
SIGNATURE COLOR. ITS USE IN WHEN PRINTING IN ONLY ONE COLOR. OF APPLICATIONS. IT DOES NOT
OTHER AREAS OF A PIECE SHOULD THE TAGLINE ALWAYS PRINTS BLACK, DETRACT FROM THE IMPACT OF
BE LIMITED SO AS NOT TO DETRACT EXCEPT WHEN IT REVERSES TO WHITE THE NCI RED AND IS LEGIBLE
FROM THE SIGNATURE. THE PANTONE OUT OF A BLACK BACKGROUND. WHEN USED FOR TEXT. THIS
MATCHING SYSTEM EQUIVALENT IS 485. COLOR CANNOT BE REPRESENTED
THE 4-COLOR PROCESS EQUIVALENT IS BY A PERCENTAGE OF BLACK. IT
100 PERCENT MAGENTA AND 100 PERCENT SHOULD NOT BE REPRESENTED
YELLOW. BY ITS 4-COLOR EQUIVALENT. THE
PANTONE MATCHING SYSTEM
EQUIVALENT IS 5405.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DESIGN TIP
------------------------------
WHEN CHOOSING A COLOR PALETTE,
COLORS SHOULD NOT OVERWHELM THE
NCI RED. THE SIGNATURE AND ITS
COLOR SHOULD NEVER LOSE IMPACT
DUE TO A BRIGHTER COLOR.
</TABLE>
<PAGE>
GLOSSARY
BASELINE
The imaginary line along which the bottom edge of most lower case and all
capital letters align.
BLEED
An image that extends beyond the trim marks of a page or other defined area
is said to "bleed."
CAP HEIGHT
The height of an upper case or capital letter.
COMPENDIA
Independent or supporting materials, such as CD-ROM, Video, Audio, Electronic
Media.
CORPORATE SIGNATURE
The NCI corporate signature consists of the Corporate logotype, tagline, and
appropriate trademarks.
EM
A unit of measurement used with type which is exactly as wide and as high as
the point size being set.
FLUSH
This typographic term refers to the alignment of successive lines of type
with either margin. (As opposed to "random.")
FONT
See Typeface.
GRID An arrangement of horizontal and vertical divisions that serve as
positioning guidelines.
LEADING
Leading is the amount of space, measured in points, between lines of type.
LETTER SPACING
This refers to the amount of space between individual letters of typeset copy.
LOGOTYPE
This refers to the corporate and product names in their specified typographic
form only.
PANTONE MATCHING SYSTEM
This is a standardized color system known around the world.
<PAGE>
GLOSSARY (CONT.)
PICA
The pica is the basic typographic unit of measurement; there are six picas to
one inch / 25.4 mm.
POINT
The point is the smallest unit of measurement used in
typesetting and printing. Twelve points equal one pica;
there are 72 points to one inch / 25.4 mm.
RULE
This is a straight line produced by either commercial
typesetting equipment or by hand.
SANS SERIF
A typeface without serifs is referred to as sans serif.
SERIF
A serif is the short line that angles from the main stroke of a letter.
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<PAGE>
[Logo]
[Logo]
NETWORK COMPUTER INC.
100 BRIDGE PARKWAY
REDWOOD SHORES
CALIFORNIA 94065
U.S.A.
PHONE +650.631-4683
FAX +650.631.4683
HTTP://WWW.NC.COM
NCI IS A REGISTERED TRADEMARK OF NETWORK COMPUTER, INCORPORATED.
ORACLE IS A REGISTERED TRADEMARK OF ORACLE CORPORATION.
COPYRIGHT 1998, NETWORK COMPUTER, INC. ALL RIGHTS RESERVED,
PRINTED IN THE U.S.A.
<PAGE>
Exhibit 10.15
NETSCAPE COMMUNICATIONS CORPORATION
501 E. Middlefield Rd.
Mountain View, CA. 94043
May 16, 1997
Mr. David Roux
Oracle Corporation
500 Oracle Parkway
Redwood Shores, California 94065
Mr. Jerry Baker Dr. Wei Yen
Network Computer, Inc. Navio Communications, Inc.
477100 Marine Parkway, 2nd Floor 870 W. Maude Ave.
Redwood Shores, California 94065 Sunnyvale, California
94086
RE: CERTAIN AGREEMENTS
Gentlemen:
This letter, when countersigned by you below, will reflect our
agreement regarding certain aspects of the acquisition of Navio Communications,
Inc. (formerly "TVsoft Corporation") ("Navio") by Network Computer, Inc.
("NCI"). Netscape Communications Corporation ("Netscape"), NCI, and Oracle
Corporation ("Oracle") are entering into a Merger Agreement ("Merger Agreement")
concurrently with the signing of this letter. Oracle and Netscape are parties to
that certain OEM License Agreement dated OCTOBER 17, 1996 ("OEM License
Agreement"). Netscape and Navio are parties to that certain Source Code License
Agreement dated July 9, 1996 ("Navio Agreement") and a Trademark Agreement
("Trademark Agreement"), also of such date.
Capitalized terms not defined herein shall have the meanings assigned
to them under the OEM Agreement, the Navio Agreement and the Trademark
Agreement, as indicated. This letter agreement shall become effective at the
Effective Time (as such term is defined in the Merger Agreement). Before the
Effective Time, Netscape and Navio shall make no amendment to the Navio
Agreement without Oracle and NCI's written consent, and no amendment thereto
shall be valid and legally binding, except as set forth on Exhibit A hereto.
1. ASSIGNMENT OF NAVIO AGREEMENT. Netscape consents to the assignment
of the Navio Agreement to NCI immediately upon the Effective Time. NCI hereby
accepts assignment of the Navio Agreement and agrees to perform all the
obligations of Navio thereunder after the Effective Time. Netscape hereby agrees
to fully cooperate with NCI, including promptly executing all documents
reasonably requested by NCI, to effect the rights and assignments agreed to
hereunder.
2. DIVESTITURE EVENT. The acquisition of Navio by NCI is a "Divestiture
Event," as that term is defined in Section 1.8 of the Navio Agreement. Because a
Divestiture Event has occurred, certain provisions of Navio Agreement become
effective, including without limitation of the following: (i) delivery of
Netscape Technology Updates under Section 5.2 is no longer required;(ii) each
party's Marketing Right in Section 8.2 and 8.3, respectively, shall cease to
apply (the licenses granted to Netscape under the Navio Agreement are thereby
nonexclusive); and (iii) the grant of license to Netscape in Section 4 becomes
effective, and Navio has certain delivery obligations (see paragraph 4 below).
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May 16, 1997
Page 2
3. NETSCAPE TECHNOLOGY UPDATES. Notwithstanding the fact that a
Divestiture Event has occurred and that therefore the Update Period has ended,
(i) before the Effective Time Netscape shall continue to deliver Netscape
Technology Updates to Navio pursuant to the Navio Agreement and (ii) Netscape
shall deliver the source code for Netscape navigator 4.0 ("4.0 Code") to NCI
within two (2) weeks following Netscape's release of Netscape navigator 4.0, or
whenever an unrelated third party receives such code, whichever is sooner. Until
termination of the OEM Agreement, but not later than October 17, 1999 (in either
event, the "OEM Termination Date"). Netscape shall also deliver to NCI the
source code for any and all Maintenance Updates and Minor Updates (defined in
Section 1.13 of the Navio Agreement) to the 4.0 Code (collectively, the "4.0
Updates"). Such 4.0 Code and 4.0 Updates shall be deemed Netscape Technology
Updates and Netscape Technology under the Navio Agreement. Except for such 4.0
Updates, Netscape shall have no obligation to deliver any Netscape Technology to
NCI after its delivery of such 4.0 Code. NCI shall have the right at any time to
direct Netscape not to deliver any further Netscape Technology Updates to NCI.
The date of the delivery of the final 4.0 Update constituting a Minor Update is
hereinafter referred to as the "Final Update Delivery Date."
As used herein, the term "Netscape navigator 4.0" means that product to
be introduced by Netscape as Netscape Navigator 4.0, which product does not
include messaging or mail functions.
4. NCI DELIVERY OBLIGATIONS.
a. TVSOFT TECHNOLOGY. Pursuant to Section 5.3 of the Navio
Agreement, within thirty (30) days of the Effective Time, NCI shall deliver to
Netscape one (1) copy of all TVsoft Technology (as defined in the Navio
Agreement) and the NCI Version (as defined in paragraph 7 below), existing as of
the Effective Time, including source code and object code versions thereof (the
"First Delivery"). In addition, within sixty (60) days of the delivery of the
4.0 Code to NCI, NCI shall deliver to Netscape any TVsoft Technology and NCI
Version that has been created since the First Delivery. Thereafter, NCI shall
deliver any modifications, enhancements, additions or updates to the TVsoft
Technology and NCI Version that include or are based on the 4.0 Code and/or the
4.0 Updates, in the form described in Section 5.3 of the Navio Agreement, not
less than one (1) time in each calendar quarter, until such time as Netscape has
received that initial version of the TVsoft Technology and NCI Version
incorporating the final Netscape Technology update delivered to NCI hereunder,
which is expected to be within 135 days of the Final Update Delivery Date.
Netscape shall have the rights with respect to such TVsoft Technology and NCI
Version as set forth for the TVsoft Technology in Section 4 of the Navio
Agreement. Netscape shall have the right at any time to direct NCI not to
deliver any further TVsoft Technology or NCI Version to Netscape, except to the
extent required for NCI to perform porting activities on Netscape's premises
described in paragraphs 7 and 8 below.
b. NETSCAPE SOURCE CODE. Subject to the limitations on NCI's
use contained herein and in the Navio Agreement, Netscape shall not exercise its
right under Section 17.3 of the Navio Agreement to require the return of the
Netscape Source Code and shall have no further right to demand return of the
Netscape Source Code.
5. APPLICABILITY OF SECTION 12.6. The restrictions on competition by
employees and consultants in Section 12.6 of the Navio Agreement shall apply for
the six (6) month period beginning with the Final Update Delivery Date, not the
Divestiture Event.
<PAGE>
May 16, 1997
Page 3
6. CERTAIN NAVIO AGREEMENTS.
6.1 GENERAL. Navio has entered into the following agreements:
(i) that certain agreement dated as of November 7,1996 between Navio and HDS, a
Delaware corporation (the "HDS Agreement") ; (ii) that certain agreement dated
as of January 7, 1997, between Navio and Tektronix, Inc., an Oregon corporation
(the "Tektronix Agreement"); (iii) that certain agreement dated as of February
12, 1997, between Navio and Hewlett-Packard (Canada)Ltd., an Ontario corporation
(the "HP Agreement"); and (iv) that certain agreement dated as of March 27, 1997
between Navio and International Business Machines Corporation, a New York
corporation (the "IBM Agreement"). The foregoing agreements are referred to
herein collectively as the "Navio NC Agreement." Each of the Navio NC Agreements
provides a license to a third party of certain Netscape Technology.
6.2 LICENSE. From and after the Effective Time, and subject in
the case of the HP Agreement and the IBM Agreement to the specific restrictions
set forth herein, Netscape hereby grants to NCI a nonexclusive, nontransferable
and nonsublicenseable (except to the limited extent contractually required under
the Navio NC Agreement) right and license in and to the Netscape Technology,
only to the extent required to grant to each of HDS, IBM, HP and Tektronix the
rights granted to each of such parties under the Navio NC Agreements. Navio's
and NCI's rights under the Navio NC Agreements shall be royalty-free, except as
set forth in paragraph 6.3 below with respect to the Navio Browser Product
Licensed on a stand-alone basis by IBM.
6.3 HP AGREEMENT. With respect to the source code
license granted to HP in Section 4.1 of the HP Agreement, and set forth in
paragraph 8 (a) below, the "premises" upon which HP is to make any source
code modifications shall be Navio/NCI's premises. Navio/NCI shall make the
Source Code (as defined therein) available to HP for the limited purposes as
set forth in and subject to all the restrictions contained in Section 4.1 of
the HP Agreement and in the Source Code Access Agreement attached as
Exhibit E to the HP Agreement.
6.4 IBM AGREEMENT. NCI shall be responsible for its
obligations the IBM Agreement. At such time, if any, that NCI determines that
its rights to receive updated code hereunder are insufficient to allow it to
perform its obligations to provide Major Updates under Section 5.2.1.1 and
5.2.1.2 and Minor Updates under Section 5.3 of the IBM Agreement, then NCI will
so inform Netscape. Thereafter the parties will negotiate in good faith and
enter into an agreement having either of the following terms (and such other
terms and conditions as are customary for agreements of this type in the
software industry, except that no additional charges or fees shall be part of
any such agreement):
a. NCI will seek IBM's permission to delegate to
Netscape its obligations to provide Major Updates under
Section 5.2.1.1 and 5.2.1.2 and Minor Updates under Section
5.3 of the IBM Agreement. If such delegation is permitted by
IBM, Netscape shall assume such obligations. If such
delegation is permitted by IBM, NCI shall at its expense
provide Netscape with all code, know-how, documentation and
software tools reasonably required or useful for Netscape to
provide IBM with Major Updates under Section 5.2.1.1 and
5.2.1.2 and Minor Updates under Section 5.3 of the IBM
Agreement and Netscape shall provide same to IBM. In such
event NCI/Navio shall assign to Netscape and direct IBM to
deliver to Netscape any and all royalties, fees or other
payments from IBM with respect to such Major Updates or Minor
Updates provided to IBM by Netscape; or
b. Subject to all of Netscape's standard terms and
conditions for access to its most sensitive information,
including without limitation appropriate confidentiality
restrictions, and at
<PAGE>
May 16, 1997
Page 4
NCI's expense, NCI shall be given access during the
term of the IBM Agreement on a "one-time" basis to the source
code for each new Major Update and Minor Update (as defined in
the IBM Agreement) of Netscape Navigator released by Netscape
during the term of the IBM Agreement ("New Code") at
Netscape's facilities solely for the purpose of NCI's
fulfilling its obligations under the Sections of the IBM
Agreement referred to in (a) above. In such event, with
respect to each copy of the Navio Browser Product (as defined
in the IBM Agreement) made by or on behalf of IBM and
incorporating any updates or modifications made in connection
with NCI's access to the New Code, NCI shall bay to Netscape
the Other NCOS Royalty, as defined in paragraph 7.7(b) below,
at the times and on the terms set forth below.
The determination as to whether the agreement shall be based on the
terms set forth in (a) or (b) above shall be made by Netscape in its sole
discretion.
Netscape shall have no further obligation under this subparagraph later
than the end of the term of the IBM Agreement.
In the event that IBM requests a source code escrow under Attachment E
to the IBM Agreement, NCI will use good faith reasonable efforts to convince IBM
to enter into such an agreement directly with Netscape instead of NCI.
Under paragraph B of Agreement C to the IBM Agreement, IBM has the
right to distribute "Navio Browser Products" on a stand-alone basis ("Stand
Alone Units," as defined therein), subject to a royalty schedule. NCI hereby
agrees that in the event that IBM makes any such "stand-alone" distribution, NCI
will pay to Netscape a royalty of five dollars ($5) for each copy of Navio
Browser Product sold or distributed in such manner. Any amounts paid to NCI
under the final subparagraph of paragraph B (i.e. upon IBM's written commitment
to (a) $1,000,000 in royalty revenue or (b) the remaining royalty revenue for
the number of Stand Alone Units necessary to reach the $10 royalty level),when
received from IBM, shall be deemed to be pre-payments of royalties owed for the
applicable number of Stand Alone Units (100,000 units in the case of (a) and the
number of additional units purchased in the case of (b)) and the $5 per unit
royalty for each such unit shall be payable to Netscape upon such receipt.
6.5 PERFORMANCE. Netscape shall not hereafter make any claim
that as of the date hereof Navio has infringed any right of Netscape by entering
into the Navio NC Agreements. In no event will Netscape be liable for any
failure of Navio or NCI to perform any of its obligations under any of the Navio
NC Agreements, including without limitation NCI/Navio's obligation to provide
IBM with timely Major Updates and Minor Updates, and NCI hereby agrees to defend
and indemnify Netscape from and against any costs and/or damages (including
without limitation attorneys' fees) incurred or suffered by Netscape as a result
of any claim that NCI or Navio has failed to perform such obligations. In no
event will NCI be liable for any failure of Netscape to perform any obligations
assumed by Netscape pursuant to paragraph 6.4(b) and Netscape hereby agrees to
defend and indemnify NCI from and against any costs and/or damages (including
without limitation attorneys' fee) incurred or suffered by NCI as a result of
any claim that Netscape has failed to perform any obligation it may assume under
paragraph 6.4(a) above.
<PAGE>
May 16, 1997
Page 5
7. NC DEVELOPMENT.
7.1 RIGHTS. Netscape, Navio, Oracle and NCI acknowledge and
agree that Navio has produced and NCI shall have the right (in addition to its
rights under the Navio NC Agreements, which rights do not include the right to
use the Netscape Technology on Network Computers) to improve and create
derivative works based upon a version of the Netscape Technology designed to be
distributed on Network Computers (the "NCI Version"). NCI will have the right to
distribute and sublicense the NCI Version for use only on Network Computers and
bundled as follows:
a. with the operating system licensed or developed
and distributed by NCI for use on NCI network Computers, which
operating system my include third party technology but will
always include substantial development work by NCI (the
"NCI-NCOS"); or
b. with the suite of bundled software application and
system programs designed to operate on Netscape Computers and
marketed by NCI as the NC Desktop (and variations of and
successor products thereto), and which comprise substantial
value added (the "NC Desktop"). The NC Desktop incorporating
the NCI Version will generally be distributed and sublicensed
to operate with the NCI-NCOS but may also be distributed and
sublicensed for use with other Network Computer operating
systems ("Other NCOSs").
The NCI Version shall be distributed by Oracle and NCI only under the
terms of the OEM Agreement, except as expressly modified herein. With the sole
exception of the licenses granted to NCI hereunder with respect to the Navio NC
Agreements (which, except for the standalone versions under the IBM Agreement
shall be royalty free), each license granted hereunder shall be royalty-bearing
as set forth in the OEM Agreement and in this Agreement.
It is expressly understood that one of the restrictions set forth in
this Section 7.1 shall apply to licensing of the Netscape Technology for use
with Consumer Hardware Devices pursuant to the Navio Agreement. Nothing herein
shall prevent or limit Netscape from developing versions of its technology for
use with Netscape Computers or otherwise. The NCI Version may be ported as set
forth in paragraph 8(a) below.
7.2 DUAL-BOOT MACHINE. In addition to the right granted to it
in paragraph 7.1, NCI shall have the right to distribute and sublicense the NCI
Version bundled with the NC Desktop for use on computers having the capability
of executing instructions from either (i) the NCI-NCOS or an Other NCOS, or (ii)
a Microsoft Windows, Apple Macintosh or UNIX operating system, but not where
both (i) and (ii) are available to the user within the same session (Dual-Boot
Machines"). Any use of the NCI Version on a Dual-Boot Machine shall be subject
to the payment to Netscape of the Other NCOS Royalty referred to in paragraph
7.7 below.
7.3 PROPERTY. Except as set forth paragraph 8(c) below, as
between Netscape and NCI, and subject to the patent licenses granted to Netscape
and NCI in paragraph 11 below, all Netscape Technology is and shall be the
property of Netscape, and all the modifications and improvements to and
derivative works of the Netscape Technology created by NCI and used in the NCI
Version shall be the property of NCI.
7.4 DELIVERY. Each delivery of the TVsoft Technology to
Netscape under paragraph 4(a) above will contain the source code and object
code for the NCI Version, as improved and modified. Each delivery of source code
and object code for the NCI Version shall be made such that the object code is
delivered in
<PAGE>
May 16, 1997
Page 6
packaging separate from the source code. The object code shall be delivered in a
form that will allow Netscape to deliver such code to Oracle and NCI as a
Netscape Product under the OEM Agreement without any modification or alteration
by Netscape. The source code for the NCI Version shall be delivered to Netscape
physically packaged in a sealed container with a notice of its contents
prominently displayed.
7.5 NETSCAPE PRODUCT. Subject to there limitations act forth
in this paragraph 7, the NCI Version with be considered a Netscape Product for
purposes of the OEM Agreement and made available to Oracle and NCI as provided
in the OEM Agreement, and shall be subject to all the terms of the OEM Agreement
relating to such Netscape Product. NCI shall indemnify and hold Netscape
harmless from and against any claim by Oracle or a third party that NCI Version
(excluding the unmodified Netscape Technology incorporated therein) fails in any
respect to meet any warranty or representation made to Oracle under the OEM
Agreement, whether of performance, noninfringement of third party rights, or
otherwise.
7.6 DEFINITIONS. As used in this letter agreement, the term
"Netscape Computer" shall mean a computing device that is marketed as a network
computer and that does not require local persistent storage (e.g., a hard disk
drive) for its operation and which uses a periodic connection with a network to
obtain applications, user data and content. A Network Computer shall not include
a personal computer (including those that function as servers) or any computer
that uses as operating system set forth on Exhibit B hereto, or any new release,
new version, successor, follow-on or replacement of any such operating system.
The term "Other NCOS" shall include, by way of example and not
limitation, Microsoft Windows CE, Java OS, VXWorks, OS/9 and Newton OS.
7.7 PAYMENT.
a. With respect to the rights granted to NCI under
paragraph 7.1(a) above, Netscape shall receive the amount of one dollar ($1.00)
per copy payable to Netscape for Netscape Products under the OEM Agreement.
b. With respect to any distribution of the NCI
Version under subparagraphs 7(b) or 7.2 above, Oracle shall pay to Netscape, for
each copy of the NCI Version made or distributed thereunder, an amount equal to
the greater of one dollar ($1.00) or twenty-five percent (25%) of all amounts
received by NCI with respect to the NC Desktop bundle in which the NCI Version
is incorporated (the "Other NCOS Royalty"). The Other NCOS Royalty shall be paid
on any amounts paid to NCI as a "prepayment" or "Advance" or similar lump-sum.
The Other NCOS Royalty shall be paid and accounted for as set forth in Section r
of the OEM Agreement, except that the report called for in Section 4.3 thereof
shall include a statement for the applicable period of each amount received by
NCI with respect to the licensing of the NC Desktop bundle incorporating the NCI
Version.
c. Payment will be due in accordance with the OEM
Agreement, as expressly modified herein, for all copies of the NCI Version
through October 17, 1999. Thereafter, no license fee payment will be due with
respect to Oracle's distribution of such copies and NCI's license rights shall
be deemed fully paid up and, so long as NCI is not in material breach thereof,
perpetual.
d. There foregoing provisions (a), (b) and (c) shall
amend the payment provisions of Exhibit B of the OEM Agreement (i.e., the Major
Update per-copy pricing of $5.00 for Oracle Network Computer
<PAGE>
May 16, 1997
Page 7
End User Customers shall not apply to the NCI Version). Each copy of the NCI
Version made or distributed hereunder will bear a royalty under either (a) or
(b) above.
7.8 LATER RELEASES OF NCI VERSION. With respect to versions
(releases) of the NCI Version NCI delivers to Netscape under paragraph 4 above
after such time as Netscape has received that version of the TVsoft Technology
and NCI Version incorporating the final 4.0 Update Netscape delivers to NCI
under paragraph 4(a) above, Netscape shall have no rights under the Navio
Agreement or this letter agreement except to make the executable form thereof
available or Oracle and NCI under the OEM Agreement.
8. OEM AGREEMENT.
a. PORTING AT NCI'S FACILITY. NCI shall have the
right to develop and port the NCI Version (i) bundled with the NCI-NCOS under
the license grant in subparagraph 7.1(a) above to various Network Computer
hardware platforms and (ii) under the Navio NC Agreements to the network
Computer operating systems expressly referred to in those agreements. Such
porting activities shall be conducted on NCI's premises in Redwood Shores,
California and shall be subject to the same protections and procedures for the
Netscape Technology, including without limitation with respect to the
confidentiality and integrity, as NCI uses Oracle's most sensitive source code.
b. PORTING AT NETSCAPE FACILITY. NCI shall have the
right to port the NCI Version with the NC Desktop under the license grant in
subparagraph 7.1(b) and paragraph 7.2 above to Other NCOSs as defined therein.
All such porting shall take place at Netscape's facilities and shall be subject
to the terms of Section 14.13 of the OEM Agreement.
c. OWNERSHIP. All ported Source Code for the Netscape
Technology developed under (a) above shall be owned by NCI, subject to
Netscape's rights in the underlying Netscape Technology. All ports of the Source
Code for the Netscape Technology developed under (b) above shall be Derivative
Works (as defined in the OEM Agreement) and owned by Netscape, subject to NCI's
ownership in the underlying NCI Version. Nothing in this Agreement or otherwise
shall prevent or restrict Netscape from developing and/or exploiting ports of
the Netscape Technology or Netscape Tools to any platform.
d. TERMS. With respect only to the NCI Version, and
subject to the limitations set forth in paragraph 7, the license grants to NCI
in paragraph 7 hereof and to Oracle in Sections 2.1 and 3.3 of the OEM Agreement
shall survive the termination of the agreement and shall continue in perpetuity.
e. FCS. The requirement of production release/FCS
(First Customer Ship) with respect to when Navio client products are available
to Oracle under Section 1.7 of the OEM Agreement is hereby deleted.
9. INDEMNIFICATION. Netscape's indemnification obligations under
Sections 10.1 and 10.2 of the OEM Agreement shall apply to the Netscape
Technology licensed under the Navio Agreement and this letter agreement as if
set forth therein and herein. Similarly, such sections shall apply and NCI shall
have such obligations to Netscape, MUTATIS MUTANDIS, with respect to the TVsoft
Technology licensed to Netscape under such Navio Agreement and this letter
agreement. Both party's indemnification obligations shall be subject to the
limitation of liability set forth in Section 11.3 of the OEM Agreement;
provided, however, that each party's
<PAGE>
May 16, 1997
Page 8
aggregate liability thereunder shall be limited to $10,000,000, except with
respect to any claims brought under the IBM Agreement, in which event the limit
for each party shall be $20,000,000.
10. ASSIGNMENT. Section 17.3(a) of the Navio Agreement ("Assignment"),
is amended and restated as follows:
NCI shall have the right to assign its rights and obligations
hereunder to Oracle Corporation ("Oracle"), subject to the
following conditions precedent: (1) such assignment shall be
in connection with an acquisition by Oracle of all of the
equity or all of the assets of NCI; (2) Oracle shall agree in
a separate writing delivered to Netscape to be bound by and
perform all of NCI's obligations under this License Agreement;
and (3) such assignment shall not be effected unless and until
(i) six (6) months have passed since the Final Update Delivery
Date and (ii) Oracle shall have agreed in writing that, for an
additional six (6) month period commencing on the expiration
of the period referred to in (i), no Oracle employee shall
have access to the source code for any product incorporating
or based on any Netscape Technology, other than for the
purpose of continuing to develop the NCI products being
developed at the time of the acquisition, and not any other
Oracle product.
Further, NCI shall have the right to assign its rights under this
letter agreement, the Navio Agreement and the OEM Agreement to any entity other
than Microsoft or Oracle (except as described in the immediately preceding
paragraph) that succeeds to all of the business or assets of NCI subject to the
following conditions precedent: (1) such assignee shall agree in a separate
writing delivered to Netscape to be bound by and perform all of NCI's
obligations under this letter agreement, the Navio Agreement and OEM Agreement;
and (2) such assignment shall not be effected unless and until fifteen (15)
months have passed since the Final Update Delivery Date.
11. PATENTS. The following changes shall be made to Section 3 of the
Navio Agreement.
a. Section 3.3 shall be omitted and replaced
with the following:
NCI INVENTIONS. NCI shall be the owner of
any Inventions it develops ("NCI
Inventions"). As used in this Section 3.3,
"NCI Licensed Patents" means any issued
patents that claim any NCI Invention arising
from the Netscape Technology or Netscape
Tools and covering or reading on any
Netscape Technology or Netscape Tools, or
any Derivative Work of Netscape Technology
or Netscape Tools. NCI hereby grants to
Netscape a perpetual, irrevocable,
non-exclusive, non-transferable, fully
paid-up right and license, with the right to
grant and authorize sublicenses, under any
and all NCI Licensed Patents, to make, have
made, use, offer to sell, sell, import and
export any products and items.
b. A new Section 3.4 shall be inserted, which
shall be as follows:
NETSCAPE INVENTIONS. Netscape shall be the
sole owner of any Inventions it develops
("Netscape Inventions"). As used in this
Section 3.4, "Netscape Licensed Patents"
means any issued patents that claim any
Netscape Invention arising from the NCI
(TVsoft) Technology or NCI (TVsoft) Tools
and covering
<PAGE>
May 16, 1997
Page 9
or reading on any NCI Technology or NCI
Tool, or any Derivative Work of NCI
Technology or NCI Tools. Netscape hereby
grants to NCI a perpetual, irrevocable,
non-exclusive, non-transferable, fully
paid-up right and license, with the right to
grant and authorize sublicenses, under any
and all Netscape Licensed Patents, to make,
have made, use, offer to sell, sell, import
and export any products and items.
c. Former Section 3.4, Inventions Generally,
shall become Section 3.5.
12. TECHNICAL SUPPORT. Section 6 of the Navio Agreement (Support) is
hereby deleted. NCI shall have the right to purchase the following support
services:
a. AUTOMATED SERVICES: Subject to the limitation on
source code access beyond the 4.0 Code and 4.0 Updates, as set forth in
paragraph 3 above, NCI shall be allowed access to Netscape's standard automated
developer support services, "Netscape DevEdge Gold", for access by up to 15
developers. Such services currently include FAQs, Bug Reporting, Known Bugs,
Newsgroups, Documentation, and Sample Code. Such services may be modified during
such period as Netscape Determines for all similarly situated developers.
b. ENGINEERING SUPPORT: Netscape shall provide to NCI
the following as Non-Recurring Engineering (NRE) support for the Netscape source
code: Support for the preparation of source drops, training on the source code
build process, account management and code drops of the Netscape test suites.
Engineering support contact for inquiries regarding the Netscape Technology will
also be provided under this support service via the Netscape OEM Support
process.
c. BINARY SUPPORT SERVICES: Per the OEM Agreement,
Attachment D, through Netscape Support).
NCI shall pay Netscape the sum of $250,000, payable annually in
advance, with respect to such support services. NCI here by agrees to purchase
such support for the annual period commencing on the Effective Time and Netscape
agrees to extend NCI a discount of $75,000 with respect to such period. NCI
shall have the right to purchase one (1) additional year of such support on
notice to Netscape not less than thirty (30) days prior to the first anniversary
of the effective Time for an additional payment of $250,000. Amounts paid by NCI
under this paragraph 12 shall be credited against any amounts due to Netscape
from Oracle under Section 3 Exhibit B to the OEM Agreement. Subject to NCl's
payment of the $175,000 referred to above, neither Oracle or NCI shall owe any
additional payment for technical support as set forth in this paragraph through
the first anniversary of the Effective Time. In the event that during such
period NCI and/or Oracle uses or requests to use more support services than
provided in this paragraph, then Oracle or NCI, as applicable, shall pay
Netscape for such additional services as available.
13. TRADEMARKS. The Trademark Agreement between Navio and Netscape
entered into concurrently with the Navio Agreement (the "Trademark Agreement")
is hereby amended to set forth the following as the definition of "Licensed
Trademark" therein:
a. for the NCI Version distributed in a
manner in which the NCI Version is substantially similar in
appearance and functionality to the Netscape Navigator, then
NCI shall either (i) place Netscape's "N Animation" logo in
the upper right corner of the NCI Version
<PAGE>
May 16, 1997
Page 10
screen in accordance with Netscape's standard trademark
guidelines or (ii) place NCI's designated logo in such
position (i.e., upper right hand corner) and place the
Netscape logo on the toolbar or a position of equivalent
prominence approved in advance by Netscape; and
b. for Consumer Hardware Products, NCI shall
follow the standards in (a) above where practicable. Where
such is not practicable, whether for reasons of memory, space
or otherwise, then during the startup sequence of any such
product the phrase "Netscape Technology Inside" or a similar
phrase designated In writing by Netscape shall prominently
appear. NCI shall use "Netscape Technology Inside" until such
time as NCI and Netscape mutually agree upon an alternate
mark.
Netscape shall provide all copy and artwork for the foregoing mark
placements and NCI shall not change or revise same except with Netscape's prior
written approval in each case. Any use of Netscape trademarks shall be subject
to Netscape's standard trademark guidelines.
The foregoing obligations shall continue until the later to occur of
(i) the OEM Termination Date and (ii) the date that the applicable NCI Version
or Consumer Hardware Device no longer comprised of a material portion of
Netscape Technology code. At such time NCI shall cease using such marks. NCI
acknowledges the high quality reputation and goodwill associated with Netscape
and its marks. In the event that Netscape shall at any time reasonably determine
that the NCI's use of the Netscape trademarks will negatively affect such
reputation and goodwill, then Netscape shall have the right to cause NCI to
promptly discontinue such use of the Netscape trademarks on notice to NCI and
NCI shall take prompt action to cure any such negative use.
Netscape acknowledges that Navio has shipped product without the
application of a Licensed Trademark in a manner that may not be consistent with
Navio's obligations under the Trademark Agreement. NCI shall promptly begin
using such mark in such manner. Netscape hereby agrees not to assert any claim
it may have against Navio in connection with such failure.
14. DISPUTE RESOLUTION. Prior to the commencement of any action
hereunder, the parties will follow the dispute resolution process set forth in
this paragraph. Promptly following any event that may give rise to a dispute,
but in any event prior to the commencement of any action, the individuals
working on the particular matter will meet and confer. In the event that such
individuals are unable to resolve the dispute within 3 days, the matter will be
referred to Jerry Baker, on behalf of NCI, David Roux, on behalf of Oracle, and
Roberta Katz on behalf of Netscape. Those three persons will meet and confer
regarding the problem and attempt to resolve it in good faith for a period of
not less than 20 days, following which time the aggrieved party may commence any
appropriate action.
15. COUNTERPARTS. This letter agreement may be executed in any number
of counter parts, each of which shall be an original, but all of which together
shall constitute one instrument.
<PAGE>
May 16, 1997
Page 11
The OEM Agreement, the Navio Agreement and the Trademark Agreement are
hereby amended, but only to the extent required to effect the express intent of
the foregoing. Except as expressly set forth herein, the OEM Agreement, the
Navio Agreement and the Trademark Agreement shall continue in force and effect
in accordance with their terms. If the foregoing represents your understanding
of our agreement, please countersign this letter where indicated below.
Sincerely
NETSCAPE COMMUNICATIONS CORPORATION
By: /s/ [Illegible]
------------------------------------
Title: Senior Vice President and
------------------------------------
Chief Financial Officer
------------------------------------
Date: 5/16/97
------------------------------------
Accepted and agreed to:
NETWORK COMPUTER, INC. ORACLE CORPORATION
By: /s/ Jerry Baker By: /s/ David Roux
------------------------ ------------------------------------
Jerry Baker David Roux
Title: Title:
------------------------ ------------------------------------
Date: 5/16/97 Date: 5/16/97
------------------------ ------------------------------------
NAVIO COMMUNICATIONS, INC.
By: /s/ Dr. Wei Yen
------------------------
Dr. Wei Yen
Title: President and CEO
------------------------
Date: 5/16/97
------------------------
<PAGE>
May 16, 1997
Page 12
EXHIBIT A
LETTER AGREEMENT DATED MAY BETWEEN NETSCAPE AND NAVIO
<PAGE>
May 16, 1997
Page 13
EXHIBIT B
Operating Systems
All PC platforms currently supported by NSCP software: Win 3.1, Win95, NT, Mac
PPC, Mac68K, DEC UNIX, Calders, IBMAIX, HP UX, SGI IRIX, Sun OS, Solaris, SCO,
O/S2 and NetWare.
<PAGE>
NETSCAPE COMMUNICATIONS CORPORATION
501 E. Middlefield Rd.
Mountain View, CA 94043
May 16, 1997
Dr. Wei Yen
Navio Communications, Inc.
870 W. Maude Ave.
Sunnyvale. California 94086
RE: SOURCE CODE LICENSE AGREEMENT DATED JULY 9, 1996
(THE "LICENSE AGREEMENT")
Dear Dr. Yen:
This letter, when countersigned by you below, will reflect our
agreement regarding certain aspects of the acquisition of Navio Communications.
Inc. (formerly "TVsoft Corporation") ("Navio") by Network Computer, Inc.
("NCI"). Netscape Communications Corporation ("Netscape"), NCI, and Oracle
Corporation ("Oracle") are entering into a Merger Agreement ("Merger Agreement")
concurrently with the signing of this letter. Netscape and Navio are parties to
that certain Source Code License Agreement dated July 9, 1996 (the "License
Agreement") and a Trademark Agreement ("Trademark Agreement"), also of such
date. Navio, Netscape, Oracle and NCI have also entered into a letter agreement
of even date herewith ("Letter Agreement") amending the Agreement in some
respects. As an inducement for Netscape to enter into the Merger Agreement, and
for other good and valuable consideration, we hereby agree to amend the
Agreement further as follows, all effective as of the date hereof unless
otherwise indicated'
1. Netscape shall no longer have any obligations under Section 8.2 of the
License Agreement. Navio shall no longer have any obligations under
Section 8.3 of the License Agreement. In the event that the Effective
Time, as defined in the Merger Agreement, has not occurred within
seventy-five (75) days of the date hereof, then in such event at
Netscape's discretion either (i) the parties will take such actions as
may be necessary to reinstate the foregoing Sections of the License
Agreement, or (ii) Netscape shall promptly take such actions as may be
necessary to reduce its equity ownership interest in Navio (by offering
to contribute, at no cost to Navio, shares directly to Navio's
treasury) to that number of shares required to cause a Divestiture
Event.
2. Section 16 of the Agreement is hereby deleted.
The Agreement is hereby amended, but only to the extent required to effect the
express intent of the foregoing. All references to the License Agreement in any
other document shall be deemed to refer to the License Agreement as modified by
this Amendment. Except as modified by this Amendment, the License Agreement
shall remain in full force and effect and shall be enforceable in accordance
with its terms. In the event that the terms of this Amendment conflict with the
terms of the License Agreement or its exhibits, the terms of this Amendment
shall be deemed to govern.
<PAGE>
Except as expressly set forth herein, the Agreement shall continue in force and
effect in accordance with its terms. If the foregoing represents your
understanding of our agreement, please countersign this letter where indicated
below.
Sincerely
NETSCAPE COMMUNICATIONS CORPORATION
By: /s/ [Illegible]
----------------------------------
Title: Senior Vice President and Chief
Financial Officer
----------------------------------
Date: 5/16/97
----------------------------------
Accepted and agreed to:
NAVIO COMMUNICATIONS, INC.
By: /s/ Dr. Wei Yen
------------------------
Dr. Wei Yen
Title: President and CEO
------------------------
Date: 5/16/97
------------------------
<PAGE>
Exhibit 10.16
NETSCAPE COMMUNICATIONS CORPORATION
SOURCE CODE LICENSE AGREEMENT
This Source Code License Agreement ("License Agreement") is entered into
by and between NETSCAPE COMMUNICATIONS CORPORATION, a Delaware corporation,
with principal offices at 501 East Middlefield Road, Mountain View, CA 94043
("Netscape"), and TVSOFT CORPORATION, a Delaware corporation, with principal
offices at 477 Potrero Road, Sunnyvale, CA 94086 ("TVsoft").
RECITALS
A. Netscape develops and markets a range of software products and
services that link people and information over networks.
B. Netscape and various other parties have entered into a Stockholder
Agreement (as defined in Section 1.16 below) and various other documents
related to the formation of TVsoft.
C. The parties believe that a potential market exists for software
products and services specifically designed to provide access to the Internet
through consumer devices, and that such market is not addressed by Netscape's
current product line.
D. The parties desire that TVsoft develop products specifically aimed at
such potential market, while Netscape continues to develop and promote such
other aspects of network-based applications as Netscape deems appropriate.
E. Netscape desires to grant, and TVsoft desires to accept, in
consideration for the TVsoft stock issued to Netscape under the Common Stock
Purchase Agreement (as defined in Section 1.4 below) and other good and
valuable consideration, a license to certain Netscape technology in order for
TVsoft to create new products for this market as further specified herein.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. DEFINITIONS. For purposes of this License Agreement, the following terms
shall have the following meanings:
<PAGE>
1.1 "Affiliate" moans a corporation, company or other entity more than
fifty percent (50%) of the outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority) of
which are now or hereafter, owned or controlled, directly or indirectly, by a
party hereto, but such corporation, company or other entity shall be deemed
to be an Affiliate only so long as such ownership or control exists.
1.2 "API" means application programming interface.
1.3 "Code" means computer programming code.
(a) "Object Code" means computer programming code in binary form,
which is intended to be directly executable by a computer after suitable
processing and linking but without the intervening steps of compilation or
assembly.
(b) "Source Code" means computer programming code in a form other
than Object Code form, and related programmer comments and documentation,
which may be printed out or displayed in human readable form, among other
forms.
1.4 "Common Stock Purchase Agreement" means that certain Common Stock
Purchase Agreement entered into between the parties dated as of ______________.
1.5 "Consumer Hardware Device" means a product which meets the criteria
of all of items (a)-(c) below:
(a) is primarily intended for use by consumers as one or more of the
following and permits access to the Internet:
(i) game console;
(ii) digital set top box;
(iii) digital viewing device (DVD);
(iv) smart television (TV);
(v) hand held personal digital assistant;
(vi) other Internet consumer devices which generally have an
actual "street" retail price to consumers in the U.S. of less than
Five Hundred United States Dollars (U.S. $500.00);
(b) is not a personal computer or any successor product to the
multipurpose personal computer (including those that function as servers);
and
(c) does not use a Microsoft Windows, Apple Macintosh or
UNIX operating system, or any new release, new version, successor,
follow-on or replacement of any such operating system, other than any such
release, version, successor, follow-on or
-2-
<PAGE>
replacement that is designed primarily for use in connection with one or
more of the devices listed in subsection (a) above.
1.6 "Derivative Work" means a work which is based upon one or more
pre-existing copyrightable works such as a revision, modification,
translation, abridgment, compilation, condensation or expansion or any other
form in which such pre-existing work may be recast, transformed, or adapted,
and which, if prepared without the consent of the author of the pre-existing
work, would be a copyright infringement.
1.7 "Distribution Channel" of a party means any third party appointed
by such party (including without limitation, Source Code OEMs, OEMs, VARs,
distributors and subdistributors) or by any such entity that has been
appointed by such party, but excluding end users, to reproduce, sublicense
and/or distribute product(s) of such party in accordance with the terms
hereof.
1.8 "Divestiture Event" shall be deemed to occur upon the earlier to
occur of (i) the date Netscape ceases to be a holder of at least 35% of the
total issued and outstanding shares of TVsoft; (ii) the date of the IPO (as
defined in Section 1(b) of the Stockholder Agreement); (iii) the date
Netscape is no longer the single largest shareholder of TVsoft; or (iv) the
expiration or termination of the time period in which Netscape has the right
to exercise the Buyout or the IPO Buyout (as such terms are defined in
Sections 3(a) and 3(e), respectively of the Stockholder Agreement). TVsoft
agrees to give Netscape prompt written notice upon the occurrence of a
Divestiture Event under clause (i) or (iii) above.
1.9 "Effective Date" means the date on which the Common Stock Purchase
Agreement is executed by TVsoft and Netscape.
1.10 "End User" means any third party licensed by a party or its
Distribution Channel to use, but not to further distribute, a product of such
party hereunder.
1.11 "Netscape Product" means any and all products whether now in
existence or hereafter developed or distributed by or for Netscape which (a)
are Derivative Works of TVsoft Technology and (b) are not software products
that are primarily intended for use on one or more Consumer Hardware Devices
and that are reasonably expected to compete with any TVsoft Product.
1.12 "Netscape Technology" means the Netscape technology and related
documentation set forth on Attachment A.
1.13 "Netscape Technology Updates" means (a) the Source Code for Minor
Updates, Major Updates and Maintenance Updates to the Netscape Technology and
(b) any updates to the Netscape Tools which are released internally at
Netscape for general use by Netscape software developers and (c) related
documentation. As used in this Section 1.13, "Minor Update" means a new
version of a product for which there is a change in the number immediately to
the right of the decimal point in the release number, "Major Update" means a
new version of a product for which there is a change in the number to the
left of the decimal point in the release number, and "Maintenance Update"
means a new version of
-3-
<PAGE>
a product for which there is a change in the number two places to the right
of the decimal point in the release number.
1.14 "Netscape Tools" means the Netscape development tools set forth on
Attachment A.
1.15 "Source Code OEM" means a manufacturer of Consumer Hardware Devices.
1.16 "Stockholder Agreement" means that certain Stockholders and Voting
Agreement entered into between Netscape, TVsoft, Wei Yen and the holders of
TVsoft's Series A Preferred Stock dated as of ______________.
1.17 "Subsidiary" means a corporation, company or other entity one
hundred percent (100%) of the outstanding shares or securities (representing
the right to vote for the election of directors or other managing authority)
of which are now or hereafter, owned or controlled, directly or indirectly,
by a party hereto, but such corporation, company or other entity shall be
deemed to be a Subsidiary only so long as such ownership or control exists.
1.18 "Technology" means Netscape Technology and/or TVsoft Technology, as
the context requires.
1.19 "TVsoft Product" means a software product which (a) is a Derivative
Work of the Netscape Technology; and (b) requires restructuring of the
Netscape Technology so that it is specifically designed for one or more
Consumer Hardware Devices; and (c) operates on one or more Consumer Hardware
Devices; and (d) does not run on a Microsoft Windows, Apple Macintosh or UNIX
operating system, or any new release, new version, successor, follow-on or
replacement of any such operating system other than any such release,
version, successor, follow-on or replacement that is designed primarily for
use in connection with one or more of the devices listed in Section 1.5(a)
above; and in no event shall a TVsoft Product be directed to the market for
personal computers or successor products to the multipurpose personal
computer (including those that function as servers).
1.20 "TVsoft Technology" means all Source Code, development tools,
Object Code and documentation created or modified by or for TVsoft and based
on the Netscape Technology or Netscape Tools, including, but not limited to,
any Derivative Works of Netscape Technology or Netscape Tools, and all
related documentation.
1.21 "Update Period" means the time period beginning with the Effective
Date of this License Agreement and ending on the date of a Divestiture Event.
2. GRANT OF LICENSE TO TVSOFT. Subject to the terms and conditions of this
License Agreement, Netscape hereby grants and TVsoft hereby accepts the
licenses described in this Section 2, each of which shall be world-wide,
non-exclusive (except as specifically set forth in Section 8.2 below), fully
paid-up and nontransferable (except as provided in Section 17.3).
-4-
<PAGE>
2.1 INTERNAL USE -- SOURCE CODE AND OBJECT CODE. A license to use
internally, reproduce, display, modify and create Derivative Works of the
Source Code and Object Code versions of the Netscape Technology for the sole
purpose of creating TVsoft Products and using such TVsoft Products internally.
2.2 EXTERNAL DISTRIBUTION -- OBJECT CODE. A license to reproduce,
distribute, license and sublicense the Object Code version of TVsoft
Products, including any Derivative Works of the Netscape Technology contained
therein, to Distribution Channels and End Users solely for use with Consumer
Hardware Devices, and to sublicense the rights in this Section 2.2 to
TVsoft's Distribution Channels.
2.3 EXTERNAL DISTRIBUTION -- SOURCE CODE. A license:
(a) to sublicense the Source Code of TVsoft Products, including
any Derivative Works of the Netscape Technology contained therein, to a
TVsoft Subsidiary solely (i) for further development, internationalization
and support of such TVsoft Products; and (ii) entering into written
agreements with Source Code OEMs which meet the requirements of subsection
(b) below.
(b) to sublicense the Source Code of TVsoft Products, including
any Derivative Works of the Netscape Technology contained therein, to Source
Code OEMs solely for the purpose of and to the extent necessary to port such
TVsoft Products to operate with the Source Code OEMs' Consumer Hardware
Devices; provided that (i) TVsoft shall use its best efforts to minimize
exposure of the Source Code OEMs to Source Code for Netscape Technology (such
as, for example, by compiling critical modules for the Source Code
Licensees); and (ii) each such license must be pursuant to a written
agreement meeting the requirements of Section 12.6 below.
(c) to enter into written Source Code escrow arrangements
customary in the industry with Source Code OEMs providing that (i) such
Source Code OEMs may have access to the Source Code for TVsoft Products for
such Source Code OEMs' Consumer Hardware Devices in the event that TVsoft
ceases to do business in the normal course and Netscape does not assume
TVsoft's obligations for support and maintenance of such TVsoft Products;
(ii) upon release of the Source Code for TVsoft Products, such Source Code
OEMs may use and modify the Source Code (provided that TVsoft shall use its
best efforts to limit the scope of permitted use and modification to use and
modification only as necessary to correct errors in such TVsoft Product(s)),
and may only distribute the Object Code version of such modified Source Code
as permitted under this License Agreement; and (iii) the Source Code OEMs are
obligated to keep such Source Code confidential according to terms
substantially similar to those set forth in Section 12.6.
TVsoft may not grant its Source Code OEMs any rights to Netscape Technology or
Derivative Works thereof except as part of a TVsoft Product. Except as
specifically set forth in this Section 2.3, TVsoft may not grant any third party
any rights to Netscape Technology or Derivative Works thereof in Source Code
form.
-5-
<PAGE>
2.4 INTERNAL USE -- NETSCAPE TOOLS. A license to use internally,
reproduce, display, modify and create Derivative Works of the Source Code and
Object Code versions of the Netscape Tools for the sole purpose of creating
TVsoft Products.
2.5 THIRD PARTY CODE.
(a) TVsoft acknowledges that the Netscape Technology may contain
Source Code or Object Code licensed by Netscape from a third party ("Third
Party Code"), and that Netscape may not have the right to sublicense Third
Party Code to TVsoft under the terms of this License Agreement. If Netscape
does have the right to sublicense Third Party Code to TVsoft for the purposes
set forth in this License Agreement, then Netscape will include such Third
Party Code and any Netscape Derivative Works thereof in the Netscape
Technology to be delivered to TVsoft hereunder. All licenses granted by
Netscape under this License Agreement are subject to compliance by TVsoft
with any applicable license restrictions, payment by TVsoft of any royalties
or other fees and Netscape receiving any required consents with respect to
Third Party Code. A list of Third Party Code in the Netscape Technology as of
the Effective Date of this License Agreement which Netscape does not have the
right to sublicense to TVsoft, and any such required restrictions, royalties
or other fees, and consents for Third Party Code which Netscape does have the
right to sublicense, is set forth in Attachment B hereto.
(b) Netscape agrees that, in the event there is Third Party Code
in the Netscape Technology that cannot be sublicensed by Netscape to TVsoft
under this License Agreement, Netscape will introduce TVsoft to appropriate
personnel at the vendor of such Third Party Code and, as the parties deem
appropriate, will approach such vendor, together with TVsoft, and use its
good faith commercially reasonable efforts to cause such vendor to consent to
the sublicense of such Third Party Code to TVsoft on commercially reasonable
terms.
(c) Netscape agrees to use its good faith, commercially reasonable
efforts to obtain the right to sublicense Third Parry Code to TVsoft under
this License Agreement in its agreements entered into after the Effective
Date for any Third Party Code that may be included in Netscape Technology
Updates.
(d) TVsoft shall provide to Netscape such information as Netscape
may reasonably request from time to time to verify compliance by TVsoft with
the applicable restrictions and royalty or other fee obligations for Third
Party Code that is sublicensed to TVsoft. In the event of any material
default of such restrictions or royalty or other fee obligations, Netscape
may deliver to TVsoft a written notice of termination of TVsoft's rights with
respect to such Third Party Code. If such breach is not corrected within
thirty (30) days after receipt of such notice, Netscape may terminate
TVsoft's rights with respect to such Third Party Code effective immediately
upon notice to TVsoft.
2.6 RIGHTS NOT GRANTED. This License Agreement does not grant any right
or license to TVsoft other than those expressly provided herein, and no other
grant or license is to be implied by or inferred from any provision of this
License Agreement.
-6-
<PAGE>
2.7 PATENTS: AUDIO-VISUAL EFFECTS. The licenses granted under Sections
2.1-2.5 above include, subject to the same limitations as provided therein
and elsewhere in this License Agreement: (a) a nonexclusive license under any
patent or patent applications that are (i) owned by Netscape or (ii) licensed
by Netscape from a third party ("Netscape Third Party Patents") during the
term of this License Agreement with the right to grant sublicenses under the
terms of this License Agreement and subject to compliance by TVsoft with any
applicable license restrictions, payment by TVsoft of any royalties or other
fees and Netscape receiving any required consents with respect to such Third
Party Patents; and (b) a nonexclusive license (including the right to perform
and display) to pictorial, graphic and audio-visual works, including without
limitation icons, screens and characters, that are included in or result from
execution of the Netscape Technology.
2.8 SUPPORT BY TVSOFT. TVsoft shall use its best efforts to meet its
commitments to its Source Code OEMs, Distribution Channels and End Users with
respect to the support and maintenance of TVsoft Products, all in accordance
with TVsoft's obligations to provide such support and maintenance.
3. INVENTIONS.
3.1 INVENTIONS DEFINED. As used in this Section 3, "Invention" means
any new or improved idea, design, development, discovery, concept or other
invention that is patentable subject matter and that is made and developed in
the course of creating TVsoft Products hereunder.
3.2 JOINT INVENTIONS. Netscape and TVsoft shall jointly own any
Inventions that are made and developed jointly by Netscape and TVsoft ("Joint
Inventions"). The parties shall agree from time to time regarding
responsibility for prosecution and maintenance of patents on Joint
Inventions. Subject to TVsoft's obligations set forth herein with respect to
Netscape Technology, Netscape Tools and Derivative Works thereof, each party
shall have the right to fully exploit, commercialize, license and enforce any
Joint Inventions and jointly owned patents issuing thereon without the
consent of the other party and without a duty to account to the other party
for profits issuing thereon.
3.3 TVSOFT INVENTIONS. TVsoft shall be the sole owner of any Inventions
that are made and developed solely by TVsoft ("TVsoft Inventions"). As used
in the Section 3.3, "TVsoft Licensed Patents" means any issued patents that
claim any TVsoft Invention that covers or reads on any Netscape Technology or
Netscape Tools, or any Derivative Work of Netscape Technology or Netscape
Tools. TVsoft hereby grants to Netscape a perpetual, irrevocable,
non-exclusive, non-transferable (except as provided in Section 17.3) and
fully paid-up right and license, with the right to grant and authorize
sublicenses, under any and all TVsoft Licensed Patents, to make, have made,
use, offer to sell, sell, import and export any products and items (except as
specifically set forth in Section 8.2 below).
3.4 INVENTIONS GENERALLY. Ownership of Inventions shall be determined
with reference to the rules of inventorship under U.S. patent law
notwithstanding whether such Inventions may be patentable. Each party shall
keep the other party reasonably informed regarding patent prosecution and
maintenance of Inventions under this Section 3. Until and except to the
extent that any Invention is publicly disclosed
-7-
<PAGE>
in a patent or patent application, such Invention shall be considered to be
Confidential Information of the patent applicant(s) under the provisions of
Section 12.
4. GRANT OF LICENSE TO NETSCAPE. Effective as of the earlier of the date of
a Divestiture Event or of Netscape's termination of this License Agreement
under Section 15.2, and subject to the terms and conditions of this License
Agreement, TVsoft hereby grants and Netscape hereby accepts the licenses
described in this Section 4, each of which shall be world-wide, non-exclusive
(except as specifically set forth in Section 8.3 below), fully paid-up and
nontransferable (except as provided in Section 17.3).
4.1 INTERNAL USE - SOURCE AND OBJECT CODE. A license to use internally,
reproduce, display, modify and create Derivative Works of the Source Code and
Object Code versions of the TVsoft Technology for the sole purpose of
creating Netscape Products and using such Netscape Products internally.
4.2 EXTERNAL DISTRIBUTION -- OBJECT CODE. A license to reproduce,
distribute, license and sublicense the Object Code version of the Netscape
Product(s), including the Derivative Works of the TVsoft Technology contained
therein, to Distribution Channels and End Users and to sublicense the rights
in this Section 4.2 to Netscape's Distribution Channels.
4.3 EXTERNAL DISTRIBUTION -- SOURCE CODE. A license:
(a) to sublicense the Source Code of Netscape Products, including
any Derivative Works of the TVsoft Technology contained therein, to Netscape
Subsidiaries solely (i) for further development, internationalization and
support of such Netscape Products, and (ii) entering into written agreements
with licensees of Netscape Products which meet the requirements of
subsections (b) and (c) below.
(b) to sublicense the Source Code of Netscape Products, including
any Derivative Work(s) of the TVsoft Technology contained therein, to
Netscape's Source Code licensees of such Netscape Products solely for further
development, internationalization or support of such Netscape Products and
any Derivative Works thereof, provided that Netscape shall use its best
efforts to minimize exposure of the Source Code licensees to Source Code for
TVsoft Technology (such as, for example, by compiling critical modules for
the licensee) and each such license must be pursuant to a written agreement
meeting the requirements of Section 12.6 below.
(c) to enter into written Source Code escrow arrangements
customary in the industry with Netscape's licensees of Netscape Products
providing that (i) such licensees may have access to the Source Code for
licensed Netscape Products in the event that Netscape ceases to do business
in the normal course; (ii) upon release of the Source Code for Netscape
Products, such licensees may use and modify the Source Code (provided that
Netscape shall use its best efforts to limit the scope of permitted use and
modification to use and modification only as necessary to correct errors in
the Netscape Products), and may only distribute the Object Code version of
such modified Source Code as permitted
-8-
<PAGE>
under this License Agreement; and (iii) the licensee is obligated to keep
such Source Code confidential according to terms substantially similar to
those set forth in Section 12.6.
Netscape may not grant its licensees any rights to TVsoft Technology or
Derivative Works thereof except as part of a Netscape Product. Except as
specifically set forth in this Section 4.3, Netscape may not grant any third
party any rights to TVsoft Technology or Derivative Works thereof in Source
Code form.
4.4 INTERNAL USE -- TVSOFT TOOLS. A license to use internally,
reproduce, display, modify and create Derivative Works of the Source Code and
Object Code versions of the TVsoft Tools for the sole purpose of creating
Netscape Products.
4.5 THIRD PARTY CODE.
(a) Netscape acknowledges that the TVsoft Technology may contain
Source Code or Object Code licensed by TVsoft from a third party ("TVsoft
Third Party Code"), and that TVsoft may not have the right to sublicense
TVsoft Third Party Code to Netscape under the terms of this License
Agreement. If TVsoft does have the right to sublicense TVsoft Third Party
Code to Netscape for the purposes set forth in this Agreement, then TVsoft
will include such TVsoft Third Party Code and any TVsoft Derivative Works in
the TVsoft Technology to be delivered to Netscape hereunder. All licenses
granted by TVsoft under this License Agreement are subject to compliance by
Netscape with any applicable license restrictions, payment by Netscape of any
royalties or other fees and TVsoft receiving any required consents with
respect to TVsoft Third Party Code.
(b) TVsoft agrees that, in the event there is TVsoft Third Party
Code that cannot be sublicensed by TVsoft to Netscape under this License
Agreement, TVsoft will introduce Netscape to appropriate personnel at the
vendor of such TVsoft Third Party Code and, as the parties deem appropriate,
will approach such vendor, together with Netscape, and use its good faith
commercially reasonable efforts to cause such vendor to consent to the
sublicense of such TVsoft Third Party Code to Netscape on commercially
reasonable terms.
(c) TVsoft agrees to use its good faith, commercially reasonable
efforts to obtain the right to sublicense TVsoft Third Party Code to Netscape
under this License Agreement in its agreements entered into after the
Effective Date for any TVsoft Third Party Code that may be included in TVsoft
Technology.
(d) Netscape shall provide to TVsoft such information as TVsoft
may reasonably request from time to time to verify compliance by Netscape
with the applicable restrictions and royalty or other fee obligations for
TVsoft Third Party Code that is sublicensed to Netscape. In the event of any
material default of such restrictions or royalty or other fee obligations,
TVsoft may deliver to Netscape a written notice of termination of Netscape's
rights with respect to such TVsoft Third Party Code. If such breach is not
corrected within thirty (30) days after receipt of such notice, TVsoft may
terminate Netscape's rights with respect to such TVsoft Third Party Code
effective immediately upon notice to Netscape.
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4.6 RIGHTS NOT GRANTED. This License Agreement does not grant any
right or license to Netscape other than those expressly provided herein, and
no other grant or license is to be implied by or inferred from any provision
of this License Agreement.
4.7 PATENTS: AUDIO-VISUAL EFFECTS. The licenses granted under
Sections 4.1-4.5 above include, subject to the same limitations as provided
therein and elsewhere in this License Agreement: (a) a nonexclusive license
under any patent or patent applications that are (i) owned by TVsoft or (ii)
licensed by TVsoft from a third party ("TVsoft Third Party Patents") during
the term of this License Agreement with the right to grant sublicenses under
the terms of this License Agreement and subject to compliance by Netscape
with any applicable license restrictions, payment by Netscape of any
royalties or other fees and TVsoft receiving any required consents with
respect to such TVsoft Third Party Patents; and (b) a nonexclusive license
(including the right to perform and display) to pictorial, graphic and
audio-visual works, including without limitation icons, screens and
characters, that are included in or result from execution of the TVsoft
Technology.
5. DELIVERY.
5.1 INITIAL DELIVERY BY NETSCAPE. Within ten (10) days after the
Effective Date, Netscape shall deliver to TVsoft one (1) copy of the
Netscape Technology.
5.2 DELIVERY OF UPDATES BY NETSCAPE. During the Update Period,
Netscape shall provide access to TVsoft, on mutually agreeable terms, to all
activities relating to the development of Netscape Technology Updates. Each
Netscape Technology Update shall be considered to be Netscape Technology or
Netscape Tools, as applicable, for the purposes of this License Agreement.
After the expiration of the Update Period, Netscape shall have no further
obligation hereunder to deliver any Source Code, Object Code or other
technology to TVsoft or to provide access to TVsoft to any development
activities of Netscape.
5.3 DELIVERY OF TVSOFT TECHNOLOGY BY TVSOFT. Within thirty (30) days
after the earlier of a Divestiture Event or of Netscape's termination of this
Agreement under Section 15.3, TVsoft shall provide to Netscape one (1) copy
of all of the then existing TVsoft Technology. TVsoft shall provide to
Netscape a complete copy the TVsoft Technology that is then used internally
for development by TVsoft and a complete copy of the TVsoft Technology for
the most recently commercially released version(s) of the TVsoft Products.
5.4 MANNER OF DELIVER. Except for carrier, which shall be the
delivering party's choice, the delivering party under this Section 5 shall
deliver any item hereunder in accordance with the receiving party's
instructions. The delivering party shall deliver all items via a carrier of
the delivering party's choice with freight and insurance prepaid and
separately invoiced to the receiving party. At the receiving party's request,
the delivering party shall deliver items to be delivered hereunder by
electronic transmission whenever practicable, and provided that the receiving
party shall pay any sales tax and related charges that may be assessed
(whenever assessed) by the relevant taxing authority. The receiving party
acknowledges that electronic transmission may be subject to reasonable
procedure requirements (such
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as use of FTP or a modem) that may be necessary for the electronic
transmission to be in compliance with applicable export control laws. The
delivering party shall be responsible for and shall bear any and all risk of
loss of, or damage to, any item until delivery to the site specified by the
receiving party. Upon delivery, risk of loss and damage shall pass to the
receiving party; provided, however, that the delivering party shall bear any
loss or damage, whenever occurring, that results from the delivering party's
inadequate packaging or other preparation for shipping. In the event of any
loss or damage to any item while the delivering party bears the risk of loss,
the delivering party's sole obligation and liability shall be to redeliver
the item.
6. TECHNICAL SUPPORT.
6.1 PROCEDURE. The parties intend to develop a technical assistance
plan which will allow each party to receive assistance (the "Assisted Party")
in its use of the other party's Technology in a fashion which does not
disrupt the operations of the providing party ("Assisting Party"). Prior to
completion of the plan, each party will designate one (1) technical
assistance liaison, and all requests for technical assistance shall be in
writing.
6.2 TECHNICAL ASSISTANCE PLAN. The technical assistance plan will
include the following components: (a) identification of one (1) designated
technical assistance liaison for each party, (b) procedures for the Assisted
Party's designated liaisons to ask and receive assistance from the Assisting
Party, (c) resolution procedures if designated personnel are unable to
respond to the Assisted Party's requests, (d) the period of time covered by
the Assisting Party's technical assistance obligation, (e) hours in which
technical assistance will be available, and (f) such other items as the
parties deem appropriate.
6.3 SCOPE OF TECHNICAL ASSISTANCE. Technical Assistance under this
Section 6 means that the Assisting Party will attempt in good faith to answer
questions concerning its Source Code that arise in connection with
development by the Assisted Party, as more fully set forth in the Technical
Assistance Plan, and subject to such limitations as the parties shall agree
in the Technical Assistance Plan.
6.4 NOTICE. Any documentation distributed by TVsoft for TVsoft
Products will clearly and conspicuously state that support questions should
be addressed to TVsoft or its Distribution Channel. If Netscape is
nevertheless contacted by TVsoft's customers or its Distribution Channels,
then, upon the request of Netscape, the parties will cooperate to eliminate
such contact. Netscape has no obligation to respond to requests for technical
assistance or support from TVsoft's End Users or Distribution Channels.
7. DISTRIBUTION TERMS.
7.1 GOVERNMENT RESTRICTED RIGHTS. Each party agrees to comply with
and shall require its Distribution Channels to comply with all applicable
laws, rules and regulations to preclude the acquisition of unlimited rights
to technical data pertaining to the other party's Technology to a
governmental agency, and to ensure the inclusion of the appropriate notices
required by U.S. Government agencies or other applicable agencies.
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7.2 PROTECTION OF LICENSOR'S RIGHTS. Except as expressly permitted
herein, each party shall not copy, distribute, modify, translate, decompile,
reverse engineer, disassemble, or otherwise determine or attempt to determine
Source Code for the other party's products. Each party shall cooperate with
the other party in any legal action to prevent or stop unauthorized use,
reproduction or distribution of other party's Source Code, Object Code,
Technology or Confidential Information provided hereunder.
7.3 END USER AGREEMENTS. Each party shall distribute its products
that contain Derivative Works of the other party's Technology under the terms
of end user agreements that are reasonably calculated to protect the other
party's rights and contain protective provisions consistent with industry
practices for the type of product being distributed, as such practices may
change and evolve from time to time.
7.4 EXPORT. TVsoft shall comply fully with all then current
applicable laws, rules and regulations relating to the export of technical
data, including, but not limited to any regulations of the United States
Office of Export Administration and other applicable governmental agencies.
7.5 DISTRIBUTION CHANNEL AGREEMENTS. Each party shall use its
reasonable commercial efforts to have in place agreements containing
provisions substantially equivalent to the provisions of Sections 7.2, 7.3
and 7.4 above with those of its Distribution Channels to whom it distributes
Derivative Works of the other party's Technology.
8. TRADEMARKS AND MARKETING.
8.1 TRADEMARKS. The parties shall enter into a mutually agreed
Trademark License Agreement regarding trademarks and branding for the TVsoft
Products.
8.2 TVSOFT'S MARKETING RIGHT. Until the occurrence of a Divestiture
Event, Netscape agrees that Netscape and its Affiliates (other than TVsoft)
will not (i) develop, market or distribute software products (in Source Code
or Object Code form) which are designed for use primarily on Consumer
Hardware Devices; or (ii) grant any third party any Source Code license for
the purpose of developing, marketing or distributing software products which
are designed for use primarily on Consumer Hardware Devices; or (iii) grant
any third party any license for Object Code which Netscape knows and intends
will be used on Consumer Hardware Devices; provided that in no event shall
the limitation of clause (iii) be deemed to require Netscape to include in
its Object Code license agreements a prohibition on the use of its software
products on Consumer Hardware Devices (notwithstanding whether such Object
Code license agreements may also include a Source Code escrow provision).
8.3 NETSCAPE'S MARKETING RIGHT. Because Netscape Technology and
Netscape Confidential Information will be pervasive within TVsoft, TVsoft
agrees that during the Update Period, TVsoft and its Affiliates will not
develop, license, market or distribute any product that is directed to the
market for personal computers or any successor products to the multipurpose
personal computer (including those that function as servers), or that uses a
Microsoft Windows, Apple Macintosh or UNIX operating system, or any new
release, new version, successor, follow-on or replacement of any such
operating
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system (other than any such release, version, successor, follow-on or
replacement that is designed primarily for use in connection with one or more
of the devices listed in Section 1.5(a) above), or license any technology for
the purpose of developing, licensing, marketing or distributing any product
that is directed to the market for personal computers or any successor
products to the multipurpose personal computer (including those that function
as servers), or that uses a Microsoft Windows, Apple Macintosh or UNIX
operating system, or any new release, new version, successor, follow-on or
replacement of any such operating system (other than any such release,
version, successor, follow-on or replacement that is designed primarily for
use in connection with one or more of the devices listed in Section 1.5(a)
above), or participate with, or sublicense any third party to engage in any
such activities.
8.4 EXCEPTIONS. TVsoft may, in its discretion, make exceptions to the
limitations in Section 8.2 above, and Netscape may, in its discretion, make
exceptions to the limitations set forth in Section 8.3 above, in each case,
upon the request by the other party with respect to business opportunities
that would otherwise be prohibited. Any such exceptions shall be embodied in
a writing signed by the party making the exception.
8.5 TREATMENT OF APIS -- PROCESS AND COMPATIBILITY.
(a) The parties will work together to develop a process whereby
Netscape will make TVsoft aware of new APIs that Netscape expects to include
in Netscape Technology Updates, and TVsoft will make Netscape aware of new
APIs that TVsoft expects to include in TVsoft Products, in each case as soon
as commercially feasible.
(b) In the event that TVsoft uses functions of the Netscape
Technology in TVsoft Products, then TVsoft shall preserve in TVsoft Products
the same API for such function as is present in the Netscape Technology;
however, with respect to additional software other than Netscape Technology or
Derivative Works thereof that are included in TVsoft Products, TVsoft may
include other APIs as it determines in its sole discretion.
8.6 STANDARDS. TVsoft will support Netscape's applicable Internet
standards in the marketplace.
9. TAXES. TVsoft shall be responsible for and shall pay all taxes now or
hereafter imposed on or in connection with this License Agreement or with any
sublicense granted hereunder, including, but not limited to, sales, use or
value-added taxes, duties, withholding taxes and other assessments.
10. RECORDS AND AUDITS
10.1 RECORDS. TVsoft shall maintain full, tree and accurate records
of licenses granted hereunder to Source Code OEMs and any other agreements
and practices involving the Source Code version of Netscape Technology.
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10.2 AUDIT OF RECORDS. Netscape shall have the right, during normal
business hours, to have an independent third party auditor review and analyze
the relevant records and facilities of TVsoft to verify compliance with the
provisions of this License Agreement. Any such audit shall be conducted at
Netscape's expense. Netscape shall give TVsoft at least ten (10) business
days' prior written notice of any such audit. Audits under this Section 10.2
may take place no more frequently than once in any twelve (12) month period;
provided, that if any such audit discloses any material breach of this
License Agreement, then the next succeeding audit may be conducted after six
(6) months.
11. PROPRIETARY RIGHTS.
11.1 NETSCAPE PROPRIETARY RIGHTS. Title to and ownership of all
copies of the Netscape Technology, Netscape Technology Updates and Netscape
Tools, whether in machine-readable or printed form, and all related technical
know-how provided by Netscape and all intellectual property rights therein
and thereto, are and shall remain the exclusive property of Netscape or its
suppliers. TVsoft shall not knowingly take any action to jeopardize, limit or
interfere in any manner with Netscape's ownership of and rights with respect
to the Netscape Technology, Netscape Technology Updates and Netscape Tools.
Any Derivative Works made by TVsoft or its licensees outside the scope of the
licenses granted herein shall belong exclusively to Netscape. TVsoft shall
inform Netscape promptly in writing of any such Derivative Works and shall
execute and cause to be executed such instruments and documents and take such
other actions as Netscape shall reasonably request from time to time to
effect the foregoing assignment.
11.2 NETSCAPE PROPRIETARY NOTICES. TVsoft shall ensure that all
copies of the Netscape Technology, TVsoft Products and related documentation
conspicuously display a notice substantially in the following form:
portions Copyright -C- 1994 -1996 (or other appropriate
year(s)), Netscape Communications Corporation. All
Rights Reserved.
If TVsoft is unsure of the appropriate year(s), it shall consult with
Netscape to obtain the correct designation. If the copyright symbol -C-
cannot technically be reproduced, TVsoft shall use the word "Copyright"
followed by the notation "(c)" in its place.
11.3 TVSOFT PROPRIETARY RIGHTS. Title to and ownership of all copies
of Derivative Works of the Netscape Technology, Netscape Technology Updates
and Netscape Tools made by TVsoft within the scope of the license granted
herein, whether in machine-readable or printed form and all related technical
know-how developed by TVsoft and all intellectual property rights therein,
are and shall remain the exclusive property of TVsoft or its suppliers, in
all cases subject to Netscape's and its suppliers' rights in the Netscape
Technology, Netscape Technology Updates and Netscape Tools.
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12. CONFIDENTIAL INFORMATION AND DISCLOSURE
12.1 CONFIDENTIAL INFORMATION. For the purposes of this License
Agreement, "Confidential Information" of Netscape means (i) the Netscape
Technology, Netscape Technology Updates and Netscape Tools; (ii) information
regarding Netscape's business, marketing and technical plans (other than
documentation and information expressly intended for use by and released to
end users or the general public), and (iii) any and all other information, of
whatever type and in whatever medium, that is disclosed in any form by
Netscape to TVsoft and identified as Confidential Information. "Confidential
Information" of TVsoft means (i) TVsoft Technology and TVsoft tools, (ii)
information regarding TVsoft's business, marketing and technical plans (other
than documentation and information expressly intended for use by and released
to end users or the general public), and (iii) any and all other information
of whatever type and in whatever medium, that is disclosed in any form by
TVsoft to Netscape and identified as Confidential Information.
12.2 PRESERVATION OF CONFIDENTIALITY; NON-DISCLOSURE. Each party
("Receiving Party") shall hold all Confidential Information of the other
party ("Disclosing Party") in trust and in strict confidence for the sole
benefit of the Disclosing Party and for the exercise of the limited rights
expressly granted to the Receiving Party under this License Agreement. The
Receiving Party shall take all steps reasonably necessary to preserve the
confidentiality of the Confidential Information of the Disclosing Party, and
to prevent it from falling into the public domain or in the possession of
persons other than those persons to whom disclosure is authorized hereunder,
including but not limited to those steps that the Receiving Party takes to
protect the confidentiality of its own most highly confidential information.
Except as may be expressly authorized by the Disclosing Party in writing, the
Receiving Party shall not at any time, either before or after any termination
of this License Agreement, directly or indirectly: (i) disclose any
Confidential Information to any person other than an employee, subcontractor
or permitted Source Code licensee of the Receiving Party who needs to know or
have access to such Confidential Information for the purposes of this License
Agreement, and only to the extent necessary for such purposes (and with
respect to any Source Code, only in accordance with Section 12.6 below); (ii)
except as otherwise provided in this License Agreement, duplicate the
Confidential Information for any purpose whatsoever; or (iii) use the
Confidential Information for any reason or purpose other than as permitted in
this License Agreement.
12.3 NOTICE TO DISCLOSING PARTY. If at any time the Receiving Party
becomes aware of any unauthorized duplication, access, use, possession or
knowledge of any Confidential Information, including use of Confidential
Information beyond the scope of the applicable license grant(s), the Receiving
Party shall immediately notify the Disclosing Party. The Receiving Party
shall provide any and all reasonable assistance to the Disclosing Party to
protect the Disclosing Party's proprietary rights in any Confidential
Information that the Receiving Party or its employees or permitted
subcontractors or Source Code licensees may have directly or indirectly
disclosed or made available and that may be duplicated, accessed, used,
possessed or known in a manner or for a purpose not expressly authorized by
this License Agreement including but not limited to enforcement of
confidentiality agreements, commencement and prosecution in good faith (alone
or with the Disclosing Party) of legal action, and reimbursement for all
reasonable attorneys' fees (and all related costs), costs and expenses
incurred by the Disclosing Party to
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protect its proprietary rights in the Confidential Information. The Receiving
Party shall take all reasonable steps requested by the Disclosing Party to
prevent the recurrence of any unauthorized duplication, access, use,
possession or knowledge of the Confidential Information.
12.4 ACCOUNTING, ETC. If either party violates or fails to comply
with any of the terms or conditions of this Section 12, the other party shall
be entitled to an accounting and repayment of all forms of compensation,
commissions, remuneration or benefits which such other party directly or
indirectly realizes as a result of or in connection with any such violation
or failure to comply. Such remedy shall be in addition to and not in
limitation of any injunctive relief or other remedies to which either party
may be entitled under this License Agreement or otherwise, at law or in
equity.
12.5 EXCEPTIONS. The foregoing restrictions will not apply to
information to the extent that the Receiving Party can demonstrate such
information: (i) was known to the Receiving Party at the time of disclosure
to the Receiving Party by the Disclosing Party as shown by the files of the
Receiving Party in existence at the time of disclosure; (ii) becomes part of
information publicly available through no fault of the Receiving Party; (iii)
has been rightfully received from a third party authorized by the Disclosing
Party to make such disclosure without restriction; (iv) has been approved for
release by prior written authorization of the Disclosing Party; or (v) has
been disclosed by court order or as otherwise required by law (including
without limitation to the extent that disclosure may be required under
Federal or state securities laws), provided that the Receiving Party has
notified the Disclosing Party immediately upon learning of the possibility of
any such court order or legal requirement and has given the Disclosing Party
a reasonable opportunity (and cooperated with the Disclosing Party) to
contest or limit the scope of such required disclosure (including application
for a protective order). Information shall not be deemed known to the
Receiving Party or publicly known for purposes of the above exceptions (A)
merely because it is embraced by more general information in the prior
possession of the Receiving Party or others, or (B) merely because it is
expressed in public material in general terms not specifically the same as
Confidential Information.
12.6 TREATMENT OF SOURCE CODE. Source Code for the Netscape
Technology, Netscape Technology Updates, Netscape Tools, TVsoft Technology
and TVsoft Products and any Derivative Works thereof shall be Confidential
Information under the foregoing terms of this Section 12 and shall in
addition be subject to the terms of this Section 12.6.
(a) TVsoft will limit access to the Source Code of the Netscape
Technology, Netscape Technology Updates and Netscape Tools solely to TVsoft
employees and on-site independent contractors ("Contractors") with a need to
know for purposes of this License Agreement, and will limit access to the
Source Code of TVsoft Products containing Derivative Works of the Netscape
Technology only to employees, Source Code licensees (authorized pursuant to
Section 2.3) and Contractors who have a need to know for purposes of this
License Agreement. In the event that any third party acquires a majority of
the outstanding capital stock of TVsoft entitled to vote in the election of
directors, or in the event of assignment of this Agreement by TVsoft pursuant
to Section 17.3, then TVsoft agrees that:
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(i) its employees and Contractors who have had access to
the Source Code of the Netscape Technology, Netscape
Technology Updates, Netscape Tools, Derivative Works of
any of the foregoing or TVsoft Products containing
Derivative Works of the foregoing will not, for a period
of six (6) months after the effective date of such
acquisition or assignment (as applicable), participate
in the development of any product that competes with the
Netscape Products or TVsoft Products for TVsoft or for
the acquiring party or assignee (as applicable);
provided, that the foregoing provisions of this clause
(i) shall not be deemed to limit any such employee or
Contractor from continuing to participate in the
development of TVsoft Products hereunder, and
(ii) its employees and Contractors who have had access
to the Source Code of the Netscape Technology, Netscape
Technology Updates or Netscape Tools will not, for a
period of six (6) months after such employee or
Contractor has ceased to have access to such Source
Code, participate in the development of any product that
competes with the Netscape Products or TVsoft Products
for the acquiring party or assignee (as applicable); (A)
provided, that the foregoing provisions of this clause
(ii) shall not be deemed to limit any such employee or
Contractor from continuing to participate in the
development of TVsoft Products hereunder; (B) provided,
further, that the foregoing provisions of this clause
(ii) shall terminate two (2) years after the effective
date of such acquisition or assignment (as applicable);
and (C) provided, further, that for the purposes of this
clause (ii), loss of access to the Source Code for
Netscape Technology, Netscape Technology Updates and
Netscape Tools shall be deemed to occur upon the return
or destruction of all copies of such Source Code under
Section 17.3 or otherwise, although such return or
destruction shall not be considered to be the exclusive
means of demonstrating such loss of access.
Netscape will limit access to the Source Code of the TVsoft Technology solely
to Netscape employees and Contractors with a need to know for purposes of
this License Agreement, and will limit access to the Source Code of Netscape
Products containing Derivative Works of the TVsoft Technology only to
employees, Source Code licensees (authorized pursuant to Section 4.3) and
Contractors, who have a need to know for purposes of this License Agreement
(b) The Receiving Party shall have in place a confidentiality
agreement with each of its employees, Source Code licensees and Contractors
who are given access to the Source Code, which requires the employee,
Contractor or Source Code licensee to comply with the requirements of this
License Agreement. At Netscape's or TVsoft's written request, designated
Source Code shall be marked "Netscape Confidential" or "TVsoft Confidential,"
respectively.
(c) Each party shall use its best efforts to protect the
confidentiality of the other party's Source Code, including methods of
limiting access. The Receiving Party will use the other party's Source Code
in a building with restricted access or in a locked room; and only on
computer systems with security
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protection which is adequate to prevent unauthorized parties from accessing
such Source Code. TVsoft shall not permit access to the Source Code of the
TVsoft Products or Netscape Technology electronically except for individually
controlled distributions to permitted Source Code licensees with protections
adequate to avoid receipt by unauthorized parties. Each party shall be liable
for the conduct of its employees, agents, representatives and independent
contractors who in any way breach this section of this License Agreement.
(d) If the Receiving Party decides, where permitted by the
scope of the licenses granted in this License Agreement, to license the
Source Code version of the other party's Technology, such license shall be
subject to the terms of Section 2.3 or 4.3, as applicable and protective
terms no less protective than the terms of this Section 12.6.
12.7 CONFIDENTIALITY OF AGREEMENT. The terms and conditions of this
License Agreement shall be treated as Confidential Information; provided that
each party may disclose the terms and conditions of this License Agreement:
(i) to legal counsel; (ii) in confidence, to accountants, banks and financing
sources and their advisors; (iii) in connection with the enforcement of this
License Agreement or rights under this License Agreement; (iv) as required by
law or regulations; and (v) to others, as mutually agreed by the parties.
Both parties shall treat the fact that the parties have entered into this
License Agreement as Confidential Information until a mutually agreed public
announcement is released.
12.8 REMEDIES. The Receiving Party acknowledges that any breach of
any of its obligations with respect to confidentiality or use of Confidential
Information hereunder is likely to cause or threaten irreparable harm to the
Disclosing Party and, accordingly, the Receiving Party agrees that in such
event the Disclosing shall be entitled to seek equitable relief to protect
its interest therein, including, but not limited to, preliminary and
permanent injunctive relief, as well as money damages.
13. WARRANTY DISCLAIMER. THE NETSCAPE TECHNOLOGY, NETSCAPE TECHNOLOGY
UPDATES, NETSCAPE TOOLS AND TVSOFT TECHNOLOGY ARE PROVIDED ON AN "AS IS"
BASIS, WITHOUT WARRANTY OF ANY KIND, INCLUDING WITHOUT LIMITATION ANY
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT. THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF SUCH
ITEMS LIES WITH THE RECEIVING PARTY. THIS DISCLAIMER OF WARRANTY CONSTITUTES
AN ESSENTIAL PART OF THIS LICENSE AGREEMENT.
14. LIMITATION OF LIABILITY. TO THE EXTENT ALLOWED BY APPLICABLE LAW, IN NO
EVENT SHALL EITHER PARTY OR ITS VENDORS OF THIRD PARTY CODE BE LIABLE FOR ANY
LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF USE OR DATA, INTERRUPTION OF
BUSINESS, OR FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF
ANY KIND, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING
NEGLIGENCE) EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, OR FOR ANY CLAIM AGAINST SUCH PARTY BY ANY THIRD PARTY; PROVIDED,
HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT APPLY TO A BREACH BY EITHER
PARTY OF SECTION 12, A BREACH BY TVSOFT OF SECTION 2 OR A BREACH BY NETSCAPE
OF SECTION 4. IN NO EVENT WILL EITHER PARTY OR ITS
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VENDORS OF THIRD PARTY CODE BE LIABLE FOR (A) ANY REPRESENTATION OR WARRANTY
MADE BY THE OTHER PARTY OR ITS DISTRIBUTION CHANNELS OR AGENTS TO ANY THIRD
PARTY; (B) FAILURE OF THE OTHER PARTY'S TECHNOLOGY TO PERFORM; (C) FAILURE OF
THE OTHER PARTY'S TECHNOLOGY TO PROVIDE SECURITY; OR (D) ANY USE OF THE OTHER
PARTY'S TECHNOLOGY OR THE RESULTS OR INFORMATION OBTAINED OR DECISIONS MADE BY
END USERS OF THE OTHER PARTY'S TECHNOLOGY.
15. TERM AND TERMINATION
15.1 EFFECTIVE DATE. This License Agreement will not be binding upon
the parties until it has been signed by or on behalf of each party, in which
event it shall be effective as of the Effective Date. This License Agreement
shall continue in force unless and until earlier terminated as provided herein.
15.2 TERMINATION FOR MATERIAL DEFAULT.
(a) For the purposes of this Section 15.2, "Material
Default" shall mean a material failure by a party to: (i) deliver any material
item that it is obligated to deliver to the other party under this License
Agreement, if such item is in existence at the time of the failure; or (ii)
comply with the material provisions of Section 2 (for TVsoft) or Section 4 (for
Netscape); or (iii) comply with the provisions of Section 12; or (iv) comply
with the provisions of Section 8.2 (for Netscape) or Section 8.3 (for TVsoft).
(b) If either party believes that the other party is in Material
Default, it may deliver to the other party a written notice of termination
for Material Default. If such Material Default is not corrected within thirty
(30) days after receipt of such notice, the non-defaulting party may
terminate this License Agreement effective immediately upon notice to the
defaulting party.
15.3 EFFECT OF TERMINATION FOR MATERIAL DEFAULT. Upon termination of
this License Agreement, (a) all licenses granted herein to the defaulting party
under Section 2 (if TVsoft is the defaulting party) or Section 4 (if Netscape is
the defaulting party) shall terminate (but those licenses that are irrevocable
under Section 3 shall not terminate), and (b) all licenses granted herein to the
non-defaulting party under Section 2 (if TVsoft is the non-defaulting party)
shall survive with respect to Netscape Technology that was delivered (or
required to be delivered) under Section 5.2 prior to the effective date of
termination or Section 4 (if Netscape is the non-defaulting party) shall survive
with respect to TVsoft Technology that was delivered or is required to be
delivered under Section 5.3; provided that the defaulting party may continue to
use a reasonable number of copies of the Netscape Technology under Section 2 (if
TVsoft is the defaulting party) or the TVsoft Technology under Section 4 (if
Netscape is the defaulting party) for support of customers existing as of the
termination date. The non-defaulting party's surviving license is subject to
termination for Material Default as provided herein. In addition, any and all
End User licenses granted prior to the effective date of termination of the
applicable license shall survive and the defaulting party and its Distribution
Channels shall have the right to distribute any products remaining in inventory
after the effective date of termination of the applicable license.
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15.4 SURVIVAL. Sections 3, 5.3, 6.1-6.3 (according to the terms of
the technical assistance plan developed pursuant thereto) 6.4, 7, 10-14, 15.3,
15.5, 16 and 17 of this License Agreement, and Sections 2 and 4 of this License
Agreement to the extent set forth in Section 15.3 above, shall remain in effect
in accordance with their terms, binding the parties and their legal
representatives and successors beyond any expiration or termination of this
License Agreement. All other provisions shall terminate.
15.5 REMEDIES CUMULATIVE. Except as expressly provided in Section
5.4, the remedies herein are cumulative, and nothing in this section is intended
to preclude a party from exercising any remedy available at law or equity,
including without limitation rights and remedies available under applicable
patent, copyright, trade secret and other intellectual property laws, rules and
regulations, due to a Material Default or any other breach.
16. CHANGES OVER TIME. The parties acknowledge that, because of the rapid pace
of technological change and evolution in the industries associated with the
Internet and software related thereto, many of the underlying facts and
circumstances (including assumptions regarding the facts and circumstances) that
were the basis for the allocation of various rights and obligations pursuant to
this Agreement are likely to change over time as such industries evolve. In
drafting this License Agreement, the parties have addressed relevant facts and
issues as they exist with current technologies and today's business models;
however, the parties also intend for this License Agreement to remain in force
throughout the term as such technologies and business models change over time,
with appropriate modifications to reflect such equitable adjustments as are
required to maintain a substantially comparable allocation of rights and
obligations in light of changed circumstances. The parties do not intend for
this License Agreement to be effectively nullified or abrogated because of
changed circumstances, but rather intend that the intent and purpose of this
License Agreement be preserved as circumstances change. To such end, the parties
agree that certain provisions regarding the parties' respective rights and
obligations under this License Agreement, while drafted to address current
circumstances, are also intended to reflect general principles to be implemented
by the parties in a pragmatic and meaningful way as such circumstances change.
Notwithstanding the foregoing, the provisions of this Section 16 shall not
apply to those rights and/or obligations that should not be affected by changes
in technology and/or business models.
17. MISCELLANEOUS
17.1 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing in English and shall be deemed to be
properly given upon the earlier of (a) actual receipt by the addressee or (b)
seven (7) calendar days after deposit in the mail, postage prepaid, when mailed
by registered or certified airmail, return receipt requested, or (c) two (2)
business days after being sent via private industry courier to the respective
parties at the addresses first set forth above or to such other person or
address as the parties may from time to time designate in a writing delivered
pursuant to this Section 17.1. Notices to Netscape and TVsoft shall be attention
to: General Counsel and President, respectively.
17.2 WAIVER AND AMENDMENT. The waiver by either party of a breach of
or a default under any provision of this License Agreement, shall not be
construed as a waiver of any subsequent breach of the
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<PAGE>
same or any other provision of this License Agreement, nor shall any delay or
omission on the part of either party to exercise or avail itself of any right or
remedy that it has or may have hereunder operate as a waiver of any right or
remedy. No amendment or modification of any provision of this License Agreement
shall be effective unless in writing and signed by a duly authorized signatory
of Netscape and TVsoft.
17.3 ASSIGNMENT. This License Agreement and the licenses granted
hereunder are to a specific legal entity or legal person (not including
Subsidiaries or Affiliates except to the extent specifically set forth herein),
and are not assignable by TVsoft or Netscape, nor are the obligations imposed on
TVsoft or Netscape delegable; provided, however, that:
(a) with respect to TVsoft, after the earlier of (i)
consummation of an IPO (as defined in Section (b) of the
Stockholder Agreement) or (ii) the date that is one
hundred and thirty-five (135) days after a Divestiture
Event other than an IPO, TVsoft may assign this License
Agreement to an entity that succeeds to all or
substantially all of the business or assets of TVsoft;
provided, further, that in the event of such an
assignment, (x) Netscape shall have the right to require
TVsoft to return or destroy, at Netscape's option, all
copies of the Source Code for Netscape Technology,
Netscape Tools and Netscape Technology Updates and
TVsoft shall have the right to return or destroy all
such copies, and (y) the provisions of Section 12.6
shall apply. Any attempt by TVsoft to sublicense (except
as expressly permitted herein), assign or transfer any
of the rights, duties or obligations under this License
Agreement in derogation hereof whether by operation of
law or otherwise shall be null and void; and
(b) with respect to Netscape, Netscape shall have the
right to assign this License Agreement to an entity that
succeeds to all or substantially all of the business or
assets of Netscape.
17.4 COMPLIANCE WITH APPLICABLE LAWS. The parties shall at all times
comply with all applicable regulations and orders of their respective countries
and all conventions and treaties to which their countries are a party or
relating to or in any way affecting this License Agreement and the performance
by the parties of this License Agreement. Each party, at its own expense, shall
negotiate and obtain any approval, license or permit required in the performance
of its obligations, and shall declare, record or take such steps to render this
License Agreement binding, including, without limitation, the recording of this
License Agreement with any appropriate governmental authorities (if required).
17.5 LEGAL COSTS AND EXPENSES. In the event either party retains the
services of an attorney or attorneys to enforce the terms of this License
Agreement or to file or defend any action arising out of this License Agreement,
then the prevailing party in any such action shall be entitled, in addition to
any other rights and remedies available to it at law or in equity, to recover
from the other party its reasonable fees for attorneys and expert witnesses,
plus such court costs and expenses as may be fixed by any court of competent
jurisdiction. The term "prevailing party" for the purposes of this Section shall
include a
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defendant who has by motion, judgment, verdict or dismissal by the court,
successfully defended against any claim that has been asserted against it.
17.6 GOVERNING LAW: JURISDICTION. This License Agreement shall be
governed by and construed in accordance with the laws of the State of
California, U.S.A., without reference to its conflicts of law provisions. Any
disputes regarding this License Agreement shall be subject to the exclusive
jurisdiction of the California state courts in and for Santa Clara County,
California (or, if there is exclusive federal jurisdiction, the United States
District Court for the Northern District of California), and the parties agree
to submit to the personal and exclusive jurisdiction and venue of these courts.
This License Agreement will not be governed by the United Nations Convention of
Contracts for the International Sale of Goods, the application of which is
hereby expressly excluded.
17.7 RELATIONSHIP OF THE PARTIES. No agency, partnership, joint
venture, or employment is created as a result of this License Agreement and
neither party nor its agents have any authority of any kind to bind the other
party in any respect whatsoever.
17.8 CAPTIONS AND SECTION HEADINGS. The captions and section and
paragraph headings used in this License Agreement are inserted for convenience
only and shall not affect the meaning or interpretation of this License
Agreement.
17.9 SEVERABILITY. If the application of any provision or provisions
of this License Agreement to any particular facts of circumstances shall be held
to be invalid or unenforceable by any court of competent jurisdiction, then (a)
the validity and enforceability of such provision or provisions as applied to
any other particular facts or circumstances and the validity of other provisions
of this License Agreement shall not in any way be affected or impaired thereby
and (b) such provision or provisions shall be reformed without further action by
the parties hereto to and only to the extent necessary to make such provision or
provisions valid and enforceable when applied to such particular facts and
circumstances.
17.10 ENTIRE AGREEMENT. This License Agreement, including the
Attachments hereto, constitutes the entire agreement between the parties
concerning the subject matter hereof and supersedes all proposals or prior
agreements whether oral or written, and all communications between the parties
relating to the subject matter of this License Agreement and all past courses of
dealing or industry custom. The terms and conditions of this License Agreement
shall prevail, notwithstanding any variance with any other written instrument
submitted by either party, whether formally rejected or not.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this License Agreement to be
executed by duly authorized representatives of the parties effective as of
the Effective Date.
NETSCAPE COMMUNICATIONS TVSOFT CORPORATION
CORPORATION
By: /s/ Jim Sha By:
---------------------- -------------------
Signature Signature
Name: JIM SHA Name:
--------------------- ------------------
Print or Type Print or Type
Title: SR. VICE PRESIDENT, Title:
NEW VENTURES
-------------------- ----------------------
Date: 7/9/96 Date:
--------------------- ------------------
<PAGE>
IN WITNESS WHEREOF, the parties have caused this License Agreement to be
executed by duly authorized representatives of the parties effective as of
the Effective Date.
NETSCAPE COMMUNICATIONS TVSOFT CORPORATION
CORPORATION
By: By: /s/ Wei Yen
------------------- --------------------
Signature Signature
Name: Name: WEI YEN
------------------ -------------------
Print or Type Print or Type
Title: Title: President & CEO
----------------- ------------------
Date: Date: 7/9/96
------------------ -------------------
<PAGE>
ATTACHMENT A
NETSCAPE TECHNOLOGY
Netscape Technology: Source Code, Object Code and related documentation for:
(1) Netscape Navigator, LAN Edition, version 2.0,
(2) Netscape Navigator Gold, LAN Edition, version 2.0,
(3) Netscape Chat, version 2.0
(4) Netscape LiveMedia version 2.0
(5) Netscape Live3D, version 2.0
(6) Netscape Power Pack
(7) Netscape Navigator, LAN Edition. version 3.0 (currently in beta)
(8) other Netscape client software products (which shall be
identified by the parties in writing from time to time by amendment
to this Attachment A)
Netscape Tools: To be identified by the parties from time to time in writing
by amendment to this Attachment A.
Netscape will use its good faith, reasonable commercial efforts to identify
other Netscape client software products and tools that it believes may be
appropriate for addition to this Attachment A and to discuss with TVsoft
whether such products and tools should be added to this Attachment A.
NETSCAPE COMMUNICATIONS TVSOFT CORPORATION
CORPORATION
By: /s/ Jim Sha By:
---------------------- ----------------------
Signature Signature
Name: JIM SHA Name:
-------------------- -------------------
Print or Type Print or Type
Title: SR. VICE PRESIDENT, Title:
NEW VENTURES
------------------- -------------------
Date: Date:
-------------------- ------------------
<PAGE>
ATTACHMENT A
NETSCAPE TECHNOLOGY
Netscape Technology: Source Code, Object Code and related documentation for:
(1) Netscape Navigator, LAN Edition, version 2.0,
(2) Netscape Navigator Gold, LAN Edition, version 2.0,
(3) Netscape Chat, version 2.0
(4) Netscape LiveMedia version 2.0
(5) Netscape Live3D, version 2.0
(6) Netscape Power Pack
(7) Netscape Navigator, LAN Edition. version 3.0 (currently in beta)
(8) other Netscape client software products (which shall be
identified by the parties in writing from time to time by
amendment to this Attachment A)
Netscape Tools: To be identified by the parties from time to time in writing
by amendment to this Attachment A.
Netscape will use its good faith, reasonable commercial efforts to identify
other Netscape client software products and tools that it believes may be
appropriate for addition to this Attachment A and to discuss with TVsoft
whether such products and tools should be added to this Attachment A.
NETSCAPE COMMUNICATIONS TVSOFT CORPORATION
CORPORATION
By: By: /s/ Wei Yen
------------------- -------------------
Signature Signature
Name: Name: WEI YEN
------------------ -------------------
Print or Type Print or Type
Title: Title: President & CEO
----------------- -----------------
Date: Date: 7/9/96
----------------- -----------------
<PAGE>
ATTACHMENT B
THIRD PARTY CODE
(1) RSA
(2) Borland Just In Time Compiler
(3) Java
(4) other Third Party Code licensed in Object Code form only (which
shall be identified by the parties in writing from time to time by
amendment to this Attachment B)
Whether the above Third Party Code can be licensed by Netscape to
TVsoft hereunder, and any restrictions, fees or consents under
Section 2.5 will be identified in writing by Amendment to this
Attachment B.
NETSCAPE COMMUNICATIONS TVSOFT CORPORATION
CORPORATION
By: /s/ Jim Sha By:
------------------- ---------------------
Signature Signature
Name: JIM SHA Name:
------------------ -------------------
Print or Type Print or Type
Title: SR. VICE PRESIDENT, Title:
NEW VENTURES
-------------------- -------------------
Date: 7/9/96 Date:
----------------- --------------------
<PAGE>
ATTACHMENT B
THIRD PARTY CODE
(1) RSA
(2) Borland Just In Time Compiler
(3) Java
(4) other Third Party Code licensed in Object Code form only (which
shall be identified by the parties in writing from time to time by
amendment to this Attachment B)
Whether the above Third Party Code can be licensed by Netscape to
TVsoft hereunder, and any restrictions, fees or consents under
Section 2.5 will be identified in writing by Amendment to this
Attachment B.
NETSCAPE COMMUNICATIONS TVSOFT CORPORATION
CORPORATION
By: By: /s/ Wei Yen
------------------- -------------------
Signature Signature
Name: Name: WEI YEN
------------------ -------------------
Print or Type Print or Type
Title: Title: President & CEO
----------------- -----------------
Date: Date: 7/9/96
----------------- -----------------
<PAGE>
EXHIBIT 10.17
NETSCAPE COMMUNICATIONS CORPORATION
AND
ORACLE CORPORATION
OEM LICENSE AGREEMENT
No.________________
This OEM License Agreement ("Agreement") is entered into by and between Oracle
Corporation, a company organized under the laws of Delaware, with principal
offices at 500 Oracle Parkway, Redwood Shores, CA 94065 ("Oracle"), and the
Netscape entity identified below as a signatory to the Agreement ("Netscape"),
effective as of the date of execution by Netscape ("Effective Date").
WHEREAS, Oracle markets and distributes computer software products.
WHEREAS, Netscape has proprietary or remarketing rights to certain computer
software products.
WHEREAS, Netscape wishes to grant to Oracle and Oracle desires to obtain certain
license rights to such computer software products more particularly described
below in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree to the following terms and conditions, which set forth the rights,
duties, and obligations of the parties.
1. Definitions
For purposes of this Agreement, the following terms shall have the following
meanings:
1.1. "Exhibit(s)" means the Exhibits to this Agreement which are attached hereto
and incorporated herein:
1.1.1 Exhibit A (Description of Netscape Products) which sets forth a
description of each Netscape Product licensed hereunder.
1.1.2 Exhibit B (Pricing, Payment Schedules and Deliverables) which sets
forth pricing for Oracle, payment schedules, and specific items to
be delivered to Oracle.
1.1.3 Exhibit C (Netscape's End User License Agreement) which sets forth
Netscape's terms and conditions of licensing applicable to an end
user customer.
1.1.4 Exhibit D (OEM Maintenance and Support) which sets forth Netscape's
and Oracle's maintenance and support obligations.
1.1.5 Exhibit E-1 (Oracle Preferred Product(s)) which sets forth a
description of Oracle Products which may be bundled with the
Netscape Preferred Product in accordance with Section 3.1. Exhibit
E-2 (Oracle Non-Preferred Product(s)) which sets forth a description
of Oracle Products which may be bundled with the Netscape Products.
1.1.6 Exhibit F (Netscape Trademark Usage Guidelines)
1.1.7 Exhibit G (Third Party Code)
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1.1.8 Exhibit H (Oracle Subsidiaries)
1.2 "Derivative Work(s)" means a revision, modification, translation,
abridgment, condensation or expansion of a Netscape Product or Documentation or
any form in which a Netscape Product or Documentation may be recast,
transformed, or adapted, which, if prepared without the consent of Netscape,
would be a copyright infringement.
1.3 "Distributor" means any third party appointed by Oracle or Subsidiaries
pursuant to this Agreement to distribute the Netscape Products to End Users in
accordance with the terms hereof. For the purposes of this Agreement, where
applicable, "Distributors" shall be deemed to include "Subsidiaries."
1.4 "Documentation" means those software user manuals, reference manuals and
installation guides, or portions thereof, which are distributed in conjunction
with the Netscape Products set forth in Exhibit A.
1.5 "End User" means any third party licensed by Oracle or a Distributor to use,
but not to further distribute, the Netscape Products except that if such third
party is a corporation or other entity, then, for the purpose of license fee
accrual, "End User" means each individual within such corporation or entity
licensed by Oracle pursuant to this Agreement to use, but not to further
distribute, the Netscape Product.
1.6 "Major and Minor Updates" mean updates, if any, to the Netscape Products.
Major Updates involve additions of substantial functionality while Minor Updates
do not. Major Updates are designated by a change in the number to the left of
the decimal point of the number appearing after the product name while Minor
Updates are designated by a change in such number to the right of the decimal
point. Netscape is the sole determiner of the availability and designation of an
update as a Major or Minor Update. Major Updates exclude software releases which
are reasonably designated by Netscape as new products. Where used herein
"Updates" shall mean Major Updates or Minor Updates interchangeably.
1.7 "Netscape Preferred Product" means Netscape Navigator 3.0 or subsequent
versions and Navio client products upon their production release/FCS (First
Customer Ship).
1.8 "Netscape Product(s)" means the executable version (but not the source code
version) of the computer software products listed or described in Exhibit A as
Netscape may update and provide hereunder from time to time.
1.9 "Subsidiaries" means Network Computer Inc. and Oracle's wholly-owned or
majority-owned subsidiaries (which are not Competitors of Netscape) as listed on
Exhibit H, attached hereto, to be updated in writing by Oracle from time to
time. For the purposes of this Agreement, "Competitors" shall mean Microsoft,
Spyglass and such other companies as mutually agreed to by the parties. All
payments or reports to Netscape under this Agreement shall be made or submitted
by Oracle. Oracle shall be responsible for any breach of the terms of this
Agreement by Subsidiaries.
1.10 "Program Errors" means one or more reproducible deviations in the Netscape
Products from the applicable specifications shown in the Documentation.
1.11 "Oracle Product(s)" means Oracle's or Subsidiaries' computer products
developed and marketed by Oracle and/or Subsidiaries, as described in Exhibits
E-1 and E-2, with which the Netscape Products are distributed under this
Agreement.
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<PAGE>
2. Grant Of Licenses and Rights
2.1. Licenses
2.1.1 License. Subject to the terms and conditions of this Agreement,
Netscape hereby grants and Oracle hereby accepts, a nonexclusive and
nontransferable worldwide right and license to (i) reproduce,
without change, the Netscape Products (in executable form only) on
any tangible media with a right to sublicense this right to
reproduce to Subsidiaries and/or Distributors and (ii) distribute by
sublicense such Netscape Product copies to Subsidiaries and/or
Distributors and/or End Users only in conjunction with an Oracle
Product. Oracle is expressly prohibited from any marketing and/or
distribution of Netscape Products unless each copy is bundled with
an Oracle Product. Oracle may grant Distributors the rights under
this Subsection 2.1.1 to other Distributors regardless of tier and
Oracle and all Distributors shall have the right to distribute the
Netscape Products to End Users. Oracle may grant End Users the right
to copy the Netscape Product bundled with any Oracle Product except
for the Oracle Network Computer so long as such End User also
receives the right to copy for the Oracle Product. Each copy of the
Netscape Product (i) distributed hereunder to an End User or (ii)
which an End User with a right to copy has the right to make
hereunder shall be deemed a "shipment" of an Oracle Product with the
Netscape Product under Section 4.1.1. In addition, Netscape grants
Oracle a royalty free license to use 100 copies of Netscape
Navigator LAN (object code) solely for internet development purposes
and not for redistribution. At Oracle's written request for
electronic distribution rights under this Agreement, Netscape agrees
not to unreasonably withhold permission therefor.
2.1.2 License Restrictions. Subject to Sections 14.11 and 14.12, Oracle
agrees not to copy (except as expressly permitted herein), modify,
translate, decompile, reverse engineer, disassemble, or otherwise
determine or attempt to determine source code for the executable
code of the Netscape Products or to create any Derivative Works
based upon the Netscape Products or Documentation, and agrees not to
permit or authorize anyone else to do so; provided, however, that if
Oracle's address set forth above is located within a Member State of
the European Union, then such activities shall be permitted solely
to the extent, if any, permitted by Article 6 of the Council
Directive of 14 May 1991 on the legal protection of computer
programs, and implementing legislation thereunder.
2.1.3 Documentation License. Subject to the terms and conditions of this
Agreement, Netscape hereby grants and Oracle hereby accepts a
nonexclusive and nontransferable worldwide right and license, in
accordance with Subsection 2.1.1 above, to use and reproduce the
Documentation, and to distribute the Documentation solely in
conjunction with the Netscape Products. Such distribution may be to
Distributors and End Users.
2.1.4 Licenses Dependent on Bundling. The licenses granted in Section
2.1.1 are conditional upon bundling each Netscape Product as
required therein. If Oracle fails to so bundle the Netscape
Products, and licenses a Netscape Product on a "stand-alone" basis,
the licenses shall be immediately revocable by Netscape in addition
to any other remedies Netscape may have.
2.1.5 Third Party License. If all or any part of the Netscape Products or
Updates delivered to Oracle has been licensed to Netscape by a third
party software supplier then, notwithstanding anything to the
contrary contained in this
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Agreement, Oracle is granted a sublicense to the third party
software subject to the same terms and conditions as those contained
in the agreement between Netscape and such third party software
supplier. In addition, Netscape reserves the right to substitute any
third party software in the Netscape Products so long as the new
third party software does not materially affect the functionality of
the Netscape Products. Netscape represents that the current release
of the Netscape Products contains no third party software which
would require Oracle to agree to any terms and conditions in
addition to those set forth in this Agreement.
2.1.6 Trial Licenses for Evaluation. During the term of this Agreement,
Oracle and/or its Distributors and/or Subsidiaries may distribute,
up to a maximum combined total of fifty (50) licenses pursuant to
Sections 2.1.1 and 2.1.3 solely for purposes of evaluation at no
license fee ("Trial Licenses"). Each Trial License shall not exceed
a period of sixty (60) consecutive days per customer from the date
of delivery of the Netscape Product to such customer. A customer may
be a prospective End User or Distributor. Oracle shall pay Netscape
the applicable license fees for any Trial Licenses in excess of
sixty (60) days. Each such Trial License shall be sublicensed under
an End User License Agreement which provides for such trial use.
2.2 Export
Oracle shall and shall require its Distributors to comply fully with all
then current applicable laws, rules and regulations relating to the export of
technical data, including, but not limited to any regulations of the United
States Office of Export Administration and other applicable governmental
agencies and Oracle acknowledges that by virtue of certain security technology
embedded in the Netscape Products, that export of such software may not be
legal. Oracle shall and shall require its Distributors to conspicuously mark all
packaging containing the Netscape Products identified by Netscape as not for
export with a "Not For Export" notice. Netscape agrees to cooperate in providing
information requested by Oracle as necessary to obtain any required licenses and
approvals. When distributing the Netscape Products and Documentation in
countries where an enforceable copyright law covering the same does not exist,
Oracle or its Distributors shall obtain a written agreement signed by the
customer prohibiting the customer from making unauthorized copies of the same.
Oracle warrants that neither it nor its Distributors will grant
sublicenses in or ship any Netscape Products to a country until it (or the
Distributor) has completed all necessary government formalities in such country
and upon reasonable request by Netscape, Oracle (or its Distributor) provides
evidence of completion of such formalities to Netscape. Oracle will indemnify
Netscape for any losses, costs, liability, and damages incurred by Netscape as a
result of a failure by Oracle or its Distributors to comply with the necessary
government requirements in any country. The obligations under this Section shall
survive the expiration or termination of this Agreement. Upon Netscape's
reasonable request, Oracle shall make records available to Netscape to allow
Netscape to confirm Oracle's compliance with this Section.
To the extent that Netscape discontinues licensing the Netscape Products
in certain countries and denies other resellers the right to sublicense in such
countries, Netscape may from time to time deny Oracle the right to sublicense in
such certain countries in order to protect Netscape's interests if, in the
reasonable opinion of Netscape's counsel, such countries (i) do not provide
adequate protection for Netscape's proprietary rights through copyright, trade
secret, patent, or other laws; or (ii) have laws or regulations or the
government has committed acts which in the opinion of Netscape's counsel, are
injurious to Netscape's interests in the Netscape Products.
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3. Marketing and Distribution
3.1 Nonexclusivity of Arrangement
In consideration for the promises contained herein, beginning on the
Effective Date of this Agreement until the Renewal Date, Oracle agrees that with
respect to Oracle Preferred Products, Netscape Product (Exhibits A and B) shall
be the preferred software to be bundled with the Oracle Preferred Products in
cases where such third party non-Oracle software is bundled. For purposes of
this Agreement, the term "preferred" means that the only third party non-Oracle
software primarily designed for viewing HTML documents over standard Internet
protocols that Oracle shall bundle with the Oracle Preferred Products shall be
Netscape Product (Exhibits A and B); provided, however, that if an End User
specifically requests that a third party product with Internet browser
functionality be provided with any Oracle Preferred Product, Oracle may provide
such third party product with the Oracle Preferred Product solely for such
End-User. In addition, subject to the applicable terms and conditions of this
Agreement, Oracle shall have the right at its sole discretion to bundle Netscape
Products (Exhibits A and B) on a non-preferred basis with the Oracle
Non-Preferred Products.
For the time period set forth above, Oracle agrees to make commercially
reasonable efforts to treat Netscape Product at least as favorably as it treats
any other third party products distributed with Oracle Preferred Products that
are competitive with the Netscape Product. Specifically, such third party
product will not be shipped by default under the or with the Oracle Preferred
Products.
3.2 Public Announcements and Promotional Materials
Netscape and Oracle shall cooperate with each other so that each party may
issue a press release concerning this Agreement on a mutually agreed upon
release date, provided that each party must approve, in writing, such press
release prior to its release. Netscape shall cooperate with Oracle in its
development of the initial marketing and sales materials used to promote the
distribution of the Netscape Products.
3.3 Terms Relating to Distribution
3.3.1 General Restrictions on Distribution
Oracle agrees to comply with and shall require its Distributors to
comply with all applicable laws, rules and regulations to preclude
the acquisition of unlimited rights to technical data, software and
documentation provided with the Netscape Product to a governmental
agency, and ensure the inclusion of the appropriate "U.S. Government
End Users" notices required by the U.S. Government agencies or other
applicable agencies.
3.3.2 Distributor License Agreement
Oracle shall procure from each Distributor an executed copy of a
distribution license ("Distributor License Agreement") sufficient to
ensure that such Distributors are required to comply with the
relevant terms of this Agreement.
3.3.3 End User License Agreements
Oracle and its Distributors shall distribute the Netscape Products
to End Users only under the terms of, and shall ensure that the
Netscape Products are subject to, applicable end user license
agreements with terms at least as restrictive as
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those set forth in the end user license agreement attached hereto as
Exhibit C ("End User License Agreement").
3.3.4 Third Party Requirements. In the event that Netscape is required by
a third party software supplier to cease and to cause its licensees
to cease reproduction and distribution of a particular revision of
the Netscape Products, Oracle agrees to comply herewith provided
Netscape provides Oracle with thirty (30) days prior written notice
and further provided Netscape replaces such affected Netscape
Product with a functionally equivalent Netscape Product as soon as
commercially practicable, before Oracle is required to cease
reproduction and distribution of such third party software.
3.4 Enforcement of Sublicense Agreements
Oracle and its Distributors shall use commercially reasonable efforts to
enforce each Distributor License Agreement and End User License Agreement,
whichever may be relevant, with at least the same degree of diligence used in
enforcing similar agreements governing others, which in any event shall be that
sufficient to adequately enforce such agreements. Oracle shall use commercially
reasonable efforts to protect Netscape's copyright, shall notify Netscape of any
breach of a material obligation under a Distributor License Agreement or an End
User License Agreement affecting Netscape Products, and will cooperate with
Netscape in any legal action to prevent or stop unauthorized use, reproduction
or distribution of Netscape Products.
4. Fees and Payment
4.1 Prepaid License Fees
4.1.1 Oracle shall pay to Netscape the non-refundable prepaid license fees
("Prepaid License Fees") specified in Exhibit B hereto. Upon
exhaustion of the Prepaid License Fees, Oracle shall pay to Netscape
the license fee specified in Exhibit B for each license granted by
Oracle and/or Distributors to End Users in connection with the
distribution of all or any portion of a Netscape Product or Update.
Subject to the terms of this Agreement, the Prepaid License Fees
shall be credited against the license fees accruing under this
Agreement during the Initial Term of the Agreement. License fees
shall accrue for any license to a Netscape Product at the time
revenue is recognized by Oracle for shipment of an Oracle Product
with the Netscape Product. In the event that Oracle distributes (i)
at no charge Oracle Products containing the Netscape Product or (ii)
Oracle Products containing the Netscape Product which Oracle does
not intend to recognize revenue on at time of shipment, license fee
hereunder shall still accrue at the time of shipment.
4.1.2 Service Fees. Oracle shall pay to Netscape the service fees set
forth in Exhibit B for maintenance and support services described in
Exhibit D hereto.
4.2 Payment and Taxes
4.2.1 Payments. All payments shall be made in United States dollars, at
Netscape's option, (i) at Netscape's address as indicated in this
Agreement or at such other address as Netscape may from time to time
indicate by proper notice hereunder or (ii) by wire transfer to a
bank and account number designated by Netscape. Payments, if any,
shall accompany the applicable quarterly report under Section 4.3.
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4.2.2 Taxes. All prices are in U.S. Dollars and are exclusive of any
applicable taxes. Oracle shall pay, indemnify and hold Netscape
harmless from all import duties, customs fees, levies or imposts,
and all sales, use, value added or other taxes of any nature, other
than taxes on Netscape's net income, including penalties and
interest, and all government permit or license fees assessed upon or
with respect to any products sold or licensed to Oracle and any
services rendered to Oracle (except to the extent Oracle provides
Netscape with a valid tax exemption certificate). If any applicable
law requires Oracle to withhold amounts from any payments to
Netscape hereunder, Oracle shall effect such withholding, remit such
amounts to the appropriate taxing authorities and promptly furnish
Netscape with tax receipts evidencing the payments of such amounts.
4.3 Quarterly Reports
To the extent permitted and consistent with Oracle's standard business
practices, Oracle and its Distributors shall maintain accurate records of
distribution to Distributors and/or End Users pursuant to Section 2.1.1 (ii) by
Country and Zip Code/Country Code, description of Netscape Product and quantity,
and any further information as Netscape may from time to time reasonably
request. Oracle shall report to Netscape within forty-five (45) calendar days
after the end of each Oracle fiscal quarter, the type, if applicable, and number
of licenses granted for the Netscape Products during such prior quarter by
Oracle to Distributors and End Users including zip/postal code and/or country
therefor. Oracle shall require its Distributors and each Distributor shall
require its Distributors to report this information to Oracle on a quarterly
basis and Oracle will include it in the report for the quarter in which Oracle
received the information. For the purposes of this Agreement, "Oracle fiscal
quarter" commences on the first day of June, September, December and March of
each year during the term of this Agreement.
4.4 Audit of Records
4.4.1 Oracle shall keep and maintain full, true, and accurate records
containing all data reasonably required for verification of amounts
to be paid, and the quantity of Netscape Products distributed.
Netscape shall have the right, no more than once every year during
normal business hours upon at least thirty (30) days prior notice,
to audit and analyze, by a nationally recognized independent public
accounting firm, the relevant records of Oracle to verify compliance
with the provisions of this Agreement. The audit shall be conducted
at Netscape's expense unless the results of such audit establish
that inaccuracies have resulted in underpayment to Netscape of more
than five percent (5%) of the amount actually due, in which case
Oracle shall pay all amounts due and bear the expenses of the audit.
Results of such audit will be held confidential.
4.4.2 Upon Netscape's request that Oracle perform an audit of any first
tier Distributor's books and records with respect to distribution of
the Netscape Products, Oracle shall promptly perform such audit at
its own cost, or provide Netscape with written notice of its
election not to audit such Distributor and permit Netscape, at
Netscape's cost and with reasonable assistance from Oracle, to audit
such Distributor. Netscape shall be responsible for the reasonable
expenses associated with such audit unless the results of such audit
establish that inaccuracies have resulted in underpayment to
Netscape of more than five percent (5%) of the amount actually due,
in which case Oracle shall pay all amounts due and bear the expenses
of the audit. Results of such audit will be held confidential.
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4.4.3 Upon Netscape's request that Oracle perform an audit of any End
User's books and records with respect to reproduction and use of the
Netscape Products, Oracle shall promptly perform such audit at its
own cost, or provide Netscape with written notice of its election
not to audit such End User and permit Netscape, at Netscape's cost
and with reasonable assistance from Oracle, to audit such End User.
Netscape shall be responsible for the reasonable expenses associated
with such audit unless the results of such audit establish that
inaccuracies have resulted in underpayment to Netscape of more than
five percent (5%) of the amount actually due, in which case Oracle
shall pay all amounts due and bear the expenses of the audit.
Results of such audit will be held confidential.
5. Deliverables, Updates, and Technical Support
5.1 Deliverables
Netscape shall provide Oracle with the deliverables indicated in Exhibit B
("Deliverables"). All deliveries under this Agreement shall be F.C.A. Netscape.
"F.C.A." means Free Carrier Alongside and shall have the definition in INCOTERMS
1990.
5.2 Updates and Technical Support
Netscape shall provide Oracle with Updates as they become available from
Netscape at the pricing, terms and conditions specified in Exhibits B and D.
6. Trademarks and Trade Names/License to Use
Whenever Oracle makes reference to the Netscape Products or the functionality of
the Netscape Products provided within the Oracle Product, Oracle shall use, and
is hereby granted a worldwide non-transferable, non-exclusive and restricted
license to use (with no right to sublicense), "Netscape Navigator Included" and
those Netscape trademarks and trade names relating to the applicable Netscape
Products in any advertising, marketing, technical or other materials related to
such Netscape Products which are distributed by Oracle or its Distributors in
connection with this Agreement. Such use shall be in accordance with Netscape's
then current trademark guidelines attached hereto as Exhibit F and to be
provided and updated by Netscape from time to time. Oracle need not use
Netscape's trademarks and trade names in any country in which their connotation
is offensive and will consult with Netscape as to the foreign translation of
Netscape trademarks and trade names so that Netscape can help ensure uniformity
with their use by Netscape or third parties. Oracle shall dearly indicate
Netscape's ownership of Netscape's trademarks or trade names. All such usage
shall inure to Netscape's benefit. Oracle agrees not to register, and agrees to
obtain the agreement of its Distributors not to register, any Netscape
trademarks or trade names without Netscape's express prior written consent. Upon
Netscape's request from time to time Oracle agrees to provide Netscape with
copies of goods bearing Netscape's trademarks and trade names so that Netscape
can verify that the quality of Oracle's use of such trademarks is comparable to
that of Netscape's use thereof. Oracle shall suspend use of Netscape trademarks
and trade names if such quality is reasonably deemed inferior by Netscape until
Oracle has taken such steps as Netscape may reasonably require to solve the
quality deficiencies. Netscape will update Oracle when trademark guidelines
change.
7. Proprietary Rights
7.1 Proprietary Rights
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Title to and ownership of all copies of the Netscape Products and
Documentation whether in machine-readable or printed form, and including,
without limitation, Derivative Works, compilations, or collective works thereof
and all related technical know-how and all rights therein (including without
limitation rights in patents, copyrights, and trade secrets applicable thereto),
are and shall remain the exclusive property of Netscape or its suppliers. Oracle
shall not take any action to jeopardize, limit or interfere in any manner with
Netscape's ownership of and rights with respect to the Netscape Products and
Documentation. Oracle shall have only those rights in or to the Netscape
Products and Documentation granted to it pursuant to this Agreement.
7.2 Proprietary Notices
7.2.1 No Alteration of Notices. Oracle and its employees and agents shall
not remove or alter any trademark, trade name, copyright, or other
proprietary notices, legends, symbols, or labels appearing on or in
copies of the Netscape Products and Documentation delivered to
Oracle by Netscape and shall use the same notices, legends, symbols,
or labels in and on copies of Netscape Products and Documentation
made pursuant to Section 2.1 as are contained in and on such
Netscape Products and Documentation.
7.2.2 Notice. Each portion of the Netscape Products and Documentation
reproduced by Oracle shall include the intellectual property notice
or notices appearing in or on the corresponding portion of such
materials as delivered by Netscape hereunder. Oracle shall and shall
require its Distributors ensure that all copies of the Netscape
Products made pursuant to this Agreement conspicuously display a
notice substantially in the following form:
Copyright (C) 1994 (or other appropriate year(s)), Netscape
Communications Corporation. All Rights Reserved.
If Oracle is unsure of the appropriate year(s), it shall consult
Netscape to obtain the correct designation. Such notice shall be on
labels on all media containing Netscape Products. If the copyright
symbol "(C)" cannot technically be reproduced, Oracle shall use the
word "Copyright" followed by the notation "(c)" in its place.
8. Confidential Information and Disclosure
8.1 Confidential Information
Each party agrees to maintain all Confidential Information in confidence
to the same extent that it protects its own similar Confidential Information and
to use such Confidential Information only as permitted under this Agreement. For
purposes of this Agreement "Confidential Information" shall mean information
including, without limitation, computer programs, code, algorithms, know-how,
formulas, processes, ideas, inventions (whether patentable or not), schematics
and other technical, business, financial and product development plans,
forecasts, strategies and information marked "Confidential" or if disclosed
verbally reduced to writing within thirty (30) days of disclosure and marked as
"Confidential." Each party agrees to take all reasonable precautions to prevent
any unauthorized disclosure or use of Confidential Information including,
without limitations disclosing Confidential Information only to its employees
(a) with a need to know to further permitted uses of such information and (b)
who are parties to appropriate agreements sufficient to comply with this Section
8, and (c) who are informed of the nondisclosure/non-use obligations imposed by
this Section 8 and both
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parties shall take appropriate steps to implement and enforce such
non-disclosure/non-use obligations. The foregoing restrictions on disclosure and
use shall survive for three (3) years following termination of this Agreement
but shall not apply with respect to any Confidential Information which: (i) was
or becomes publicly known through no fault of the receiving party; (ii) was
rightfully known or becomes rightfully known to the receiving party without
confidential or proprietary restriction from a source other than the disclosing
party; (iii) is independently developed by the receiving party without the
participation of individuals who have had access to the Confidential
Information; (iv) is approved by the disclosing party for disclosure without
restriction in a written document which is signed by a duly authorized officer
of such disclosing party; and (v) the receiving party is legally compelled to
disclose; provided, however, that prior to any such compelled disclosure, the
receiving party will (a) assert the privileged and confidential nature of the
Confidential Information against the third party seeking disclosure and (b)
cooperate fully with the disclosing party in protecting against any such
disclosure and/or obtaining a protective order narrowing the scope of such
disclosure and/or use of the Confidential Information. In the event that such
protection against disclosure is not obtained, the receiving party will be
entitled to disclose the Confidential Information, but only as and to the extent
necessary to legally comply with such compelled disclosure.
8.2 Confidentiality of Agreement
Unless required by law, and except to assert its rights hereunder or for
disclosures to its own employees on a "need to know" basis, both parties agree
not to disclose the terms of this Agreement or matters relating thereto without
the prior written consent of the other party, which consent shall not be
unreasonably withheld.
9. Warranties
9.1. Limited Warranty
Subject to the limitations set forth in this Agreement, Netscape warrants
only to Oracle that the Netscape Products when properly adapted, installed, and
used will substantially conform to the specifications in the Documentation in
effect when the Netscape Products are shipped to Oracle. Netscape's warranty and
obligation shall extend for a period of ninety (90) days ("Warranty Period")
from the date Netscape first delivers the Netscape Products to Oracle. All
warranty claims not made in writing or not received by Netscape within the time
period specified above shall be deemed waived. Netscape's warranty and
obligation is solely for the benefit of Oracle, who has no authority to extend
this warranty to any other person or entity. NETSCAPE MAKES NO WARRANTY THAT ALL
ERRORS OR FAILURES WILL BE CORRECTED.
9.2 EXCLUSIVE WARRANTY
THE EXPRESS WARRANTY SET FORTH IN SECTION 9.1 CONSTITUTES THE ONLY
WARRANTY WITH RESPECT TO THE NETSCAPE PRODUCTS. NETSCAPE MAKES NO OTHER
REPRESENTATION OR WARRANTY OR CONDITION OF ANY KIND WHETHER EXPRESS OR IMPLIED
(EITHER IN FACT OR BY OPERATION OF LAW) WITH RESPECT TO THE NETSCAPE PRODUCTS.
NETSCAPE EXPRESSLY DISCLAIMS ALL WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. NETSCAPE DOES NOT WARRANT THAT THE NETSCAPE
PRODUCTS ARE ERROR-FREE OR THAT OPERATION OF THE NETSCAPE PRODUCTS WILL BE
SECURE OR UNINTERRUPTED AND HEREBY DISCLAIMS ANY AND ALL LIABILITY ON ACCOUNT
THEREOF. THERE IS ALSO NO IMPLIED WARRANTY OF NON-INFRINGEMENT; THE SOLE REMEDY
FOR INFRINGEMENT IS PROVIDED IN SECTION 10. This subsection shall be enforceable
to the extent allowed by applicable law.
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9.3 Defects Not Covered by Warranties
Netscape shall have no obligations under the warranty provisions set forth
in Section 9.1 if any nonconformance is caused by: (a) Oracle's incorporation,
attachment or otherwise engagement of any attachment, feature, program, or
device to the Netscape Products, or any part thereof; or (b) accident;
transportation; neglect or misuse; alteration, modification, or enhancement of
the Netscape Products by Oracle; failure to provide a suitable installation
environment; use of supplies or materials not meeting specifications; use of the
Netscape Products for other than the specific purpose for which the Netscape
Products are designed; use of the Netscape Products on any systems other than
the specified hardware platform for such Netscape Products; or Oracle's use of
defective media or defective duplication of the Netscape Products.
9.4 Exclusive Remedy
If Oracle finds what it believes to be errors or a failure of the Netscape
Products to meet functional specifications set forth in the Documentation in
effect when the Netscape Products are shipped to Oracle, and provides Netscape
with a written report during the Warranty Period, Netscape will use reasonable
efforts to correct promptly, at no charge to Oracle, any such errors or
failures. This is Oracle's sole and exclusive remedy for any express or implied
warranties hereunder.
9.5 Warranty of Authority
Each party hereby warrants that such party has the authority to enter into
and be bound by the terms of this Agreement.
10. Indemnification
10.1 Netscape shall defend and indemnify Oracle against, or settle at
Netscape's option, any action brought against Oracle to the extent it is based
on a claim that reproduction or distribution by Oracle of the Netscape portion
of the Netscape Products furnished hereunder within the scope of a license
granted hereunder directly infringes any valid patent issued as of the Effective
Date, copyright, trademark or trade secret. Pursuant to the preceding sentence,
Netscape will pay resulting costs, damages and legal fees finally awarded
against Oracle in such action which are attributable to such claim provided that
Oracle (a) promptly (within twenty (20) days) notifies Netscape in writing of
any such action and Netscape has sole control of the defense and all related
settlement negotiations, and (b) cooperates with Netscape, at Netscape's
expense, in defending or settling such action.
10.2 Should a Netscape Product become, or be likely to become in
Netscape's opinion, the subject of infringement of such patent, copyright,
trademark or trade secret, Netscape may (i) procure for Oracle the right to
continue using the same or (ii) replace or modify it to make it non-infringing,
or if neither (i) nor (ii) is commercially practicable, (iii) terminate the
license for the infringing Netscape Product and refund the license fees paid for
those Netscape Product. Netscape shall have no obligation or liability for any
claim based upon: (a) use of other than the then current, unaltered version of
the Netscape Product, unless the infringing portion is also in the then current,
unaltered release, provided Netscape furnishes Oracle with a non-infringing
version upon Netscape's becoming aware of an infringing version; (b) use,
operation or combination of Netscape Products with non-Netscape programs, data,
equipment or documentation if such infringement would have been avoided but for
such use, operation or combination; (c) Oracle's or its agent's activities after
Netscape has notified Oracle that Netscape
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believes such activities may result in such infringement; (d) compliance with
Oracle's designs, specifications or instructions if such infringement would have
been avoided but for such compliance; (e) any modifications or marking of the
Netscape Products not specifically authorized in writing by Netscape; or (f)
Oracle's use of any trademarks other than the Netscape trademarks pursuant to
Section 6. With respect to third party software provided with the Netscape
Products, Netscape shall indemnify Oracle pursuant to Subsections 10.1 and 10.2
herein to the same extent Netscape is indemnified by such third party provided
of the software. The foregoing states the entire liability of Netscape and the
exclusive remedy of Oracle with respect to infringement of any intellectual
property rights, whether under theory of warranty, indemnity or otherwise.
10.3 General Indemnification by Oracle. Oracle agrees to indemnify, hold
harmless and, at Netscape's request, defend Netscape and its suppliers from and
against any and all claims, liabilities, losses damages expenses and costs
(including reasonable attorneys' fees and costs) arising out of, in connection
with or relating to (i) Oracle's failure to include in each End User License
Agreement the contractual terms required to be included therein pursuant to
Section 3.3.3 or any breach thereof by End User, or (ii) any use by Oracle or
its Distributions or End Users of any product not provided by Netscape hereunder
in combination or bundled with the Netscape Products if such claim or damage
would have been avoided but for such use in combination or bundling, or (iii)
any defective duplication of or the use of defective media in the duplication of
Netscape Products, or (iv) Oracle's failure to include in each Distributor
License Agreement the contractual terms required to be included therein pursuant
to Section 3.3.2 or any breach thereof by Distributor.
11. Limitation of Liability
11.1 IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, OR DAMAGES FOR LOSS OF PROFITS,
REVENUE, DATA OR USE, INCURRED BY EITHER PARTY OR ANY THIRD PARTY, WHETHER IN AN
ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY OR ANY OTHER PERSON HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
11.2 IN NO EVENT WILL NETSCAPE OR ITS SUPPLIERS BE LIABLE FOR (a) ANY
REPRESENTATION OR WARRANTY MADE TO ANY THIRD PARTY BY ORACLE, ANY AGENT OF
ORACLE OR DISTRIBUTOR; (b) FAILURE OF THE NETSCAPE PRODUCTS TO PERFORM AS
SPECIFIED HEREIN EXCEPT AS, AND TO THE EXTENT, OTHERWISE EXPRESSLY PROVIDED
HEREIN; (c) FAILURE OF THE NETSCAPE PRODUCTS TO PROVIDE SECURITY; OR (d) ANY USE
OF THE NETSCAPE PRODUCTS OR THE DOCUMENTATION OR THE RESULTS OR INFORMATION
OBTAINED OR DECISIONS MADE BY END USERS OF THE NETSCAPE PRODUCTS OR THE
DOCUMENTATION. THE REMEDIES PROVIDED HEREIN ARE ORACLE'S SOLE AND EXCLUSIVE
REMEDIES.
11.3 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY AND
EXCEPT FOR A BREACH OF SECTIONS 8, NETSCAPE'S ENTIRE LIABILITY TO ORACLE FOR
DAMAGES CONCERNING PERFORMANCE OR NONPERFORMANCE BY NETSCAPE OR IN ANY WAY
RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT, AND REGARDLESS OF WHETHER THE
CLAIM FOR SUCH DAMAGES IS BASED IN CONTRACT OR IN TORT, SHALL NOT EXCEED THE
AMOUNT RECEIVED BY NETSCAPE FROM ORACLE UNDER THIS AGREEMENT FOR THE NETSCAPE
PRODUCT GIVING RISE TO SUCH CLAIM.
11.4 THE PROVISIONS OF THIS SECTION 11 ALLOCATE THE RISKS UNDER THIS
AGREEMENT BETWEEN NETSCAPE AND ORACLE. NETSCAPE'S PRICING REFLECTS THIS
ALLOCATION OF RISK AND THE LIMITATION OF LIABILITY SPECIFIED HEREIN.
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12. Term of Agreement
Unless sooner terminated under the provisions of Section 13, or otherwise
rightfully terminated, this Agreement shall remain in effect for (a) a period of
two (2) years from the date of production release/FCS (First Customer Ship) of
an Intel-based version of an Oracle Network Computer or (b) thirty-six (36)
months after the Effective Date, whichever is earlier ("Initial Term"). No later
than twelve (12) months prior to the expiration of the Initial Term (the
"Renewal Date"), the parties shall negotiate and execute an extension of this
Agreement for an agreed upon term ("the Subsequent Term"); if the parties do not
so execute an extension for a Subsequent Term, this Agreement shall terminate as
of the end of the Initial Term.
13. DEFAULT AND TERMINATION
13.1 Termination for Default
If either party defaults in any of its obligations under this Agreement,
the non-defaulting party, at its option shall have the right to terminate this
Agreement by written notice unless, within thirty (30) calendar days after
written notice of such default, the defaulting party remedies the default, or,
in the case of a default which cannot with due diligence be cured within a
period of thirty (30) calendar days, the defaulting party institutes within the
thirty (30) calendar days steps necessary to remedy the default and thereafter
diligently prosecutes the same to completion. In the event Oracle breaches
Sections 2.1.1, 2.1.2, 6, 7.2 and/or 8 of this Agreement, Netscape may
immediately terminate this Agreement. In the event Netscape breaches Section 8.1
of this Agreement, Oracle may immediately terminate this Agreement.
13.2 Bankruptcy
Either party shall have the right to terminate this Agreement if the other party
ceases to do business in the normal course, becomes or is declared insolvent or
bankrupt, is the subject of any proceeding relating to its liquidation or
insolvency which is not dismissed within ninety (90) calendar days, or makes an
assignment for the benefit of its creditors.
13.3 Effect on Rights
13.3.1 Termination of this Agreement by either party shall not act as a
waiver of any breach of this Agreement and shall not act as a
release of either party from any liability for breach of such
party's obligations under this Agreement.
13.3.2 Except as specified in Sections 13.4 and 13.5 below, upon
termination or expiration of this Agreement, all licenses for
Netscape Products and Documentation granted under this Agreement
shall terminate.
13.3.3 Except where otherwise specified, the rights and remedies granted
to a party under this Agreement are cumulative and in addition to,
and not in lieu of, any other rights or remedies which the party
may possess at law or in equity, including without limitation
rights or remedies under applicable patent, copyright, trade
secrets, or proprietary rights laws, rules or regulations.
13.4 Effect of Termination
Within thirty (30) calendar days after termination of this Agreement,
Oracle shall either deliver to Netscape or destroy all copies of the Netscape
Products and Documentation (except as provided in Section 13.5) and any other
materials provided by Netscape to Oracle hereunder in
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its possession or under its control, and shall furnish to Netscape an affidavit
signed by an authorized signatory of Oracle certifying that, to the best of its
knowledge, such delivery or destruction has been fully effected. Notwithstanding
the foregoing, and provided Oracle fulfills its obligations specified in this
Agreement with respect to such items, Oracle may continue to use and retain
copies of the Netscape Products and Documentation to the extent, but only to the
extent, necessary to support and maintain Netscape Products rightfully
distributed to End Users by Oracle prior to termination of this Agreement.
Without limiting the generality of the foregoing, and provided that Oracle has
not breached Sections 2.1.1, 2.1.2, 6, 7.2 or 8: (i) for six (6) months
following any termination or expiration, Oracle may sublicense and distribute in
accordance with the terms of this Agreement any inventory of the Netscape
Product, including work in process, on hand or in the manufacturing process at
the time of such termination or expiration; (ii) Oracle may continue to exercise
the rights and licenses granted hereunder until six (6) months after termination
or expiration to fill any orders received by Oracle or its Distributors from End
Users or potential End Users prior to the effective date of termination or
expiration; and (iii) subject to payment of the fees set forth in Section 3 of
Exhibit B, Oracle may continue to exercise the rights and licenses granted
hereunder as necessary to provide maintenance and technical support for End
Users under support agreements as of the date of any termination or expiration.
In the event that Oracle has breached Sections 2.1.1, 2.1.2, 6, 7.2 or 8, then
Oracle's rights under this Agreement with respect to the Netscape Products shall
immediately terminate. Notwithstanding any of the foregoing, Oracle shall still
have the right following expiration of the Agreement or termination of the
Agreement for any cause to sublicense, provided in accordance with the terms of
this Agreement, any remaining inventory of the one million (1,000,000) copies of
the Netscape Products for which Oracle has prepaid Netscape.
13.5 Continuing Obligations
13.5.1 Payment of Accrued Fees. Within sixty (60) calendar days of
termination of this Agreement, Oracle shall, pay to Netscape all
sums then due and owing. Any other such sums shall subsequently be
promptly paid as they become due and owing.
13.5.2 Continuance of Sublicenses. Notwithstanding the termination of
this Agreement, all End User sublicenses which have been properly
granted by Oracle and Distributors pursuant to this Agreement
prior to its termination shall survive; provided, however, that
Oracle shall immediately terminate and shall require Distributors
to immediately terminate an End User sublicense upon the failure
of the End User to cure a breach of or default under the End User
License Agreement within forty-five (45) days after written
notification to the End User by Oracle or to Oracle by Netscape of
End User's failure to comply with its duties and obligations under
the applicable sections of the End User License Agreement that are
required to be included therein pursuant to this Agreement.
13.5.3 Other Continuing Obligations. The respective rights and
obligations of Netscape and Oracle under the provisions of
Sections 2.1, 2, 2.2, 3, 3.1, 3.4, 4, 6, 7, 8, 9.2, 9.3, 9.4, 9.5,
10, 11, 13.3, 13.4, 13.5 and 14 shall survive any termination of
this Agreement.
14. General Provisions
14.1 Notices
Any notice, request, demand, or other communication required or permitted
hereunder shall be in writing and shall be deemed to be properly given upon the
earlier of (a) actual receipt by the addressee or (b) five (5) business days
after deposit in the mail, postage prepaid, when
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mailed by registered or certified airmail, return receipt requested, or two (2)
business days after being sent via private industry courier to the respective
parties at the addresses set forth herein or to such other person or address as
the parties may from time to time designate in a writing delivered pursuant to
this Section 14.1. Notices to Netscape and Oracle shall be attention to: Legal
Department.
14.2 Waiver and Amendment
The waiver by either party of a breach of or a default under any provision
of this Agreement, shall not be construed as a waiver of any subsequent breach
of the same or any other provision of the Agreement, nor shall any delay or
omission on the part of either party to exercise or avail itself of any right or
remedy that it has or may have hereunder operate as a waiver of any right or
remedy. No amendment or modification of any provision of this Agreement shall be
effective unless in writing and signed by a duly authorized signatory of
Netscape and Oracle.
14.3 Assignment
This Agreement and the licenses granted hereunder are to a specific legal
entity or legal person, and are not assignable by Oracle, nor are the
obligations imposed on Oracle delegable. Any attempt to sublicense (except as
expressly permitted herein) assign or transfer any of the rights, duties or
obligations under this Agreement in derogation hereof shall be null and void.
14.4 Governing Law
This Agreement is entered into in the State of California, U.S.A., and
this Agreement shall be governed by and construed in accordance with the laws of
the State of California, U.S.A., without reference to its conflicts of law
provisions. Any dispute regarding this Agreement shall be subject to the
exclusive jurisdiction of the California state courts in and for Santa Clara
County, California (or, if there is exclusive federal jurisdiction, the United
States District Court for the Northern District of California), and the parties
agree to submit to the personal and exclusive jurisdiction and venue of these
courts. This Agreement will not be governed by the United Nations Convention of
Contracts for the International Sale of Goods, the application of which is
hereby expressly excluded.
14.5 Relationship of the Parties
No agency, partnership, joint venture, or employment is created as a
result of this Agreement and neither Oracle nor its agents have any authority of
any kind to bind Netscape in any respect whatsoever.
14.6 Captions and Section Headings
The captions and section and paragraph headings used in this Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement.
14.7 Severability
If the application of any provision or provisions of this Agreement to any
particular facts of circumstances shall be held to be invalid or unenforceable
by any court of competent jurisdiction, then (a) the validity and enforceability
of such provision or provisions as applied to any other particular facts or
circumstances and the validity of other provisions of this Agreement shall not
in any way be affected or impaired thereby and (b) such provision or provisions
shall be reformed without further action by the parties hereto to and only to
the extent necessary to make
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such provision or provisions valid and enforceable when applied to such
particular facts and circumstances.
14.8 Force Majeure
Either party shall be excused from any delay or failure in performance
hereunder, except the payment of monies by Oracle to Netscape, caused by reason
of any occurrence or contingency beyond its reasonable control, including but
not limited to, acts of God, earthquake, labor disputes and strikes, riots, war,
novelty of product manufacture or other unanticipated product development
problems, and governmental requirements. The obligations and rights of the party
so excused shall be extended on a day-to-day basis for the period of time equal
to that of the underlying cause of the delay.
14.9 Entire Agreement
This Agreement, including the Exhibits hereto, constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes all proposals or prior agreements whether oral or written, and all
communications between the parties relating to the subject matter of this
Agreement and all past courses of dealing or industry custom. The terms and
conditions of this Agreement shall prevail, notwithstanding any variance with
any purchase order or other written instrument submitted by Oracle, whether
formally rejected by Netscape.
14.10 English
This Agreement is in the English language only, which language shall be
controlling in all respects, and all versions hereof in any other language shall
not be binding on the parties hereto. All communications and notices to be made
or given pursuant to this Agreement shall be in the English language.
14.11 Source Code Escrow
14.11.1 Escrow Account. Netscape has placed and agrees to maintain a
copy of the source code and related materials ("Source Code")
for the Netscape Product, including each Update, in escrow
with Data Securities International, Inc. (the "Escrow Agent")
pursuant to a Master Technology Escrow Agreement with the
Escrow Agent dated September 1, 1995 (the "Escrow Agreement"),
and, upon written request by Oracle, to permit Oracle at
Oracle's expense to become a beneficiary of such agreement by
execution of Exhibit A thereto.
14.11.2 License. Netscape hereby grants to Oracle a nontransferable,
nonexclusive license to use, reproduce and modify the Source
Code to support and maintain the Netscape Product and for no
other purpose if Netscape is no longer in the business of
supporting Netscape Products. Such license shall be effective
upon the proper release of the Source Code from the Escrow
Agent, in accordance with the terms of the Escrow Agreement.
The object code derived from source code modified by Oracle is
subject to the same restrictions and obligations as apply to
Oracle with respect to the Netscape Product under this
Agreement, including but not limited to the payment of license
fees. Netscape shall have no obligation to support or maintain
any Source Code modified by Oracle.
14.11.3 Ownership. Netscape shall retain all ownership rights, title
and interest in and to the Source Code, including all patents,
copyrights, trademarks, trade secrets and other intellectual
property rights inherent therein.
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14.11.4 Confidentiality
14.11.4.1 Any Source Code which Oracle receives under this
Agreement shall be subject to the confidentiality
provisions contained in Section 8; provided,
however, that the restrictions set forth in Section
8 shall survive for a period of ten (10) years
after the termination of this Agreement with
respect to the Source Code.
14.11.4.2 Oracle agrees that, in addition to the provisions
of Section 8, it will protect the confidentiality
of the Source Code using the highest level of
security that applies to its own most confidential
source code.
14.11.4.3 Oracle shall be fully responsible for the conduct
of its employees and independent contractors who
may in any way breach the provisions of Section 8
and this Section 14.11 as they may relate to the
Source Code. Oracle agrees to notify Netscape
promptly in the event of any breach of its security
under conditions in which it would appear that the
trade secrets represented by the Source Code were
prejudiced or exposed to loss. Oracle shall, upon
request of Netscape, take all other reasonable
steps, necessary to recover any compromised trade
secrets disclosed to or placed in the possession of
Oracle by virtue of this Agreement. The cost of
taking such steps shall be borne by Oracle.
14.11.4.4 Oracle acknowledges that any breach of any of its
obligations with respect to confidentiality or use
of Source Code hereunder is likely to cause or
threaten irreparable harm to Netscape and,
accordingly, Oracle agrees that in such event
Netscape shall be entitled to equitable relief to
protect its interest therein, including, but not
limited to, preliminary and permanent injunctive
relief, as well as money damages.
14.12 Source Code Option
Netscape hereby grants Oracle an option to license the source code version
of the next Major Update of the Netscape Navigator 3.0 LAN version (currently
named Netscape Navigator 4.0 LAN version), excluding Third Party Code, as
defined below (the "Netscape Source"), subject to the following terms (the
"Source Option").
14.12.1 Option Length. The Source Option shall terminate on the 180th
day following the date of production release/FCS (First
customer Ship) of the object code version of the Netscape
Source.
14.12.2 Exercise Price. The exercise price for the Source Option shall
be US $2,000,000 (two million dollars), to be paid to Netscape
on the date of exercise.
14.12.3 Third Party Code. Oracle acknowledges that the Netscape Source
may contain source code or object code licensed by Netscape
from a third party ("Third Party Code"), and that Netscape
does not have the right to sublicense Third Party Code to
Oracle. All licenses granted hereto are subject to this
limitation of Third Party Code. A list of Third Party Code in
the Netscape Source as of September 1996 is set forth in
Exhibit G. Oracle acknowledges that it shall be
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Oracle's responsibility to obtain licenses to Third Party
Code. If Oracle exercises the Source Option, Netscape will
make an introductory phone call to the vendor of the Third
Party Code requesting a waiver permitting Netscape to deliver
such Third Party Code to Oracle for the sole purpose of Oracle
porting to a platform of any Oracle Preferred Product or
non-Intel based Oracle Network Computer not available from
Netscape (a "Ported Version"), in exchange for which Oracle
will return the Ported Version to the Third Party Code vendor
(if such vendor so desires). If a Third Party Code vendor
disagrees, Netscape will provide Oracle with a name and
contact information at the Third Party Code vendor.
14.12.4 Effect of Exercise of Source Option. Following Oracle's
exercise of and payment for the Source Option:
(a) Netscape shall grant Oracle an internal use license to
use, reproduce and modify the Netscape Source solely in
order to port and improve the integration between the
Netscape Source and any Oracle Preferred Product or
non-Intel based Oracle Network Computer and not to
create any Derivative Work or for any other purpose. The
Netscape Source, as modified by Oracle under this
Section 14.12.4(a) is referred to below as the
("Modified Source"), and
(b) Oracle shall return the Modified Source to Netscape at
or prior to commercial release.
(c) The rights granted to Oracle to distribute Netscape
Products under Section 2 of the Agreement shall apply to
the object code version of the Modified Source.
(d) Oracle shall ensure that the Modified Source is of a
quality comparable to Oracle programs and the Netscape
Source. Oracle shall provide the Modified Source to
Netscape prior to release of the Modified Source to
third parties. Netscape may treat the Modified Source,
and the object code versions compiled therefrom, as
Netscape treats its own code.
14.12.5 No Right to Sublicense. Oracle shall not have the right to
sublicense or distribute the Netscape Source or the Modified
Source.
14.12.6 Protection of Source Code. The Netscape Source and Modified
Source shall be Confidential Information governed by the terms
of Section 8 whether or not the Source Code is marked
"Confidential" by Netscape, provided however that the
restrictions set forth in Section 8 shall survive for a period
of ten (10) years after the date of exercise of this Source
Option.
14.12.7 Rights Limited. This Agreement does not grant any right or
license to Oracle other than those expressly provided herein,
and no other grant or license is to be implied by or inferred
from any provision of this Agreement.
14.13 Porting.
Notwithstanding Section 14.12, upon reasonable written notice to Netscape,
Oracle shall have the right at Oracle's expense, to access Netscape's porting
facilities under Netscape's standard terms and conditions therefor solely to
port to and integrate the Netscape Preferred Product with Oracle Preferred
Products or non-Intel based Oracle Network Computers and not to create any
Derivative Work or for any other purpose. Netscape Preferred Product will
include the beta version thereof which Netscape generally provides porting
facilities access to other OEM
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partners. It is Netscape's policy to make a beta version available to Netscape's
OEM partners only when Netscape, in its sole discretion, deems such beta version
generally stable enough for distribution to such OEM partners. Examples of
Oracle's expenses, calculated based on Netscape's cost, could include computer
equipment used for project, software tools and third party software components
for project, support from Netscape engineering and documentation writers for
project, customized quality assurance test scripts, cost for space and any
ongoing Netscape support for this project.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
duly authorized representatives of the parties effective as of the Effective
Date.
NETSCAPE COMMUNICATIONS ORACLE CORPORATION
CORPORATION
By: /s/ Peter L.S. Currie By: /s/ Karen White
----------------------------- ------------------------------
Signature Signature
Name: Peter L.S. Currie Name: Karen White
--------------------------- ----------------------------
Print or Type Print or Type
Title: SVP & CFO Title: SVP
-------------------------- ---------------------------
Date: October 17, 1996 Date: October 17, 1996
--------------------------- ----------------------------
Address: 501 E. Middlefield Road
Mountain View, CA 94043
Exhibits:
Exhibit A - Description of Netscape Products
Exhibit B - Pricing, Payment Schedules and Deliverables
Exhibit C - Netscape's End User License Agreements
Exhibit D - OEM Maintenance and Support
Exhibit E-1 - Oracle Preferred Products
Exhibit E-2 - Oracle Non-Preferred Products
Exhibit F - Netscape Trademark Usage Guidelines
Exhibit G - Third Party Code
Exhibit H - Oracle Subsidiaries
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EXHIBIT A
NETSCAPE PRODUCT DESCRIPTIONS
Client Products Platforms
- -----------------------------------------------------------------------
Netscape Navigator LAN 3.0* Unix, Mac, Windows
* The license for the Netscape Products set forth in this Agreement includes the
current and subsequent versions of the above products.
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EXHIBIT B
PRICING, PAYMENT SCHEDULES AND DELIVERABLES
1. Commitment and Sub-License Fee Prepayment for Netscape Products. During the
Initial Term of this Agreement, Oracle commits to purchase and license
one-million (1,000,000) copies of the Netscape Product set forth in Section 2
below. Oracle agrees to pay to Netscape a nonrefundable sub-license fee
prepayment ("Prepaid License Fees") for the Netscape Products equal to
One-Million Dollars ($1,000,000) due and payable within ten (10) days of the
Effective Date. After the Prepaid License Fees are fully depleted, License fees
for the Netscape Product will be paid in accordance with Section 2 of this
Exhibit B and Section 4 of this Agreement.
In addition, Netscape grants Oracle a royalty free License to use 100 copies of
Netscape Navigator LAN (object code) solely for internal development purposes
and not for redistribution. These 100 copies shall not count towards the
1,000,000 copies in the preceding paragraph.
2. Pricing for Netscape Products. The License fee for each copy of Netscape
Product shall be as follows:
Navigator LAN 3.0 Binary* $1.00**
* The license for the Netscape Products set forth in this Agreement includes the
current, and subsequent versions of the above products.
Major Updates for the Netscape Products. Major Updates for the Netscape Products
shall be supplied to Oracle at the pricing described below. Major Updates must
be distributed to End Users who have previously received the Netscape Product
from Oracle under this Agreement and request to receive the current version.
Oracle shall not distribute the current version of the Netscape Products to such
End-User in order to avoid the payment of a Major Update fee.
Major Update Pricing:
Oracle Non-Network Computer End User Customers $7.50/copy
Oracle Network Computer End User Customers $5.00/copy**
** This pricing shall also apply to non-Intel based Network Computers or
Navio-released client products upon production release/FCS, at which time it
will automatically be included in Exhibit A.
3. Maintenance and Support. Oracle agrees to pay to Netscape the following
annual fee for the maintenance and support described in Exhibit D: One Hundred
Fifty Thousand Dollars ($150,000) for one dedicated Netscape person for premium
technical support due and payable on the Effective Date and on each anniversary
of the Effective Date. Oracle shall have the option, for an additional fee of
One Hundred Fifty Thousand Dollars ($150,000) per year, to have a second
dedicated Netscape person for premium technical support. Such additional fee
shall be paid upon Oracle's exercise of said option.
4. Deliverables. One (1) master reproduction copy of each of the Netscape
Product (media) and one (1) copy of the applicable Documentation, in any format
generally available from Netscape. When available, Netscape shall provide to
Oracle (1) master reproduction copy for Major Updates.
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5. Ship To Address for Deliverables. Bill To Address for Invoice.
--------------------------------- ----------------------------
(not P.O. address)
Oracle Corporation Oracle Corporation
- -------------------------------- ----------------------------------
500 Oracle Parkway 500 Oracle Parkway
- -------------------------------- ----------------------------------
Mailstop 659510 Mailstop 659510
- -------------------------------- ----------------------------------
Redwood City, CA 94065 Redwood City, CA 94065
- -------------------------------- ----------------------------------
Attention: Teresa Chong
- -------------------------------- -----------------------
Attention: Karen White Telephone: 415-506-8779
- -------------------------------- -----------------------
Fax: 415-633-1292
- -------------------------------- ------------------------------
Telephone: 415-506-2448 Email: [email protected]
--------------------- ---------------------------
Email: [email protected]
-------------------------
Netscape Sales Rep: Joan Braddi
Telephone Number: 415 937 3727
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EXHIBIT C-CLIENT PRODUCTS END USER LICENSE
BY CLICKING ON THE "ACCEPT" BUTTON OR OPENING THE PACKAGE, YOU ARE CONSENTING TO
BE BOUND BY AND ARE BECOMING A PARTY TO THIS AGREEMENT. IF YOU DO NOT AGREE TO
ALL OF THE TERMS OF THIS AGREEMENT, CLICK THE "DO NOT ACCEPT" BUTTON AND THE
INSTALLATION PROCESS WILL NOT CONTINUE. (IF APPLICABLE, YOU MAY RETURN THE
PRODUCT TO THE PLACE OF PURCHASE FOR A FULL REFUND.)
NETSCAPE END USER LICENSE AGREEMENT
REDISTRIBUTION OR RENTAL NOT PERMITTED
This Agreement has 3 parts. Part I applies if you have not purchased a license
to the accompanying software (the "Software"). Part II applies if you have
purchased a license to the Software. Part III applies to all license grants. If
you initially acquired a copy of the Software without purchasing a license and
you wish to purchase a license, contact Netscape Communications Corporation
("Netscape") on the Internet at http://www.netscape.com. As used in this
Agreement, for residents of Europe or Africa, "Netscape" shall refer to Netscape
Communications Ireland Limited; for residents of Japan, "Netscape" shall refer
to Netscape Communications (Japan), Ltd.; for residents of all other countries,
"Netscape" shall refer to Netscape Communications Corporation.
PART I -- TERMS APPLICABLE WHEN LICENSE FEES NOT (YET) PAID
(LIMITED TO EVALUATION, EDUCATIONAL AND NON-PROFIT USE)
LICENSE GRANT. Netscape grants you a non-exclusive license to use the Software
free of charge if (a) you are a student, faculty member or staff member of an
educational institution (K-12, junior college, college or university, or the
international equivalent, or a library), a staff member of a religious
organization or an employee of an organization which meets Netscape's criteria
for a charitable non-profit organization; or (b) your use of the Software is for
the purpose of evaluating whether to purchase an ongoing license to the
Software. The evaluation period for use by or on behalf of a commercial entity
is limited to ninety (90) days; evaluation use by others is not subject to this
ninety (90) day limit. Government agencies (other than public libraries) are not
considered educational, religious or charitable non-profit organizations for
purposes of this Agreement. If you are using the Software free of charge, you
are not entitled to hard-copy documentation, support or telephone assistance. If
you fit within the description above, you may use the Software in the manner
described in Part III below under "Scope of Grant."
DISCLAIMER OF WARRANTY. Free of charge Software is provided on an "AS IS" basis,
without warranty of any kind, including without limitation the warranties that
the Software is free of defects, merchantable, fit for a particular purpose or
non-infringing. The entire risk as to the quality and performance of the
Software is borne by you. Should the Software prove defective in any respect,
you and not Netscape or its suppliers assume the entire cost of any service and
repair. In addition, the security mechanisms implemented by Netscape software
have inherent limitations, and you must determine that the Software sufficiently
meets your requirements. This disclaimer of warranty constitutes an essential
part of this Agreement. No use of the software without payment of license fees
to Netscape is authorized hereunder except under this Disclaimer.
PART II -- TERMS APPLICABLE WHEN LICENSE FEES PAID
LICENSE GRANT. Subject to payment of applicable license fees, Netscape grants to
you a non-exclusive license to use the Software and accompanying documentation
("Documentation") in the manner described in Part III below under "Scope of
Grant."
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LIMITED WARRANTY. Netscape warrants that for a period of ninety (90) days from
the date of acquisition, the Software, if operated as directed, will
substantially achieve the functionality described in the Documentation. Netscape
does not warrant, however, that your use of the Software will be uninterrupted
or that the operation of the Software will be error-free or secure. In addition,
the security mechanisms implemented by Netscape software have inherent
limitations, and you must determine that the Software sufficiently meets your
requirements. Netscape also warrants that the media containing the Software, if
provided by Netscape, is free from defects in material and workmanship and will
so remain for ninety (90) days from the date you acquired the Software.
Netscape's sole liability for any breach of this warranty shall be, in
Netscape's sole discretion: (i) to replace your defective media or Software; or
(ii) to advise you how to achieve substantially the same functionality with the
Software as described in the Documentation through a procedure different from
that set forth in the Documentation; or (iii) if the above remedies are
impracticable, to refund the license fee you paid for the Software. Repaired,
corrected, or replaced Software and Documentation shall be covered by this
limited warranty for the period remaining under the warranty that covered the
original Software, or if longer, for thirty (30) days after the date (a) of
shipment to you of the repaired or replaced Software, or (b) Netscape advised
you how to operate the Software so as to achieve the functionality described in
the Documentation.
Only if you inform Netscape of your problem with the Software during the
applicable warranty period and provide evidence of the date you purchased a
license to the Software will Netscape be obligated to honor this warranty.
Netscape will use reasonable commercial effort to repair, replace, advise or,
for individual consumers, refund pursuant to the foregoing warranty within
thirty (30) days of being so notified.
If any modifications are made to the Software by you during the warranty period;
if the media is subjected to accident, abuse, or improper use; or if you violate
the terms of this Agreement, then this warranty shall immediately terminate.
Moreover, this warranty shall not apply if the Software is used on or in
conjunction with hardware or software other than the unmodified version of
hardware and software with which the Software was designed to be used as
described in the Documentation.
THIS IS A LIMITED WARRANTY, AND IT IS THE ONLY WARRANTY MADE BY NETSCAPE OR ITS
SUPPLIERS. NETSCAPE MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT
NOT LIMITED TO ANY WARRANTY OF NONINFRINGEMENT OF THIRD PARTIES' RIGHTS. YOU MAY
HAVE OTHER STATUTORY RIGHTS. HOWEVER, TO THE FULL EXTENT PERMITTED BY LAW, THE
DURATION OF STATUTORILY REQUIRED WARRANTIES IF ANY, INCLUDING WITHOUT LIMITATION
THE WARRANTIES THAT THE SOFTWARE IS FREE OF DEFECTS, MERCHANTABLE, AND FIT FOR A
PARTICULAR PURPOSE, SHALL BE LIMITED TO THE ABOVE LIMITED WARRANTY PERIOD.
MOREOVER, IN NO EVENT WILL WARRANTIES PROVIDED BY LAW, IF ANY, APPLY UNLESS THEY
ARE REQUIRED TO APPLY BY STATUTE NOTWITHSTANDING THEIR EXCLUSION BY CONTRACT. NO
NETSCAPE DEALER, AGENT, OR EMPLOYEE IS AUTHORIZED TO MAKE ANY MODIFICATIONS,
EXTENSIONS, OR ADDITIONS TO THIS LIMITED WARRANTY.
PART III -- TERMS APPLICABLE TO ALL LICENSE GRANTS
SCOPE OF LICENSE GRANT.
You may:
o use the Software on any single computer;
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o use the Software on a network, provided that each person accessing
the Software through the network must have a copy licensed to that
person;
o use the Software on a second computer so long as only one copy is
used at a time;
o copy the Software for archival purposes, provided any copy must
contain all of the original Software's proprietary notices; or
o if you have purchased licenses for a 10 Pack or a 50 Pack, make up
to 10 or 50 copies, respectively, of the Software (but not the
Documentation), or, if you have purchased licenses for multiple
copies of the Software, make the number of copies of Software (but
not the Documentation) which the packing slip or invoice states you
have paid for, provided any copy must contain all of the original
Software's proprietary notices. The number of copies on the invoice
is the total number of copies that may be made for all platforms.
Additional copies of Documentation may be purchased from Netscape.
You may not:
o permit other individuals to use the Software except under the terms
listed above;
o permit concurrent use of the Software;
o modify, translate, reverse engineer, decompile, disassemble (except
and solely to the extent an applicable statute expressly and
specifically prohibits such restrictions), or create derivative
works based on the Software;
o copy the Software other than as specified above;
o rent, lease, grant a security interest in, or otherwise transfer
rights to the Software; or
o remove any proprietary notices or labels on the Software.
TITLE. Title, ownership rights, and intellectual property rights in the Software
shall remain in Netscape and/or its suppliers. The Software is protected by
copyright and other intellectual property laws and by international treaties.
Title and related rights in the content accessed through the Software is the
property of the applicable content owner and is protected by applicable law. The
license granted under this Agreement gives you no rights to such content.
TERMINATION. This Agreement and the license granted hereunder will terminate
automatically if you fail to comply with the limitations described herein. Upon
termination, you must destroy all copies of the Software and Documentation.
EXPORT CONTROLS. None of the Software or underlying information or technology
may be downloaded or otherwise exported or reexported (i) into (or to a national
or resident of) Cuba, Iraq, Libya, Sudan, North Korea, Iran, Syria or any other
country to which the U.S. has embargoed goods; or (ii) to anyone on the U.S.
Treasury Department's list of Specially Designated Nationals or the U.S.
Commerce Department's Table of Denial Orders. By downloading or using the
Software, you are agreeing to the foregoing and you are representing and
warranting that you are not located in, under the control of, or a national or
resident of any such country or on any such list.
In addition, if the licensed Software is identified as a not-for-export product
(for example, on the box, media or in the installation process), then, unless
you have an exemption from the United
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States Department of State, the following applies: EXCEPT FOR EXPORT TO CANADA
FOR USE IN CANADA BY CANADIAN CITIZENS, THE SOFTWARE AND ANY UNDERLYING
TECHNOLOGY MAY NOT BE EXPORTED OUTSIDE THE UNITED STATES OR TO ANY FOREIGN
ENTITY OR "FOREIGN PERSON" AS DEFINED BY U.S. GOVERNMENT REGULATIONS, INCLUDING
WITHOUT LIMITATION, ANYONE WHO IS NOT A CITIZEN, NATIONAL OR LAWFUL PERMANENT
RESIDENT OF THE UNITED STATES. BY DOWNLOADING OR USING THE SOFTWARE, YOU ARE
AGREEING TO THE FOREGOING AND YOU ARE WARRANTING THAT YOU ARE NOT A "FOREIGN
PERSON" OR UNDER THE CONTROL OF A FOREIGN PERSON.
LIMITATION OF LIABILITY. UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY, TORT,
CONTRACT, OR OTHERWISE, SHALL NETSCAPE OR ITS SUPPLIERS OR RESELLERS BE LIABLE
TO YOU OR ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES OF ANY CHARACTER INCLUDING, WITHOUT LIMITATION, DAMAGES
FOR LOSS OF GOODWILL, WORK STOPPAGE, COMPUTER FAILURE OR MALFUNCTION, OR ANY AND
ALL OTHER COMMERCIAL DAMAGES OR LOSSES. IN NO EVENT WILL NETSCAPE BE LIABLE FOR
ANY DAMAGES IN EXCESS OF THE AMOUNT NETSCAPE RECEIVED FROM YOU FOR A LICENSE TO
THE SOFTWARE, EVEN IF NETSCAPE SHALL HAVE BEEN INFORMED OF THE POSSIBILITY OF
SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PARTY. THIS LIMITATION OF LIABILITY
SHALL NOT APPLY TO LIABILITY FOR DEATH OR PERSONAL INJURY RESULTING FROM
NETSCAPE'S NEGLIGENCE TO THE EXTENT APPLICABLE LAW PROHIBITS SUCH LIMITATION.
SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR
CONSEQUENTIAL DAMAGES, SO THIS EXCLUSION AND LIMITATION MAY NOT APPLY TO YOU.
HIGH RISK ACTIVITIES. The Software is not fault-tolerant and is not designed,
manufactured or intended for use or resale as on-line control equipment in
hazardous environments requiring fail-safe performance, such as in the operation
of nuclear facilities, aircraft navigation or communication systems, air traffic
control, direct life support machines, or weapons systems, in which the failure
of the Software could lead directly to death, personal injury, or severe
physical or environmental damage ("High Risk Activities"). Accordingly, Netscape
and its suppliers specifically disclaim any express or implied warranty of
fitness for High Risk Activities.
MISCELLANEOUS. If the copy of the Software you received was accompanied by a
printed or other form of "hard-copy" End User License Agreement whose terms vary
from this Agreement, then the hard-copy End User License Agreement governs your
use of the Software. This Agreement represents the complete agreement concerning
the license granted hereunder and may be amended only by a writing executed by
both parties. THE ACCEPTANCE OF ANY PURCHASE ORDER PLACED BY YOU IS EXPRESSLY
MADE CONDITIONAL ON YOUR ASSENT TO THE TERMS SET FORTH HEREIN, AND NOT THOSE IN
YOUR PURCHASE ORDER. If any provision of this Agreement is held to be
unenforceable, such provision shall be reformed only to the extent necessary to
make it enforceable. This Agreement shall be governed by California law (except
to the extent applicable law, if any, provides otherwise). The application of
the United Nations Convention of Contracts for the International Sale of Goods
is expressly excluded.
U.S. GOVERNMENT END USERS. The Software is a "commercial item," as that term is
defined in 48 C.F.R. 2.101 (Oct. 1995), consisting of "commercial computer
software" and "commercial computer software documentation," as such terms are
used in 48 C.F.R. 12.212 (Sept. 1995). Consistent with 48 C.F.R. 12.212 and 48
C.F.R. 227.7202-1 through 227.7202-4 (June 1995), all U.S. Government End Users
acquire the Software with only those rights set forth herein.
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BY CLICKING ON THE "ACCEPT" BUTTON OR OPENING THE PACKAGE, YOU ARE CONSENTING TO
BE BOUND BY THIS AGREEMENT. IF YOU DO NOT AGREE TO ALL OF THE TERMS OF THIS
AGREEMENT, CLICK THE "DO NOT ACCEPT" BUTTON AND THE INSTALLATION PROCESS WILL
NOT CONTINUE, AND, IF APPLICABLE, RETURN THE PRODUCT TO THE PLACE OF PURCHASE
FOR A FULL REFUND.
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EXHIBIT D
OEM MAINTENANCE AND SUPPORT
In consideration of the applicable license fee, Netscape will provide to
Oracle the maintenance and support services set forth in this Exhibit D during
the Initial Term of the Agreement or the term for which Netscape has received
payment therefor (the "Support Term"). Notwithstanding anything contained in
this Exhibit D to the contrary, Oracle shall not be entitled to provide Updates
to any Distributor or End User or use any back-end support received from
Netscape to provide front-line support to any Distributor or End User prior to
the payment by Oracle to Netscape of the annual maintenance and support fee.
1. Maintenance/Minor Updates. Netscape will provide to Oracle any Minor Updates
made generally available by Netscape during the Support Term. Oracle and not
Netscape will be responsible for providing Minor Updates to its Distributors
and/or End Users. The expenses of any such distribution will be paid by Oracle.
Oracle and Netscape will favorably consider electronic or alternative
dissemination methods of such Minor Updates to the extent consistent with
policies of both companies. Oracle and Netscape agree to discuss monthly support
issues and processes.
2. Technical Support. Netscape will provide Oracle with Netscape's backend
technical support services as follows:
(a) Back-end Support. Netscape will provide back-end support to Oracle for
Program Errors not resolved by Oracle pursuant to Oracle's support policies and
in accordance with subsection (b) below. This support includes efforts to
identify defective source code and to provide corrections, workarounds and/or
patches to correct Program Errors. Netscape will provide Oracle with a telephone
number and an e-mail address which Oracle may use to report Program Errors
during Netscape's local California business hours (5am - 5pm Pacific Standard
Time). For priority 1 failures, Oracle agrees to notify Netscape via both
telephone and e-mail. Oracle will identify two (2) members of its customer
support staff and an alternate to act as the primary technical liaisons
responsible for all communications with Netscape's technical support
representatives. Such liaisons will have sufficient technical expertise,
training and/or experience for Oracle to perform its obligations hereunder.
Within one (1) week after the Effective Date, Oracle will designate its
liaison(s). Notification will be in writing and/or e-mail to Netscape. Oracle
may substitute contacts at any time by providing to Netscape one (1) week's
prior written and/or electronic notice thereof.
Netscape will make reasonable efforts to correct significant Program Errors that
Oracle identifies, classifies and reports to Netscape and that Netscape
substantiates. Netscape may reclassify Program Errors if it reasonably believes
that Oracle's classification is incorrect. Oracle will provide sufficient
information to enable Netscape to duplicate the Program Error before Netscape's
response obligations will commence. Netscape will not be required to correct any
Program Error caused by (a) Oracle's in corporation or attachment of a feature,
program, or device to the Netscape Product, or any part thereof; (b) any
nonconformance caused by accident, transportation, neglect, misuse, alteration,
modification, or enhancement of the Netscape Product; (c) the failure to provide
a suitable installation environment; (d) use of the Netscape Product for other
than the specific purpose for which the Netscape Product was designed; (e) use
of the Netscape Product on any systems other than the specified hardware
platform for such Netscape Product; (f) Oracle's use of defective media or
defective duplication of the Netscape Product; or (g) Oracle's failure to
incorporate any Maintenance Release or Update previously released by Netscape
which corrects such Program Error.
29
<PAGE>
Provided Program Error reports are received by Netscape during Netscape's local
California business hours (5am - 5pm Pacific Standard Time), Netscape will use
its best commercial efforts to communicate with Oracle about the Program Error
via telephone or e-mail within the following targeted response times:
For Standard Technical Support:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Initial Action Target Fix of
Priority Failure Description Response Time Plan Within Workaround
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Fatal (system down or unusable) 4 working hours 10 working hours 5 working days
- -------------------------------------------------------------------------------------------------------
2 Severe Impact (functionality 4 working hours 12 working hours 10 working days
disabled): errors which result in a
lack of application functionality or
cause intermittent system failure
- -------------------------------------------------------------------------------------------------------
3 Degraded Operations: errors 6 working hours 36 working hours 15 working days
causing malfunction of non-critical
functions
- -------------------------------------------------------------------------------------------------------
4 Minimal Impact: attributes and/or 12 working hours 10 working days Next release
options to utility programs do not
operate as stated
- -------------------------------------------------------------------------------------------------------
5 Enhancement Request 12 working hours 15 working days Next release
- -------------------------------------------------------------------------------------------------------
</TABLE>
For Premium Technical Support: Netscape will also provide Oracle with an
emergency telephone pager number which Oracle may use to report only Priority I
Program Errors twenty four (24) hours a day, seven (7) days a week.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Initial Action Target Fix of
Priority Failure Description Response Time Plan Within Workaround
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Fatal (system down or unusable) 2 working hours 6 working hours 5 working days
- -------------------------------------------------------------------------------------------------------
2 Severe Impact (functionality 2 working hours 10 working hours 10 working days
disabled): errors which result in a
lack of application functionality or
cause intermittent system failure
- -------------------------------------------------------------------------------------------------------
3 Degraded Operations: errors 4 working hours 12 working hour 15 working days
causing malfunction of non-critical
functions
- -------------------------------------------------------------------------------------------------------
4 Minimal Impact: attributes 8 working hours 8 working days Next release
and/or options to utility programs
do not operate as stated
- -------------------------------------------------------------------------------------------------------
5 Enhancement Request 8 working hours 8 working days Next release
- -------------------------------------------------------------------------------------------------------
</TABLE>
Netscape will use reasonable commercial efforts to resolve each significant
Program Error by providing either a reasonable workaround, an object code patch,
or a specific action plan for how Netscape will address the problem and an
estimate of how long it will take to rectify the defect. Netscape reserves the
right to charge Oracle additional fees at its then-standard rates for support
services performed in connection with customized Netscape Product or reported
Program Errors which are later determined to have been due to hardware or
software not supplied by Netscape. Notwithstanding the foregoing, Netscape has
no obligation to perform services in connection with (i) Program Errors
resulting from hardware or software not supplied by Netscape; or (ii)
30
<PAGE>
which occur in the Netscape Product release which is not the then-current
release. Netscape agrees to support in accordance with this Exhibit D a given
revision of the Product for the shorter of (i) twelve (12) months from the date
such revision is superseded by the next sequential Minor and/or Major Update; or
(ii) until such revision is superseded by two (2) sequential Minor and/or Major
Updates. (For example, Netscape will support version 2. i for the shorter of
twelve (12) months from the date version 2.2 or 3.0 (if 3.0 is the next
sequential release), is released by Netscape, or until version 2.1 is superseded
by two (2) sequential releases (2.2 and 2.3 or 2.2 and 3.0, as the case may be.)
(b) Front-line Support. Oracle, and not Netscape, will provide front-line, or
first and second level, technical support to its Distributors or End Users. Such
support includes call receipt, call screening, installation assistance, problem
identification and diagnosis, efforts to create a repeatable demonstration of
the Program Error and, if applicable, the distribution of any Maintenance
Releases or Updates. Oracle agrees that any documentation distributed by Oracle
will clearly and conspicuously state that Distributors and End Users should call
Oracle for technical support for the Netscape Product. Netscape will have no
obligation to furnish any assistance, information or documentation with respect
to the Netscape Product, to any End User. If Netscape customer support
representatives are being contacted by a significant number of Oracle's
Distributors and/or End Users then, upon Netscape's request, Oracle and Netscape
will cooperate to minimize such contract. In the event that Netscape is able to
identify any End User obtaining front-line support from Netscape as a customer
of Oracle, Oracle hereby agrees to pay to Netscape Netscape's then current
charges for such support.
31
<PAGE>
EXHIBIT E-1
ORACLE PREFERRED PRODUCTS
Intel based version of Oracle Network Computer
Oracle InterOffice
32
<PAGE>
EXHIBIT E-2
ORACLE NON-PREFERRED PRODUCTS
Acorn based version of Oracle Network Computer Other non-Intel based versions of
Oracle Network Computers Oracle programs on the Oracle price list not listed in
Exhibits E-1 and E-2
33
<PAGE>
EXHIBIT F
NETSCAPE TRADEMARK USAGE GUIDELINES
34
<PAGE>
Trademark Usage Guidelines
General Terms and Conditions
You must comply with the following guidelines in order to avoid any breach of
the terms and conditions under which you have been authorized or licensed to use
Netscape's logos, service marks, trademarks, and/or registered trademarks:
o All logos, service marks, trademarks, and/or registered trademarks under
which Netscape markets or promotes its various products are, and shall
remain, the exclusive property of Netscape Communications Corporation or
its subsidiaries.
o Advertising for Netscape, its products, or its programs must not be in
violation of any United States federal or state laws, municipal ordinances
or administrative agency regulations, or the laws, rules and regulations
of any other country.
o Advertising for Netscape, its products, or its programs must not be
misleading in price, product features or specifications.
Netscape may modify these guidelines from time to time and you will be bound to
comply with the material contained in the updated guidelines immediately upon
receipt of the new guidelines.
Trademark Guidelines
o Trademarks must be used as art adjective to identify products from
Netscape. Trademarks must not be used as a noun or verb. Trademarks must
never appear in plural or possessive form.
Examples:
Incorrect
o The Netscape Navigator provides access to Internet.
o The Netscape Navigator's code is proprietary.
o The Netscape Navigators are popular.
Correct
o The Netscape Navigator(TM) software provides access to Internet.
o The Netscape Navigator(TM) software's code is proprietary.
o The Netscape Navigator(TM) software programs are popular.
o After first use of trademark as an adjective, and if needed for ease of
writing, you may alternate use of the trademark between an adjective and a
noun.
o The first mention of a Netscape trademark in the body of printed material
must include proper notice of trademark ownership, i.e., (R), (TM) or
(SM). If the first mention is in a headline, the symbols do not have to
appear at that mention provided there is text (on the same page/screen)
following the headline or title where the notice does appear.
1
<PAGE>
o Advertising and all other printed materials must include credit lines for
Netscape products. If more than one Netscape trademark/servicemark or
registered trademark/servicemark is used, all may be incorporated into one
sentence. A sample credit line that meets these criteria is: The following
are worldwide trademarks of Netscape Communications Corporation or its
subsidiaries, registered in the United States as indicated by "(R)," and
in numerous other countries worldwide: Netscape(TM); Netscape
Navigator(TM); Netscape iStore(TM).
o When listing the names and/or logos of other trademark owners, you must
acknowledge their trademark(s) with the following: All other names
indicated by (R) or (TM) are registered trademarks or trademarks of their
respective owners. If space permits, a more detailed credit should appear,
e.g., RSA Digital Signature is a trademark of RSA Data Security, Inc.
The following chart is a list of Netscape trademarks, which may be used only to
identify the products of Netscape Communications Corporation or its
subsidiaries. Use of the "(R)" in the chart indicates registration in the United
States of America for the related mark. Use of the "(TM)" symbol is appropriate
for any Netscape marks outside the United States of America; however,
registration has been secured for many of the marks in other countries, and
further registrations will have been secured since this printing. Information
available from your local office of Netscape Communications Corporation will
control the proper usage of a registration symbol for the local jurisdiction.
Use of the trademark symbols may differ from country to country.
- --------------------------------------------------------------------------------
Descriptive Copy/
Trademark Special Considerations
- --------------------------------------------------------------------------------
The Netscape communications Corporation Logo (see Corporate Signature Kit)
- --------------------------------------------------------------------------------
Netscape TM
- --------------------------------------------------------------------------------
Netsite TM
- --------------------------------------------------------------------------------
Mozilla TM
- --------------------------------------------------------------------------------
Netscape Navigator TM
- --------------------------------------------------------------------------------
Netscape Internet Applications TM
- --------------------------------------------------------------------------------
Netscape Communications Server TM
- --------------------------------------------------------------------------------
Netscape Commerce Server TM
- --------------------------------------------------------------------------------
Netscape News Server TM
- --------------------------------------------------------------------------------
Netscape Proxy Server TM
- --------------------------------------------------------------------------------
Netscape Merchant System TM
- --------------------------------------------------------------------------------
Netscape Community System TM
- --------------------------------------------------------------------------------
Netscape Publishing System TM
- --------------------------------------------------------------------------------
Netscape iStore TM
- --------------------------------------------------------------------------------
Secure Courier TM
- --------------------------------------------------------------------------------
2
<PAGE>
Netscape Navigator(TM) Included
Logo and Trademark Usage Guidelines
[LOGO]
N E T S C A P E
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1. Qualification
The Netscape Navigator Included logo may only be used by licensed
third parties (OEM's) to indicate that Netscape Navigator(TM)
software is included in an OEM's branded product. The usage of the
logo must comply with all of these guidelines. No use of the logo
should imply Netscape Communications either warrants or supports the
OEM branded product.
[GRAPHIC OMITTED]
2. Required Usage of the "Netscape Navigator(TM) Included" logo
A. In product packaging
Placement: The logo must appear on the front of the product package.
The logo may appear on the spine and/or back of the product package.
The logo must be placed on a high contrast background and must
stand-alone in making a commercial impression. The logo must not
touch or overlap any other logo on the packaging.
Size: The N-graphic portion of Netscape Navigator Included logo must
be at least 3/4" on each side. Always size the logo proportionally
based on the size of the N-graphic.
For CD-ROMs and CD-ROM jewel case size packaging, the minimum size
of the N-graphic portion of Netscape Navigator Included logo must be
at least 1/2" on each side.
The logo may be no larger than the OEM brand or product name or logo
on the package. The N-graphic portion of the logo may never exceed
1 1/2" on each side.
[GRAPHIC OMITTED]
B. In print, online, and broadcast advertising and direct mail:
Placement: The logo must be on a high contrast background and
stand-alone in making a commercial impression. The logo must not
touch or overlap any other logo on the advertisement. In print
advertising and direct mail, the logo must appear in every viewing
plane (i.e. page, spread or gatefold) of the ad. In broadcast
advertising, the logo must be on screen for at least 5 seconds and
totally within the title-safe screen area.
Size: For all print applications, the N-graphic portion of Netscape
Navigator Included logo must be at least 3/4". The logo may be no
larger than the OEM brand or product name or logo in the printed
material. In addition, the graphic portion of the logo may never
exceed 1/2" on each side.
For all broadcast applications, the logo must be a minimum of 15% of
the title safe area. The logo may be no larger than the OEM brand or
product name or logo in the broadcast advertisement.
For all online advertising, the N-graphic portion of Netscape
Navigator Included logo must be at least 30 pixels on each side and
must link to the Netscape site at this URL: "www.netscape.com"
[GRAPHIC OMITTED]
3. Optional usage: In product brochures and other collateral:
Placement: The logo must be displayed on the first page of all
brochures and on the cover of all manuals and bound collateral. The
logo must be on a high contrast background and stand-alone in making
a commercial impression.
Size: the N-graphic portion of Netscape Navigator Included logo must
be at least 3/4". The logo may be no larger than the OEM brand or
product name or logo. In addition, the N-graphic portion of the logo
may never exceed 1 1/2" on each side. The logo may be no larger than
the OEM brand or product name or logo in the collateral.
<PAGE>
4. Altering of the logo
The logo may only be reproduced directly from the diskette, provided
by Netscape in this kit. It may not be altered in color, shape,
font, proportion or in any other manner. The logo may be increased
in size, but only in whole and in proportion to the original.
5. Trademark Credit
In all usage the Netscape Navigator Included logo should always be
identified as a trademark of Netscape Communications Corporation
with the following credit line: Netscape Navigator and the Netscape
Navigator Included logo are trademarks of Netscape Communications.
6. Standards and quality: The Netscape Navigator Included logo must be
displayed in a positive manner. The logo may not depict Netscape in
any negative way.
- --------------------------------------------------------------------------------
Netscape Navigator(TM) Name Usage Guidelines
These guidelines apply to printed collateral, advertising, point of sale
material, retail packaging, all on-line communications, icons and all
other media.
The OEM must always represent the product as "including",
"containing" or "with" Netscape Navigator software.
The OEM must brand the product as their own. The words "Netscape" or
"Netscape Navigator" may NOT appear in the product or brand name.
Examples of correct usage:
XYZ Online Kit containing Netscape Navigator(TM)
Internet client.
ABC Internet Suite with Netscape Navigator(TM) software,
Snailmail e-mail and MyStack software
123 Company's Family Internet Fun-pak. Netscape
Navigator Internet client included.
Examples of Incorrect Usage:
XYZ Netscape Browse
The Netscape Navigator from ABC company
123 Internet Navigator
ABC Netscape Navigator
The words "Netscape Navigator" should always be used together to
represent the Internet client product supplied by Netscape. Never
use the term, Netscape, Mozilla or Mosaic to refer to the Netscape
Navigator product.
The Netscape Navigator name should always be used as a adjective
followed by an appropriate noun. Appropriate nouns are: Internet
client and software. Browser is NOT an appropriate noun. Never use
Netscape or Netscape Navigator as a verb or noun.
Examples of correct usage:
"...includes the Netscape Navigator(TM) Internet
client."
"...with Netscape Navigator(TM) software, you can
view..."
Examples of Incorrect Usage
"includes the Netscape browser..."
"with Navigator, you can view..."
"includes Netscape's Mosaic-like Navigator..."
"Just use Netscape to view this..."
"You can Netscape from your home PC..."
Font Size: In all media, the size of the font of the words Netscape Navigator
should be no larger than the font of the brand or product name of the OEM
product.
Support: The OEM may NOT indicate in any way that the product is supported or
warranted directly by Netscape Communications Corporation.
Trademark Credit: Netscape Navigator software should always be identified as a
trademark of Netscape Communications Corporation with the following credit line:
Netscape Navigator is a trademark of Netscape Communications.
Standards and quality: The Netscape Navigator name must be used in a positive
manner. The name may not depict Netscape in any negative way.
<PAGE>
[LOGO]
N E T S C A P E
------------
Netscape
Communications
Corporation
Corporate
Signature
Kit
------------
<PAGE>
o Netscape Communications
Corporate Signature Kit
[Netscape Signature Kit]
<PAGE>
o Netscape Communications
Corporate Signature Kit
[Netscape Signature Kit]
<PAGE>
o Netscape Communications
Corporate Signature Kit
[Netscape Signature Kit]
<PAGE>
o Netscape Communications
Corporate Signature Kit
[Netscape Signature Kit]
<PAGE>
o Netscape Communications
Corporate Signature Kit
[Netscape Signature Kit]
<PAGE>
EXHIBIT G
THIRD PARTY CODE
Sun Java
RSA
Pointcast PCN
Jpeg Library
GIF Decoder
Berkeley DBM
MS-URL.DLL
SmartHeap
Apple QuickTime Plug-In
Digital Alchemy (MDES) (Macintosh)
Precept Software
35
<PAGE>
EXHIBIT H
ORACLE SUBSIDIARIES
36
<PAGE>
EXHIBIT H
ORACLE SUBSIDIARIES: AS OF JULY, 1996
Oracle Corporation
Oracle Real Estate Corp.
Oracle Taiwan Inc.
Falcon Systems Inc.
OmniScience Object Technology, Inc,.
Oracle Systems Shelf Corporation
Oracle Belgium N.V.
Oracle Finland OY
Oracle Corporation Svenska AB
Oracle Deutschland GmbH
Oracle Datenbanksysteme Ges.m.b.H.
Oracle Iberica S.A.
Oracle Portugal - Sistemas de Informacao Lda
Relational Software Limited
Oracle Europe Manufacturing Holdings Limited
Oracle Corporation Canada Inc.
La Societa D'lnformatique Oracle du Quebec Inc.
Oracle do Brasil Sistemas Limitda
Centro de Capacitacion per Sistems Oracles Ltd.
Oracle de - Centroamerica, S.A.
Sistemas Oracle de Venezuela, C.A.
Oracle Corporation Japan
Oracle System (Australia) Pty. Ltd.
Beijing Oracle Systems Corp.
Oracle Systems (Korea) Ltd.
Oracle Malaysia - Sumiputra
Oracle Systems (Philippines) Inc.
Oracle Systems South East Asia (Singapore) Pte. Ltd.
Oracle Systems (Thailand) Company Limited
Oracle Systems Integration Limited
Oracle Systems Limited
Oracle Bilgisayar Sistemleri Limited Sirketi
Oracle Software India Private Ltd.
Oracle Piolska (Poland), Sp.z.o.o.
Oracle Czech s.r.o,
Oracle Hungary Kft.
Oracle Italia SpA
Sistemas Oracle del Peru
Oracle Slovenia
Oracle Credit Corp.
Oracle China Inc,
Oracle Complex Systems Corp.
Oracle Corporation - FSC
RSIB, Inc.
Oracle Nederland B.V.
Oracle Danmark ApS
Oracle Norge A/S
Oracle France S.A.
Oracle Software (Switzerland) Ltd.
Oracle Hellas S.A.
Oracle Software d.o.o.
Oracle Corporation UK Limited.
Oracle RDBMS Ireland
Oracle Europe Manufacturing Limited
Oracle Complex Systems Canada Inc.
Oracle Argentina S.A.
Sistemas Oracle de Chile S.A.
Oracle Columbia Limitada
Oracle de Mexico, S.A. de C.V.
Oracle Caribbean
Oracle Japan Holding, Inc.
Oracle Systems China Limited
Oracle Systems Hong Kong Limited
Oracle Systems Malaysia Sdn. Bhd.
Oracle New Zealand, Ltd.
<PAGE>
Exhibit 10.21
NETWORK COMPUTER, INC.
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (the "AGREEMENT") is made as of August
11, 1997 by and among Network Computer, Inc., a Delaware corporation (the
"COMPANY"), Oracle Corporation, a Delaware corporation ("ORACLE"), and the
parties listed on EXHIBIT A hereto (each a "NAVIO STOCKHOLDER" and
collectively, the "NAVIO STOCKHOLDERS"), each of which is presently a
stockholder of Navio Communications, Inc., a Delaware corporation ("NAVIO").
Oracle and the Navio Stockholders are sometimes collectively referred to
herein as the "STOCKHOLDERS."
RECITALS
A. The Company and Navio have entered into an Agreement and Plan
of Merger dated as of May 16, 1997 (the "MERGER AGREEMENT") pursuant to which
Navio will be merged (the "MERGER") with and into the Company upon and
subject to the terms and conditions set forth therein.
B. Oracle is the sole stockholder of the Company. Upon
consummation of the Merger, each of the Navio Stockholders will become
stockholders of the Company.
C. Certain parties hereto are also parties to a Put/Call and
Voting Agreement of even date herewith (the "PUT/CALL AND VOTING AGREEMENT")
with certain other holders of equity interests in Navio, which agreement is
related in certain respects to this Agreement.
D. The Company and the Stockholders each desire to provide for
certain agreements and understandings with respect to the ownership and
transfer of shares of the Company's capital stock as well as for certain
agreements with respect to certain matters relating to the governance of the
Company following consummation of the Merger.
AGREEMENT
The parties hereby agree as follows:
1. REGISTRATION RIGHTS. The Company and the Stockholders
covenant and agree as follows:
1.1 DEFINITIONS. For purposes of this Agreement:
(a) All capitalized terms used in this Agreement and
not otherwise defined shall have the meanings given to them in the Merger
Agreement.
(b) The terms "REGISTER," "REGISTERED" and
"REGISTRATION" refer to a registration effected by preparing and filing a
registration statement or similar document in
<PAGE>
compliance with the Securities Act of 1933, as amended (the "ACT"), and the
declaration or ordering of effectiveness of such registration statement or
document;
(c) The term "REGISTRABLE SECURITIES" means (i) the
shares of Common Stock issuable or issued upon conversion of the Series A
Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock or Series C-1 Preferred Stock, as the case may be (such
shares of Common Stock are collectively referred to hereinafter as the
"STOCK"), and (ii) any other shares of Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security that is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, the Stock; PROVIDED, HOWEVER, that
the foregoing definition shall exclude in all cases any Registrable
Securities sold by a person in a transaction in which his or her rights under
this Agreement are not assigned. Notwithstanding the foregoing, Common Stock
or other securities shall only be treated as Registrable Securities if and so
long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or
(B) sold in a transaction exempt from the registration and prospectus
delivery requirements of the Act under Section 4(1) thereof in which all
transfer restrictions, and restrictive legends with respect thereto, if any,
are removed upon the consummation of such sale;
(d) The term "HOLDER" means any person that is a
Stockholder and who owns or has the right to acquire Registrable Securities
or any permitted assignee thereof;
(e) The term "TEN PERCENT HOLDER" means any Holder
that as of the date of measurement beneficially owns, together with its
affiliates, ten percent or more of the Fully Diluted Equity of the Company;
(f) The term "FIVE PERCENT HOLDER" means any Holder
that as of the date of measurement beneficially owns, together with its
affiliates, five percent or more of the Fully Diluted Equity of the Company;
(g) The term "FULLY DILUTED EQUITY," as of any date
of measurement, shall refer to (i) the number of shares of Common Stock
issued and outstanding as of such date, PLUS (ii) the number of shares of
Common Stock issuable upon conversion of any shares of Series A Preferred
Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and/or Series C-1 Preferred Stock issued and outstanding as
of such date, plus (iii) any shares of Common Stock issuable upon the
conversion or exercise of any warrant, option, right or other convertible
security issued and outstanding as of such date;
(h) The term "FORM S-3" means such form under the
Act as in effect on the date hereof or any successor form under the Act; and
(i) The term "SEC" means the Securities and Exchange
Commission.
-2-
<PAGE>
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after
June 30, 1998 and at such time as both of the following circumstances shall
exist: (i) the Company shall have generated total revenues of at least
$25,000,000 for the 12 consecutive month period ending on the last day of the
calendar month immediately prior to such time and (ii) the Company's income
from operations, calculated in accordance with generally accepted accounting
principles ("GAAP") and on a basis consistent with the Company's past
practices and procedures, shall have been greater than zero for the two most
recent fiscal quarters immediately prior to such time, a written request from
Holders of more than 20% percent of the Registrable Securities outstanding on
that date that the Company file a registration statement under the Act
covering the registration of at least thirty percent of the Registrable
Securities then outstanding, then the Company shall, within ten days of the
receipt thereof, give written notice of such request to all Holders and
shall, subject to the limitations of subsection 1.2(b), use its reasonable
efforts to effect as soon as practicable, and in any event within 90 days of
the receipt of such request, the registration under the Act of all
Registrable Securities which the Holders request to be registered within 20
days of the mailing of such notice by the Company in accordance with Section
3.6.
(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 this
Section 1.2 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 (calculated based upon the
number of Registrable Securities beneficially owned by each Initiating Holder
at the time the request shall be made) and shall be reasonably acceptable to
the Company and Oracle. In such event, the right of any Holder to include
such Holder's 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 that are to be sold in such
offering 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 in accordance with
the foregoing. Notwithstanding any other provision of this Section 1.2, if
the underwriter advises the Company and the Initiating Holders 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 that 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, in each case in
proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder electing to participate in the
underwriting; provided, however, that the Registrable Securities to be
included in such Underwriting shall not be reduced unless all securities
(other than Registrable Securities) are first entirely excluded from the
underwriting.
-3-
<PAGE>
(c) Notwithstanding the foregoing, if the Company
shall furnish to Holders requesting a registration statement pursuant to this
Section 1.2, 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
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 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-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 one
registration pursuant to this Section 1.2 and such registration shall have
been declared or ordered effective; or
(ii) During the period starting with the date
60 days prior to the Company's good faith estimate of the date of filing of,
and ending on a date 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.
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 capital stock under the Act in connection with the public offering
of such securities solely for cash (other than (i) a registration relating
solely to the sale of securities to participants in a Company stock plan or a
transaction covered by Rule 145 under the Act, (ii) a registration in which
the only stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered, or (iii) any 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), the Company shall, at such time, promptly give
each Holder written notice of such registration. Upon the written request of
each Holder given within 20 days after mailing of such notice by the Company
in accordance with Section 3.6, 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.
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 reasonable
efforts to cause such registration statement to become effective, and, upon
the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to
120 days.
-4-
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(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 for up to 120 days.
(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 reasonable efforts to register and
qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders, PROVIDED that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter 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, such obligation to continue for 120 days.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on the securities exchange or market chosen
by the Company and reasonably acceptable to Oracle.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for
all such Registrable Securities, in each case not later than the effective
date of such registration.
(i) Use its reasonable 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
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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. 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 disposition of such securities as shall be required in the judgment
of counsel to the Company to effect the registration of such Holder's
Registrable Securities. The Company shall have no obligation with respect to
any registration requested pursuant to Section 1.2 of this Agreement if, as a
result of the application of the preceding sentence, the number of
Registrable Securities to be included in the registration does not equal or
exceed the number of shares required to originally trigger the Company's
obligation to initiate such registration as specified in subsection 1.2(a).
1.6 EXPENSES OF DEMAND REGISTRATION. 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 reasonable fees and disbursements of one counsel for the
selling Holders selected by them with the approval of the Company, which
approval shall not be unreasonably withheld, shall be borne by the Company;
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), unless the Holders of at
least 25% of the then outstanding Registrable Securities beneficially owned
by Holders other than Oracle 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 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 reasonable fees and disbursements
of one counsel for the selling Holders selected by them with the approval of
the Company, which approval shall not be unreasonably withheld, 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
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the success of the offering by the Company. 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 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 if the underwriters make the determination
described above and no other stockholder's securities are included or (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. For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder which is a holder of
Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such holder, or the estates
and family members of any such partners 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.
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 Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Act, the Exchange Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of
or are based upon any of the following statements, omissions or violations
(collectively a "VIOLATION"): (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 Exchange Act, any state
securities law or any
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rule or regulation promulgated under the Act, the Exchange Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, 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), 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, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with
such registration; and each such Holder will pay, as incurred, 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 without the
consent of the Holder, which consent shall not be unreasonably withheld;
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,
except in the case of willful fraud 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 reasonable 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
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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 to the extent its defense has been prejudiced, 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 held by a court of competent jurisdiction to be unavailable
to 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; PROVIDED, that in no
event shall any contribution by a Holder under this Subsection 1.10(d) exceed
the net proceeds from the offering received by such Holder, except in the
case of willful fraud by such Holder. 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.
(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.
(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 90
days after the effective date of the first registration statement filed by
the Company for the offering of its securities to the general public so long
as the Company remains subject to the periodic reporting requirements under
Sections 13 or 15(d) of the Exchange Act;
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(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the Exchange 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 Exchange
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 90 days after the effective date of the
first registration statement filed by the Company), the Act and the Exchange
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 which 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 other Holder or Holders joining in such request as are specified in a
written request given within 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 (net of any underwriters' discounts or
commissions) of less than $1,000,000; (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 60 days after receipt of the request of the Holder
or Holders under this Section 1.12; provided, how-
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ever, that the Company shall not utilize this right more than once in any
twelve month period; (4) if the Company has, within the 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. All 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 counsel for the
selling Holder or Holders and counsel for the Company, but excluding any
underwriters' discounts or commissions associated with Registrable
Securities, 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 Registrable Securities who, immediately following
such transfer or assignment, is the beneficial owner of at least five percent
(5%) of the Fully Diluted Equity of the Company, or by a Holder of the
Company's Series B Preferred Stock in connection with the transfer to a
single third party of all shares of Series B Preferred Stock held by such
Holder as of the date of such transfer, provided 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; and provided
further, that 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. 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 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 Oracle and the Holders of at least 25% of the then
outstanding Registrable Securities beneficially owned by Holders other than
Oracle, enter into any agreement with any holder or prospective holder of any
securities of the Company which would allow such holder or prospective holder
(i) to include such securities in any registration filed under Section 1.2
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such
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registration only to the extent that the inclusion of such holder's
securities will not reduce the amount of the Registrable Securities of the
Holders which is included or (ii) to make a demand registration which could
result in such registration statement being declared effective prior to the
earlier of the trigger dates contemplated by subsection 1.2(a) or within 180
days of the effective date of any registration effected pursuant to Section
1.2.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby
agrees that, during the period of duration (up to, but not exceeding, 180
days) specified by the Company and an underwriter of Common Stock or other
securities of the Company, following the date of the final prospectus
distributed in connection with 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 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
offerings commenced during the one year period following the date of the
final prospectus distributed pursuant to the first such registration
statement of the Company that covers Common Stock (or other securities) to be
sold on its behalf to the public in an underwritten offering; and
(b) all officers and directors of the Company, all
holders of at least two percent the Fully Diluted Equity of the Company at
such time, and all other persons with registration rights (whether or not
pursuant to this Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the Company
may impose stop-transfer instructions with respect to the Registrable
Securities of each Holder (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period, and each
Holder agrees that, if so requested, such Holder will execute an agreement in
the form provided by the underwriter containing terms which are essentially
consistent with the provisions of this Section 1.15.
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 an SEC Rule
145 transaction on Form S-4 or similar forms which may be promulgated in the
future.
1.16 TERMINATION OF REGISTRATION RIGHTS. No Holder shall
be entitled to exercise any right provided for in this Section 1 after the
earlier of (i) five years following the consummation of the sale of
securities pursuant to a registration statement filed by the Company under
the Act in connection with the initial firm commitment underwritten offering
of its securities to the general public, or (ii) such time (and for so long)
as Rule 144 or another similar exemption under the Act is available for the
sale of all of such Holder's shares during a three (3)-month period without
registration.
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1.17 TERMINATION OF PRIOR AGREEMENTS. The parties hereto
agree that any agreement providing for registration rights for shares of
capital stock of the Company or Navio similar to those contemplated by this
Agreement entered into prior to the date hereof between Oracle and the
Company and between Navio and one or more of the Navio Stockholders, as the
case may be, will upon consummation of the Merger be terminated in its
entirety and that at such time the terms of such agreement will be entirely
superseded by the terms of this Agreement.
1.18 APPROVAL OF SUBSEQUENT OFFERINGS. Oracle agrees that
between the date hereof and December 31, 1999 it will support as a
stockholder of the Company a registered public offering by the Company of the
Company's securities at any time during which the Company has satisfied the
performance conditions provided for in clauses (i) and (ii) of Section
1.2(a); provided, that such support is at no material cost to Oracle and
provided, further, that nothing in this Section 1.18 shall obligate any
Director of the Company designated by Oracle to vote for or otherwise support
such offering.
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall
deliver to each Five Percent Holder and each Holder of at least 250,000
shares of the Company's Series B Preferred Stock:
(a) as soon as practicable, but in any event within
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 statement of cash
flows for such year, such year-end financial reports to be in reasonable
detail, prepared in accordance with GAAP and audited and certified by an
independent public accounting firm of nationally recognized standing selected
by the Company; and
(b) as soon as practicable, but in any event within
45 days after the end of each of the first three quarters of each fiscal year
of the Company, an unaudited income statement, a statement of cash flows for
such fiscal quarter and an unaudited balance sheet as of the end of such
fiscal quarter.
2.2 RIGHT TO MAINTAIN INTEREST. Subject to the terms and
conditions specified in this Section 2.2, the Company hereby grants to each
Ten Percent Holder and each Holder of at least 250,000 shares of the
Company's Series B Preferred Stock (a "Series B Holder") a right to maintain
interest with respect to future sales by the Company of its Shares (as
hereinafter defined). A Ten Percent Holder who chooses to exercise its right
to maintain interest may designate as purchasers under such right itself or
its partners or affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer 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 Ten Percent Holder and each Series B Holder in accordance
with the following provisions:
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(a) The Company shall deliver a notice in accordance
with Section 3.6 hereof ("NOTICE") to the Ten Percent Holders and Series B
Holders 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) Within 15 calendar days after delivery of the
Notice, the Ten Percent Holder or Series B Holder may elect to purchase or
obtain, at the price and on the terms specified in the Notice, up to that
portion of such Shares which equals the proportion that the number of shares
of Common Stock issued and held, or issuable upon conversion and exercise of
all convertible or vested and exercisable securities then held, by such Ten
Percent Holder or Series B Holder bears to the total number of shares of
Common Stock then outstanding (assuming full conversion and exercise of all
convertible or vested and exercisable securities).
(c) The Company may, during the 45-day period
following the expiration of the period provided in subsection 2.2(b) hereof,
offer the remaining unsubscribed portion of the 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 60 days of the execution thereof, the
right to maintain interest provided hereunder shall be deemed to be revived
and such Shares shall not be offered unless first reoffered to the Ten
Percent Holders and Series B Holders in accordance herewith.
(d) The right to maintain interest in this Section
2.3 shall not be applicable to (i) the issuance or sale of Common Stock (or
options therefor) to employees, consultants and directors, pursuant to plans
or agreements approved by the Board of Directors for the primary purpose of
soliciting or retaining their services, (ii) 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 with proceeds
of greater than $20,000,000; (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; (v) to the issuance of securities to
financial institutions or lessors in connection with commercial credit
arrangements, equipment financings, or similar transactions; (vi) to the
issuance or sale of securities in connection with the consummation of the
Merger; (vii) to the issuance of securities that with unanimous approval of
the Board of Directors of the Company are not offered to any existing
stockholder of the Company; (viii) the issuance after the date hereof of up
to 42,909,091 shares of Series A-1 Preferred Stock (less any shares of Series
A-1 Preferred Stock issued to Oracle prior to the date hereof), at a purchase
price of $1.10 per share; or (ix) the issuance of shares of Series A-1
Preferred Stock pursuant to Oracle's right to purchase Series A-1 Preferred
upon the exercise by any Navio stockholder of dissenters' rights.
2.3 CO-SALE RIGHTS.
(a) Subject to the terms of subsection 2.3(c) below,
in the event that any Stockholder (the "SELLING STOCKHOLDER") may desire to
sell any shares of Company
-14-
<PAGE>
capital stock held by it, the Selling Stockholder shall first notify all
other Stockholders in writing of the proposed sale, at least 30 days prior to
the proposed date thereof, which notice shall contain all material terms of
the proposed sale, including, without limitation, the name and address of the
prospective purchaser, the purchase price and terms of payment, the date of
the proposed sale, and the number of shares to be sold. Within 30 days after
mailing the notice to the Stockholders, each Stockholder may notify the
Selling Stockholder of its desire to sell to the prospective purchaser (or at
such Stockholder's option and demand, to the Selling Stockholder, who hereby
agrees to purchase in the event that a direct sale from the Selling
Stockholder to the prospective purchaser is consummated) all or any part of
the shares of Company capital stock which such Stockholder then holds,
subject to the next sentence, on the same terms as those on which the Selling
Stockholder proposed to sell its Company capital stock to the prospective
purchaser. The maximum number of shares which any Stockholder electing to
participate in the sale shall be entitled to sell hereunder shall be equal to
that number obtained by multiplying the total number of shares of Company
capital stock (on an as-converted basis) being sold by the Selling
Stockholder by a fraction, the numerator of which is the total number of
shares of Company capital stock (on an as-converted basis) held by such
Stockholder at such time, and the denominator of which is the total number of
such shares held by all Stockholders (on an as-converted basis) at such time.
If a Stockholder elects to sell to the prospective purchaser, then the
Selling Stockholder shall assign as much of its interest in the agreement of
sale with the prospective purchaser as any Stockholder electing to
participate in the sale shall be entitled to and shall accept hereunder. If
within 30 days after receipt by the Stockholders of notice from the Selling
Stockholder of such stockholder's intention to sell to a prospective
purchaser the Stockholders do not send notice as set forth above, then the
Selling Stockholder shall be free to sell the stock to such prospective
purchaser, but only at the time and on the same terms and conditions as
outlined in the notice sent to the Stockholders; PROVIDED that in the event
such shares are not sold within 120 days of the date of the notice, they
shall once again be subject to the right of co-sale provided herein.
(b) The provisions of subsection (a) above shall not
pertain to or apply to (i) any bona fide pledge of shares of stock made by a
Stockholder which creates a mere security interest, or (ii) any transfer made
by a Stockholder which is a partnership to its constituent partners, or by a
Stockholder which is a corporation to its shareholders, to its parent
corporation or to a wholly-owned subsidiary corporation, (iii) any bona fide
transfer to an inter vivos trust for the benefit of the transferring
Stockholder, or (iv) any bona fide gift to a spouse or direct lineal
descendant of a Stockholder or a trust for their benefit.
(c) The parties hereto acknowledge that the terms of
this Section 2.3 are subordinate to the rights contemplated by Section 1 of
the Put/Call and Voting Agreement and subordinate to the rights contemplated
by Section 4 of the Put/Call and Voting Agreement. To the extent a
Stockholder does not elect to have a portion of his or her equity interest in
the Company purchased under Section 1 of the Put/Call and Voting Agreement
and to the extent the Ten Percent Holders do not elect to acquire all of the
shares of Company capital stock being offered by the Stockholder under
Section 4 of the Put/Call and Voting Agreement, then and only then shall the
co-sale right contemplated by this Section 2.3 be effective. The
-15-
<PAGE>
notice provisions contemplated in this Section 2.3 may be satisfied
concurrently with and in tandem with the notice provisions contemplated in
the Put/Call and Voting Agreement.
2.4 LIMITED APPROVAL RIGHTS. So long as Oracle shall
beneficially own at least a majority in interest of the Fully Diluted Equity
of the Company, the approval of Oracle shall be required for the Company or
any of its subsidiaries to do or effect any of the following:
(a) any incurrence, assumption or issuance by the
Company or any of its subsidiaries of any indebtedness for borrowed money
that when aggregated with the principal amount of all other indebtedness of
borrowed money of the Company and its subsidiaries at such time exceeds
$1,000,000; or
(b) the incurrence or entering into by the Company
or any of its subsidiaries of any operating or capital property or equipment
lease with a minimum term in excess of two years or which requires the
Company or its subsidiaries, as the case may be, to make minimum aggregate
payments thereunder in excess of $ 1,000,000.
2.5 RESTRICTIVE LEGENDS. The Stockholders and the Company
agree that all certificates of stock evidencing the capital stock of the
Company issued to the Stockholders shall prior to their issuance be endorsed
as follows for so long as this Agreement shall remain in effect:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO AND MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE
TERMS OF A STOCKHOLDERS AGREEMENT DATED AS OF [CLOSING DATE]
BETWEEN THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY,
COPIES OF WHICH ARE ON FILE AT THE OFFICES OF THE COMPANY.
2.6 TERMINATION OF CERTAIN COVENANTS. The covenants set
forth in Section 2 shall terminate as to Stockholders and be of no further
force or effect when the sale of securities pursuant to a registration
statement filed by the Company under the Act in connection with the firm
commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic
reporting requirements of Sections 13 or 15(d) of the Exchange Act, whichever
event shall first occur.
2.7 AGREEMENT TO BE BOUND. As a condition to the
consummation of any purported transfer of any of the Company's capital stock,
which transfer complies in all respects with the terms of this Section 2 and
the Put/Call and Voting Agreement, the transferee of such shares of capital
stock shall have agreed in writing to be bound by the terms of this Section 2
and by the terms of the Put/Call and Voting Agreement. The transferor and
transferee of such shares shall give prompt notice of the transfer and
deliver a copy of the agreement to be bound to the Company in advance of the
actual date of transfer.
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<PAGE>
3. MISCELLANEOUS.
3.1 EFFECTIVENESS OF AGREEMENT. This Agreement shall
only become effective at the Effective Time (as defined in the Merger
Agreement).
3.2 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 permitted assigns of the
parties. 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.
3.3 GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto shall be governed, construed and interpreted in
accordance with the laws of the State of Delaware, without giving effect to
principles of conflicts of laws. All actions and proceedings arising out of
or relating to this Agreement shall be heard and determined exclusively in
any California state or federal court sitting in either of San Mateo or San
Francisco counties.
3.4 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.
3.5 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.
3.6 NOTICES. Unless otherwise provided, any notice
required or permitted by this Agreement shall be in writing and shall be
deemed sufficient upon delivery, when delivered personally or by overnight
courier or sent by telegram or fax, or forty-eight (48) hours after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party's address as
set forth below or on EXHIBIT A hereto or as subsequently modified by written
notice.
3.7 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.
3.8 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, Oracle and
Holders of at least 25% of the then outstanding Registrable Securities
beneficially owned by Holders other than Oracle. 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.
-17-
<PAGE>
3.9 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, the parties
agree to renegotiate such provision in good faith. In the event that the
parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (x) such provision shall be excluded from this
Agreement, (y) the balance of the Agreement shall be interpreted as if such
provision were so excluded and (z) the balance of the Agreement shall be
enforceable in accordance with its terms.
3.10 AGGREGATION OF STOCK. All shares of Company capital
stock held or acquired by affiliated entities or persons shall be aggregated
together for the purpose of determining the availability of any rights under
this Agreement.
3.11 OWNERSHIP OF SHARES. Each Navio Stockholder
represents and warrants that such stockholder is the record and beneficial
owner of each of the shares of Navio capital set forth opposite the name of
the stockholder on EXHIBIT A hereto and that such stockholder is not the
owner of record or beneficially of any shares of Navio other than those
provided for on such exhibit.
[Signature Page Follows]
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<PAGE>
The parties have executed this Stockholders Agreement as of the date first
above written.
STOCKHOLDERS:
NETWORK COMPUTER, INC. -----------------------------------
(Stockholder)
By: By:
----------------------------------- --------------------------------
Name: Name:
--------------------------------- ------------------------------
(print)
Title: Title:
-------------------------------- -----------------------------
ORACLE CORPORATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE>
+
EXHIBIT A
STOCKHOLDERS
<TABLE>
<CAPTION>
NAME/ADDRESS NO. OF SHARES
------------ -------------
<S> <C>
Netscape Communications Corporation 12,777,778
Wei Yen 8,333,334
Sony Corporation 2,222,222
Acer America Corporation 740,741
All Holdings Corporation 370,370
Sega Enterprises, Ltd. 1,111,111
Nintendo Co., Ltd. 1,111,111
NEC Corporation 1,111,111
</TABLE>
<PAGE>
Exhibit 10.23
SUBLEASE AGREEMENT
BETWEEN
ORACLE CORPORATION
AND
NETWORK COMPUTER, INC.
September 17, 1997
<PAGE>
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (hereinafter referred to as "Sublease"),
entered into as of September 17, 1997, is made by and between ORACLE
CORPORATION (herein called "Sublandlord") and NETWORK COMPUTER, INC. (herein
called "Subtenant"), with reference to the following facts:
A. Pursuant to that certain Lease dated October 8, 1996, (the "Master
Lease"), Westport Investments, a California general partnership ("Landlord"),
as Landlord, leased to Sublandlord, as tenant, certain space (the "Master
Lease Premises") consisting of the entire 48,384 square foot Building to be
constructed by Landlord and located at 1000 Bridge Parkway in the City of
Redwood City (the "Building").
B. Subtenant wishes to sublease from Sublandlord, and Sublandlord
wishes to sublease to Subtenant, the entire Master Lease Premises
(hereinafter called the "Subleased Premises").
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged by the parties, Sublandlord and Subtenant hereby agree as
follows:
1. SUBLEASE. Sublandlord hereby subleases to Subtenant and
Subtenant hereby subleases from Sublandlord for the term, at the rental, and
upon all of the conditions set forth herein, the Subleased Premises.
2. TERM.
2.1 TERM.
(a) INITIAL TERM. The term of this Sublease ("Term")
shall commence on September 8, 1997 (the "Commencement Date") and end on
September 30, 2002 (the "Expiration Date"), unless sooner terminated pursuant
to any provision hereof.
(b) OPTION TO EXTEND. Provided that Subtenant is not in
default under this Sublease (or the Furniture and Equipment Lease attached
hereto as Exhibit B) as of the date of Subtenant's exercise of the rights
described in this Section 2.1(b) or as of the date of commencement of a
Renewal Term (defined below), Tenant shall have two (2) consecutive rights to
extend the term of this Sublease, each for a period of five (5) years (each,
a "Renewal Term") upon the same terms and conditions as are set forth herein,
such rights to be exercised by written notice delivered to Landlord at least
one hundred eighty (180) days prior to the expiration of the Term or, in the
case of the Second Renewal Term, prior to the expiration of the First Renewal
Term.
<PAGE>
3. RENT.
3.1 RENT PAYMENTS. From and after the Commencement Date
Subtenant shall pay to Sublandlord as Base Rent for the Subleased Premises
during the Term the sum of $120,960.00 per month. Such Base Rent amount
shall be subject to increases tied to increases in the CPI (as defined in the
Master Lease) in accordance with the terms of Paragraph 44 of the Master
Lease, it being the intent of the parties hereto that Subtenant shall pay as
Rent hereunder the amount Subtenant is required to pay Landlord as Rent under
the Master Lease. If the Term does not end on the last day of a month, the
Base Rent and Additional Rent (hereinafter defined) for that partial month
shall be prorated by multiplying the monthly Base Rent and Additional Rent by
a fraction, the numerator of which is the number of days of the partial month
included in the Term and the denominator of which is the total number of days
in the full calendar month. All Rent (hereinafter defined) shall be payable
in lawful money of the United States, by wire transfer or regular bank check
of Subtenant, or such other means as the parties may mutually agree, to
Sublandlord at the address stated herein or to such other persons or at such
other places as Sublandlord may designate in writing.
3.2 OPERATING EXPENSES.
(a) DEFINITIONS. For purposes of this Sublease and in
addition to the terms defined elsewhere in this Sublease, the following terms
shall have the meanings set forth below:
(1) "ADDITIONAL RENT" shall mean the sums payable
pursuant to subparagraph 3.2(b) of this Sublease.
(2) "OPERATING COSTS" shall mean Additional Rent
(as defined in Section 4(D) of the Master Lease) charged by Landlord to
Sublandlord pursuant to Section 4.D of the Master Lease.
(3) "RENT" shall mean, collectively, Base Rent,
Additional Rent, and all other sums payable by Subtenant to Sublandlord under
this Sublease, whether or not expressly designated as "rent", all of which
are deemed and designated as rent pursuant to the terms of this Sublease.
(4) "SUBTENANT'S PERCENTAGE SHARE" shall mean one
hundred percent (100%). Sublandlord and Subtenant acknowledge that
Subtenant's Percentage Share has been obtained by dividing the rentable
square footage of the Subleased Premises by the total rentable square footage
of the Master Lease Premises and multiplying such quotient by 100. In the
event Subtenant's Percentage Share is changed during a calendar year by
reason of a change in the rentable square footage of the Subleased Premises
or the Master Lease Premises, Subtenant's Percentage Share shall
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<PAGE>
thereupon be adjusted to equal the result obtained by dividing the rentable
square footage of the Subleased Premises by the rentable square footage of
the Master Lease Premises and multiplying such quotient by 100, and Sublease,
Subtenant's Percentage Share shall be determined on the basis of the number
of days during such calendar year at each such percentage share.
(b) In addition to the Base Rent payable pursuant to
Section 3.1 above, from and after the Commencement Date, for each calendar
year of the Term, Subtenant, as Additional Rent, shall pay (i) Subtenant's
Percentage Share of Operating Costs payable by Sublandlord for the then
current calendar year. The Additional Rent payable pursuant to this
Subsection (b) shall be determined and adjusted in accordance with the
provisions of Subsection 3.2(c) below.
(c) Pursuant to the provisions of Section 4.D of the
Master Lease, Landlord has the right to bill Tenant from time to time for
components of Additional Rent, or to elect to require Tenant to pay, in
advance, a monthly pro rata share of estimated Additional Rent. The parties
hereto agree that if and to the extent that Landlord elects to require the
payment to all or any components of Additional Rent on the basis of an
invoice as described above, any such amount shall be payable by Subtenant to
Sublandlord within five (5) days following presentation by Sublandlord to
Subtenant of an invoice therefore (which shall include a copy of Landlord's
invoice to Sublandlord). Alternatively, if and to the extent that Landlord
elects to have Additional Rent under the Master Lease paid in monthly
estimated payments, the determination and adjustment of Additional Rent
contemplated under Subsection 3.2(b) above shall be made in accordance with
the following procedures.
(1) Upon receipt of any statement from Landlord
specifying the estimated Operating Expenses to be charged to Sublandlord
under the Master Lease with respect to each calendar year, or as soon after
receipt of such statement as practicable, Sublandlord shall give Subtenant
written notice of its estimate of Additional Rent payable under Subsection
3.2(b) for the ensuing calendar year, which estimate shall be prepared based
on the estimate received from Landlord (as Landlord's estimate may change
from time to time), together with a copy of the statement received from
Landlord. Sublandlord's estimate of Additional Rent to be paid by Subtenant
pursuant to this Sublease shall not exceed Subtenant's Percentage Share of
Landlord's estimate delivered to Sublandlord pursuant to the Master Lease (as
Landlord's estimate may change from time to time). On or before the first
day of each month during each calendar year, Subtenant shall pay to
Sublandlord as Additional Rent one-twelfth (1/12th) of such estimated amount
together with the Base Rent.
3
<PAGE>
(2) In the event Sublandlord's notice set forth in
Subsection 3.2(c)(1) is not given on or before December of the calendar year
preceding the calendar year for which Sublandlord's notice is applicable, as
the case may be, then until the calendar month after such notice is delivered
by Sublandlord, Subtenant shall continue to pay to Sublandlord monthly,
during the ensuing calendar year, estimated payments equal to the amounts
payable hereunder during the calendar year just ended. Upon receipt of any
such post-December notice Subtenant shall (i) commence as of the immediately
following calendar month, and continue for the remainder of the calendar
year, to pay to Sublandlord monthly such new estimated payments and (ii) if
the monthly installment of the new estimate of such Additional Rent is
greater than the monthly installment of the estimate for the previous
calendar year, pay to Sublandlord within thirty (30) days of the receipt of
such notice an amount equal to the difference of such monthly installment
multiplied by the number of full and partial calendar months of such year
preceding the delivery of such notice.
(d) Within thirty (30) days after the receipt by
Sublandlord of a final statement of Operating Cost from Landlord with respect
to each calendar year, Sublandlord shall deliver to Subtenant a statement of
the adjustment to be made pursuant to Section 3.2 hereof for the calendar
year just ended, together with a copy of the Statement received by
Sublandlord from Landlord. If on the basis of such statement Subtenant owes
an amount that is less than the estimated payments for the calendar year just
ended, previously paid by Subtenant, Sublandlord shall credit such excess to
the next payments of Rent coming due or, if the term of this Sublease is
about to expire, promptly refund such excess to Subtenant. If on the basis
of such statement Subtenant owes an amount that is more than the estimated
payments for the calendar year just ended previously made by Subtenant,
Subtenant shall pay the deficiency to Sublandlord within thirty (30) days
after delivery of the statement from Sublandlord to Subtenant.
(e) Sublandlord shall refund to Subtenant Subtenant's
Percentage Share of any sums actually refunded or reimbursed to Sublandlord
pursuant to the terms of the Master Lease, reduced by Subtenant's Percentage
Share of any amounts, including attorney's fees, expended by Sublandlord to
obtain such refund, reimbursement or payment.
(f) For partial calendar years during the term of this
Sublease, the amount of Additional Rent payable pursuant to Subsection 3.2(d)
that is applicable to that partial calendar year shall be prorated based on
the ratio of the number of days of such partial calendar year falling during
the term of this Sublease to 365. The expiration or earlier termination of
this Sublease shall not affect the obligations of Sublandlord and Subtenant
pursuant to Subsection 3.2 (d), and such obligations shall survive, remain to
be
4
<PAGE>
performed after, any expiration or earlier termination of this Sublease.
4. USE AND OCCUPANCY.
4.1 USE. The Subleased Premises shall be used and occupied
only for the use permitted under Section 1 of the Master Lease by Subtenant,
Subtenant's employees and visitors and for no other use or purpose.
4.2 COMPLIANCE WITH MASTER LEASE.
(a) Subtenant agrees that it will occupy the Subleased
Premises in accordance with the terms of the Master Lease and will not suffer
to be done or omit to do any act which may result in a violation of or a
default under any of the terms and conditions of the Master Lease, or render
Sublandlord liable for any damage, charge or expense thereunder. Subtenant
further covenants and agrees to indemnify Sublandlord against and hold
Sublandlord harmless from any claim, demand, action, proceeding, suit,
liability, loss, judgment, expense (including attorneys fees) and damages of
any kind or nature whatsoever arising out of, by reason of, or resulting
from, Subtenant's failure to perform or observe any of the terms and
conditions of the Master Lease or this Sublease. Any other provision in this
Sublease to the contrary notwithstanding, Subtenant shall pay to Sublandlord
as Rent hereunder any and all sums which Sublandlord may be required to pay
the Landlord arising out of a request by Subtenant for additional Building
services from Landlord (e.g. charges associated with after-hour HVAC usage
and over standard electrical charges).
(b) Subtenant agrees that Sublandlord shall not be
required to perform any of the covenants, agreements and/or obligations of
Landlord under the Master Lease. Sublandlord shall not be responsible for
any failure or interruption, for any reason whatsoever, of the services or
facilities that may be appurtenant to or supplied at the Building by Landlord
or otherwise, including, without limitation, heat, air conditioning,
ventilation, life-safety, water, electricity, elevator service and cleaning
service, if any; and no failure to furnish, or interruption of, any such
services or facilities shall give rise to any (i) abatement, diminution or
reduction of Subtenant's obligations under this Sublease (except to the
extent that Sublandlord's obligations are abated, diminished or reduced under
the Master Lease) or (ii) liability on the part of Sublandlord.
Notwithstanding the foregoing, Sublandlord shall promptly take such action as
may reasonably be indicated, under the circumstances, to secure such
performance upon Subtenant's request to Sublandlord to do so and shall
thereafter diligently prosecute such performance on the part of Landlord.
5
<PAGE>
5. MASTER LEASE AND SUBLEASE TERMS.
5.1 Subtenant acknowledges that Subtenant has reviewed and is
familiar with all of the terms, agreements, covenants and conditions of the
Master Lease.
5.2 This Sublease is and shall be at all times subject and
subordinate to the Master Lease. Additionally, Subtenant's rights under this
Sublease shall be subject to the terms of the Landlord's written Consent to
Sublease (the "Consent").
5.3 The terms, conditions and respective obligations of
Sublandlord and Subtenant to each other under this Sublease shall be the
terms and conditions of the Master Lease except for those provisions of the
Master Lease which are directly contradicted by this Sublease in which event
the terms of the Sublease document shall control over the Master Lease.
Therefore, for the purposes of this Sublease, wherever in the Master Lease
the word "Landlord" is used it shall be deemed to mean the Sublandlord herein
and wherever in the Master Lease the word "Tenant" is used it shall be deemed
to mean the Subtenant herein. Any non-liability, release, indemnity or hold
harmless provision in the Master Lease for the benefit of Landlord that is
incorporated herein by reference, shall be deemed to inure to the benefit of
Sublandlord, Landlord, and any other person intended to be benefited by said
provision, for the purpose of incorporation by reference in this Sublease.
Any right of Landlord under the Master Lease of access or inspection and any
right of Landlord under the Master Lease to do work in the Master Lease
premises or in the Building and any right of Landlord under the Master Lease
in respect of rules and regulations, which is incorporated herein by
reference, shall be deemed to inure to the benefit of Sublandlord, Landlord,
and any other person intended to be benefited by said provision, for the
purpose of incorporation by reference in this Sublease.
5.4 For the purposes of incorporation herein, the terms of
the Master Lease are subject to the following additional modifications:
(a) In all provisions of the Master Lease (under the
terms thereof and without regard to modifications thereof for purposes of
incorporation into this Sublease) requiring the approval or consent of
Landlord, Subtenant shall be required to obtain the approval or consent of
both Sublandlord and Landlord.
(b) In all provisions of the Master Lease requiring
Tenant to submit, exhibit to, supply or provide Landlord with evidence,
certificates, or any other matter or thing, Subtenant shall be required to
submit, exhibit to, supply or provide, as the case may be, the same to both
Landlord and
6
<PAGE>
Sublandlord. In any such instance, Sublandlord shall determine if such
evidence, certificate or other matter or thing shall be satisfactory, in the
exercise of its reasonable discretion.
(c) Sublandlord shall have no obligation to restore or
rebuild any portion of the Sublease Premises after any destruction or taking
by eminent domain.
(d) In all provisions of the Master Lease requiring
Tenant to designate Landlord as an additional or named insured on its
insurance policy, Subtenant shall be required to so designate Landlord and
Sublandlord on its insurance policy.
5.5 Notwithstanding the terms of Section 5.3 above, Subtenant
shall have no rights nor obligations under the following parts, Sections and
Exhibits of the Master Lease: 2, 4A, 4B, 4D, 4F, 4G, 7, 12, 19, 34, 37, 43,
44, 50(F) and 50(G), 51, 52, 53, and Construction Agreement.
5.6 During the Term and for all periods subsequent thereto
with respect to obligations which have arisen prior to the termination of
this Sublease, Subtenant agrees to perform and comply with, for the benefit
of Sublandlord and Landlord, the obligations of Sublandlord under the Master
Lease which pertains to the Subleased Premises and/or this Sublease, except
for those provisions of the Master Lease which are directly contradicted by
this Sublease, in which event the terms of this Sublease document shall
control over the Master Lease.
6. TERMINATION OF MASTER LEASE.
6.1 If for any reason the term of the Master Lease shall
terminate prior to the scheduled Expiration Date, this Sublease shall
thereupon be terminated and Sublandlord shall not be liable to Subtenant by
reason thereof, except if such termination results from Sublandlord's breach
of its obligations hereunder; in no event shall Sublandlord be liable to
Subtenant for consequential damages or the loss of Subtenant's profits or
business.
6.2 The foregoing is hereby included in this Sublease so as
to comply with the provisions of Paragraph 49.A of the Master Lease:
If Landlord and Tenant jointly and voluntarily elect, for
any reason whatsoever, to terminate the Master Lease prior
to the scheduled Master Lease termination date, then this
Sublease (if then still in effect) shall terminate
concurrently with the termination of the Master Lease.
Subtenant expressly acknowledges and agrees that (1) the
voluntary termination of the Master Lease by Landlord
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<PAGE>
and Tenant and the resulting termination of this Sublease
shall not give Subtenant any right or power to make any legal
or equitable claim against Landlord, including without
limitation any claim for interference with contract or
interference with prospective economic advantage, and (2)
Subtenant hereby wives any and all rights it may have under
law or at equity against Landlord to challenge such an early
termination of the Sublease, and unconditionally releases
and relieve Landlord, and its officers, directors, employees
and agents, from any and all claims, demands, and/or causes
of action whatsoever (collectively, "Claims"), whether such
matters are known or unknown, latent or apparent, suspected
or unsuspected, foreseeable or unforeseeable, which
Subtenant may have arising out of or in connection with any
such early termination of this Sublease. Subtenant
knowingly and intentionally waives any and all protection
which is or may be given by Section 1542 of the California
Civil Code which provides as follows: "A general release
does not extend to claims which the creditor does not know
or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially
affected his settlement with debtor.
The term of this Sublease is therefore subject to early
termination. Subtenant's initials here below evidence (a)
Subtenant's consideration of and agreement to this early
termination provision, (b) Subtenant's acknowledgment that,
in determining the net benefits to be derived by Subtenant
under the terms of this Sublease, Subtenant has anticipated
the potential for early termination, and (c) Subtenant's
agreement to the general waiver and release of Claims above.
Initials: /s/ [ILLEGIBLE] 9/24/97 Initials: /s/ [ILLEGIBLE]
------ ------
Subtenant Tenant
6.3 Sublandlord covenants to maintain the Master Lease in
full force and effect, without default, throughout the term of this Sublease.
7. INDEMNITY. Subtenant shall indemnify, defend and hold
harmless Sublandlord from and against all losses, costs,
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damages, expenses and liabilities, including, without limitation, reasonable
attorneys' fees and disbursements, which Sublandlord may incur or pay out
(including, without limitation, to the landlord under the Master Lease) by
reason of (i) any accidents, damages or injuries to persons or property
occurring in, on or about the Subleased Premises (unless the same shall have
been caused by Sublandlord's negligence or wrongful act or the negligence or
wrongful act of the landlord under the Master Lease), (ii) any breach or
default hereunder on Subtenant's part, (iii) the successful enforcement of
Sublandlord's rights under this Section 7 or any other Section of this
Sublease, (iv) any work done after the date hereof in or to the Subleased
Premises except if done by Sublandlord or the landlord under the Master
Lease, or (v) any act, omission or negligence on the part of Subtenant and/or
its officers, partners, employees, agents, customers and/or invitees, or any
person claiming through or under Subtenant relating to Subtenant's use of the
Leased Premises pursuant to this Sublease.
8. LIMITATION ON LIABILITY. Sublandlord shall not be liable for
personal injury or property damage to Subtenant, its officers, agents,
employees, invitees, guests, licensees or any other person in the Sublease
Premises, regardless of how such injury or damage may be caused (except to
the extent arising solely out of Sublandlord's gross negligence or willful
misconduct). Any property of Subtenant kept or stored in the Sublease
Premises shall be kept or stored at the sole risk of Subtenant. Subtenant
shall hold Sublandlord harmless from any claims arising out of any personal
injury or property damage occurring in the Sublease premises, including
subrogation claims by Subtenant's insurance carrier(s).
9. CONSENTS.
9.1 Under the Master Lease, Sublandlord must obtain the
consent of Landlord to any subletting. Landlord has, pursuant to that
certain letter dated May 14, 1997, consented to this Sublease.
9.2 CONSENTS AND APPROVALS. In any instance when
Sublandlord's consent or approval is required under this Sublease,
Sublandlord's refusal to consent to or approve any matter or thing shall be
deemed reasonable if, among other matters, such consent or approval is
required under the provisions of the Master Lease incorporated herein by
reference but has not been obtained from Landlord. Except as otherwise
provided herein, Sublandlord shall not unreasonably withhold, or delay its
consent to or approval of a matter if such consent or approval is required
under the provisions of the Master Lease and Landlord has consented to or
approved of such matter. If Subtenant shall seek the approval by or consent
of Sublandlord and Sublandlord shall fail or refuse to give such consent or
approval, Subtenant shall not be entitled to any damages for any withholding
or delay of such approval or
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consent by Sublandlord, it being agreed that Subtenant's sole remedy in
connection with an alleged wrongful refusal or failure to approve or consent
shall be an action for injunction or specific performance and that said
remedy of an action for injunction or specific performance shall be available
only in those cases where Sublandlord shall have expressly agreed in this
Sublease not to unreasonably withhold or delay its consent.
10. ATTORNEY'S FEES. If Sublandlord, Subtenant or Landlord brings
an action to enforce the terms hereof or to declare rights hereunder, the
prevailing party who recovers substantially all of the damages, equitable
relief or other remedy sought in any such action on trial and appeal shall be
entitled to his reasonable attorney's fees to be paid by the losing party as
fixed by the Court.
11. "AS-IS" OCCUPANCY. Sublandlord shall deliver, and Subtenant
shall accept, possession of the Subleased Premises in their "AS IS"
condition as the Subleased Premises exists on the date hereof, for purposes
of Subtenant's general contractor constructing Subtenant's improvements.
Notwithstanding the foregoing, Sublandlord agrees (i) to use commercially
reasonable efforts to enforce the provisions of the Master Lease as and when
necessary such that Landlord completes all work required of Landlord in the
construction of the Building, and (ii) to either enforce or assign to
Subtenant any warranties received by Sublandlord (whether directly or by
assignment from Landlord) from contractors or suppliers. Sublandlord shall
have no obligation to furnish, render or supply any work, labor, services,
materials, furniture, fixtures, equipment, decorations or other items to make
the Subleased Premises ready or suitable for Subtenant's occupancy. In
making and executing this Sublease, Subtenant has relied solely on such
investigations, examinations and inspections as Subtenant has chosen to make
or has made and has not relied on any representation or warranty concerning
the Subleased Premises or the Building, except as expressly set forth in this
Sublease. Subtenant acknowledges that Sublandlord has afforded Subtenant the
opportunity for full and complete investigations, examinations and
inspections of the Subleased Premises and the common areas of the Building.
Subtenant acknowledges that it is not authorized to make or do any
alterations or improvements in or to the Subleased Premises except as
permitted by the provisions of this Sublease and the Master Lease and that
upon termination of this Sublease, Subtenant shall deliver the Subleased
Premises to Sublandlord in the same condition as the Subleased Premises were
at the commencement of the Term hereof, reasonable wear and tear excepted.
12. PARKING. During the Term hereof Subtenant and its employees
shall be permitted to use all of the on-site parking spaces allocated to
Sublandlord in the Master Lease.
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13. NOTICES. Any notice by either party to the other
required, permitted or provided for herein shall be valid only if in writing
and shall be deemed to be duly given only if (a) delivered personally, or (b)
sent by means of Federal Express, UPS Next Day Air or another reputable
express mail delivery service guaranteeing next day delivery, or (c) sent by
United States Certified or registered mail, return receipt requested,
addressed (i) if to Sublandlord, at the following addresses:
Oracle Corporation
500 Oracle Parkway
Box LGN2
Redwood Shores, CA 94065
Attn: Lease Administrator
With a copy to:
Oracle Corporation
500 Oracle Parkway
Box 5OP7
Redwood Shores, CA 94065
Attn: Legal Department
and (ii) if the Subtenant, at the Subleased Premises.
or at such other address for either party as that party may designate by
notice to the other. A notice shall be deemed given and effective, if
delivered personally, upon hand delivery thereof, if sent via express mail,
upon hand delivery, and if mailed by United States certified or registered
mail, five (5) days following such mailing in accordance with this Section.
14. COMPLETE AGREEMENT. There are no representations, warranties,
agreements, arrangements or understandings, oral or written, between the
parties or their representatives relating to the subject matter of this
Sublease which are not fully expressed in this Sublease. This Sublease
cannot be changed or terminated nor may any of its provisions be waived
orally or in any manner other than by a written agreement executed by both
parties.
15. FURNITURE AND EQUIPMENT LEASE. Concurrently with the
execution and delivery of this Sublease, Sublandlord and Subtenant are
executing that certain Furniture and Equipment Lease attached hereto as
EXHIBIT A. The parties hereto acknowledge that the Furniture and Equipment
Lease shall govern Subtenant's use of certain items of furniture and
equipment belonging to Sublandlord within the Sublease Premises, and of
default under the Furniture and Equipment Lease shall automatically
constitute a default under this Sublease.
16. INTERPRETATION. This Sublease shall be governed by and construed
in accordance with the laws of the State of
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California. If any provision of this Sublease or the application thereof to
any person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, the remainder of this Sublease and the application
of that provision to other persons or circumstances shall not be affected but
rather shall be enforced to the extent permitted by law. The captions,
headings and titles, if any, in this Sublease are solely for convenience of
reference and shall not affect its interpretation. This Sublease shall be
construed without regard to any presumption or other rule requiring
construction against the party causing this Sublease or any part thereof to
be drafted. If any words or phrases in this Sublease shall have been
stricken out or otherwise eliminated, whether or not any other words or
phrases have been added, this Sublease shall be construed as if the words or
phrases so stricken out or otherwise eliminated were never included in this
Sublease and no implication or inference shall be drawn from the fact that
said words or phrases were so stricken out or otherwise eliminated. Each
covenant, agreement, obligation or other provision of this Sublease shall be
deemed and construed as a separate and independent covenant of the party
bound by, undertaking or making same, not dependent on any other provision of
this Sublease unless otherwise expressly provided. All terms and words used
in this Sublease, regardless of the number or gender in which they are used,
shall be deemed to include any other number and any other gender as the
context may require. The word "person" as used in this Sublease shall mean a
natural person or persons, a partnership, a corporation or any other form of
business or legal association or entity.
17. COUNTERPARTS. This Sublease may be executed in separate
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. This Sublease shall
be fully executed when each party whose signature is required has signed and
delivered to each of the parties at least one counterpart, even though no
single counterpart contains the signatures of all parties hereto.
18. SUBLANDLORD'S OPTION TO TERMINATE. Sublandlord shall have the
right, from time to time during the Term, to terminate this Sublease with
respect to all or any portion of the Sublease Premises. Any such termination
shall be affected by at least six (6) months' advance written notice to
Subtenant, which notice shall specify the portion of the Sublease Premises
which shall be subject to such termination, and the effective date of such
termination. Prior to the effective date of such termination as specified in
Sublandlord's notice, Subtenant shall vacate such portion of the Sublease
Premises, leaving the same broom-clean and free of Subtenant's equipment,
personnel and personal property except such items of furniture and/or
equipment which Subtenant leases from Sublandlord pursuant to the Furniture
and Equipment Lease attached hereto as Exhibit B, which Sublandlord has
specified that Subtenant must leave behind). On the later to occur of (i)
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<PAGE>
the effective date of such termination as specified in the Sublandlord's
notice to Subtenant and (ii) the date upon which Subtenant actually vacates
the subject space pursuant to the provisions of the immediately preceding
sentence, this Sublease shall be revised to provide that the Sublease
Premises shall consist only of the portion of the Master Lease Premises which
Subtenant may remain in occupancy of pursuant to the provisions of
Sublandlord's notice; concurrently, the Base Rent and Subtenant's Percentage
Share shall be appropriately adjusted to reflect the relationship between the
Sublease Premises, as so reduced, and the Master Lease Premises. As soon as
reasonably possible, the Sublandlord shall present to Subtenant, for
execution by Subtenant, an amendment to this Sublease setting forth such
changes to the Sublease Premises, Base Rent payable, and Subtenant's
Percentage Share, together with an amendment to the Furniture and Equipment
Lease, reflecting the reduction of the Sublease Premises in the manner
described in this Section 18.
IN WITNESS WHEREOF, the parties hereto hereby execute this Sublease
as of the day and year first above written.
SUBLANDLORD:
ORACLE CORPORATION, a Delaware
corporation
By: /s/ Bruce Lange
----------------------------------------
Print Name: BRUCE LANGE
--------------------------------
Title: VP AND CORPORATE TREASURER
-------------------------------------
SUBTENANT:
NETWORK COMPUTER, INC., a Delaware
corporation
By: /s/ Jerry Baker
----------------------------------------
Print Name: Jerry Baker
--------------------------------
Title: CEO 9/24/97
-------------------------------------
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<PAGE>
EXHIBIT A
FURNITURE & EQUIPMENT LEASE
This Furniture and Equipment Lease ("Lease") is entered into as of
September 17, 1997, by and between Oracle Corporation ("Lessor"), and NETWORK
COMPUTER, INC. ("Lessee"), with reference to the following facts:
A. Lessor currently leases that certain office building located at
1000 Bridge Parkway, Redwood City, California (the "Building") pursuant to
the terms of a lease with Westpark Investments ("Master Lease").
B. Lessor and Lessee are entering into that certain Sublease of even
date herewith (the "Sublease") pursuant to which Lessor will sublet the
Building to Lessee for an initial term of five (5) years, subject to certain
renewal and cancellation rights set forth therein. In addition to subletting
the Building from Lessor, Lessee desires to lease from Lessor certain
furniture, equipment and furnishings owned or leased by Lessor and presently
located in the Building, and Lessor is willing to lease the same to Lessee on
the terms, covenants and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants herein contained, and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto do hereby agree as follows.
1. LEASE. Lessor agrees to lease to Lessee and Lessee agrees to lease
from Lessor, subject to the terms, covenants and conditions herein, the items
of furniture, equipment, furnishings and other personal property described in
EXHIBIT A attached hereto and incorporated herein by this reference (the
"Furniture"). Lessor being the owner of the Furniture for all purposes, this
Lease is intended to constitute a true lease of the Furniture and not an
agreement for the sale of or the grant of a security interest in any
Furniture. Lessee's interest in the Furniture is limited to a leasehold.
2. TERM. The term of this Lease shall commence upon the commencement
date of the term of the Sublease referred to above and, unless earlier
terminated as provided herein, shall continue for so long as the Sublease
shall remain in effect. Upon the commencement of the term of this Lease,
Lessor and Lessee shall conduct an inspection of the Building in order to
identify and inventory the Furniture and verify its then current condition.
3. RENT. Lessee shall pay to Lessor rent for the Furniture in the
amount of $55,095.16 per month. Lessee shall commence
<PAGE>
payment of such monthly rent on the commencement date of the term of the
Sublease, which date shall be September 8, 1997, unless otherwise determined,
notwithstanding any earlier commencement of the term of this Lease. The
parties understand and acknowledge that the rent figure set forth above is an
estimate by Lessor of the rent to be payable hereunder, based upon Lessor's
preliminary estimate of the initial cost of the Furniture and the
amortization of such cost over the term of this Lease, and that Lessor shall
not know the actual initial cost of the Furniture until after the date of
commencement of the term. Accordingly, Lessor shall have the right, within
six (6) months following the date of commencement of the term of this Lease,
to deliver notice to Lessee setting forth a revised monthly rent figure
payable hereunder, together with reasonable back-up documentation supporting
the calculation of such rent figure. If such monthly rental amount is in
excess of the amount stated above, Lessee shall deliver to Lessor a
reconciliation payment of any underpayment within thirty (30) days following
Lessor's delivery of such statement; correspondingly, if such figure is less
than the monthly rental figure set forth above, Lessor shall credit any
overpayments by Lessee against Lessee's next due payment(s) of rent
hereunder. Such monthly rent shall be payable in advance on the first day of
each calendar month during the term hereof, in lawful money of the United
States (via wire transfer or other method mutually acceptable to Lessor and
Lessee), to Lessor at its offices at 500 Oracle Parkway, Box LGN2, Redwood
City, California 94065, Attention: Lease Administrator, or to such other
person or at such other place as Lessor may from time to time designate in
writing. All rent and other amounts payable hereunder shall be due and
payable without any offset, deduction, prior notice or demand and without any
abatement, reduction, counterclaim or other right Lessee may claim against
Lessor.
4. CONDITION OF FURNITURE. Upon the commencement of the term of this
Lease, Lessor shall deliver the Furniture to Lessee in good order and repair,
subject to normal wear and tear. Lessee acknowledges that Lessor is not a
seller under the California Uniform Commercial Code and that Lessor makes no
warranties of any nature, including, but not limited to, warranties as to the
merchantability of the Furniture, its fitness for any particular purpose, its
installation, its size, design, capacity or condition, its quality, its
compliance with any law, rule, specification or contract or latent defects.
5. LOCATION; LESSOR'S INSPECTIONS; LABELS. All of the Furniture shall
remain at the Building and shall not be removed therefrom for any reason
whatsoever without Lessor's prior written consent. Lessor shall have the
right to enter the Building and inspect the Furniture at any time during
normal business hours and upon reasonable advance notice given to Lessee. If
Lessor supplies Lessee with labels stating that the Furniture or any item
thereof is owned by Lessor (or by a primary lessor), Lessee shall affix and
keep the same on each item of Furniture, Lessee shall not alter,
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<PAGE>
deface or remove any of the same and Lessee shall promptly replace any such
labels that may be removed, defaced or destroyed. Lessee shall not permit
the name of any person other than Lessor (or any primary lessor identified to
Lessee) to be placed on any item of Furniture in a manner that might be
interpreted as a claim of any right, title or interest in or to such item.
6. TITLE. Title to each item of Furniture (whether full legal title
or Lessor's interest as primary lessee) shall be and remain with Lessor at
all times, and Lessee shall at no time make any assertion to the contrary.
Lessee shall have no right, title or interest in or to any of the Furniture
except its leasehold interest solely as lessee as provided herein.
Each item of Furniture is and shall at all times remain personal
property, notwithstanding the manner in which it may now or hereafter be
affixed or attached to the Building.
7. REPAIRS AND MAINTENANCE; USE; ALTERATIONS. Lessee, at its sole
expense, shall keep the Furniture in good working order, condition and repair
throughout the term of this Lease, ordinary wear and tear excepted. Lessee
represents, warrants and agrees that all Furniture will be used solely for
business purposes and not for personal, family or household purposes. Lessee
shall use the Furniture in a careful, proper manner only for the purposes for
which it is intended to be used.
8. SURRENDER. Lessee acknowledges and agrees that each item of the
Furniture will have significant value to Lessor at the expiration or earlier
termination of the term of this Lease, and that Lessor intends to retake
possession of the Furniture at that time. Lessor shall notify Lessee of
Lessor's schedule for removal of the Furniture, and Lessee shall cooperate
with Lessor in effecting the removal of the Furniture from the Building in
accordance with Lessor's schedule. The parties shall agree upon an equitable
proration of the rent for the final month of the term hereof based upon
Lessor's schedule for removal of the Furniture.
9. RISK OF LOSS. Lessee shall at all times bear the entire risk of
loss, theft, destruction or damage, whether partial or complete and whether
or not insured, of each item of the Furniture, and of any condemnation,
confiscation, requisition, seizure, forfeiture or other taking of title to or
use of each item of Furniture, whether partial or complete, from any cause
whatsoever (herein "Loss or Damage"), except to the extent that any such Loss
or Damage may result from the negligence or willful misconduct of Lessor, or
its agents, contractors or employees; and Lessee shall indemnify and defend
Lessor and hold Lessor harmless from and against any and all Loss or Damage,
except to the extent that any such Loss or Damage may result from the
negligence or willful misconduct of Lessor, or its agents, contractors or
employees, until such time as such item of Furniture shall have been returned
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<PAGE>
to Lessor and received by Lessor in accordance with all terms and conditions
of this Lease. No Loss or Damage shall release, impair or otherwise affect
Lessee's obligation to pay rent or any other obligation of Lessee under this
Lease. In the event of any Loss or Damage to any item of Furniture, Lessee
shall notify Lessor thereof in writing within five (5) days after the
occurrence of such Loss or Damage, and Lessee shall immediately, at Lessee's
option and at Lessor's sole expense, with respect to such item of Furniture,
(a) place the same in good working order, condition and repair, (b) replace
the same with like Furniture in good working order, condition and repair,
having equivalent value and utility and with clear title therein in Lessor
(which shall thereupon be deemed substituted for such item of Furniture for
all purposes), or (c) pay to Lessor an amount equal to the replacement cost
of such item of Furniture.
10. INSURANCE. Lessee shall, at its own expense, at all times during
the term of this Lease, insure the Furniture against risks customarily
insured against (as reasonably approved by Lessor) on similar items of
furniture in an amount not less than the full cost of replacement of the
Furniture. The insurance shall provide thirty (30) days prior written notice
to Lessor in the event of material change to or cancellation or expiration of
the insurance. Lessee shall deliver to Lessor certificates of such insurance
and evidence satisfactory to Lessor of Lessee's payment when due of all
premiums on such insurance. Without relieving Lessee of its obligations
under section 9 above, in the event of any Loss or Damage, if Lessor receives
any insurance proceeds as a consequence of being the loss payee under any
insurance policy maintained by Lessee, Lessor shall make such proceeds
available to Lessee for replacement of any items of Furniture damaged or
destroyed.
11. LIENS; TAXES. During the term of this Lease, Lessee shall keep the
Furniture free of all claims, liens, charges, security interests and other
encumbrances resulting from the action of Lessee. During the term of this
Lease, Lessee shall comply with all federal, state and local laws requiring
the filing of ad valorem and other tax returns relating to the Furniture. If
such returns are required to be filed by Lessor, Lessee shall so notify
Lessor in writing, whereupon Lessee shall provide Lessor promptly on request
such information as Lessor shall require to complete such returns, and Lessor
shall file such returns. If Lessee does not pay any of the same when due,
Lessor shall have the right, but shall not be obligated, to pay the same, in
which event Lessee shall pay to Lessor on demand, as additional rent, an
amount equal to all amounts paid or expenses incurred by Lessor, together
with interest thereon at the annual rate of twelve percent or, if lower, the
maximum rate that Lessor may lawfully charge.
12. INDEMNITY. Lessee shall indemnify and defend (by counsel engaged
by Lessee, but satisfactory to Lessor) Lessor and its
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<PAGE>
agents, employees, officers and directors and hold them harmless from and
against any and all claims, liabilities, losses, damages and expenses,
including, without limitation, all court costs and attorneys' and expert
witnesses' fees and costs, arising from or in connection with or based on (a)
the possession, condition, operation or use (by whomever operated or used) of
any of the Furniture, or (b) the performance or enforcement of any of the
terms, or any noncompliance or nonperformance of any condition, of this
Lease, except to the extent that any of the foregoing result from the
negligence or willful misconduct of Lessor, or its agents, contractors or
employees, or from any breach on the part of Lessor under any contract made
by Lessor affecting any of the Furniture. Lessee shall satisfy, pay and
discharge any and all settlements, judgments and fines that may be recovered
against Lessor in connection therewith. Lessor shall give Lessee written
notice of any such claim.
13. ASSIGNMENT. Lessee expressly covenants and agrees that it shall
not assign, mortgage or encumber this Lease or sublet or lend any of the
Furniture or permit any of the Furniture to be used by anyone other than
Lessee. No assignment or sublease by Lessee shall in any event relieve or
release Lessee of or from any debt, duty, obligation or liability hereunder,
and Lessee shall remain primarily liable hereunder.
Lessor, in its sole and absolute discretion, may sell, assign,
transfer, pledge, hypothecate, grant security interests in or otherwise
encumber or dispose of this Lease or any interest herein, as a whole or in
part, without notice to Lessee. Notwithstanding any assignment by Lessor,
Lessor warrants that so long as Lessee is not in default hereunder, Lessee
shall quietly enjoy use of the Furniture subject to the terms and conditions
of this Lease and, as part of any such assignment, the assignee thereunder
shall agree that Lessee's rights hereunder in and to the Furniture shall not
be disturbed so long as Lessee is not in default hereunder. Lessor shall
notify Lessee in writing of any transfer of this Lease by Lessor; and Lessee
agrees to acknowledge receipt of and comply with any notice thereof given by
Lessor in writing and to provide Lessor or its assignee with such agreements,
consents, conveyances, documents and certificates as may be reasonably
requested by Lessor or its assignee to effect, facilitate or perfect any
assignment by Lessor.
Subject to the foregoing, this Lease shall inure to the benefit of
and bind Lessor, Lessee and their respective heirs, legatees, personal
representatives, successors and assigns.
14. DELINQUENCY CHARGE. Should Lessee fail to pay any rent hereunder
or any other sum required to be paid to Lessor by Lessee on the date due,
Lessee agrees to pay to Lessor, on demand, (a) an amount equal to five
percent (5%) of such rent or other sum, and (b) all of Lessor's costs and
expenses incurred or paid in
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<PAGE>
collecting the delinquent payment, with interest thereon from the date paid
by Lessor until paid by Lessee at the annual rate of twelve percent or, if
lower, the maximum rate Lessor may lawfully charge.
15. DEFAULT. Any of the following shall constitute a "default"
hereunder: (a) Lessee fails to pay when due any rent or any other sum
required to be paid hereunder and such failure continues for ten days from
written notice thereof from Lessor; (b) Lessee fails to observe, keep or
perform any other term, covenant or condition of this Lease and such failure
continues for thirty days from written notice thereof from Lessor; (c) Lessee
becomes insolvent or admits in writing its inability to pay or fails to pay
its debts as they become due, or makes an assignment for the benefit of its
creditors, or applies for or acquiesces in the appointment of a receiver,
trustee or other custodian for any of its properties or assets; (d) any
proceeding shall be commenced by or against Lessee for any relief which
includes, or might result in, any modification of the obligations of Lessee
under this Lease or relief under any bankruptcy or insolvency laws or other
laws relating to the relief of debtors, adjustment of indebtedness,
reorganization, composition or extension, unless, in the case of an
involuntary proceeding not consented to or acquiesced in by Lessee, such
proceeding shall have been dismissed within 90 days after the same shall have
been commenced (provided that this Lease shall terminate automatically if
Lessee fails to pay any rent when due hereunder after a proceeding has been
commenced by or against Lessee under the United States Bankruptcy Code); (e)
Lessee voluntarily or involuntarily, by operation of law or otherwise,
removes, sells, transfers, assigns, grants any security interest in, pledges,
hypothecates, encumbers, parts with possession of or sublets this Lease or
any Furniture, or attempts to do so, except only as and to the extent
expressly permitted hereby; or (f) Lessee commits an event of default under
the Sublease.
16. REMEDIES. On any default hereunder by Lessee, Lessor shall have
the right, but shall not be obligated, to exercise at any time or from time
to time thereafter any one or more of the following rights and remedies, any
of which rights and remedies may be exercised by Lessor without notice to or
demand on Lessee:
(a) ADVANCE RENT. If Lessee shall have paid any rent hereunder in
advance of the due date therefor, Lessor may apply any or all thereof to any
obligation of Lessee hereunder.
(b) RECOVERY OF SUMS DUE AND TO BECOME DUE. In lieu of such
acceleration, Lessor may recover all rent and other amounts due as of the
date of such default and recover all rent and other sums as they accrue
thereafter.
(c) PROCEEDING IN COURT. Lessor may proceed by appropriate court
action, either at law or in equity, to enforce
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performance by Lessee of the terms and conditions of this Lease or to recover
damages for the breach hereof or to regain possession of the Furniture.
(d) TERMINATION. Any of the foregoing actions by Lessor under
this section 16 shall not constitute a termination of this Lease or any of
Lessee's obligations under this Lease. Lessor may, in its exclusive
discretion, terminate this Lease by express written notice thereof to Lessee.
(e) OTHER REMEDIES. Lessor may pursue any other remedy available
to Lessor at law or in equity. Under all circumstances, Lessee shall also
pay to Lessor, on demand, an amount equal to any and all incidental damages
sustained by Lessor, including, without limitation, all costs of collection,
repossession, transportation, storage, repair, reconditioning, resale or
other disposition of the Furniture, all attorneys', expert witnesses' and
accountants' fees and costs (whether or not suit is commenced), court costs
and other costs and expenses incurred in exercising any rights or remedies
hereunder or in enforcing any of the terms or conditions hereof.
The discount rate for purposes of determining present value shall
be a rate equal to one percent in excess of the discount rate of the Federal
Reserve Bank of San Francisco as of the date of entry of judgment in favor of
Lessor.
The provisions of this section 16 shall not prejudice Lessor's
right to recover or prove damages for unpaid rent accrued prior to default.
No remedy referred to in this section 16 is intended to be exclusive, but
each shall be cumulative and in addition to any other remedy referred to
above or otherwise available to Lessor at law or in equity and may be
exercised concurrently or consecutively. The exercise or beginning of
exercise by Lessor of any one or more of such remedies shall not preclude the
simultaneous or later exercise by Lessor of any or all of such other
remedies. Lessor's remedies shall be available to Lessor's successors and
assigns.
17. FURTHER ASSURANCES. Lessee will promptly and duly execute and
deliver to Lessor such further documents and assurances and take such further
action as Lessor may from time to time reasonably request in order more
effectively to carry out the intent and purposes of this Lease and to
establish and protect the rights, interests and remedies intended to be
created in favor of Lessor hereunder, including, without limitation, the
execution and filing of financing statements and continuation statements with
respect to the Furniture and this Lease.
18. PERFORMANCE BY LESSOR OF LESSEE'S OBLIGATIONS. If Lessee fails
promptly to perform any of its obligations under this Lease, Lessor, on written
notice to Lessee, may (but shall not be obligated to and shall not incur any
liability or obligation to
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Lessee or any third party for failure to) perform the same for the account of
Lessee without waiving Lessee's failure as a default. All sums paid or
expense or liability incurred by Lessor in such performance (including
reasonable legal fees) shall be promptly reimbursed by Lessee on demand of
Lessor, together with interest thereon from the date paid by Lessor to the
date reimbursed by Lessee at the annual rate of twelve percent or, if lower,
the maximum rate that Lessor may lawfully charge.
19. NOTICES. All notices, consents and other communications required
or permitted under this Lease shall be in writing and shall be deemed duly
given and received when delivered personally or three days after mailing if
mailed by first class or certified mail, charges or postage prepaid, properly
addressed to Lessor or Lessee, as the case may be, at its address set forth
below, or at such other address as either party shall from time to time
designate by notice under this section 19.
Lessor: Oracle Corporation
500 Oracle Parkway
Box LGN2
Redwood Shores, CA 94065
Attn: Lease Administrator
With copy to: Oracle Corporation
500 Oracle Parkway
Box 5OP7
Redwood City, California 94065
Attention: Lease Administrator
Lessee: At the Building
20. ENFORCEMENT. This Lease shall be deemed to have been entered into
in the County of San Mateo, State of California, where this Lease is being
signed on behalf of Lessor and Lessee, and all performance on the part of
Lessee, including the payment of all rent and other sums due hereunder, shall
be deemed to have been required to be performed by Lessee in said County.
This Lease shall be governed by and construed, interpreted and enforced in
accordance with the laws of the State of California, without giving effect to
principles of conflicts of law or choice of law. Jurisdiction and venue in
any action or proceeding in connection with this Lease shall be in the proper
state or Federal court located in the City and County of San Francisco or the
County of San Mateo, State of California.
21. MISCELLANEOUS. The singular includes the plural and vice versa, as
applicable. The term "Lessee" as used herein, if this Lease is signed by
more than one Lessee, means each Lessee, and their obligations and
representations hereunder shall be joint and several. The headings or
captions at the beginning of sections
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hereof are solely for convenience of reference and are not part of this Lease.
22. TIME. Time is of the essence of this Lease.
23. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Lease constitutes the
entire agreement between Lessor and Lessee and supersedes all prior or
contemporaneous agreements, promises, representations, correspondence and
negotiations, regarding the subject matter hereof. This Lease may not be
amended, altered or changed except by written agreement signed by Lessor and
Lessee and supported by new consideration. No provision hereof for the
benefit of Lessor and no default of Lessee hereunder may be waived except in
writing signed by Lessor. No failure on the part of Lessor to exercise, and
no delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof. Waiver by Lessor of any provision hereof or default hereunder
in any instance shall not constitute a waiver as to any other provision,
default or instance.
24. SEVERABILITY. If any provision of this Lease is held invalid, such
invalidity shall not affect the other provisions, which shall be given effect
without the invalid provision.
IN WITNESS WHEREOF, the parties hereto have executed this Furniture
Lease as of the date first above written.
LESSOR: LESSEE:
ORACLE CORPORATION NETWORK COMPUTER, INC.
By: By:
----------------------------------- -----------------------------------
Name: Name:
--------------------------------- ---------------------------------
Title: Title:
-------------------------------- --------------------------------
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EXHIBIT 10.24
MAINTENANCE SERVICES AGREEMENT
BETWEEN
NETWORK COMPUTER, INC.
("NCI")
AND
ORACLE CORPORATION
("ORACLE")
<PAGE>
MAINTENANCE SERVICES AGREEMENT
THIS MAINTENANCE SERVICES AGREEMENT (the "Agreement") is made as of
September 17, 1997, between NETWORK COMPUTER, INC., a Delaware corporation
("NCI"), and ORACLE CORPORATION, a Delaware corporation, ("Oracle"), with
reference to the following facts:
A. Pursuant to the terms of that certain Lease Agreement dated October 8,
1996 (the "Master Lease") by and between Westport Investments ("Landlord"), as
Landlord, and Oracle as Tenant, Oracle leased from Landlord the entire building
located at 1000 Bridge Parkway, Redwood City, California consisting of
approximately 48,384 square feet of space (the "Building"). Concurrently with
the execution of the Master Lease, Landlord and Oracle executed an additional
Lease (the "800 Bridge Lease") pursuant to which Oracle leased from Landlord the
Building located at 800 Bridge Parkway in Redwood City, California ("800
Building").
B. Pursuant to the provisions of that certain Sublease by and between
Oracle, as Sublandlord and NCI, as Subtenant, dated as of September 17, 1997
(the "Sublease"), NCI subleased the Building from Oracle.
C. Pursuant to the provisions of the Master Lease, Oracle, as the tenant
thereunder, has responsibility for certain maintenance and repair of the
Building; such responsibility for maintenance and repair is assumed by NCI
pursuant to the provisions of the Sublease.
D. Pursuant to the provisions of the 800 Bridge Lease, Oracle, as the
tenant thereby has maintenance and repair responsibilities with respect to the
800 Building identical to NCI's maintenance and repair responsibilities
described in Recital C above.
E. NCI does not have the internal staffing necessary to perform all of the
maintenance and repair duties assumed by NCI under the Sublease, and desires to
obtain the services of Oracle in connection with the operation, maintenance and
repair of the Building as required under the Master Lease and Sublease, and
Oracle desires to render such services to NCI.
NOW, THEREFORE, in consideration of the foregoing and for good and other
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the mutual covenants herein contained, the parties hereto agree as
follows:
1. INCORPORATION OF RECITALS. Recitals A through E above are hereby
incorporated herein.
<PAGE>
2. DUTIES OF ORACLE
2.1. Appointment of Oracle. Subject to the provisions hereof and during
the term hereof, NCI hereby appoints Oracle, and Oracle hereby accepts
appointment and agrees, to perform NCI's maintenance and repair responsibilities
with respect to the Building pursuant to the Sublease (the "Services"). Oracle
shall at all times keep NCI informed as to all material matters concerning the
Building.
2.2. Duties of Oracle. Oracle agrees to do the following in connection
with the continuing operation of the Building and performance of the Services,
subject to the budgets approved by NCI and the availability of funds provided by
NCI for such purposes:
(a) Personnel. Hire and retain as employees of Oracle, and not as
employees of NCI, such personnel as may be required to perform properly Oracle's
functions hereunder. Such personnel shall include the following:
i. A maintenance manager who will oversee the operation,
supervision, equipment warranty management and general repair and maintenance of
the Building and who will be available 6 hours per week;
ii. A maintenance assistant who will be available 6 hours per
week to respond to general calls (to expedite lighting replacements, for
example);
iii. An engineering technician to oversee HVAC units and
resolve electrical and plumbing issues;
iv. Additional personnel will be allocated for a total of 293
hours during each calendar year to cover Building operations, lease
administration, financial reporting, and operations coordination (central
dispatch) to handle property maintenance requests from NCI.
Oracle personnel will be available Monday through Friday from 8:00 a.m. until
5:00 p.m., except during the following holidays: New Years Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving (2 days) and Christmas. A building
emergency contact number will be provided for after normal business hours. The
employees of Oracle shall be hired at Oracle's sole cost and expense; except
that the costs of the personnel included in the maintenance and administration
of the Building shall be paid in accordance with the approved operating budget
for the Building. The compensation, retention and performance of employees hired
by Oracle at its own expense shall be controlled exclusively by Oracle, and
Oracle shall be responsible for complying with all laws and regulations
affecting such employment, including the provision of any benefits or
compensation and payment of withholding taxes required by statute or contract.
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(b) Contracts; Permits.
i. Assemble and retain all contracts, agreements and other
records and data as may be necessary to carry out Oracle's functions hereunder
and as may otherwise be required in connection with the repair and maintenance
of the Building and performance of the Services. A schedule of all real estate
and personal property taxes and assessments will be provided to NCI on an annual
basis. All notices or copies of such will be forwarded to NCI. All such
contracts, agreements and other records and data at all times shall be the
property of NCI (or of Oracle, as the tenant under the Master Lease).
ii. Retain and maintain in effect any permits and occupancy
certificates required for the operation and occupancy of the Building, and act
as a liaison between NCI and the City of Redwood City and all other entities
claiming jurisdiction over the Building. If the cost of compliance exceeds
$1,000 in any single instance NCI will be notified immediately for prior
approval.
(c) Books and Records. Maintain books and records in connection with
its maintenance of the Building (including all invoices and payment records).
Oracle will make the books of account and all other records relating to or
reflecting the maintenance of the Building available to NCI and its
representatives at reasonable times upon reasonable advance notice at a location
approved by NCI and Oracle for examination, audit, inspection and copying.
(d) Maintenance. Oversee maintenance and repairs, furniture and
equipment moving, and storage and warehouse fees. Oracle will keep the Building
in good order and repair at all times in compliance with NCI's responsibilities
under the Sublease. In this regard, Oracle shall undertake all necessary routine
maintenance and replacements, and shall make all repairs and improvements to any
portion of the Building that is the responsibility of NCI under the Sublease,
exterior or interior (including, without limitation, interior improvements),
that may be required from time to time, subject to the conditions set forth in
the following sentences. Except to the extent that such repairs, maintenance,
replacements, or improvements have been provided for in the operating and
capital expense budget approved by NCI and except for any emergency repairs to
the Building not exceeding Fifteen Thousand Dollars ($15,000) in cost per
repair, all repairs, maintenance, replacements, or improvements to the Building
shall be undertaken or made by Oracle only after securing NCI's written
approval. Oracle agrees to give prompt notice of any such emergency repairs to
NCI and to make every reasonable effort to secure NCI's prior written approval.
To the extent practicable, items of routine maintenance, repair and replacement
shall be undertaken and accomplished by the maintenance personnel.
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(e) Alterations. If requested in writing by NCI, and subject to the
procurement of any required approvals from Landlord, Oracle (as sublandlord
under the Sublease) and any applicable governmental authorities, obtain, or
cause to be obtained, bids and supervise the construction and completion of
alterations, additions or improvements to the Building or any portion thereof
(collectively, "Alterations"), including, without limitation, renovations,
changes and alterations of any interior improvements.
(f) Recommended Procedures. Recommend from time to time to NCI, in
writing, such procedures with respect to the Building as Oracle may deem
advisable for the more efficient and economic management and operation thereof;
publish applicable operating procedures, (e.g., property maintenance contact
system, etc.), organizational chart, emergency plans, hazardous materials
management plans and any other safety or similar plans that may be required; and
perform or Cause to be performed all other services which are customarily
performed in connection with the operation of a project of this type and perform
all services normally provided by property managers to first-class office
properties.
(g) Meetings with and Response to NCI. Be available upon reasonable
notice for meetings with NCI to discuss the Building and the management
activities conducted by Oracle hereunder. In addition, Oracle shall promptly
respond to all requests and inquiries of, and shall coordinate with, the
representatives of NCI who have responsibility for the Building in order to
facilitate and maintain complete communication between NCI and Oracle regarding
the Building.
2.3. On-Site Offices. Oracle shall maintain the Building from an office in
the building that is to be provided by NCI at no expense to Oracle, which shall
have sufficient room to accommodate two (2) individuals as well as necessary
equipment and minimal storage. Oracle shall supply equipment, furniture and
services (telephone and data) necessary and appropriate for such maintenance
office.
3. LIMITATIONS AND RESTRICTIONS ON ORACLE
3.1. Restricted Activities. Notwithstanding any provisions of this
Agreement, Oracle shall not take any action, expend any sum, make any decision,
give any consent, approval or authorization, or incur any obligation with
respect to any of the following matters unless and until the same has been
approved by NCI:
(a) making any expenditure or incurring any obligation by or on
behalf of NCI or the Building which would result in the amount of any Adjusted
Annualized (defined below) operating expense category (other than utilities), as
said expense categories are specified in Exhibit A hereto, exceeding the
approved annual operating expense budget for said expense category by the
greater
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<PAGE>
of five percent (5%) or Three Thousand Dollars ($3,000), except for such matters
as may be otherwise expressly delegated in writing to Oracle by NCI and except
in the event of emergency, in which event Oracle shall be authorized to expend
up to $15,000 as may be reasonably necessary, and provided that Oracle shall
notify NCI as promptly as reasonably possible (but in any event within two
business days) following the making of such expenditure or incurring of such
obligation. Adjusted Annualized operating expense(s) shall be the actual
expense(s) incurred to date during the budget year plus the estimated operating
expense(s), as estimated by Oracle, for the balance of the budget year. After
the total approved operating expense budget is exceeded pursuant to this
Subsection 3.1(a), all operating expense items that exceed the approved budget
will require NCI's approval; and
(b) expending more than what Oracle in good faith believes to be the
fair and reasonable market value at the time and place of contracting for any
goods purchased or leased or services engaged on behalf of NCI or otherwise in
connection with the Building.
4. EXPENSES BORNE BY NCI
Except as otherwise provided in this Agreement, all expenses incurred
pursuant hereto and in accordance with this Agreement shall be for and on behalf
of NCI and for its account. NCI shall fund Oracle in advance on a monthly basis
for the purpose of disbursement of expenses incurred in performing Oracle's
obligations hereunder, and Oracle's salary and management fee compensation as
detailed in Exhibits A and B. Notwithstanding the foregoing, under no
circumstances is Oracle to be considered an agent of NCI, but rather as an
independent contractor performing services for the benefit of NCI.
5. EXPENSES BORNE BY ORACLE
5.1 Expenses of Oracle. Oracle shall pay all salaries, wages, and other
usual compensation and fringe benefits (including, without limitation, the
workers' compensation insurance and other amounts referred to in Section 8.1) of
the personnel hired and retained by Oracle at the expense of Oracle as
specifically described in Section 1.2(a), provided that NCI shall reimburse
Oracle, as a budgeted expense as shown on Exhibit A, for a prorated portion of
such compensation.
6. BUDGETS AND REPORTS
6.1. Annual Budget. Oracle shall annually prepare operating and capital
expense budgets in the form attached hereto as Exhibit A approved by NCI, for
the current or next Fiscal Year (i.e., June 1 - May 31) of the Building and
submit such budgets to NCI.
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<PAGE>
6.2. Budget Revisions. No changes shall be made in any budget or any line
item therein without NCI's prior written approval. Oracle shall use diligence
and employ reasonable efforts to ensure that the actual costs of the Building
shall not exceed the approved budgets.
6.3 Payments, etc., on NCI's Direction. Notwithstanding the above, Oracle
agrees to make all repairs, replacements, renovations, additions and other
payments directed by NCI and shall establish such reserves as directed by NCI,
whether or not such items have been included in the approved construction,
operating and/or capital expense budgets provided that NCI makes adequate
provision for the payment or reimbursement of all costs connected with such
items.
6.4. Mid-Year Variance Reports. On or about the expiration of the month of
December in each Fiscal Year, Oracle shall prepare and submit to NCI a report
showing each component of the annual budget for such calendar year, and
variances from budgeted amounts in each such component, with associated notes
and explanations.
6.5. Reconciliation. Following the expiration of each Fiscal Year, Oracle
shall submit to NCI a reconciliation of actual costs incurred against the
estimated cost therefor as set forth in the approved budget for such Fiscal
Year. If it is determined that actual costs were less than the estimates upon
which NCI's payments were based, Oracle shall either refund any overpayments to
NCI within thirty (30) days following such determination or, at NCI's option,
credit such overpayment against amounts next due and payable under the
then-current budget. If it is determined that such actual costs exceeded NCI's
payments, NCI shall, within thirty (30) days following such determination,
deliver to Oracle the amount of any such excess.
7. COMPLIANCE
7.1. Legal and Insurance Requirements. Oracle shall make reasonable
efforts to comply with and abide by all laws, rules, regulations, requirements,
orders, notices, determinations and ordinances of any federal, state or
municipal authority, and the requirements of any insurance companies covering
any of the risks against which the Building is insured, as well as the
requirements of the Master Lease and the Sublease. To the extent such action is
not the responsibility of Landlord under the Master Lease, Oracle shall obtain
and maintain in effect any permits and occupancy certificates required in
connection with the occupancy and operation of the Building or any portion or
component thereof.
8. INSURANCE AND INDEMNIFICATION
8.1. Workers' Compensation. Oracle agrees to maintain and keep in force
all workers' compensation or similar insurance
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<PAGE>
required with respect to its employees who are employed in connection with the
performance of its obligations under this Agreement and to comply with any
Federal or State withholding tax, Social Security, or unemployment laws existing
or enacted in the future for the benefit of, or other laws affecting or
respecting, the employment of such employees. NCI shall reimburse Oracle in
accordance with the approved operating budget for the Building for the prorated
cost of workers' compensation insurance for the on-site personnel hired as an
expense of the Building, whose salaries are to be specified in the approved
budget for the Building.
8.2. Insurance Requirements for Contracts. Any service contract entered
into by Oracle for the Building in accordance with the requirements hereof shall
require each contractor to provide to NCI an insurance certificate prior to
commencement of work evidencing that (a) the contractor has in force Workers'
Compensation Insurance at statutory limits, Employers Liability Insurance in a
minimum amount of One Hundred Thousand Dollars ($100,000.00) per accident or
occurrence (or such greater amount as may be required by Landlord under the
Master Lease), General Liability and Contractual Liability Insurance, in a
minimum amount of Two Million Dollars ($2,000,000.00) per accident or occurrence
(or such greater amount as may be required by Landlord under the Master Lease),
and (b) Landlord, Oracle Corporation and NCI are named as additional insureds
under the contractor's aforementioned liability coverages.
8.3. Liability Insurance. Both NCI and Oracle shall obtain and maintain
commercial general liability insurance with respect to the Building in such
amounts as they shall reasonably determine from time to time, but in any event
not less than $3,000,000 combined single limit. Such liability policies shall
include blanket contractual liability coverage and a crossliability endorsement
(or provision) permitting recovery with respect to claims of one insured against
another. Each party's policy shall name the other as an additional insured and
shall provide that it may not be canceled, or the coverage reduced, without 30
days prior written notice to the other party. Each party shall, upon the request
of the other, provide certificates of such insurance.
8.4. Indemnification. Oracle agrees to indemnify, defend and hold NCI, and
NCI's officers and employees, harmless from and against all loss, cost,
liability, damage and expense, including but not limited to, reasonable counsel
fees, which may be occasioned by its negligence or willful misconduct in
connection with the Services provided hereunder and the breach by Oracle of any
of the provisions of this Agreement. NCI agrees (a) to indemnify, defend and
hold Oracle harmless from any loss, cost, liability, damage and expense,
including but not limited to, reasonable counsel fees, relating to the Building
which results from any acts of willful misconduct or acts or omissions which
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<PAGE>
constitute negligence on the part of NCI, and (b) to indemnify Oracle against
all claims arising out of the performance by Oracle of its duties hereunder to
the extent that such claims are not claims for which Oracle is obligated to
indemnify NCI as described above. The terms of this Section 8.4 shall survive
the expiration or sooner termination of this Agreement.
9. TERM OF AGREEMENT
9.1. Term. This Agreement shall become effective as of August 1, 1997, and
shall continue through the remainder of the initial term of the Sublease, (i.e.,
through September 30, 2002).
9.2. Termination. Notwithstanding Section 9.1 above, this Agreement may be
terminated and the obligations of the parties hereunder shall thereupon cease
with respect thereto, upon the occurrence of any of the events described in, and
in accordance with the terms of, paragraphs (a) through (f) below.
(a) In the event of the condemnation or destruction of the entire
Building, either party may terminate this Agreement upon ten (10) days' written
notice to the other party. Notwithstanding the foregoing, if the Building is to
be rebuilt following any such condemnation or destruction, this Agreement shall
not terminate but shall be suspended during such rebuilding and shall be
reinstated in accordance with its terms upon the completion of such rebuilding;
provided, however, that in no event shall the term of this Agreement be extended
beyond the date of expiration of the Sublease as a result of any such rebuilding
following condemnation or destruction.
(b) Upon the appointment, pursuant to an order of a court of
competent jurisdiction, of a trustee, receiver or liquidator of Oracle or NCI,
or any termination or voluntary suspension of the transaction of business of
Oracle or NCI, or any attachment, execution or other judicial seizure of all or
any substantial portion of the assets of Oracle or NCI, the party which is not
the subject of such action may terminate this Agreement upon ten (10) days'
written notice to the other party.
(c) If NCI or Oracle shall file a voluntary case under any
applicable bankruptcy, insolvency, debtor relief, or other similar law now or
hereafter in effect, or shall consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or
similar official) of NCI or Oracle, or shall make any general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, then the party which is not the subject of such action may terminate this
Agreement upon ten (10) days' written notice to the other party.
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(d) If a court having jurisdiction shall enter a decree or order for
relief in respect of NCI or Oracle, in any involuntary case brought under any
bankruptcy, insolvency, debtor relief, or similar law now or hereafter in
effect, or if NCI or Oracle shall consent to or shall fail to oppose any such
proceeding, or if any such court shall enter a decree or order appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of NCI or Oracle, or ordering the winding up or liquidation of the
affairs of NCI or Oracle, then the party which is not the subject of such
action may terminate this Agreement upon ten (10) days' written notice to the
other party.
(e) If either party shall default in the performance of any of its
obligations hereunder and such default shall continue for twenty (20) days after
written notice from one party to the defaulting party designating such default
(or if such default cannot be cured within such twenty (20) day period, then if
such party does not commence to cure such, default and diligently pursue such
cure to completion with a reasonable period thereafter), the party not in
default may terminate this Agreement upon five (5) days' written notice to the
defaulting party.
(f) In the event of any termination of the Master Lease or the
Sublease, this Agreement shall terminate, effective on such date of termination
of the Master Lease or the Sublease.
(g) Additionally, Oracle shall have the right to terminate this
Agreement upon thirty (30) days advance written notice to NCI.
9.3 Authority Termination; Final Accounting. Upon termination of this
Agreement for any reason, the obligations created hereby shall immediately cease
and Oracle shall have no further right to or obligation to perform the Services
or draw checks on the Building Account. In the event of termination, Oracle
agrees to fulfill all reporting and accounting functions hereunder for the
period from the end of that covered by the last such report and/or accounting
until the date of termination. Upon termination, Oracle shall also (1) surrender
and deliver to NCI possession of the Building Account, and all rents and income
of the Building and other moneys of NCI on hand and in any bank account, (2)
deliver to NCI as received any moneys due NCI under this Agreement but received
after such termination, (3) deliver to NCI all materials and supplies, keys,
contracts and documents, and such other accounting papers and records pertaining
to the Building or this Agreement as the NCI shall request, (4) assign any right
Oracle may have in and to any existing contracts relating to the operation and
maintenance of the Building as the NCI shall require, and (5) deliver to NCI or
NCI's duly appointed agent all records, contracts, receipts for deposits, unpaid
bills, and all other papers or documents which pertain to the Building.
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10. COMPENSATION
10.1. Management Fee. NCI agrees to pay Oracle a management fee as set out
on Exhibit B, which is attached hereto and incorporated herein by reference.
11. DISBURSEMENT OF FUNDS
11.1. Monthly Disbursement by NCI. On or before the first day of each
calendar month, NCI shall disburse to Oracle the amount of monthly costs
(including line-items for contingencies and the Management Fee) allocated to
such month in accordance with the approved budget. Oracle shall then pay
directly all expenses of the Building that are specified in the then current
budget for the Building. If at any time NCI fails to timely fund the amounts due
for any calendar month, Oracle shall have the option (but shall not be
obligated) to make such payments, in which event any amounts not timely paid by
NCI but so advanced shall bear interest at the rate of fourteen percent (14%)
per annum, or the maximum allowable under applicable law, whichever is less,
from the date disbursed by Oracle until the date paid by NCI. Oracle shall not
be liable hereunder for any penalties, damages, loss, costs or liabilities
incurred by NCI as a result of NCI' s failure to timely fund budgeted amounts
and Oracle' s failure to make payments of any Building operating cost if and to
the extent such failure to pay such Building operating cost is due to NCI's
failure to timely deposit with Oracle the budgeted amount therefor and NCI
hereby agrees to indemnify, defend, protect and hold Oracle harmless from and
against any and all loss, cost, damage or liability arising in any way out of
NCI's failure to timely fund sums due hereunder.
12. NOTICES
All notices hereunder shall be in writing, shall be sent by registered or
certified mail, postage prepaid and return receipt requested, or by personal
delivery or courier service with a request for an acknowledgment of receipt, and
shall be effective on receipt. Notices shall be sent or delivered to the
following addresses or such other address(es) as a party may designate by notice
given in the manner provided herein:
If to Oracle. Oracle Corporation
500 Oracle Parkway, Box LGN2
Redwood Shores, California 94065
Attention: Real Estate Controller
Oracle Corporation
500 Oracle Parkway, Box 50P7
Redwood Shores, California 94065
Attention: General Counsel
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If to NCI: At the Building
13. MISCELLANEOUS
13.1. Entire Agreement. This Agreement is the entire agreement between the
parties with respect to the subject matter hereof, and no alteration,
modification, or interpretation hereof shall be binding unless in writing and
signed by both parties.
13.2. Severability. If any provision of this Agreement or application to
any party or circumstances shall be determined by any court of competent
jurisdiction to be invalid and unenforceable to any extent, the remainder of
this Agreement or the application of such provision to such person or
circumstances, other than those as to which it is so determined invalid or
unenforceable, shall not be affected thereby, and each provision hereof shall be
valid and shall be enforced to the fullest extent permitted by law.
13.3. Applicable Law. This agreement shall be construed and enforced in
accordance with the laws of California.
13.4. Assignability. Oracle may not assign this Agreement without first
obtaining NCI's written consent, which consent NCI shall not unreasonably
withhold.
13.5. Relationship. Nothing contained in this Agreement shall be construed
to create a relationship of employer and employee or agent and principal between
Oracle and NCI, it being the intent of the parties hereto that the relationship
created hereby is solely that of an independent contractor. Nothing contained
herein shall be deemed to constitute NCI and Oracle as partners or joint
venturers.
13.6. Third Parties. Nothing contained in this Agreement is intended to be
for the benefit of any third party or to give any third party any claim or right
against NCI or Oracle beyond that which would exist in the absence of this
Agreement.
13.7. Successors Bound. This Agreement shall be binding upon and inure to
the benefit of NCI and Oracle and their respective successors and permitted
assigns.
13.8. Attorneys' Fees. In the event of any litigation arising out of this
Agreement, the prevailing party shall be entitled to reasonable costs and
expenses, including without limitation, reasonable attorneys' fees.
13.9. Waiver; Consents. No consent or waiver, express or implied, by
either party hereto to or of any breach or default by the other party in the
performance by the other of its obligations hereunder shall be valid unless in
writing, and no such consent or waiver shall be deemed or construed to be a
consent or waiver to or
11
<PAGE>
of any other breach or default in the performance by such other party of the
same or any other obligations of such party hereunder. Failure on the part of
either party to complain of any act or failure to act of the other party or to
declare the other party in default, irrespective of how long such failure
continues, shall not constitute a waiver by such party of its rights hereunder.
The granting of any consent or approval in any one instance by or on behalf of
NCI shall not be construed to waive or limit the need for such consent in any
other or subsequent instance.
IN WITNESS WHEREOF, NCI and Oracle have executed this Agreement as of the
date set forth above.
ORACLE:
ORACLE CORPORATION,
a Delaware corporation
By: /s/ Bruce Lange
----------------------------------
Its:
---------------------------------
BRUCE LANGE
VP. AND CORPORATE TREASURER
OWNER:
NETWORK COMPUTER, INC.,
a Delaware corporation
By: /s/ Jerry Baker
----------------------------------
Its: CEO 9/24/97
---------------------------------
12
<PAGE>
EXHIBIT A
INCOME AND EXPENSE PROJECTIONS
AND
VARIANCE REPORT
(SEE ATTACHED)
13
<PAGE>
EXHIBIT A
(Revision 1)
1000 Bridge Parkway Property Maintenance Operating Budget - (proposed)
FY 98 (Financial Year begins June 1, 1997, and ends May, 31, 1998).
Expenditure = USD
48,384 RSF - two-story building
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Line No Expenses Jun-97 Jul-97 Aug-97 Sep-97 Oct-97 Nov-97 Dec-97 Jan-98
- -------- -------- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1001 Utilities 13,306 13,306 13,306 13,306 13,306 13,306 13,306 13,306
1002 Cleaning (a) 4,158 4,158 4,158 4,158 4,158 4,158 4,158 4,158
1003 R & M - Electrical and Plumbing 605 605 605 605 605 605 605 605
1004 R & M - HVAC 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500
1005 R & M - Elevator 280 280 280 280 280 280 280 280
1006 R & M - Painting 150 150 150 150 150 150 150 150
1007 Life Safety 591 591 591 591 591 591 591 591
1008 (Invoice) Property Insurance 0 0 13,649 0 0 0 0 0
1009 Landscaping & PM Maintenance 734 734 734 734 734 734 734 734
1010 Property Taxes 658 658 40,658 658 658 658 658 658
1011 Landlord Fee @ 2% 1,210 1,210 1,210 1,210 1,210 1,210 1,210 1,210
1012 Maintenance & Repair Facility 373 373 373 373 373 373 373 373
1013 Moving - Furniture/Equipment 637 637 637 637 637 637 637 637
1014 Storage/Warehouse Fees 430 430 430 430 430 430 430 430
1015 Expense Contingency @ 3% 739 739 2,348 739 739 739 739 739
1016 Salaries 3,667 3,667 3,667 3,667 3,667 3,667 3,667 3,667
1017 Oracle Management Fee @ 7% 2,033 2,033 5,901 2,033 2,033 2,033 2,033 2,033
Totals: 31,069 31,069 90,196 31,069 31,069 31,069 31,069 31,069
-----------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------
Line No Expenses Feb-98 Mar-98 Apr-98 May-98 Annualized FY 98 Cost/RSF
- -------- -------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/1/97 -
5/31/98
1001 Utilities 13,306 13,306 13,306 13,306 159,667 133,056 $3.30
1002 Cleaning (a) 4,158 4,158 4,158 4,158 49,896 41,580 $1.03
1003 R & M - Electrical and Plumbing 605 605 605 605 7,260 6,050 $0.15
1004 R & M - HVAC 1,500 1,500 1,500 1,500 18,000 15,000 $0.37
1005 R & M - Elevator 280 280 280 280 3,360 2,800 $0.07
1006 R & M - Painting 150 150 150 150 1,800 1,500 $0.04
1007 Life Safety 591 591 591 591 7,092 5,910 $0.15
1008 (Invoice) Property Insurance 0 0 0 0 13,649 13,649 $0.28
1009 Landscaping & PM Maintenance 734 734 734 734 8,806 7,338 $0.18
1010 Property Taxes 658 658 658 658 47,896 46,580 $0.99
1011 Landlord Fee @ 2% 1,210 1,210 1,210 1,210 14,515 12,096 $0.30
1012 Maintenance & Repair Facility 373 373 373 373 4,476 3,730 $0.09
1013 Moving - Furniture/Equipment 637 637 637 637 7,644 6,370 $0.16
1014 Storage/Warehouse Fees 430 430 430 430 5,160 4,300 $0.11
1015 Expense Contingency @ 3% 739 739 739 739 10,477 8,999 $0.22
1016 Salaries 3,667 3,667 3,667 3,667 44,000 36,667 $0.91
1017 Oracle Management Fee @ 7% 2,033 2,033 2,033 2,033 28,259 24,194 $0.58
Totals: 31,069 31,069 31,069 31,069 431,957 369,819 $8.93
-------------------------------------------------------------------------
</TABLE>
(a) Cleaning $ (annual) based upon: $
Nightly Janitorial 34,451
Supplies at $0.09 psf. 4,355
Interior building window washing 1,680
Partition glass 1,920
Exterior window washing 7,490
------------
Total 12 months: 49,896
Partial 10 months: 41,580
<PAGE>
Exhibit A (Revision 1)
1000 Bridge Parkway Property Management Operating Budget - (Notes)
Period: 8/1/97- 5/31/98
1001- Utilities - $133,056 - includes allowance for Electricity, Oil, Gas, Water
& Sewer, Trash Removal, and based upon annualized cost of $159,667 or $3.30 psf.
1002 - Cleaning - $41,580 - includes nightly janitorial service (5 x per week),
supplies, traffic area carpets (4 x per year), entrance carpets and other high
traffic areas (12 x per year), pressure washing entrance sidewalk, exterior pest
control service, and exterior window washing.
1003 - Electrical & Plumbing - $6,050 - covers emergency electrical repair and
emergency plumbing call out, and based upon $0.15 psf, as per Oracle campus.
1004 - HVAC - $15,000 - covers annual maintenance contract on roof package
units, house air systems maintenance, semi-annual air test, Oracle personnel
training, and 24 hour system coverage as required.
1005 - Elevator - $2,800 - annual maintenance and emergency call out for repair,
and includes phone line, panel monitor, and annual permit.
1006 - Painting - $1,500 - painting and repairs required for all base building
areas.
1007 - Life Safety - $5,910 - includes all NFPA standard testing of complete
fire life safety systems, panel monitoring contract, methane detection system
maintenance and panel monitoring contract, telephone lines, fire extinguisher
service, quarterly fire pump testing and service, generator load testing and
service, emergency training and supplies, generator fuel, and permits.
1008 - (Invoice) Property Insurance - $13,649 - Peery Arrillaga generated
Commercial Property Indemnity Insurance (paid once per year) for 1000 Bridge
Parkway as per lease agreement - payable upon occupancy.
1009 - Landscaping and PM Maintenance - $7,338 - Landscaping is calculated at
$0.01 per sf per month, and Property Maintenance is estimated at $250 per month.
(Includes parking lot sweep and holiday decorations).
1010 - Property Taxes - $46,580 - Property Tax is $0.136 per sf per Peery
Arillaga. Oracle's Personal Property Tax is 1% of CAPEX budget = $40k to hit in
August 97 (same time as Belmont Shores).
<PAGE>
Exhibit A (Revision 1)
1000 Bridge Parkway Property Management Operating Budget - (Notes Contd.)
Period: 8/1/97- 5/31/98
1011 - Landlord Fee - $12,096 - Landlord Fee is a management fee based upon 2%
of rental income ($60,480) for Peery Arillaga, or $1,210 per month.
1012 - Maintenance & Repair Facility - $3,730- Includes allowance for outside
vendors for minor electrical/data work, patching & painting within tenant
improvements, and flooring/carpeting repairs within same. Based upon annualized
cost per square foot at Oracle HQ.
1013 - Moving Furniture/Equipment - $6,370 - Covers moves to and from warehouse,
furniture/equipment moves within the space that require more than one crew
member, and labor to do large space cleaning/recycling projects. Based upon
annualized cost per square foot at Oracle HQ.
1014 - Storage/Warehousing Fees - $4,300 - Includes furniture warehousing (based
upon cost per building square foot at Oracle HQ); document archival/retrieval,
and off-site storage based on the annual cost per headcount at Oracle HQ.
1015 - Expense Contingency @ 3% - $8,999 - Line item to cover miscellaneous
costs - office supplies, unplanned expense items, and includes consumable
maintenance supplies and tools.
1016 - Salaries - $36,667 - Prorated salary and related payroll burden costs of
the Manager, Property Maintenance Assistant, and Building Engineer. Includes
prorated salary and related payroll burden costs charged on a line item basis
for the following.
Property Maintenance Manager: 6 hours per week (15% x 40 hours)
Property Maintenance Assistant: 6 hours per week (15% x 40 hours)
Building Engineer: 3 hours per week (7.5% x 40 hours)
Building Operations Manager: 3 hours per week (7.5% x 40 hours)
Controller/Analyst: 85 hours per year (4% of annual hours)
Central Dispatch: 52 hours per year (2.5% of annual hours)
1017 - Oracle Management Fee - $24,194 - Oracle Management Fee is based upon 7%
of total facility maintenance expense.
<PAGE>
EXHIBIT B
COMPENSATION
1. Management Fee. NCI shall pay to Oracle an annual management fee (the
"Management Fee ") of seven percent (7%) of all Building expenses (which
expenses shall include the expenses, contingency and personnel line items
included from time to time in the budget), payable in equal monthly
installments, as shall be set forth in the annual budget and if necessary
adjusted in any variance report. To the extent actual expenses vary from
budgeted expenses for any calendar year, such variance, and any necessary
increase or reduction in the Management Fee resulting therefrom, shall be set
forth in Oracle's annual reconciliation statement; NCI shall reimburse Oracle
for any underpayment of the Management Fee, or receive from Oracle a
reimbursement of any overpayment of the Management Fee, as shown in such
reconciliation, within thirty (30) days following submission of such
reconciliation.
14
<PAGE>
EXHIBIT 10.25
FURNITURE & EQUIPMENT LEASE
This Furniture and Equipment Lease ("Lease") is entered into as of
September 17, 1997, by and between Oracle Corporation ("Lessor"), and NETWORK
COMPUTER, INC. ("Lessee"), with reference to the following facts:
A. Lessor currently leases that certain office building located at 1000
Bridge Parkway, Redwood City, California (the "Building") pursuant to the terms
of a lease with Westpark Investments ("Master Lease").
B. Lessor and Lessee are entering into that certain Sublease of even date
herewith (the "Sublease") pursuant to which Lessor will sublet the Building to
Lessee for an initial term of five (5) years, subject to certain renewal and
cancellation rights set forth therein. In addition to subletting the Building
from Lessor, Lessee desires to lease from Lessor certain furniture, equipment
and furnishings owned or leased by Lessor and presently located in the Building,
and Lessor is willing to lease the same to Lessee on the terms, covenants and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants herein contained, and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto do hereby agree as follows:
1. LEASE. Lessor agrees to lease to Lessee and Lessee agrees to lease from
Lessor, subject to the terms, covenants and conditions herein, the items of
furniture, equipment, furnishings and other personal property described in
Exhibit A attached hereto and incorporated herein by this reference (the
"Furniture"). Lessor being the owner of the Furniture for all purposes, this
Lease is intended to constitute a true lease of the Furniture and not an
agreement for the sale of or the grant of a security interest in any Furniture.
Lessee's interest in the Furniture is limited to a leasehold.
2. TERM. The term of this Lease shall commence upon the commencement date
of the term of the Sublease referred to above and, unless earlier terminated as
provided herein, shall continue for so long as the Sublease shall remain in
effect. Upon the commencement of the term of this Lease, Lessor and Lessee shall
conduct an inspection of the Building in order to identify and inventory the
Furniture and verify its then current condition.
3. RENT. Lessee shall pay to Lessor rent for the Furniture in the amount
of $55,095.16 per month. Lessee shall commence payment of such monthly rent on
the commencement date of the term of the Sublease, which date shall be September
8, 1997, unless
<PAGE>
otherwise determined, notwithstanding any earlier commencement of the term of
this Lease. The parties understand and acknowledge that the rent figure set
forth above is an estimate by Lessor of the rent to be payable hereunder, based
upon Lessor's preliminary estimate of the initial cost of the Furniture and the
amortization of such cost over the term of this Lease, and that Lessor shall not
know the actual initial cost of the Furniture until after the date of
commencement of the term. Accordingly, Lessor shall have the right, within six
(6) months following the date of commencement of the term of this Lease, to
deliver notice to Lessee setting forth a revised monthly rent figure payable
hereunder, together with reasonable back-up documentation supporting the
calculation of such rent figure. If such monthly rental amount is in excess of
the amount stated above, Lessee shall deliver to Lessor a reconciliation payment
of any underpayment within thirty (30) days following Lessor's delivery of such
statement; correspondingly, if such figure is less than the monthly rental
figure set forth above, Lessor shall credit any overpayments by Lessee against
Lessee's next-due payment (s) of rent hereunder. Such monthly rent shall be
payable in advance on the first day of each calendar month during the term
hereof, in lawful money of the United States (via wire transfer or other method
mutually acceptable to Lessor and Lessee), to Lessor at its offices at 500
Oracle Parkway, Box LGN2, Redwood City, California 94065, Attention: Lease
Administrator, or to such other person or at such other place as Lessor may from
time to time designate in writing. All rent and other amounts payable hereunder
shall be due and payable without any offset, deduction, prior notice or demand
and without any abatement, reduction, counterclaim or other right Lessee may
claim against Lessor.
4. CONDITION OF FURNITURE. Upon the commencement of the term of this
Lease, Lessor shall deliver the Furniture to Lessee in good order and repair,
subject to normal wear and tear. Lessee acknowledges that Lessor is not a seller
under the California Uniform Commercial Code and that Lessor makes no warranties
of any nature, including, but not limited to, warranties as to the
merchantability of the Furniture, its fitness for any particular purpose, its
installation, its size, design, capacity or condition, its quality, its
compliance with any law, rule, specification or contract or latent defects.
5. LOCATION; LESSOR'S INSPECTIONS; LABELS. All of the Furniture shall
remain at the Building and shall not be removed therefrom for any reason
whatsoever without Lessor's prior written consent. Lessor shall have the right
to enter the Building and inspect the Furniture at any time during normal
business hours and upon reasonable advance notice given to Lessee. If Lessor
supplies Lessee with labels stating that the Furniture or any item thereof is
owned by Lessor (or by a primary lessor), Lessee shall affix and keep the same
on each item of Furniture, Lessee shall not alter, deface or remove any of the
same and Lessee shall promptly replace any such labels that may be removed,
defaced or destroyed. Lessee
2
<PAGE>
shall not permit the name of any person other than Lessor (or any primary lessor
identified to Lessee) to be placed on any item of Furniture in a manner that
might be interpreted as a claim of any right, title or interest in or to such
item.
6. TITLE. Title to each item of Furniture (whether full legal title or
Lessor's interest as primary lessee) shall be and remain with Lessor at all
times, and Lessee shall at no time make any assertion to the contrary. Lessee
shall have no right, title or interest in or to any of the Furniture except its
leasehold interest solely as lessee as provided herein.
Each item of Furniture is and shall at all times remain personal
property, notwithstanding the manner in which it may now or hereafter be affixed
or attached to the Building.
7. REPAIRS AND MAINTENANCE; USE; ALTERATIONS. Lessee, at its sole expense,
shall keep the Furniture in good working order, condition and repair throughout
the term of this Lease, ordinary wear and tear excepted. Lessee represents,
warrants and agrees that all Furniture will be used solely for business purposes
and not for personal, family or household purposes. Lessee shall use the
Furniture in a careful, proper manner only for the purposes for which it is
intended to be used.
8. SURRENDER. Lessee acknowledges and agrees that each item of the
Furniture will have significant value to Lessor at the expiration or earlier
termination of the term of this Lease, and that Lessor intends to retake
possession of the Furniture at that time. Lessor shall notify Lessee of Lessor's
schedule for removal of the Furniture, and Lessee shall cooperate with Lessor in
effecting the removal of the Furniture from the Building in accordance with
Lessor's schedule. The parties shall agree upon an equitable proration of the
rent for the final month of the term hereof based upon Lessor's schedule for
removal of the Furniture.
9. RISK OF LOSS. Lessee shall at all times bear the entire risk of loss,
theft, destruction or damage, whether partial or complete and whether or not
insured, of each item of the Furniture, and of any condemnation, confiscation,
requisition, seizure, forfeiture or other taking of title to or use of each item
of Furniture, whether partial or complete, from any cause whatsoever (herein
"Loss or Damage"), except to the extent that any such Loss or Damage may result
from the negligence or willful misconduct of Lessor, or its agents, contractors
or employees; and Lessee shall indemnify and defend Lessor and hold Lessor
harmless from and against any and all Loss or Damage, except to the extent that
any such Loss or Damage may result from the negligence or willful misconduct of
Lessor, or its agents, contractors or employees, until such time as such item of
Furniture shall have been returned to Lessor and received by Lessor in
accordance with all terms and conditions of this Lease. No Loss or Damage shall
release, impair
3
<PAGE>
or otherwise affect Lessee's obligation to pay rent or any other obligation of
Lessee under this Lease. In the event of any Loss or Damage to any item of
Furniture, Lessee shall notify Lessor thereof in writing within five (5) days
after the occurrence of such Loss or Damage, and Lessee shall immediately, at
Lessee's option and at Lessee's sole expense, with respect to such item of
Furniture, (a) place the same in good working order, condition and repair, (b)
replace the same with like Furniture in good working order, condition and
repair, having equivalent value and utility and with clear title therein in
Lessor (which shall thereupon be deemed substituted for such item of Furniture
for all purposes), or (c) pay to Lessor an amount equal to the replacement cost
of such item of Furniture.
10. INSURANCE. Lessee shall, at its own expense, at all times during the
term of this Lease, insure the Furniture against risks customarily insured
against (as reasonably approved by Lessor) on similar items of furniture in an
amount not less than the full cost of replacement of the Furniture. The
insurance shall provide thirty (30) days prior written notice to Lessor in the
event of material change to or cancellation or expiration of the insurance.
Lessee shall deliver to Lessor certificates of such insurance and evidence
satisfactory to Lessor of Lessee's payment when due of all premiums on such
insurance. Without relieving Lessee of its obligations under section 9 above, in
the event of any Loss or Damage, if Lessor receives any insurance proceeds as a
consequence of being the loss payee under any insurance policy maintained by
Lessee, Lessor shall make such proceeds available to Lessee for replacement of
any items of Furniture damaged or destroyed.
11. LIENS; TAXES. During the term of this Lease, Lessee shall keep the
Furniture free of all claims, liens, charges, security interests and other
encumbrances resulting from the action of Lessee. During the term of this Lease,
Lessee shall comply with all federal, state and local laws requiring the filing
of ad valorem and other tax returns relating to the Furniture. If such returns
are required to be filed by Lessor, Lessee shall so notify Lessor in writing,
whereupon Lessee shall provide Lessor promptly on request such information as
Lessor shall require to complete such returns, and Lessor shall file such
returns. If Lessee does not pay any of the same when due, Lessor shall have the
right, but shall not be obligated, to pay the same, in which event Lessee shall
pay to Lessor on demand, as additional rent, an amount equal to all amounts paid
or expenses incurred by Lessor, together with interest thereon at the annual
rate of twelve percent or, if lower, the maximum rate that Lessor may lawfully
charge.
12. INDEMNITY. Lessee shall indemnify and defend (by counsel engaged by
Lessee, but satisfactory to Lessor) Lessor and its agents, employees, officers
and directors and hold them harmless from and against any and all claims,
liabilities, losses, damages
4
<PAGE>
and expenses, including, without limitation, all court costs and attorneys' and
expert witnesses' fees and costs, arising from or in connection with or based on
(a) the possession, condition, operation or use (by whomever operated or used)
of any of the Furniture, or (b) the performance or enforcement of any of the
terms, or any noncompliance or nonperformance of any condition, of this Lease,
except to the extent that any of the foregoing result from the negligence or
willful misconduct of Lessor, or its agents, contractors or employees, or from
any breach on the part of Lessor under any contract made by Lessor affecting any
of the Furniture. Lessee shall satisfy, pay and discharge any and all
settlements, judgments and fines that may be recovered against Lessor in
connection therewith. Lessor shall give Lessee written notice of any such claim.
13. ASSIGNMENT. Lessee expressly covenants and agrees that it shall not
assign, mortgage or encumber this Lease or sublet or lend any of the Furniture
or permit any of the Furniture to be used by anyone other than Lessee. No
assignment or sublease by Lessee shall in any event relieve or release Lessee of
or from any debt, duty, obligation or liability hereunder, and Lessee shall
remain primarily liable hereunder.
Lessor, in its sole and absolute discretion, may sell, assign,
transfer, pledge, hypothecate, grant security interests in or otherwise encumber
or dispose of this Lease or any interest herein, as a whole or in part, without
notice to Lessee. Notwithstanding any assignment by Lessor, Lessor warrants that
so long as Lessee is not in default hereunder, Lessee shall quietly enjoy use of
the Furniture subject to the terms and conditions of this Lease and, as part of
any such assignment, the assignee thereunder shall agree that Lessee's rights
hereunder in and to the Furniture shall not be disturbed so long as Lessee is
not in default hereunder. Lessor shall notify Lessee in writing of any transfer
of this Lease by Lessor; and Lessee agrees to acknowledge receipt of and comply
with any notice thereof given by Lessor in writing and to provide Lessor or its
assignee with such agreements, consents, conveyances, documents and certificates
as may be reasonably requested by Lessor or its assignee to effect, facilitate
or perfect any assignment by Lessor.
Subject to the foregoing, this Lease shall inure to the benefit of
and bind Lessor, Lessee and their respective heirs, legatees, personal
representatives, successors and assigns.
14. DELINQUENCY CHARGE. Should Lessee fail to pay any rent hereunder or
any other sum required to be paid to Lessor by Lessee on the date due, Lessee
agrees to pay to Lessor, on demand, (a) an amount equal to five percent (5%) of
such rent or other sum, and (b) all of Lessor's costs and expenses incurred or
paid in collecting the delinquent payment, with interest thereon from the date
paid by Lessor until paid by Lessee at the annual rate of
5
<PAGE>
twelve percent or, if lower, the maximum rate Lessor may lawfully charge.
15. DEFAULT. Any of the following shall constitute a "default" hereunder:
(a) Lessee fails to pay when due any rent or any other sum required to be paid
hereunder and such failure continues for ten days from written notice thereof
from Lessor; (b) Lessee fails to observe, keep or perform any other term,
covenant or condition of this Lease and such failure continues for thirty days
from written notice thereof from Lessor; (c) Lessee becomes insolvent or admits
in writing its inability to pay or fails to pay its debts as they become due, or
makes an assignment for the benefit of its creditors, or applies for or
acquiesces in the appointment of a receiver, trustee or other custodian for any
of its properties or assets; (d) any proceeding shall be commenced by or against
Lessee for any relief which includes, or might result in, any modification of
the obligations of Lessee under this Lease or relief under any bankruptcy or
insolvency laws or other laws relating to the relief of debtors, adjustment of
indebtedness, reorganization, composition or extension, unless, in the case of
an involuntary proceeding not consented to or acquiesced in by Lessee, such
proceeding shall have been dismissed within 90 days after the same shall have
been commenced (provided that this Lease shall terminate automatically if Lessee
fails to pay any rent when due hereunder after a proceeding has been commenced
by or against Lessee under the United States Bankruptcy Code); (e) Lessee
voluntarily or involuntarily, by operation of law or otherwise, removes, sells,
transfers, assigns, grants any security interest in, pledges, hypothecates,
encumbers, parts with possession of or sublets this Lease or any Furniture, or
attempts to do so, except only as and to the extent expressly permitted hereby;
or (f) Lessee commits an event of default under the Sublease.
16. REMEDIES. On any default hereunder by Lessee, Lessor shall have the
right, but shall not be obligated, to exercise at any time or from time to time
thereafter any one or more of the following rights and remedies, any of which
rights and remedies may be exercised by Lessor without notice to or demand on
Lessee:
(a) Advance Rent. If Lessee shall have paid any rent hereunder in
advance of the due date therefor, Lessor may apply any or all thereof to any
obligation of Lessee hereunder.
(b) Recovery of Sums Due and to Become Due. In lieu of such
acceleration, Lessor may recover all rent and other amounts due as of the date
of such default and recover all rent and other sums as they accrue thereafter.
(c) Proceeding in Court. Lessor may proceed by appropriate court
action, either at law or in equity, to enforce performance by Lessee of the
terms and conditions of this Lease or
6
<PAGE>
to recover damages for the breach hereof or to regain possession of the
Furniture.
(d) Termination. Any of the foregoing actions by Lessor under this
section 16 shall not constitute a termination of this Lease or any of Lessee's
obligations under this Lease. Lessor may, in its exclusive discretion, terminate
this Lease by express written notice thereof to Lessee.
(e) Other Remedies. Lessor may pursue any other remedy available to
Lessor at law or in equity. Under all circumstances, Lessee shall also pay to
Lessor, on demand, an amount equal to any and all incidental damages sustained
by Lessor, including, without limitation, all costs of collection, repossession,
transportation, storage, repair, reconditioning, resale or other disposition of
the Furniture, all attorneys', expert witnesses' and accountants' fees and costs
(whether or not suit is commenced), court costs and other costs and expenses
incurred in exercising any rights or remedies hereunder or in enforcing any of
the terms or conditions hereof.
The discount rate for purposes of determining present value shall be
a rate equal to one percent in excess of the discount rate of the Federal
Reserve Bank of San Francisco as of the date of entry of judgment in favor of
Lessor.
The provisions of this section 16 shall not prejudice Lessor's right
to recover or prove damages for unpaid rent accrued prior to default. No remedy
referred to in this section 16 is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to Lessor at law or in equity and may be exercised concurrently or
consecutively. The exercise or beginning of exercise by Lessor of any one or
more of such remedies shall not preclude the simultaneous or later exercise by
Lessor of any or all of such other remedies. Lessor's remedies shall be
available to Lessor's successors and assigns.
17. FURTHER ASSURANCES. Lessee will promptly and duly execute and deliver
to Lessor such further documents and assurances and take such further action as
Lessor may from time to time reasonably request in order more effectively to
carry out the intent and purposes of this Lease and to establish and protect the
rights, interests and remedies intended to be created in favor of Lessor
hereunder, including, without limitation, the execution and filing of financing
statements and continuation statements with respect to the Furniture and this
Lease.
18. PERFORMANCE BY LESSOR OF LESSEE'S OBLIGATIONS. If Lessee fails
promptly to perform any of its obligations under this Lease, Lessor, on written
notice to Lessee, may (but shall not be obligated to and shall not incur any
liability or obligation to Lessee or any third party for failure to) perform the
same for the
7
<PAGE>
account of Lessee without waiving Lessee's failure as a default. All sums paid
or expense or liability incurred by Lessor in such performance (including
reasonable legal fees) shall be promptly reimbursed by Lessee on demand of
Lessor, together with interest thereon from the date paid by Lessor to the date
reimbursed by Lessee at the annual rate of twelve percent or, if lower, the
maximum rate that Lessor may lawfully charge.
19. NOTICES. All notices, consents and other communications required or
permitted under this Lease shall be in writing and shall be deemed duly given
and received when delivered personally or three days after mailing if mailed by
first class or certified mail, charges or postage prepaid, properly addressed to
Lessor or Lessee, as the case may be, at its address set forth below, or at such
other address as either party shall from time to time designate by notice under
this section 19.
Lessor: Oracle Corporation
500 Oracle Parkway
Box LGN2
Redwood Shores, CA 94065
Attn: Lease Administrator
With copy to: Oracle Corporation
500 Oracle Parkway
Box 50P7
Redwood City, California 94065
Attention: Lease Administrator
Lessee: At the Building
20. ENFORCEMENT. This Lease shall be deemed to have been entered into in
the County of San Mateo, State of California, where this Lease is being signed
on behalf of Lessor and Lessee, and all performance on the part of Lessee,
including the payment of all rent and other sums due hereunder, shall be deemed
to have been required to be performed by Lessee in said County. This Lease shall
be governed by and construed, interpreted and enforced in accordance with the
laws of the State of California, without giving effect to principles of
conflicts of law or choice of law. Jurisdiction and venue in any action or
proceeding in connection with this Lease shall be in the proper state or Federal
court located in the City and County of San Francisco or the County of San
Mateo, State of California.
21. MISCELLANEOUS. The singular includes the plural and vice versa, as
applicable. The term "Lessee" as used herein, if this Lease is signed by more
than one Lessee, means each Lessee, and their obligations and representations
hereunder shall be joint and several. The headings or captions at the beginning
of sections hereof are solely for convenience of reference and are not part of
this Lease.
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22. TIME. Time is of the essence of this Lease.
23. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Lease constitutes the entire
agreement between Lessor and Lessee and supersedes all prior or contemporaneous
agreements, promises, representations, correspondence and negotiations,
regarding the subject matter hereof. This Lease may not be amended, altered or
changed except by written agreement signed by Lessor and Lessee and supported by
new consideration. No provision hereof for the benefit of Lessor and no default
of Lessee hereunder may be waived except in writing signed by Lessor. No failure
on the part of Lessor to exercise, and no delay in exercising, any right or
remedy hereunder shall operate as a waiver thereof. Waiver by Lessor of any
provision hereof or default hereunder in any instance shall not constitute a
waiver as to any other provision, default or instance.
24. SEVERABILITY. If any provision of this Lease is held invalid, such
invalidity shall not affect the other provisions, which shall be given effect
without the invalid provision.
IN WITNESS WHEREOF, the parties hereto have executed this Furniture Lease
as of the date first above written.
LESSOR: LESSEE:
ORACLE CORPORATION NETWORK COMPUTER, INC.
By: /s/ Bruce Lange By: /s/ Jerry Baker
------------------------------ ---------------------------
Name: BRUCE LANGE Name: Jerry Baker
---------------------------- -------------------------
Title: VP AND CORPORATE TREASURER Title: CEO 9/24/97
--------------------------- ------------------------
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EXHIBIT 10.26
SUBLEASE AGREEMENT
BETWEEN
ORACLE CORPORATION
AND
NETWORK COMPUTER, INC.
September 17, 1997
<PAGE>
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (hereinafter referred to as "Sublease"),
entered into as of September 17, 1997, is made by and between ORACLE CORPORATION
(herein called "Sublandlord") and NETWORK COMPUTER, INC. (herein called
"Subtenant"), with reference to the following facts:
A. Pursuant to that certain Lease Agreement dated September 22, 1995,
Aetna Life Insurance Company, a Connecticut corporation ("Landlord"), as
Landlord, leased to Sublandlord, as tenant, certain space (the "Initial Master
Lease Premises" ) consisting of 7,026 rentable square feet located on the
eleventh (11th) floor of the Building known as First Interstate Plaza located at
170 South Main Street, Salt Lake City, Utah (the "Building").
B. Pursuant to the terms of that certain First Amendment to Lease dated as
of July 9, 1996 (the "First Amendment") (the Lease referred to in Recital A, as
amended by the First Amendment, being referred to herein as the "Master Lease"),
Sublandlord leased from Landlord an additional 2,791 rentable square feet of
space located on the tenth (10th) floor of the Building (the "First Amendment
Master Lease Premises") (the First Amendment Master Lease Premises and the
Master Lease Premises being collectively referred to herein as the "Master Lease
Premises".
C. Subtenant wishes to sublease from Sublandlord, and Sublandlord wishes
to sublease to Subtenant, the entire First Amendment Master Lease Premises
(hereinafter called the "Subleased Premises"). The Subleased Premises is more
particularly described in Exhibit A attached hereto.
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged by the parties, Sublandlord and Subtenant hereby agree as follows:
1. Sublease. Sublandlord hereby subleases to Subtenant and Subtenant
hereby subleases from Sublandlord for the term, at the rental, and upon all of
the conditions set forth herein, the Subleased Premises.
2. Term. The term of this Sublease ("Term") shall commence on August
1, 1997 (the "Commencement Date") and end on December 24, 1998 (the "Expiration
Date"), unless sooner terminated pursuant to any provision hereof.
<PAGE>
3. Rent.
3.1 Rent Payments. From and after the Commencement Date
Subtenant shall pay to Sublandlord as Base Rent for the Subleased Premises
during the Term the sum of $3,837.63 per month. If the Term does not end on the
last day of a month, the Base Rent and Additional Rent (hereinafter defined) for
that partial month shall be prorated by multiplying the monthly Base Rent and
Additional Rent by a fraction, the numerator of which is the number of days of
the partial month included in the Term and the denominator of which is the total
number of days in the full calendar month. All Rent (hereinafter defined) shall
be payable in lawful money of the United States, by wire transfer or regular
bank check of Subtenant, or such other means as the parties may mutually agree,
to Sublandlord at the address stated herein or to such other persons or at such
other places as Sublandlord may designate in writing.
3.2 Operating Expenses.
(a) Definitions. For purposes of this Sublease and in
addition to the terms defined elsewhere in this Sublease, the following terms
shall have the meanings set forth below:
(1) "Additional Rent" shall mean the sums payable
pursuant to subparagraph 3.2(b) of this Sublease.
(2) "Operating Costs" shall mean the Additional
Rent (as defined in Section 4.2 of the Master Lease) charged by Landlord to
Sublandlord pursuant to Article 4 of the Master Lease.
(3) "Rent" shall mean, collectively, Base Rent,
Additional Rent, and all other sums payable by Subtenant to Sublandlord under
this Sublease, whether or not expressly designated as "rent", all of which are
deemed and designated as rent pursuant to the terms of this Sublease.
(4) "Subtenant's Percentage Share" shall mean
twenty eight and forty-three one hundredths percent (28.43%). Sublandlord and
Subtenant acknowledge that Subtenant's Percentage Share has been obtained by
dividing the rentable square footage of the Subleased Premises by the total
rentable square footage of the Master Lease Premises and multiplying such
quotient by 100. In the event Subtenant's Percentage Share is changed during a
calendar year by reason of a change in the rentable square footage of the
Subleased Premises or the Master Lease Premises, Subtenant's Percentage Share
shall thereupon be adjusted to equal the result obtained by dividing the
rentable square footage of the Subleased Premises by the rentable square footage
of the Master Lease Premises and multiplying such quotient by 100, and Sublease,
Subtenant's Percentage Share shall be determined on the basis of
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<PAGE>
the number of days during such calendar year at each such percentage share.
(b) In addition to the Base Rent payable pursuant to
Section 3.1 above, from and after the Commencement Date, for each calendar year
of the Term, Subtenant, as Additional Rent, shall pay (i) Subtenant's Percentage
Share of Operating Costs payable by Sublandlord for the then current calendar
year. The Additional Rent payable pursuant to this Subsection (b) shall be
determined and adjusted in accordance with the provisions of Subsection 3.2(c)
below.
(c) The determination and adjustment of Additional Rent
contemplated under Subsection 3.2(b) above shall be made in accordance with the
following procedures:
(1) Upon receipt of any statement from Landlord
specifying the estimated Operating Costs to be charged to Sublandlord under the
Master Lease with respect to each calendar year, or as soon after receipt of
such statement as practicable, Sublandlord shall give Subtenant written notice
of its estimate of Additional Rent payable under Subsection 3.2(b) for the
ensuing calendar year, which estimate shall be prepared based on the estimate
received from Landlord (as Landlord's estimate may change from time to time),
together with a copy of the statement received from Landlord. Sublandlord's
estimate of Additional Rent to be paid by Subtenant pursuant to this Sublease
shall not exceed Subtenant's Percentage Share of Landlord's estimate delivered
to Sublandlord pursuant to the Master Lease (as Landlord's estimate may change
from time to time). On or before the first day of each month during each
calendar year, Subtenant shall pay to Sublandlord as Additional Rent one-twelfth
(1/12th) of such estimated amount together with the Base Rent.
(2) In the event Sublandlord's notice set forth in
Subsection 3.2 (c) (1) is not given on or before December of the calendar year
preceding the calendar year for which Sublandlord's notice is applicable, as the
case may be, then until the calendar month after such notice is delivered by
Sublandlord, Subtenant shall continue to pay to Sublandlord monthly, during the
ensuing calendar year, estimated payments equal to the amounts payable hereunder
during the calendar year just ended. Upon receipt of any such post-December
notice Subtenant shall (i) commence as of the immediately following calendar
month, and continue for the remainder of the calendar year, to pay to
Sublandlord monthly such new estimated payments and (ii) if the monthly
installment of the new estimate of such Additional Rent is greater than the
monthly installment of the estimate for the previous calendar year, pay to
Sublandlord within thirty (30) days of the receipt of such notice an amount
equal to the difference of such monthly installment multiplied by the number of
full and
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partial calendar months of such year preceding the delivery of such notice.
(d) Within thirty (30) days after the receipt by
Sublandlord of a final statement of Operating Cost from Landlord with respect to
each calendar year, Sublandlord shall deliver to Subtenant a statement of the
adjustment to be made pursuant to Section 3.2 hereof for the calendar year just
ended, together with a copy of the Statement received by Sublandlord from
Landlord. If on the basis of such statement Subtenant owes an amount that is
less than the estimated payments for the calendar year just ended, previously
paid by Subtenant, Sublandlord shall credit such excess to the next payments of
Rent coming due or, if the term of this Sublease is about to expire, promptly
refund such excess to Subtenant. If on the basis of such statement Subtenant
owes an amount that is more than the estimated payments for the calendar year
just ended previously made by Subtenant, Subtenant shall pay the deficiency to
Sublandlord within thirty (30) days after delivery of the statement from
Sublandlord to Subtenant.
(e) Sublandlord shall refund to Subtenant Subtenant's
Percentage Share of any sums actually refunded or reimbursed to Sublandlord
pursuant to the terms of the Master Lease, reduced by Subtenant's Percentage
Share of any amounts, including attorney's fees, expended by Sublandlord to
obtain such refund, reimbursement or payment.
(f) For partial calendar years during the Term, the
amount of Additional Rent payable pursuant to Subsection 3.2(d) that is
applicable to that partial calendar year shall be prorated based on the ratio of
the number of days of such partial calendar year falling during the term of this
Sublease to 365. The expiration or earlier termination of this Sublease shall
not affect the obligations of Sublandlord and Subtenant pursuant to Subsection
3.2(d), and such obligations shall survive, remain to be performed after, any
expiration or earlier termination of this Sublease.
4. Use and Occupancy.
4.1 Use. The Subleased Premises shall be used and occupied
only for the use permitted under the Master Lease by Subtenant, Subtenant's
employees and visitors and for no other use or purpose.
4.2 Compliance with Master Lease.
(a) Subtenant agrees that it will occupy the Subleased
Premises in accordance with the terms of the Master Lease and will not suffer to
be done or omit to do any act which may result in a violation of or a default
under any of the terms and conditions of the Master Lease, or render Sublandlord
liable for any damage, charge or expense thereunder. Subtenant further
4
<PAGE>
covenants and agrees to indemnify Sublandlord against and hold Sublandlord
harmless from any claim, demand, action, proceeding, suit, liability, loss,
judgment, expense (including attorneys fees) and damages of any kind or nature
whatsoever arising out of, by reason of, or resulting from, Subtenant's failure
to perform or observe any of the terms and conditions of the Master Lease or
this Sublease. Any other provision in this Sublease to the contrary
notwithstanding, Subtenant shall pay to Sublandlord as Rent hereunder any and
all sums which Sublandlord may be required to pay the Landlord arising out of a
request by Subtenant for additional Building services from Landlord (e.g.
charges associated with after-hour HVAC usage and overstandard electrical
charges).
(b) Subtenant agrees that Sublandlord shall not be
required to perform any of the covenants, agreements and/or obligations of
Landlord under the Master Lease. Sublandlord shall not be responsible for any
failure or interruption, for any reason whatsoever, of the services or
facilities that may be appurtenant to or supplied at the Building by Landlord or
otherwise, including, without limitation, heat, air conditioning, ventilation,
life-safety, water, electricity, elevator service and cleaning service, if any;
and no failure to furnish, or interruption of, any such services or facilities
shall give rise to any (i) abatement, diminution or reduction of Subtenant's
obligations under this Sublease, except to the extent that Sublandlord's
obligations are abated, diminished or reduced under the Master Lease or (ii)
liability on the part of Sublandlord. Notwithstanding the foregoing, Sublandlord
shall promptly take such action as may reasonably be indicated, under the
circumstances, to secure such performance upon Subtenant's request to
Sublandlord to do so and shall thereafter diligently prosecute such performance
on the part of Landlord.
5. Master Lease and Sublease Terms.
5.1 Subtenant acknowledges that Subtenant has reviewed and is
familiar with all of the terms, agreements, covenants and conditions of the
Master Lease.
5.2 This Sublease is and shall be at all times subject and
subordinate to the Master Lease.
5.3 The terms, conditions and respective obligations of
Sublandlord and Subtenant to each other under this Sublease shall be the terms
and conditions of the Master Lease except for those provisions of the Master
Lease which are directly contradicted by this Sublease in which event the terms
of the Sublease document shall control over the Master Lease. Therefore, for the
purposes of this Sublease, wherever in the Master Lease the word "Landlord" is
used it shall be deemed to mean the Sublandlord herein and wherever in the
Master Lease the word "Tenant" is used it shall be deemed to mean the Subtenant
herein (provided that with
5
<PAGE>
respect to Article 15 of the Initial Master Lease, Subtenant shall have no
further right to assign its interest in this Sublease or Sublease all or any
part of the Subleased Premises whatsoever. Any non-liability, release, indemnity
or hold harmless provision in the Master Lease for the benefit of Landlord that
is incorporated herein by reference, shall be deemed to inure to the benefit of
Sublandlord, Landlord, and any other person intended to be benefitted by said
provision, for the purpose of incorporation by reference in this Sublease. Any
right of Landlord under the Master Lease of access or inspection and any right
of Landlord under the Master Lease to do work in the Master Lease premises or in
the Building and any right of Landlord under the Master Lease in respect of
rules and regulations, which is incorporated herein by reference, shall be
deemed to inure to the benefit of Sublandlord, Landlord, and any other person
intended to be benefitted by said provision, for the purpose of incorporation by
reference in this Sublease.
5.4 For the purposes of incorporation herein, the terms of the
Master Lease are subject to the following additional modifications:
(a) In all provisions of the Master Lease (under the
terms thereof and without regard to modifications thereof for purposes of
incorporation into this Sublease) requiring the approval or consent of Landlord,
Subtenant shall be required to obtain the approval or consent of both
Sublandlord and Landlord.
(b) In all provisions of the Master Lease requiring
Tenant to submit, exhibit to, supply or provide Landlord with evidence,
certificates, or any other matter or thing, Subtenant shall be required to
submit, exhibit to, supply or provide, as the case may be, the same to both
Landlord and Sublandlord. In any such instance, Sublandlord shall determine if
such evidence, certificate or other matter or thing shall be satisfactory, in
the exercise of its reasonable discretion.
(c) Sublandlord shall have no obligation to restore or
rebuild any portion of the Sublease Premises after any destruction or taking by
eminent domain.
(d) In all provisions of the Master Lease requiring
Tenant to designate Landlord as an additional or named insured on its insurance
policy, Subtenant shall be required to so designate Landlord and Sublandlord on
its insurance policy.
5.5 Notwithstanding the terms of Section 5.3 above, Subtenant
shall have no rights nor obligations under the following parts, Sections and
Exhibits of the Master Lease: Article 1, 2, 3, 4 (the issue of pass-throughs
being governed by Section 3.2 above), 12.2, 15, 22, 24, and 33 of the Initial
Master Lease, Exhibits A and B of the Initial Master Lease, Section 2, 3, and 4
of Exhibit
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<PAGE>
D to the Initial Master Lease, and Sections 4, 5 and 6 of the First Amendment.
5.6 During the Term and for all periods subsequent thereto
with respect to obligations which have arisen prior to the termination of this
Sublease, Subtenant agrees to perform and comply with, for the benefit of
Sublandlord and Landlord, the obligations of Sublandlord under the Master Lease
which pertains to the Subleased Premises and/or this Sublease, except for those
provisions of the Master Lease which are directly contradicted by this Sublease,
in which event the terms of this Sublease document shall control over the Master
Lease.
6. Termination of Master Lease.
6.1 If for any reason the term of the Master Lease shall
terminate prior to the scheduled Expiration Date, this Sublease shall thereupon
be terminated and Sublandlord shall not be liable to Subtenant by reason
thereof, except if such termination results from Sublandlord's breach of its
obligations hereunder; in no event shall Sublandlord be liable to Subtenant for
consequential damages or the loss of Subtenant's profits or business.
6.2 Sublandlord covenants to maintain the Master Lease in full
force and effect, without default, throughout the term of this Sublease.
7. Indemnity. Subtenant shall indemnify, defend and hold harmless
Sublandlord from and against all losses, costs, damages, expenses and
liabilities, including, without limitation, reasonable attorneys' fees and
disbursements, which Sublandlord may incur or pay out (including, without
limitation, to the landlord under the Master Lease) by reason of (i) any
accidents, damages or injuries to persons or property occurring in, on or about
the Subleased Premises (unless the same shall have been caused by Sublandlord's
negligence or wrongful act, (ii) any breach or default hereunder on Subtenant's
part, (iii) the successful enforcement of Sublandlord's rights under this
Section 7 or any other Section of this Sublease, (iv) any work done after the
date hereof in or to the Subleased Premises except if done by Sublandlord or
Landlord under the Master Lease, or (v) any act, omission or negligence on the
part of Subtenant and/or its officers, partners, employees, agents, customers
and/or invitees, or any person claiming through or under Subtenant relating to
Subtenant's use of the Subleased Premises pursuant to this Sublease.
8. Limitation on Liability. Sublandlord shall not be liable for
personal injury or property damage to Subtenant, its officers, agents,
employees, invitees, guests, licensees or any other person in the Sublease
Premises, regardless of how such injury or damage may be caused (except to the
extent arising solely
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<PAGE>
out of Sublandlord's gross negligence or willful misconduct). Any property of
Subtenant kept or stored in the Sublease Premises shall be kept or stored at the
sole risk of Subtenant. Subtenant shall hold Sublandlord harmless from any
claims arising out of any personal injury or property damage occurring in the
Sublease Premises, including subrogation claims by Subtenant's insurance
carrier(s).
9. Consents. In any instance when Sublandlord's consent or approval
is required under this Sublease, Sublandlord's refusal to consent to or approve
any matter or thing shall be deemed reasonable if, among other matters, such
consent or approval is required under the provisions of the Master Lease
incorporated herein by reference but has not been obtained from Landlord. Except
as otherwise provided herein, Sublandlord shall not unreasonably withhold, or
delay its consent to or approval of a matter if such consent or approval is
required under the provisions of the Master Lease and Landlord has consented to
or approved of such matter. If Subtenant shall seek the approval by or consent
of Sublandlord and Sublandlord shall fail or refuse to give such consent or
approval, Subtenant shall not be entitled to any damages for any withholding or
delay of such approval or consent by Sublandlord, it being agreed that
Subtenant's sole remedy in connection with an alleged wrongful refusal or
failure to approve or consent shall be an action for injunction or specific
performance and that said remedy of an action for injunction or specific
performance shall be available only in those cases where Sublandlord shall have
expressly agreed in this Sublease not to unreasonably withhold or delay its
consent.
10. Attorney's Fees. If Sublandlord, Subtenant or Landlord brings an
action to enforce the terms hereof or to declare rights hereunder, the
prevailing party who recovers substantially all of the damages, equitable relief
or other remedy sought in any such action on trial and appeal shall be entitled
to his reasonable attorney's fees to be paid by the losing party as fixed by the
Court.
11. "As-Is" Occupancy. Sublandlord shall deliver, and Subtenant
shall accept, possession of the Subleased Premises in their "AS IS" condition as
the Subleased Premises exists on the date hereof, for purposes of Subtenant's
general contractor constructing Subtenant's improvements. Sublandlord shall have
no obligation to furnish, render or supply any work, labor, services, materials,
furniture, fixtures, equipment, decorations or other items to make the Subleased
Premises ready or suitable for Subtenant's occupancy. In making and executing
this Sublease, Subtenant has relied solely on such investigations, examinations
and inspections as Subtenant has chosen to make or has made and has not relied
on any representation or warranty concerning the Subleased Premises or the
Building, except as expressly set forth in this Sublease. Subtenant acknowledges
that Sublandlord has
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afforded Subtenant the opportunity for full and complete investigations,
examinations and inspections of the Subleased Premises and the common areas of
the Building. Subtenant acknowledges that it is not authorized to make or do any
alterations or improvements in or to the Subleased Premises except as permitted
by the provisions of this Sublease and the Master Lease and that upon
termination of this Sublease, Subtenant shall deliver the Subleased Premises to
Sublandlord in the same condition as the Subleased Premises were at the
commencement of the Term hereof, reasonable wear and tear excepted.
12. Parking. During the Term hereof and provided that Subtenant
timely pays all amounts payable therefor pursuant to the provisions of Paragraph
1 of Exhibit D to the Master Lease, Subtenant and its employees shall be
permitted to use five (5) unassigned non-exclusive and unlabelled parking spaces
in the Parking Facility (as defined in the Master Lease).
13. Notices. Any notice by either party to the other required,
permitted or provided for herein shall be valid only if in writing and shall be
deemed to be duly given only if (a) delivered personally, or (b) sent by means
of Federal Express, UPS Next Day Air or another reputable express mail delivery
service guaranteeing next day delivery, or (c) sent by United States Certified
or registered mail, return receipt requested, addressed (i) if to Sublandlord,
at the following addresses:
Oracle Corporation
500 Oracle Parkway
Box LGN2
Redwood Shores, CA 94065
Attn: Lease Administrator
With a copy to:
Oracle Corporation
500 Oracle Parkway
Box 5OP7
Redwood Shores, CA 94065
Attn: Legal Department
and (ii) if the Subtenant, at the Subleased Premises.
or at such other address for either party as that party may designate by notice
to the other A notice shall be deemed given and effective, if delivered
personally, upon hand delivery thereof, if sent via express mail, upon hand
delivery, and if mailed by United States certified or registered mail, five (5)
days following such mailing in accordance with this Section.
14. Complete Agreement. There are no representations, warranties,
agreements, arrangements or understandings, oral or
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written, between the parties or their representatives relating to the subject
matter of this Sublease which are not fully expressed in this Sublease. This
Sublease cannot be changed or terminated nor may any of its provisions be waived
orally or in any manner other than by a written agreement executed by both
parties.
15. Furniture and Equipment Lease. Concurrently with the execution
and delivery of this Sublease, Sublandlord and Subtenant are executing that
certain Furniture and Equipment Lease attached hereto as Exhibit B. The parties
hereto acknowledge that the Furniture and Equipment Lease shall govern
Subtenant's use of certain items of furniture and equipment belonging to
Sublandlord within the Sublease Premises, and that a default under the Furniture
and Equipment Lease shall automatically constitute a default under this
Sublease.
16. Interpretation. This Sublease shall be governed by and construed
in accordance with the laws of the State of California. If any provision of this
Sublease or the application thereof to any person or circumstance shall, for any
reason and to any extent, be invalid or unenforceable, the remainder of this
Sublease and the application of that provision to other persons or circumstances
shall not be affected but rather shall be enforced to the extent permitted by
law. The captions, headings and titles, if any, in this Sublease are solely for
convenience of reference and shall not affect its interpretation. This Sublease
shall be construed without regard to any presumption or other rule requiring
construction against the party causing this Sublease or any part thereof to be
drafted. If any words or phrases in this Sublease shall have been stricken out
or otherwise eliminated, whether or not any other words or phrases have been
added, this Sublease shall be construed as if the words or phrases so stricken
out or otherwise eliminated were never included in this Sublease and no
implication or inference shall be drawn from the fact that said words or phrases
were so stricken out or otherwise eliminated. Each covenant, agreement,
obligation or other provision of this Sublease shall be deemed and construed as
a separate and independent covenant of the party bound by, undertaking or making
same, not dependent on any other provision of this Sublease unless otherwise
expressly provided. All terms and words used in this Sublease, regardless of the
number or gender in which they are used, shall be deemed to include any other
number and any other gender as the context may require. The word "person" as
used in this Sublease shall mean a natural person or persons, a partnership, a
corporation or any other form of business or legal association or entity.
17. Counterparts. This Sublease may be executed in separate
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. This Sublease shall be
fully executed when each party whose signature is required has signed and
delivered to each of the
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parties at least one counterpart, even though no single counterpart contains the
signatures of all parties hereto.
18. Sublandlord's Option to Terminate. Sublandlord shall have the
right, from time to time during the Term, to terminate this Sublease with
respect to all or any portion of the Sublease Premises. Any such termination
shall be affected by at least sixty (60) days' advance written notice to
Subtenant, which notice shall specify the portion of the Sublease Premises which
shall be subject to such termination, and the effective date of such
termination. Prior to the effective date of such termination as specified in
Sublandlord's notice, Subtenant shall vacate such portion of the Sublease
Premises, leaving the same broom-clean and free of Subtenant's equipment,
personnel and personal property (except such items of furniture and/or equipment
which Subtenant leases from Sublandlord pursuant to the Furniture and Equipment
Lease attached hereto as Exhibit B, which Sublandlord has specified that
Subtenant must leave behind). On the later to occur of (i) the effective date of
such termination as specified in the Sublandlord's notice to Subtenant and (ii)
the date upon which Subtenant actually vacates the subject space pursuant to the
provisions of the immediately preceding sentence, this Sublease shall be revised
to provide that the Sublease Premises shall consist only of the portion of the
Master Lease Premises which Subtenant may remain in occupancy of pursuant to the
provisions of Sublandlord's notice (provided that if and to the extent that
clause (ii) also is applicable due to Subtenant's failure to timely vacate the
subject space, the provisions of Section 20.2 of the Master Lease shall govern
and, provided further, that notwithstanding the provisions of said Section 20.2
of the Master Lease, Subtenant shall pay holdover rent in the amount of 150% of
the previously applicable Base Rent during the entirety of such holdover);
concurrently, the Base Rent and Subtenant's Percentage Share shall be
appropriately adjusted to reflect the relationship between the Sublease
Premises, as so reduced, and the Master Lease Premises. As soon as reasonably
possible, Sublandlord shall present to Subtenant, for execution by Subtenant, an
amendment to this Sublease setting forth such changes to the Sublease Premises,
11
<PAGE>
Base Rent payable, and Subtenant's Percentage Share, together with an amendment
to the Furniture and Equipment Lease, reflecting the reduction of the Sublease
Premises in the manner described in this Section 18.
IN WITNESS WHEREOF, the parties hereto hereby execute this Sublease
as of the day and year first above written.
SUBLANDLORD:
ORACLE CORPORATION, a Delaware
corporation
By: /s/ Bruce Lange
----------------------------------------
Print Name: BRUCE LANGE
--------------------------------
Title: VP AND CORPORATE TREASURER
-------------------------------------
SUBTENANT:
NETWORK COMPUTER, INC., a
Delaware corporation
By: /s/ Jerry Baker
----------------------------------------
Print Name: JERRY BAKER
--------------------------------
Title: CEO 9/24/97
-------------------------------------
12
<PAGE>
EXHIBIT "A"
[Floor Plan
First Interstate Plaza]
TENTH
FLOOR PLAN [ARROW]
10th
================================================================================
Rodney E. Coles ALA First Interstate Plaza
ARCHITECT 170 S. Main Stree
Salt Lake City, Ut. 84101
[ILLEGIBLE] (801) 531-8117
<PAGE>
[ILLEGIBLE]
<PAGE>
EXHIBIT B
FURNITURE AND EQUIPMENT LEASE
This Furniture and Equipment Lease ("Lease") is entered into as of
September 17, 1997, by and between Oracle Corporation ("Lessor"), and NETWORK
COMPUTER, INC. ("Lessee"), with reference to the following facts:
A. Lessor currently leases space (the "Premises") in that certain office
building known as First Interstate Place located at 170 South Main Street, Salt
Lake City, Utah (the "Building") pursuant to the terms of a lease with Aetna
Life Insurance Company ("Master Lease").
B. Lessor and Lessee are entering into that certain Sublease of even date
herewith (the "Sublease") pursuant to which Lessor will sublet a portion of the
Premises (the "Subleased Premises") to Lessee for an initial term of
approximately seventeen (17) months, subject to certain cancellation rights set
forth therein. In addition to subletting the Subleased Premises from Lessor,
Lessee desires to lease from Lessor certain furniture, equipment and furnishings
owned or leased by Lessor and presently located in the Building, and Lessor is
willing to lease the same to Lessee on the terms, covenants and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants herein contained, and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto do hereby agree as follows:
1. LEASE. Lessor agrees to lease to Lessee and Lessee agrees to lease from
Lessor, subject to the terms, covenants and conditions herein, the items of
furniture, equipment, furnishings and other personal property described in
Exhibit A attached hereto and incorporated herein by this reference (the
"Furniture"). Lessor being the owner of the Furniture for all purposes, this
Lease is intended to constitute a true lease of the Furniture and not an
agreement for the sale of or the grant of a security interest in any Furniture.
Lessee's interest in the Furniture is limited to a leasehold.
2. TERM. The term of this Lease shall commence upon the commencement date
of the term of the Sublease referred to above and, unless earlier terminated as
provided herein, shall continue for so long as the Sublease shall remain in
effect. Upon the commencement of the term of this Lease, Lessor and Lessee shall
conduct an inspection of the Building in order to identify and inventory the
Furniture and verify its then current condition.
<PAGE>
3. RENT. Lessee shall pay to Lessor rent for the Furniture in the amount
of Two Thousand Six Hundred One and 12/100 Dollars ($2,685.05) per month. Lessee
shall commence payment of such monthly rent on the later to occur of (1)
commencement date of the term of the Sublease, which date shall be August 1,
1997 and (ii) the date of Lessee's delivery to Lessor of an executed copy of
this Lease (in which event Lessee's payment shall include for all rent accrued
from August 1, 1997), unless otherwise determined, notwithstanding any earlier
commencement of the term of this Lease. Such monthly rent shall be payable in
advance on the first day of each calendar month during the term hereof, in
lawful money of the United States (via wire transfer or other method mutually
acceptable to Lessor and Lessee), to Lessor at its offices at 500 Oracle
Parkway, Box LGN2, Redwood City, California 94065, Attention: Lease
Administrator, or to such other person or at such other place as Lessor may from
time to time designate in writing. All rent and other amounts payable hereunder
shall be due and payable without any offset, deduction, prior notice or demand
and without any abatement, reduction, counterclaim or other right Lessee may
claim against Lessor.
4. CONDITION OF FURNITURE. Upon the commencement of the term of this
Lease, Lessor shall deliver the Furniture to Lessee in good order and repair,
subject to normal wear and tear. Lessee acknowledges that Lessor is not a seller
under the California Uniform Commercial Code and that Lessor makes no warranties
of any nature, including, but not limited to, warranties as to the
merchantability of the Furniture, its fitness for any particular purpose, its
installation, its size, design, capacity or condition, its quality, its
compliance with any law, rule, specification or contract or latent defects.
5. LOCATION; LESSOR'S INSPECTIONS; LABELS. All of the Furniture shall
remain at the Building and shall not be removed therefrom for any reason
whatsoever without Lessor's prior written consent. Lessor shall have the right
to enter the Building and inspect the Furniture at any time during normal
business hours and upon reasonable advance notice given to Lessee. If Lessor
supplies Lessee with labels stating that the Furniture or any item thereof is
owned by Lessor (or by a primary lessor), Lessee shall affix and keep the same
on each item of Furniture, Lessee shall not alter, deface or remove any of the
same and Lessee shall promptly replace any such labels that may be removed,
defaced or destroyed. Lessee shall not permit the name of any person other than
Lessor (or any primary lessor identified to Lessee) to be placed on any item of
Furniture in a manner that might be interpreted as a claim of any right, title
or interest in or to such item.
6. TITLE. Title to each item of Furniture (whether full legal title or
Lessor's interest as primary lessee) shall be and remain with Lessor at all
times, and Lessee shall at no time make any assertion to the contrary. Lessee
shall have no right, title
B-2
<PAGE>
or interest in or to any of the Furniture except its leasehold interest solely
as lessee as provided herein.
Each item of Furniture is and shall at all times remain personal
property, notwithstanding the manner in which it may now or hereafter be affixed
or attached to the Building.
7. REPAIRS AND MAINTENANCE; USE; ALTERATIONS. Lessee, at its sole expense,
shall keep the Furniture in good working order, condition and repair throughout
the term of this Lease, ordinary wear and tear excepted. Lessee represents,
warrants and agrees that all Furniture will be used solely for business purposes
and not for personal, family or household purposes. Lessee shall use the
Furniture in a careful, proper manner only for the purposes for which it is
intended to be used.
8. SURRENDER. Lessee acknowledges and agrees that each item of the
Furniture will have significant value to Lessor at the expiration or earlier
termination of the term of this Lease, and that Lessor intends to retake
possession of the Furniture at that time. Lessor shall notify Lessee of Lessor's
schedule for removal of the Furniture, and Lessee shall cooperate with Lessor in
effecting the removal of the Furniture from the Building in accordance with
Lessor's schedule. The parties shall agree upon an equitable proration of the
rent for the final month of the term hereof based upon Lessor's schedule for
removal of the Furniture.
9. RISK OF LOSS. Lessee shall at all times bear the entire risk of loss,
theft, destruction or damage, whether partial or complete and whether or not
insured, of each item of the Furniture, and of any condemnation, confiscation,
requisition, seizure, forfeiture or other taking of title to or use of each item
of Furniture, whether partial or complete, from any cause whatsoever (herein
"Loss or Damage"), except to the extent that any such Loss or Damage may result
from the negligence or willful misconduct of Lessor, or its agents, contractors
or employees; and Lessee shall indemnify and defend Lessor and hold Lessor
harmless from and against any and all Loss or Damage, except to the extent that
any such Loss or Damage may result from the negligence or willful misconduct of
Lessor, or its agents, contractors or employees, until such time as such item
of Furniture shall have been returned to Lessor and received by Lessor in
accordance with all terms and conditions of this Lease. No Loss or Damage shall
release, impair or otherwise affect Lessee's obligation to pay rent or any other
obligation of Lessee under this Lease. In the event of any Loss or Damage to any
item of Furniture, Lessee shall notify Lessor thereof in writing within five (5)
days after the occurrence of such Loss or Damage, and Lessee shall immediately,
at Lessee's option and at Lessee's sole expense, with respect to such item of
Furniture, (a) place the same in good working order, condition and repair, (b)
replace the same with like Furniture. in good working order, condition and
repair, having equivalent value and utility and with
B-3
<PAGE>
clear title therein in Lessor (which shall thereupon be deemed substituted for
such item of Furniture for all purposes), or (c) pay to Lessor an amount equal
to the replacement cost of such item of Furniture.
10. INSURANCE. Lessee shall, at its own expense, at all times during the
term of this Lease, insure the Furniture against risks customarily insured
against (as reasonably approved by Lessor) on similar items of furniture in an
amount not less than the full cost of replacement of the Furniture. The
insurance shall provide thirty (30) days prior written notice to Lessor in the
event of material change to or cancellation or expiration of the insurance.
Lessee shall deliver to Lessor certificates of such insurance and evidence
satisfactory to Lessor of Lessee's payment when due of all premiums on such
insurance. Without relieving Lessee of its obligations under section 9 above, in
the event of any Loss or Damage, if Lessor receives any insurance proceeds as a
consequence of being the loss payee under any insurance policy maintained by
Lessee, Lessor shall make such proceeds available to Lessee for replacement of
any items of Furniture damaged or destroyed.
11. LIENS; TAXES. During the term of this Lease, Lessee shall keep the
Furniture free of all claims, liens, charges resulting from the action of
Lessee. During the term of this Lease, Lessee shall comply with all federal,
state and local laws requiring the filing of ad valorem and other tax returns
relating to the Furniture. If such returns are required to be filed by Lessor,
Lessee shall so notify Lessor in writing, whereupon Lessee shall provide Lessor
promptly on request such information as Lessor shall require to complete such
returns, and Lessor shall file such returns. If Lessee does not pay any of the
same when due, Lessor shall have the right, but shall not be obligated, to pay
the same, in which event Lessee shall pay to Lessor on demand, as additional
rent, an amount equal to all amounts paid or expenses incurred by Lessor,
together with interest thereon at the annual rate of twelve percent or, if
lower, the maximum rate that Lessor may lawfully charge.
12. INDEMNITY. Lessee shall indemnify and defend (by counsel engaged by
Lessee, but satisfactory to Lessor) Lessor and its agents, employees, officers
and directors and hold them harmless from and against any and all claims,
liabilities, losses, damages and expenses, including, without limitation, all
court costs and attorneys' and expert witnesses' fees and costs, arising from or
in connection with or based on (a) the possession, condition, operation or use
(by whomever operated or used) of any of the Furniture, or (b) the performance
or enforcement of any of the terms, or any noncompliance or nonperformance of
any condition, of this Lease, except to the extent that any of the foregoing
result from the negligence or willful misconduct of Lessor, or its agents,
contractors or employees, or from any breach on the part of Lessor
B-4
<PAGE>
under any contract made by Lessor affecting any of the Furniture. Lessee shall
satisfy, pay and discharge any and all settlements, judgments and fines that may
be recovered against Lessor in connection therewith. Lessor shall give Lessee
written notice of any such claim.
13. ASSIGNMENT. Lessee expressly covenants and agrees that it shall not
assign, mortgage or encumber this Lease or sublet or lend any of the Furniture
or permit any of the Furniture to be used by anyone other than Lessee. No
assignment or sublease by Lessee shall in any event relieve or release Lessee of
or from any debt, duty, obligation or liability hereunder, and Lessee shall
remain primarily liable hereunder.
Lessor, in its sole and absolute discretion, may sell, assign,
transfer, pledge, hypothecate, grant security interests in or otherwise encumber
or dispose of this Lease or any interest herein, as a whole or in part, without
notice to Lessee. Notwithstanding any assignment by Lessor, Lessor warrants that
so long as Lessee is not in default hereunder, Lessee shall quietly enjoy use of
the Furniture subject to the terms and conditions of this Lease and, as part of
any such assignment, the assignee thereunder shall agree that Lessee's rights
hereunder in and to the Furniture shall not be disturbed so long as Lessee is
not in default hereunder. Lessor shall notify Lessee in writing of any transfer
of this Lease by Lessor; and Lessee agrees to acknowledge receipt of and comply
with any notice thereof given by Lessor in writing and to provide Lessor or its
assignee with such agreements, consents, conveyances, documents and certificates
as may be reasonably requested by Lessor or its assignee to effect, facilitate
or perfect any assignment by Lessor.
Subject to the foregoing, this Lease shall inure to the benefit of
and bind Lessor, Lessee and their respective heirs, legatees, personal
representatives, successors and assigns.
14. DELINQUENCY CHARGE. Should Lessee fail to pay any rent hereunder or
any other sum required to be paid to Lessor by Lessee on the date due, Lessee
agrees to pay to Lessor, on demand, (a) an amount equal to five percent (5%) of
such rent or other sum, and (b) all of Lessor's costs and expenses incurred or
paid in collecting the delinquent payment, with interest thereon from the date
paid by Lessor until paid by Lessee at the annual rate of twelve percent or, if
lower, the maximum rate Lessor may lawfully charge.
15. DEFAULT. Any of the following shall constitute a "default" hereunder:
(a) Lessee fails to pay when due any rent or any other sum required to be paid
hereunder and such failure continues for ten days from written notice thereof
from Lessor; (b) Lessee fails to observe, keep or perform any other term,
covenant or condition of this Lease and such failure continues for
B-5
<PAGE>
thirty days from written notice thereof from Lessor; (c) Lessee becomes
insolvent or admits in writing its inability to pay or fails to pay its debts as
they become due, or makes an assignment for the benefit of its creditors, or
applies for or acquiesces in the appointment of a receiver, trustee or other
custodian for any of its properties or assets; (d) any proceeding shall be
commenced by or against Lessee for any relief which includes, or might result
in, any modification of the obligations of Lessee under this Lease or relief
under any bankruptcy or insolvency laws or other laws relating to the relief of
debtors, adjustment of indebtedness, reorganization, composition or extension,
unless, in the case of an involuntary proceeding not consented to or acquiesced
in by Lessee, such proceeding shall have been dismissed within 90 days after the
same shall have been commenced (provided that this Lease shall terminate
automatically if Lessee fails to pay any rent when due hereunder after a
proceeding has been commenced by or against Lessee under the United States
Bankruptcy Code); (e) Lessee voluntarily or involuntarily, by operation of law
or otherwise, removes, sells, transfers, assigns, grants any security interest
in, pledges, hypothecates, encumbers, parts with possession of or sublets this
Lease or any Furniture, or attempts to do so, except only as and to the extent
expressly permitted hereby; or (f) Lessee commits an event of default under the
Sublease.
16. REMEDIES. On any default hereunder by Lessee, Lessor shall have the
right, but shall not be obligated, to exercise at any time or from time to time
thereafter any one or more of the following rights and remedies, any of which
rights and remedies may be exercised by Lessor without notice to or demand on
Lessee:
(a) Advance Rent. If Lessee shall have paid any rent hereunder in
advance of the due date therefor, Lessor may apply any or all thereof to any
obligation of Lessee hereunder.
(b) Recovery of Sums Due and to Become Due. In lieu of such
acceleration, Lessor may recover all rent and other amounts due as of the date
of such default and recover all rent and other sums as they accrue thereafter.
(c) Proceeding in Court. Lessor may proceed by appropriate court
action, either at law or in equity, to enforce performance by Lessee of the
terms and conditions of this Lease or to recover damages for the breach hereof
or to regain possession of the Furniture.
(d) Termination. Any of the foregoing actions by Lessor under this
section 16 shall not constitute a termination of this Lease or any of Lessee's
obligations under this Lease. Lessor may, in its exclusive discretion, terminate
this Lease by express written notice thereof to Lessee.
B-6
<PAGE>
(e) Other Remedies. Lessor may pursue any other remedy available to
Lessor at law or in equity. Under all circumstances, Lessee shall also pay to
Lessor, on demand, an amount equal to any and all incidental damages sustained
by Lessor, including, without limitation, all costs of collection, repossession,
transportation, storage, repair, reconditioning, resale or other disposition of
the Furniture, all attorneys', expert witnesses' and accountants' fees and costs
(whether or not suit is commenced), court costs and other costs and expenses
incurred in exercising any rights or remedies hereunder or in enforcing any of
the terms or conditions hereof.
The discount rate for purposes of determining present value shall be
a rate equal to one percent in excess of the discount rate of the Federal
Reserve Bank of San Francisco as of the date of entry of judgment in favor of
Lessor.
The provisions of this section 16 shall not prejudice Lessor's right
to recover or prove damages for unpaid rent accrued prior to default. No remedy
referred to in this section 16 is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to Lessor at law or in equity and may be exercised concurrently or
consecutively. The exercise or beginning of exercise by Lessor of any one or
more of such remedies shall not preclude the simultaneous or later exercise by
Lessor of any or all of such other remedies. Lessor's remedies shall be
available to Lessor's successors and assigns.
17. FURTHER ASSURANCES. Lessee will promptly and duly execute and deliver
to Lessor such further documents and assurances and take such further action as
Lessor may from time to time reasonably request in order more effectively to
carry out the intent and purposes of this Lease and to establish and protect the
rights, interests and remedies intended to be created in favor of Lessor
hereunder, including, without limitation, the execution and filing of financing
statements and continuation statements with respect to the Furniture and this
Lease.
18. PERFORMANCE BY LESSOR OF LESSEE'S OBLIGATIONS. If Lessee fails
promptly to perform any of its obligations under this Lease, Lessor, on written
notice to Lessee, may (but shall not be obligated to and shall not incur any
liability or obligation to Lessee or any third party for failure to) perform the
same for the account of Lessee without waiving Lessee's failure as a default.
All sums paid or expense or liability incurred by Lessor in such performance
(including reasonable legal fees) shall be promptly reimbursed by Lessee on
demand of Lessor, together with interest thereon from the date paid by Lessor to
the date reimbursed by Lessee at the annual rate of twelve percent or, if lower,
the maximum rate that Lessor may lawfully charge.
B-7
<PAGE>
19. NOTICES. All notices, consents and other communications required or
permitted under this Lease shall be in writing and shall be deemed duly given
and received when delivered personally or three days after mailing if mailed by
first class or certified mail, charges or postage prepaid, properly addressed to
Lessor or Lessee, as the case may be, at its address set forth below, or at such
other address as either party shall from time to time designate by notice under
this section 19.
Lessor: Oracle Corporation
500 Oracle Parkway
Box LGN2
Redwood Shores, CA 94065
Attn: Lease Administrator
With copy to: Oracle Corporation
500 Oracle Parkway
Box 5OP7
Redwood City, California 94065
Attention: Lease Administrator
Lessee: At the Subleased Premises
20. ENFORCEMENT. This Lease shall be deemed to have been entered into in
the County of San Mateo, State of California, where this Lease is being signed
on behalf of Lessor and Lessee, and all performance on the part of Lessee,
including the payment of all rent and other sums due hereunder, shall be deemed
to have been required to be performed by Lessee in said County. This Lease shall
be governed by and construed, interpreted and enforced in accordance with the
laws of the State of California, without giving effect to principles of
conflicts of law or choice of law. Jurisdiction and venue in any action or
proceeding in connection with this Lease shall be in the proper state or Federal
court located in the City and County of San Francisco or the County of San
Mateo, State of California.
21. MISCELLANEOUS. The singular includes the plural and vice versa, as
applicable. The term "Lessee" as used herein, if this Lease is signed by more
than one Lessee, means each Lessee, and their obligations and representations
hereunder shall be joint and several. The headings or captions at the beginning
of sections hereof are solely for convenience of reference and are not part of
this Lease.
22. TIME. Time is of the essence of this Lease.
23. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Lease constitutes the entire
agreement between Lessor and Lessee and supersedes all prior or contemporaneous
agreements, promises, representations, correspondence and negotiations,
regarding the subject matter hereof. This Lease may not be amended, altered or
B-8
<PAGE>
changed except by written agreement signed by Lessor and Lessee and supported by
new consideration. No provision hereof for the benefit of Lessor and no default
of Lessee hereunder may be waived except in writing signed by Lessor. No failure
on the part of Lessor to exercise, and no delay in exercising, any right or
remedy hereunder shall operate as a waiver thereof. Waiver by Lessor of any
provision hereof or default hereunder in any instance shall not constitute a
waiver as to any other provision, default or instance.
24. SEVERABILITY. If any provision of this Lease is held invalid, such
invalidity shall not affect the other provisions, which shall be given effect
without, the invalid provision.
IN WITNESS WHEREOF, the parties hereto have executed this Furniture Lease
as of the date first above written.
LESSOR: LESSEE:
ORACLE CORPORATION NETWORK COMPUTER, INC.
By: By:
--------------------------- --------------------------------
Name: Name:
------------------------- ------------------------------
Title: Title:
------------------------ -----------------------------
B-9
<PAGE>
FIRST AMENDMENT TO SUBLEASE
THIS FIRST AMENDMENT TO SUBLEASE ("First Amendment") is entered into as of
October 5, 1998 by and between ORACLE CORPORATION ("Sublandlord") and NETWORK
COMPUTER, INC. ("Subtenant") with reference to the following facts;
A. Pursuant to the provisions of that certain Sublease Agreement dated as
of September 17, 1997 (the "Sublease"), Sublandlord subleased to Subtenant
certain space in the Building known as First Interstate Plaza located at 170
South Main Street, Salt Lake City, Utah (the "Building").
B. Pursuant to the provisions of Sublease, the Term of the Sublease was
scheduled to expire as of December 24, 1998.
C. Sublandlord and Subtenant wish to amend the Sublese to adjust the
Expiration Date to February 28, 1999.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Sublandlord and Subtenant hereby agree as follows:
1. Incorporation of Recitals. Recitals A through C above arc hereby
incorporated herein.
2. Term. The Sublease is hereby amended to provide that the Term of
the Sublease shall expire on February 28, 1999 (the "Expiration Date"), unless
sooner terminated pursuant to any provision thereof. From and after the date
hereof, all references in the Sublease to the Expiration Date shall be deemed to
refer to the Expiration Date as fixed by this Section 2.
3. Status of Sublease. Except as amended hereby, the Sublease is
unchanged, and, as amended hereby, the Sublease is in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto hereby execute this First Amendment
as of the day and year first above written.
SUBLANDLORD:
ORACLE CORPORATION,
a Delaware corporation
By: /s/ Bruce Lange
----------------------------------
BRUCE LANGE
Its: VP AND CORPORATE TREASURER
---------------------------------
SUBTENANT:
NETWORK COMPUTER, INC.,
a Delaware corporation
By: /s/ David Rouse
----------------------------------
Its: CEO and President
---------------------------------
2
<PAGE>
EXHIBIT 10.27
[LETTERHEAD OF ORACLE]
Network Computer, Inc
1000 Bridge Parkway,
Redwood Shores,
California,
CA 94065,
U.S.A.
Dear Sirs,
We agree to grant you a licence to use between the hours (the "authorised
hours") of 8 a.m. and 7 p.m. on Mondays to Fridays inclusive (public holidays
excepted) that area of The Helicon, One South Place, London EC2A 1SA details of
which are set out in The Schedule hereto (the "Area") with such access thereto
as may be reasonably necessary subject to the following terms and conditions:
1. The licence will operate between the 1st day of November 1998 and the 31st
day of October 1999, and may be extended until 31st October 2000, subject
to your giving us written notice not less than two weeks prior to 31st
October 1999 for an area within One South Place of equivalent size to the
Area on the same terms as this licence generally, and at the quarterly
rate specified in paragraph 3.
2. The Area is to be used solely as offices in connection with your business
for the marketing and sale of network computers and you are not to use the
same for residential or sleeping purposes. We exclude any terms as to
soundness of construction or fitness for purpose relating to the Area or
anything attached to or contained in the same which may otherwise be
implied by law. Notwithstanding the foregoing we shall maintain our
accommodation within One South Place in accordance with our normal
procedures.
3. The charge for the use of the Area will be at the rate of (pound)30,000
per annum (exclusive of Value Added Tax) payable by equal payments in
advance each of (pound)7,500, the first such payment being made on the
signing hereof Quarter commencing on 1st November 1998. The charge is
inclusive of water and sewerage rates, uniform business rate, heating,
electricity, security, office cleaning, building maintenance, use of
office furniture, use of facsimile equipment and telephone handsets, use
of the office equipment, use of vending machines and photocopiers, and
inclusive of telephone and facsimile charges during the currency of this
licence.
4. If the charge is not paid within 14 days of the due date, we shall be
entitled to terminate this licence upon 10 days written notice to you
and/or require you to
<PAGE>
ORACLE
pay interest on the unpaid charge from the due date at the rate of 3%
above Barclays Bank Plc base rate per annum.
5. You and your authorised representatives will have access to the Area
during the authorised hours only. You will be provided with four
electro-magnetic passes for gaining access to the Area during the
authorised hours. All electro-magnetic passes must be returned to us on
termination of this licence howsoever occurring.
6. You will have the right to use the toilet facilities in the premises
belonging to us and the sixth floor reception area, lifts, fire escapes,
staircases and passageways leading to, from and between the Area.
7. We are making available for your use the furniture now in the Area which
you must leave on vacation of the Area in as good condition as it now is,
fair wear and tear excepted.
8. You will not erect any further partitioning or other structures, install
any fixed plant or equipment or carry out any alterations to the Area
without our written permission. If such erection, installation or
alteration is permitted and carried out, you will at our request upon the
termination of the licence restore the Area to its present state and make
good any damage caused thereby. All moveable plant and equipment used by
you in the Area and belonging to you shall be removed at your expense upon
termination of this licence or such will become our property free of
charge if not so removed.
9. You will maintain normal good housekeeping in the Area at all times. You
will be responsible for all loss or damage within the Area and within
other parts of the premises belonging to us caused by you, your servants
and agents other than by fair wear and tear.
10. You will be responsible for the contents of the Area (including any
permitted erections, installations and alterations). You agree to hold
harmless and indemnify us, our employees and agents from all claims
arising in respect of loss or damage to the contents of the Area from
whatsoever cause other than our negligence or wrongful misconduct.
11. Your employees, visitors and your contractors and sub-contractors will
observe all regulations notified to you relating to security, access, fire
and safety precautions, and any other reasonable on site working
conditions imposed by ourselves.
12. You will comply in your use of the area with the provisions of all
statutes and regulations for the time being and from time to time in
force, and the requirements of any competent authority relating to the
Area or its fixtures and fittings, machinery or other contents or persons
employed or activities carried on thereon but will not be required to make
any alterations, additions or improvements to the Area to bring it into
compliance with such statutes and regulations, which steps will be taken
by us at our sole cost.
2
<PAGE>
ORACLE
13. You will not cause any nuisance or annoyance to us or to any adjoining
owners or occupiers.
14. We will undertake free of charge normal office cleaning of the Area in
accordance with our standard arrangements which apply on the premises, and
will dispose of all reasonable quantities of refuse left in the
appropriate receptacles in the Area.
15. We shall be entitled to terminate this licence upon 14 days written notice
if our landlord so requires us to do, or if all or any requirements of
this licence are not complied with and if capable of remedy, are not so
remedied within 14 days of written notice of such non-compliance being
sent by us to you. However, this licence may not be terminated by us for
any other reason.
16. We will be relieved of liabilities to provide facilities including without
prejudice to the generality of the foregoing the supply of electricity,
lighting, heating, ventilation and telephone services whenever and for so
long as the use of the Area or the building in which the Area is situate
is prevented as a consequence of fire, explosion, water, aircraft, riot,
civil commotion, malicious damage, machinery breakdown or any other
circumstance beyond our control. Further, we will not be liable for any
temporary breakdown or interruption of facilities, although we shall take
all reasonable steps to have such facilities restored as soon as
reasonably practicable.
17. This licence and the privileges granted thereby is personal to your
Company.
18. You will allow us or any person authorised by us to enter the Area at any
reasonable time upon our Facility Manager giving you reasonable notice for
the purpose of ascertaining whether the terms of this licence have been
complied with or for the purpose of viewing and examining the state and
condition of the Area subject to your reasonable security requirements.
Any person entering your Area shall make themselves known to your
management in that part of the Area being inspected.
19. Notwithstanding the provisions of paragraph 17 we or our landlord shall
have a right of access to and passage through your Area on the first floor
for the purpose of using those parts of the first floor not forming part
of the Area or for the purpose of carrying out any work of whatsoever
nature to any of the risers, smoke vents or other utilities serving the
building. In times of emergency we and other occupiers of One South Place
shall also have a right of access to and passage through any parts of the
Area for the purpose of using fire escapes.
20. On the termination of this licence, you will vacate the Area, removing all
equipment, files, books and records which belong to you.
21. This licence shall not operate as a demise or create any leasehold
interest or tenancy of the Area but shall confer upon you only a right to
enter thereon for the purpose of exercising this licence and any
privileges hereby granted.
3
<PAGE>
ORACLE
THE SCHEDULE
The Area comprises part of the first floor (being 1065 sq ft or thereabouts)
within the building known as The Helicon, One South Place, London EC2A 1SA
Yours faithfully,
- -----------------------------
for and on behalf of
Oracle Corporation UK Limited
We accept the terms outlined above
- -----------------------------
Director for and on behalf of
Network Computer, Inc
this ____ day of December 1998.
4
<PAGE>
EXHIBIT 10.28
ATTACHMENT I
MASTER LEASE
LEASE AGREEMENT
BY AND BETWEEN
AETNA LIFE INSURANCE COMPANY,
A CONNECTICUT CORPORATION
AS LANDLORD
AND
NAVIO COMMUNICATION'S, INC.,
A DELAWARE CORPORATION
AND
NETSCAPE COMMUNICATIONS CORPORATION,
A DELAWARE CORPORATION
COLLECTIVELY AS TENANT
DATED NOVEMBER 4, 1996
<PAGE>
LEASE AGREEMENT
BY AND BETWEEN
AETNA LIFE INSURANCE COMPANY,
A CONNECTICUT CORPORATION
AS LANDLORD
AND
NAVIO COMMUNICATION'S, INC.,
A DELAWARE CORPORATION
AND
NETSCAPE COMMUNICATIONS CORPORATION,
A DELAWARE CORPORATION
COLLECTIVELY AS TENANT
DATED NOVEMBER 4, 1996
<PAGE>
TABLE OF CONTENTS
Page
Basic Lease Information ............................................iv
1. Demise ...........................................................1
2. Premises .........................................................1
3. Term .............................................................2
4. Rent .............................................................3
5. Utility Expenses .................................................9
6. Late Charge .....................................................10
7. Security Deposit ................................................11
8. Possession ......................................................11
9. Use Of Premises .................................................12
10. Acceptance Of Premises .........................................14
11. Surrender ......................................................14
12. Alterations And Additions ......................................15
13. Maintenance and Repairs Of Premises ............................17
14. Landlord's Insurance ...........................................18
15. Tenant's Insurance..............................................19
16. Indemnification ................................................20
17. Subrogation ....................................................21
18. Signs ..........................................................21
19. Free From Liens ................................................22
20. Entry By Landlord ..............................................22
21. Destruction And Damage..........................................23
22. Condemnation ...................................................25
23. Assignment And Subletting ......................................26
24. Tenant's Default ...............................................29
i
<PAGE>
25. Landlord's Remedies ............................................31
26. Landlord's Right to Perform Tenant's Obligations ...............34
27. Attorney's Fees ................................................35
28. Taxes ..........................................................35
29. Effect Of Conveyance ...........................................35
30. Tenant's Estoppel Certificate ..................................36
31. Subordination ..................................................36
32. Environmental Covenants ........................................37
33. Notices ........................................................41
34. Waiver .........................................................41
35. Holding Over ...................................................41
36. Successors And Assigns .........................................42
37. Time ...........................................................42
38. Brokers ........................................................42
39. Limitation Of Liability ........................................42
40. Financial Statements ...........................................43
41. Rules And Regulations...........................................43
42. Mortgagee Protection ...........................................43
43. Right Of First Negotiation .....................................44
44. Entire Agreement ...............................................45
45. Interest .......................................................45
46. Construction ...................................................45
47. Representations And Warranties .................................45
48. Security .......................................................46
49. Jury Trial Waiver ..............................................47
50. Joint and Several Liability ....................................47
ii
<PAGE>
Exhibit
A Diagram of the Initial Premises and Subsequent Premises
B Commencement and Expiration Date Memorandum
C Rules and Regulations
D Sign Criteria
E Hazardous Materials Disclosure Certificate
F Negotiation Space
iii
<PAGE>
BASIC LEASE INFORMATION
Lease Date: November 4, 1996
Landlord: AETNA LIFE INSURANCE COMPANY,
a Connecticut corporation
Landlord's Address: c/o Allegis Realty Investors LLC
1740 Technology Drive, Suite 600
San Jose, California 95110
All notices sent to Landlord under this Lease shall
be sent to the above address, with copies to:
Insignia/O'Donnell Commercial Group
160 West Santa Clara Street
Suite 1350
San Jose, California 95113
Tenant: NAVIO COMMUNICATIONS, Inc.,
a Delaware corporation
and
NETSCAPE COMMUNICATIONS CORPORATION,
a Delaware corporation
Tenant's Contact Person: Nancy Hilker,
Vice President and Corporate Controller
Tenant's Address and 870 W. Maude
Telephone Number: Sunnyvale, California 94086
(408) 328-0630
Premises Square Footage:
Initial Premises: Approximately Thirty One Thousand Six Hundred
Ninety-Nine (31,699) rentable square feet
Subsequent Premises: Approximately Thirteen Thousand Four Hundred
Nineteen (13,419) rentable square feet
iv
<PAGE>
Premises Address: 870 West Maude Avenue
Sunnyvale, California 94086
Project: 870 West Maude Avenue - 490 Potrero Avenue,
Sunnyvale, California, together with the land on
which the Project is situated and all Common Areas
Building (if not the same
as the Project): Same as the Project
Tenant's Proportionate
Share of Project:
Initial Premises: 57.45%
Subsequent Premises: 24.32%
Tenant's Proportionate
Share of Building:
Initial Premises: 57.45%
Subsequent Premises: 24.32%
Length of Term:
Initial Premises: Sixty (60) months
Subsequent Premises: Fifty-Nine (59) months
Estimated Commencement
Date:
Initial Premises: December 1, 1996
Subsequent Premises: January 1, 1997
Estimated Expiration Date: November 30, 2001
v
<PAGE>
Monthly Base Rent:
<TABLE>
<CAPTION>
Monthly Monthly
Period Sq. Ft. Base Rate Base Rent
<S> <C> <C> <C>
December 1, 1996- 31,699 x $1.35 =$42,793.65
December 31, 1996
January 1, 1997- 45,118 x $1.35 =$60,909.30
November 30, 1997
December 1, 1997- Monthly Base Rent to be increased in
November 30, 2001 accordance with the Consumer Price
Index Price (see Paragraph 4(a) of
the Lease)
</TABLE>
Prepaid Base Rent: Forty Two Thousand Seven Hundred Ninety-Three and
65/100 Dollars ($42,793.65)
Month to which Prepaid
Base Rent and Additional
Rent will be Applied: First (1st) month of the Term following the
Initial Premises Commencement Date
Security Deposit: Seventy One Thousand Two Hundred Fifty-Five
and 27/100 Dollars ($71,255.27)
Permitted Use: General office use for software development
Unreserved Parking
Spaces:
Prior to occupancy of One hundred eighteen (118) nonexclusive and
Subsequent Premises: undesignated parking spaces
From and after occupancy One hundred sixty-eight (168) nonexclusive and
of Subsequent Premises: undesignated parking spaces
Brokers: Randy Arfillaga and Mark Daschbach of Cornish &
Carey Commercial (Landlord's Broker)
Phil Mahoney and Terry Haught of Cornish & Carey
Commercial (Tenant's Broker)
vi
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into by and between Landlord and
Tenant on the Lease Date. The defined terms used in this Lease which are defined
in the Basic Lease information attached to this Lease Agreement ("Basic Lease
Information") shall have the meaning and definition given them in the Basic
Lease information. The Basic Lease Information, the exhibits, the addendum or
addenda described in the Basic Lease Information, and this Lease Agreement are
and shall be construed as a single instrument and are referred to herein as the
"Lease".
1. DEMISE
In consideration for the rents and all other charges and payments payable
by Tenant, and for the agreements, terms and conditions to be performed by
Tenant in this Lease, LANDLORD DOES HEREBY LEASE TO TENANT, AND TENANT DOES
HEREBY HIRE AND TAKE FROM LANDLORD, the Initial Premises and the Subsequent
Premises (individually or collectively, as applicable, the "Premises"), upon the
agreements, terms and conditions of this Lease for the Term hereinafter stated.
2. PREMISES
The Premises demised by this Lease is located in that certain building
(the "Building") specified in the Basic Lease Information, which Building is
located in that certain real estate development (the "Project") specified in the
Basic Lease Information. The Premises has the address and contains the square
footage specified in the Basic Lease Information. The location and dimensions of
the Initial Premises and the Subsequent Premises are depicted on Exhibit A,
which is attached hereto and incorporated herein by this reference. Tenant shall
have the non-exclusive right (in common with the other tenants, Landlord and any
other person granted use by Landlord) to use the Common Areas (as hereinafter
defined), excluding, however, the parking areas, together with a license to use
the number of non-exclusive and undesignated parking spaces set forth in the
Basic Lease Information in the Building or Project's parking areas; provided,
however, that Landlord shall not be required to enforce Tenant's right to use
such parking spaces; and, provided further, that the number of parking spaces
allocated to Tenant hereunder shall be reduced on a proportionate basis in the
event any of the parking spaces in the Building or Project's parking areas are
taken or otherwise eliminated as a result of any Condemnation (as hereinafter
defined) or casualty event affecting such parking areas. No easement for light
or air is incorporated in the Premises. For purposes of this Lease, the term
"Common Areas" shall mean all areas and facilities outside the Premises and
within the exterior boundary line of the Project that are provided and
designated by Landlord for the non-exclusive use of Landlord, Tenant and other
tenants of the Project and their respective employees, guests and invitees.
1
<PAGE>
Landlord has the right, in its sole discretion, from time to time, to (a)
make changes to the Common Areas, including, without limitation, changes in the
location, size, shape and number of driveways, entrances, parking spaces,
parking areas, ingress, egress, direction of driveways, entrances, corridors and
walkways; (b) close temporarily any of the Common Areas for maintenance purposes
so long as reasonable access to the Premises remains available; (c) add
additional buildings and improvements to the Common Areas or remove existing
buildings or improvements therefrom; (d) use the Common Areas while engaged in
making additional improvements, repairs or alterations to the Project or any
portion thereof; and (e) do and perform any other acts or make any other
changes in, to or with respect to the Common Areas and the Project as Landlord
may, in its sole discretion, deem to be appropriate. Notwithstanding the
foregoing, in no event shall such changes (i) materially reduce parking
available to Tenant or Tenant's customers, (ii) materially interfere with
Tenant's use of the Premises, (iii) unreasonably and materially impair customer
access to or visibility of the Premises.
3. TERM
The term of this Lease (the "Term") with respect to each of the Initial
Premises and the Subsequent Premises shall commence on the date (the
"Commencement Date") Landlord delivers possession of the respective Premises to
Tenant for the commencement or business operations; provided, however, that
Tenant shall not be deemed to have commenced business operations in the Initial
Premises for purposes of this Paragraph 3 if Tenant enters upon the Initial
Premises for the sole purpose of installing its fixtures and equipment and
preparing the Initial Premises for Tenant's business operations in accordance
with Paragraph 8(c) below.
The date on which the Term commences with respect to the Initial Premises
shall be hereinafter referred to as the "initial Premises Commencement Date."
The date on which the Term commences with respect to the Subsequent Premises
shall be hereinafter referred to as the "Subsequent Premises Commencement Date."
In the event the actual Commencement Date of this Lease with respect to either
the Initial Premises or the Subsequent Premises, as determined pursuant to the
foregoing, is a date other than the Estimated Commencement Date for the
respective Premises specified in the Basic Lease Information, then Landlord and
Tenant shall promptly execute a Commencement and Expiration Date Memorandum in
the form attached hereto as Exhibit B, wherein the parties shall specify the
Commencement Date of the respective Premises and the Expiration Date. The Term
shall expire with respect to the Initial Premises and the Subsequent Premises on
the fifth (5th) anniversary of the Initial Premises Commencement Date (the
"Expiration Date").
2
<PAGE>
4. RENT
(a) Base Rent. Tenant shall pay to Landlord, in advance on the first day
of each month, without further notice or demand and without offset or deduction,
the monthly installments of rent specified in the Basic Lease Information (the
"Base Rent").
The Base Rent under this Paragraph 4(a) shall be adjusted, as stated
below, on each anniversary of the Commencement Date of this Lease to reflect
percentage increases in the cost of living. The Consumer Price Index (U.S.
Department of Labor Consumer Price Index (all items) for Urban Wage Earners and
Clerical Workers, San Francisco Bay Area (1982-1984= 100), hereinafter referred
to as the "Index") published for the month immediately preceding such adjustment
date ("Adjustment Index") and the Index published for the month immediately
preceding the Commencement Date of this Lease ("Base Index") Shall be compared
and the percentage difference between the Adjustment Index and the Base Index
shall be determined. The initial Base Rent specified in the Basic Lease
Information shall be increased by adding to said initial Base Rent the
percentage amount of said initial Base Rent equal to the percentage difference
between the Base Index and the Adjustment Index; provided, however, in no event
shall the initial Base Rent hereunder be increased by less than four percent
(4%) or more than seven percent (7%) for any one year. When the adjusted Base
Rent is determined after each adjustment date, Landlord shall give Tenant
written notice indicating the amount thereof and the method of computation. If
the Consumer Price Index is changed or discontinued, Landlord shall substitute
an official index published by the Bureau of Labor Statistics or its successor
or similar governmental agency as may then be in existence and shall be most
nearly equivalent thereto.
Upon execution of this Lease, Tenant shall pay to Landlord the
Prepaid Base Rent specified in the Basic Lease Information and first monthly
installment of estimated Additional Rent (as hereinafter defined) to be applied
toward Base Rent and Additional Rent for the month of the Term specified in the
Basic Lease Information.
(b) Additional Rent. This Lease is intended to be a triple-net Lease with
respect to Landlord; and subject to Paragraph 13(b) below, the Base Rent owing
hereunder is (1) to be paid by Tenant absolutely net of all costs and expenses
relating to Landlord's ownership and operation of the Project and the Building,
and (2) not to be reduced, offset or diminished, directly or indirectly, by any
cost, charge or expense payable hereunder by Tenant or by others in connection
with the Premises, the Building and/or the Project or any part thereof. The
provisions of this Paragraph 4(b) for the payment of Tenant's Proportionate
Share(s) of Expenses (as hereinafter defined) are intended to pass on to Tenant
its share of all such costs and expenses. In addition to the Base Rent, Tenant
shall pay to Landlord, in accordance with this Paragraph 4, Tenant's
Proportionate Share(s) of all costs and expenses paid or incurred by Landlord in
connection with the ownership, operation, maintenance, management and repair of
the Premises, the Building and/or the Project or any part thereof, except as
expressly provided for herein (collectively, the
3
<PAGE>
"Expenses"), including, without limitation, all the following items (the
"Additional Rent"):
(1) Taxes and Assessments. All real estate taxes and assessments,
which shall include any form of tax, assessment, fee, license fee, business
license fee, levy, penalty (only if a result of Tenant's delinquency), or tax
(other than net income, estate, succession, inheritance, transfer or franchise
taxes), imposed by any authority having the direct or indirect power to tax, or
by any city, county, state or federal government or any improvement or other
district or division thereof, whether such tax is (i) determined by the area of
the Premises, the Building and/or the Project or any part thereof, or the Rent
and other sums payable hereunder by Tenant or by other tenants, including, but
not limited to, any gross income or excise tax levied by any of the foregoing
authorities with respect to receipt of Rent and/or other sums clue under this
Lease; (ii) upon any legal or equitable interest of Landlord in the Premises,
the Building and/or the Project or any part thereof; (iii) upon this-transaction
or any document to which Tenant is a party creating or transferring any interest
in the Premises, the Building and/or the Project; (iv) levied or assessed in
lieu of, in substitution for, or in addition to, existing or additional taxes
against the Premises, the Building and/or the Project, whether or not now
customary or within the contemplation of the parties; or (v) surcharged against
the parking area. Tenant and Landlord acknowledge that Proposition 13 was
adopted by the voters of the State of California in the June, 1978 election and
that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such purposes as fire protection, street, sidewalk,
road, utility construction and maintenance, refuse removal and for other
governmental services which may formerly have been provided without charge to
property owners or occupants. It is the intention of the parties that all new
and increased assessments, taxes, fees, levies and charges due to any cause
whatsoever are to be included within the definition of real property taxes for
purposes of this Lease. "Taxes and assessments" shall also include legal and
consultants fees, costs and disbursements incurred in connection with
proceedings to contest, determine or reduce taxes, Landlord specifically
reserving the right, but not the obligation, to contest by appropriate legal
proceedings the amount or validity of any taxes. Notwithstanding the foregoing,
the following shall not constitute "Taxes and assessments" for the purposes of
this Lease, and nothing contained herein shall be deemed to require Tenant to
pay any of the following: (i) any state, local, federal, personal or corporate
income tax measured by the income of Landlord; (ii) any estate or inheritance
taxes, (iii) any franchise, succession or transfer taxes; or (iv) interest on
taxes or penalties resulting from Landlord's failure to pay taxes, except to the
extent such failure is due to Tenant's failure to pay such taxes to Landlord
when provided under this Lease. If any assessments affecting the Premises are
payable in installments and Landlord should prepay such assessments in advance
of the date such installments would become due, Tenant shall be solely
responsible for the portion of such assessment that would have normally come
clue as an installment, unless consented to by Tenant in writing.
4
<PAGE>
(2) Insurance. All insurance premiums for the Building and/or the
Project or any part thereof, including premiums for "all risk (special form)"
fire and extended coverage insurance, commercial general liability insurance,
including, without limitation, commercial general liability insurance covering
the acts of Landlord and its Agents, rent loss or abatement insurance in an
amount equal to the Rent due hereunder for up to twelve (12) months, earthquake
insurance, flood or surface water coverage, and other insurance as Landlord
deems prudent in its sole discretion, and any deductibles paid under policies of
any such insurance. Notwithstanding the foregoing, in the event of any insured
casualty to the Building and/or the Project or any part thereof during the Term
for which the deductible under any applicable policy of casualty insurance
exceeds an amount equal to one (1) month of Base Rent payable hereunder at the
time of such casualty, then the portion of such deductible equal to one (1)
month's Base Rent shall be payable hereunder immediately as Additional Rent
pursuant to this Paragraph 4(b), and the balance of such deductible shall be
amortized by Landlord and payable by Tenant, together with interest thereon at
the rate of eight percent (8%) per annum, in equal monthly installments over the
remaining Term of this Lease; provided, however, that if this Lease shall
terminate for any reason prior to the scheduled expiration thereof, the unpaid
balance of such deductible and all accrued and unpaid interest thereon shall
immediately become due and payable in full.
(3) Utilities. The cost of all Utilities (as hereinafter defined)
serving the Premises, the Building and the Project that are not separately
metered to Tenant, any assessments or charges for Utilities or similar purposes
included within any tax bill for the Building or the Project, including without
limitation, entitlement fees, allocation unit fees. and/or any similar fees or
charges and any penalties (if a result of Tenant's delinquency) related thereto,
and any amounts, taxes, charges, surcharges, assessments or impositions levied,
assessed or imposed upon the Premises, the Building or the Project or any part
thereof, or upon Tenant's use and occupancy thereof, as a result of any
rationing of Utility services or restriction on Utility use affecting the
Premises, the Building and/or the Project, as contemplated in Paragraph 5 below
(collectively, "Utility Expenses").
(4) Common Area Expenses. All costs to operate, maintain, repair,
replace, supervise, insure and administer the Common Areas, including supplies,
materials, labor and equipment used in or related to the operation and
maintenance of the Common Areas, including parking areas (including, without
limitation, all costs of resurfacing and restriping parking areas), signs and
directories on the Building and/or the Project, landscaping (including
maintenance contracts and fees payable to landscaping consultants), amenities,
sprinkler systems, sidewalks, walkways, driveways, curbs, lighting systems and
security services, if any, provided by Landlord for the Common Areas, and any
charges, assessments, costs or fees levied by any association or entity of which
the Project or any part thereof is a member or to which the Project or any part
thereof is subject.
5
<PAGE>
(5) Parking Charges. Any parking charges or other costs levied,
assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by any governmental
authority or insurer in connection with the use or occupancy of the Building or
the Project.
(6) Maintenance and Repair Costs. Except for costs which are the
responsibility of Landlord pursuant to Paragraph 13(b) below, all costs to
maintain, repair, and replace the Premises, the Building and/or the Project or
any part thereof, including without limitation, (i) all costs paid under
maintenance, management and service agreements such as contracts for janitorial,
security and refuse removal, (ii) all costs to maintain, repair and replace the
roof coverings of the Building or the Project or any part thereof, (iii) all
costs to maintain, repair and replace the heating, ventilating, air
conditioning, plumbing, sewer, drainage, electrical, fire protection, life
safety and security systems and other mechanical, electrical and communications
systems and equipment serving the Premises, the Building and/or the Project or
any part thereof (collectively, the "Systems").
(7) Life Safety Costs. All costs to install, maintain, repair and
replace all life safety systems, including, without limitation, all fire alarm
systems, serving the Premises, the Building and/or the Project or any part
thereof (including all maintenance contracts and fees payable to life safety
consultants) whether such systems are or shall be required by Landlord's
insurance carriers, Laws (as hereinafter defined) or otherwise.
(8) Management and Administration. All costs for management and
administration of the Premises, the Building and/or the Project or any part
thereof, including, without limitation, a property management fee not to exceed
on an annual basis five percent (5%) of the gross income of the Building,
accounting, auditing, billing, postage, salaries and benefits for clerical and
supervisory employees, whether located on the Project or off-site, payroll taxes
and legal and accounting costs and fees for licenses and permits related to the
ownership and operation of the Project.
Notwithstanding the foregoing, the following shall not constitute
Expenses for the purposes of this Lease, and nothing contained herein shall be
deemed to require Tenant to pay any of the following: (i) legal fees, brokerage
commissions, advertising costs and other related expenses incurred in connection
with the leasing of the Building or Project; (ii) damage and repairs
attributable to condemnation, fire or other casualty; (iii) damage and repairs
covered under any warranty or insurance policy carded by Landlord in connection
with the Building or Project, but solely to the extent of proceeds actually
collected by Landlord under such warranty or policy; (iv) executive salaries of
Landlord at or above the level of senior vice president; (v) salaries of service
personnel to the extent that such service personnel perform services not solely
in connection with the management, operation, repair or maintenance of the
Building, Project or Common Areas (in which case the salaries of such personnel
shall be allocated by Landlord to the Building, Project or Common Areas, on the
one hand, and the other properties serviced
6
<PAGE>
by such personnel, on the other hand, based upon the relative proportion of the
time of such personnel devoted to the Building. Project or Common Areas and such
other properties, and only the portion of the salaries of such personnel devoted
to the Building, Project or Common Areas shall be considered "Expenses" for
purposes of this Lease); (vi) Landlord's general overhead expenses not related
to the Building; (vii) payments of principal or interest on any mortgage or
other encumbrance including ground lease payments and points, commissions and
legal fees associated with financing; (viii) depreciation; (ix) legal fees,
accountants fees and other expenses incurred in connection with disputes with
Tenant or other tenants or occupants of the Building or Project or associated
with the enforcement of any leases or defense of Landlord's title to or interest
in the Building or any part thereof; (x) costs (including permit, license and
inspection fees) incurred in renovating or otherwise improving, decorating,
painting or altering space for other tenants or other occupants or vacant space
(excluding the Common Areas) in the Building or Project; (xi) costs incurred due
to violation by any other tenant in the Building of the terms and conditions of
any lease; (xii) costs incurred as a result of Landlord's gross negligence or
willful misconduct in the operation of the Property; (xiii) the cost of any
service provided to Tenant or other occupants of the Building or Project for
which Landlord is entitled to be reimbursed, but solely to the extent of the
actual reimbursement received by Landlord; (xiv) charitable or political
contributions; (xv) any cost or expense related to the testing for, removal,
transportation or storage of Hazardous Materials from the Project, Building or
Premises, except to the extent of any testing performed at the request of Tenant
(in which case Tenant shall be solely responsible for the costs of such tests);
and (xvi) interest, penalties or other costs arising out of Landlord's failure
to make timely payments of its obligations (except to the extent such failure is
due to Tenant's failure to pay sums due under Lease to Landlord). Nothing
contained in this paragraph shall be deemed to limit the payment obligations of
Tenant under any other provision of this Lease, except for the obligations
arising under Paragraph 4(b).
Landlord shall not collect in excess of one hundred percent (100%)
of Expenses, or any item of cost more than once.
Notwithstanding anything in this Section 4(b) to the contrary, with
respect to all sums payable by Tenant as Additional Rent under this Section 4(b)
for the repair or replacement of any item or the construction of any new item in
connection with the physical operation of the Premises, the Building or the
Project (i,e., HVAC, roof membrane or coverings and parking area) which is a
capital item the repair or replacement of which properly would be capitalized
Under generally accepted accounting principles, Tenant shall be required to pay
only the prorata share of the cost of the item falling due within the Term based
upon the amortization of the same over the useful life of such item, as
reasonably determined by Landlord.
7
<PAGE>
(c) Payment of Additional Rent.
(1) Prior to the Initial Premises Commencement Date, Landlord shall
submit to Tenant an estimate of monthly Additional Rent for the Initial Premises
for the period between the Initial Premises Commencement Date and the following
December 31 and Tenant shall pay such estimated Additional Rent on a monthly
basis, in advance, on the first day of each month. Prior to the Subsequent
Premises Commencement Date, Landlord shall submit to Tenant an estimate of
monthly Additional Rent for the Subsequent Premises for the period between the
Subsequent Premises Commencement Date and the following December 31 and Tenant
shall pay such estimated Additional Rent on a monthly basis, in advance, on the
first day of each month. Tenant shall continue to make said monthly payments
until notified by Landlord of a change therein. By April 1 of each calendar
year, Landlord shall endeavor to provide to Tenant a statement showing in
reasonable detail the actual Additional Rent due to Landlord for the prior
calendar year, to be prorated during the first year from the respective
Commencement Date(s). If the total of the monthly payments of Additional Rent
that Tenant has made for the prior calendar year is less than the actual
Additional Rent chargeable to Tenant for such prior calendar year, then Tenant
shall pay the difference in a lump sum within ten (10) business days after
receipt Of such statement from Landlord. Any overpayment by Tenant of Additional
Rent for the prior calendar year shall be credited towards the Additional Rent
next due or, in the case such overpayment is determined subsequent to the
expiration or earlier termination of this Lease, paid to Tenant promptly upon
discovery thereof.
(2) Landlord's then-current annual operating and capital budgets for
the Building and the Project or the pertinent part thereof shall be used for
purposes of calculating Tenant's monthly payment of estimated Additional Rent
for the current year, subject to adjustment as provided above. Landlord shall
make the final determination of Additional Rent for the year in which this Lease
terminates as soon as possible after termination of such year. Even though the
Term has expired and Tenant has vacated the Premises, Tenant shall remain liable
for payment of any amount due to Landlord in excess of the estimated Additional
Rent previously paid by Tenant, and, conversely, Landlord shall promptly return
to Tenant any overpayment. Failure of Landlord to submit statements as called
for herein shall not be deemed a waiver of Tenant's obligation to pay Additional
Rent as herein provided.
(3) With respect to Expenses which Landlord allocates to the
Building, Tenant's "Proportionate Share" shall be the percentage set forth in
the Basic Lease Information as Tenant's Proportionate Share of the Building, as
adjusted by Landlord from time to time for a remeasurement of or changes in the
physical size of the Premises or the Building, whether such changes in size are
due to an addition to or a sale or conveyance of a portion of the Building or
otherwise. With respect to Expenses which Landlord allocates to the Project as a
whole or to only a portion of the Project, Tenant's "Proportionate Share" shall
be, with respect to Expenses which Landlord allocates to the
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Project as a whole, the percentage set forth in the Basic Lease Information as
Tenant's Proportionate Share of the Project and, with respect to Expenses which
Landlord allocates to only a portion of the Project, a percentage calculated by
Landlord from time to time in its sole discretion and furnished to Tenant in
writing, in either case as adjusted by Landlord from time to time for a
remeasurement of or changes in the physical size of the Premises or the Project,
whether such changes in size are due to an addition to or a sale or conveyance
of a portion of the Project or otherwise. Notwithstanding the foregoing,
Landlord may equitably adjust Tenant's Proportionate Share(s) for all or part of
any item of expense or cost reimbursable by Tenant that relates to a repair,
replacement, or service that benefits only the Premises or only a portion of the
Building and/or the Project or that varies with the occupancy of the Building
and/or the Project. Without limiting the generality of the foregoing, Tenant
understands and agrees that Landlord shall have the right to adjust Tenant's
Proportionate Share(s) of any Utility Expenses based upon Tenant's use of the
Utilities or similar services as reasonably estimated and determined by Landlord
based upon factors such as size of the Premises and intensity of use of such
Utilities by Tenant such that Tenant shall pay the portion of such charges
reasonably consistent with Tenant's use of such Utilities and similar services.
If Tenant disputes any such estimate or determination of Utility Expenses, then
Tenant shall either pay the estimated amount or cause the Premises to be
separately metered at Tenant's sole expense.
(d) General Payment Terms. The Base Rent, Additional Rent and all other
sums payable by Tenant to Landlord hereunder, including, without limitation, any
late charges assessed pursuant to Paragraph 6 below and any interest assessed
pursuant to Paragraph 45 below, are referred to as the "Rent". All Rent shall be
paid without deduction, offset or abatement in lawful money of the United States
of America. Checks are to be made payable to Moffett Park Properties Company
#317 and shall be mailed to ALIC SA87 IODCG AAF REI 3261, Moffett Park
Properties, Lock Box 66268, El Monte, California 91735-6268 or to such other
person or place as Landlord may, from time to time, designate to Tenant in
writing. The Rent for any fractional part of a calendar month at the
commencement or termination of the Lease term shall be a prorated amount of the
Rent for a full calendar month based upon a thirty (30) day month.
5. UTILITY EXPENSES
(a) Tenant shall pay the cost of all water, sewer use, sewer discharge
fees and permit costs and sewer connection fees, gas, heat, electricity, refuse
pick-up, janitorial service, telephone and all materials and services or other
utilities (collectively, "Utilities") billed or metered separately to the
Premises and/or Tenant, together with all taxes, assessments, charges and
penalties (but solely to the extent such penalties are attributable to Tenant's
failure to timely pay sums due hereunder) added to or included within such cost.
Promptly after the execution of this Lease by Landlord and Tenant, Landlord
shall cause all Utilities furnished to the Premises to be separately metered to
the extent commercially practicable. Tenant acknowledges that the Premises, the
Building
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and/or the Project may become subject to the rationing of Utility services or
restrictions on Utility use as required by a public utility company,
governmental agency or other similar entity having jurisdiction thereof. Tenant
acknowledges and agrees that its tenancy and occupancy hereunder shall be
subject to such rationing or restrictions as may be imposed upon Landlord by
such utility company, governmental agency or other entity, Tenant, the Premises,
the Building and/or the Project, and Tenant shall in no event be excused or
relieved from any covenant or obligation to be kept or performed by Tenant by
reason of any such rationing or restrictions. Tenant agrees to comply with
energy conservation programs reasonably implemented by Landlord by reason of
rationing, restrictions or Laws.
(b) Landlord shall not be liable for any loss, injury or damage to
property caused by or resulting from any variation, interruption, or failure of
Utilities, or from failure to make any repairs or perform any maintenance,
unless such loss, injury or damage is caused by Landlord's gross negligence or
willful misconduct. No temporary interruption or failure of such services
incident to the making of repairs, alterations, improvements, or due to
accident, strike, or conditions or other events shall be deemed an eviction of
Tenant or relieve Tenant from any of its obligations hereunder. In no event
shall Landlord be liable to Tenant for any damage to the Premises or for any
loss, damage or injury to any property therein or thereon occasioned by
bursting, rupture, leakage or overflow of any plumbing or other pipes
(including, without limitation, water, steam, and/or refrigerant lines),
sprinklers, tanks, drains, drinking fountains or washstands, or other similar
cause in, above, upon or about the Premises, the Building, or the Project,
unless caused by Landlord's gross negligence or willful misconduct.
6. LATE CHARGE
Notwithstanding any other provision of this Lease, Tenant hereby
acknowledges that late payment to Landlord of Rent, or other amounts due
hereunder will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. If any Rent or
other sums due from Tenant are not received by Landlord or by Landlord's
designated agent within five (5) days after their due date, then Tenant shall
pay to Landlord a late charge equal to five percent (5%) of such overdue amount,
plus any costs and attorneys' fees incurred by Landlord by reason of Tenant's
failure to pay Rent and/or other charges when due hereunder. Landlord and Tenant
hereby agree that such late charges represent a fair and reasonable estimate of
the cost that Landlord will incur by reason of Tenant's late payment and shall
not be construed as a penalty. Landlord's acceptance of such late charges shall
not constitute a waiver of Tenant's default with respect to such overdue amount
or estop Landlord from exercising any of the other rights and remedies granted
under this Lease.
Initials: Landlord [Illegible] Tenant [Illegible]
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7. SECURITY DEPOSIT
Concurrently with Tenant's execution of the Lease, Tenant shall deposit
with Landlord the Security Deposit specified in the Basic Lease Information as
security for the full and faithful performance of each and every term, covenant
and condition of this Lease. Landlord may use, apply or retain the whole or any
part of the Security Deposit as may be reasonably necessary (a) to remedy
Tenant's default in the payment of any Rent, (b) to repair damage to the
Premises caused by Tenant, (c) to clean the Premises upon termination of this
Lease, (d) to reimburse Landlord for the payment of any amount which Landlord
may reasonably spend or be required to spend by reason of Tenant's default, or
(e) to compensate Landlord for any other loss or damage which Landlord may
suffer by reason of Tenant's default. Should Tenant faithfully and fully comply
with all of the terms, covenants and conditions of this Lease, within thirty
(30) days following the expiration of the Term, the Security Deposit or any
balance thereof shall be returned to Tenant or, at the option of Landlord, to
the last assignee of Tenant's interest in this Lease. Landlord shall not be
required to keep the Security Deposit separate from its general funds and Tenant
shall not be entitled to any interest on such deposit. If Landlord so uses or
applies all or any portion of said deposit, within ten (10) business days after
written demand therefor Tenant shall deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to the full extent of the above
amount, and Tenant's failure to do so shall be a default under this Lease. In
the event Landlord transfers its interest in this Lease, Landlord shall transfer
the then remaining amount of the Security Deposit to Landlord's successor in
interest, and thereafter Landlord shall have no further liability to Tenant with
respect to such Security Deposit.
8. POSSESSION
(a) Tenant's Right of Possession. Subject to Paragraph 8(b), Tenant shall
be entitled to possession of the Initial Premises upon the Initial Premises
Commencement Date and the Subsequent Premises upon the Subsequent Premises
Commencement Date. Tenant shall lease the Initial Premises and the Subsequent
Premises in their "as is" condition on the Initial Premises Commencement Date
and the Subsequent Premises Commencement Date, respectively, and Landlord shall
have no obligation to improve, remodel or otherwise alter the Premises either
prior to or after the commencement of the Term.
(b) Delay in Delivering Possession. If for any reason whatsoever, Landlord
cannot deliver possession of the Initial Premises or the Subsequent Premises to
Tenant on or before the respective Estimated Commencement Date specified in the
Basic Lease Information, then except as expressly provided in Paragraph 8(d)
below, this Lease shall not be void or voidable, nor shall Landlord, or
Landlord's agents, advisors, employees, partners, shareholders, directors,
invitees or independent contractors (collectively, "Landlord's Agents"), be
liable to Tenant for any loss or damage resulting therefrom. Tenant shall not be
liable for Rent for the Initial Premises or the Subsequent Premises
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until Landlord delivers possession of the particular Premises to Tenant. The
Expiration Date shall be extended by the same number of days that Tenant's
possession of the Initial Premises was delayed beyond the Estimated Initial
Premises Commencement Date specified in the Basic Lease Information.
(c) Early Occupancy. Notwithstanding anything to the contrary contained
in Paragraph 8(a), and subject to the vacation of the Initial Premises by the
existing tenant thereof, Tenant shall have the right to enter upon the Initial
Premises at such times as shall be reasonably acceptable to Landlord during the
period between November 4, 1996 and the Initial Premises Commencement Date for
the sole purpose of installing Tenant's fixtures and equipment and preparing the
Initial Premises for its business operations, provided, however, that such entry
shall be subject to all of the terms and provisions of this Lease, excepting
only the obligation to pay Rent and, provided further, that Tenant shall not
conduct business in the Initial Premises during such period.
(d) Late Delivery. Notwithstanding anything in this Paragraph 8 to the
contrary, if possession of the Initial Premises is not delivered to Tenant on or
before February 15, 1997 or possession of the Subsequent Premises is not
delivered to Tenant on or before May 1, 1997, then Tenant may, in either case
within ten (10) days of the relevant deadline, as Tenant's sole remedy,
terminate this Lease by providing written notice thereof to Landlord. In such
case Landlord shall immediately deliver to Tenant the Security Deposit and any
and all prepaid Rent or other amounts prepaid by Tenant to Landlord.
9. USE OF PREMISES
(a) Permitted Use. The use of the Premises by Tenant and Tenant's agents,
advisors, employees, partners, shareholders, directors, invitees and independent
contractors (collectively, "Tenant's Agents") shall be solely for the Permitted
Use specified in the Basic Lease Information and for no other use. Tenant shall
not permit any objectionable or unpleasant odor, smoke, dust, gas, noise or
vibration to emanate from or near the Premises. The Premises shall not be used
to create any nuisance or trespass, for any illegal purpose, for any purpose not
permitted by Laws, for any purpose that would invalidate the insurance or
increase the premiums for insurance on the Premises, the Building or the Project
or for any purpose or in any manner that would interfere with other tenant's use
or occupancy of the Project. Tenant agrees to pay to Landlord, as Additional
Rent, any increases in premiums on policies resulting from Tenant's Permitted
Use or any other use or action by Tenant or Tenant's Agents which increases
Landlord's premiums or requires additional coverage by Landlord to insure the
Premises. Tenant agrees not to overload the floor(s) of the Building.
(b) Compliance With Governmental Regulations and Private Restrictions.
Tenant and Tenant's Agents shall, at Tenant's expense, faithfully observe and
comply with (1) all municipal, state and federal laws, statutes, codes, rules,
regulations, ordinances,
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requirements, and orders (collectively, "Laws"), now in force or which may
hereafter be in force pertaining to the Premises or Tenant's use of the
Premises, the Building or the Project, whether substantial in cost or otherwise,
provided, however, that except as provided in Paragraph 9(c) below, Tenant shall
not be required to make or, except as provided in Paragraph 4 above, pay for,
structural changes to the Premises or the Building, including, without
limitation, the installation of fire sprinkler systems, seismic reinforcement
and related alterations, and, except as provided in Paragraph 32 below, the
removal of asbestos or other Hazardous Materials (as hereinafter defined), not
related to Tenant's specific use of the Premises unless the requirement for such
changes is imposed as a result of any improvements or additions made or proposed
to be made at Tenant's request; (2) all recorded covenants, conditions and
restrictions affecting the Project ("Private Restrictions") now in force or
which may hereafter be in force; and (3) any and all rules and regulations set
forth in Exhibit D and any other rules and regulations now or hereafter
promulgated by Landlord related to parking or the operation of the Premises, the
Building and/or the Project (collectively, the "Rules and Regulations"). The
judgment of any court of competent jurisdiction, or the admission of Tenant in
any action or proceeding against Tenant, whether Landlord be a party thereto or
not, that Tenant has violated any such Laws or Private Restrictions, shall be
conclusive of that fact as between Landlord and Tenant.
(c) Compliance with Americans with Disabilities Act. Landlord and Tenant
hereby agree and acknowledge that the Premises, the Building and/or the Project
may be subject to, among other Laws, the requirements of the Americans with
Disabilities Act, a federal law codified at 42 U.S.C. 12101 et seq., including,
but not limited to Title III thereof, and all regulations and guidelines related
thereto, together with any and all laws, rules, regulations, ordinances, codes
and statutes now or hereafter enacted by local or state agencies having
jurisdiction thereof, including all requirements of Title 24 of the State of
California, as the same may be in effect on the date of this Lease and may be
hereafter modified, amended or supplemented (collectively, the "ADA"). Subject
to reimbursement pursuant to Paragraph 4 above, if any barrier removal work or
other work is required to the Building, the Common Areas or the Project under
the ADA, then such work shall be the responsibility of Landlord; provided, if
such work is required under the ADA as a result of Tenant's use of the Premises
or any work or Alteration (as hereinafter defined) made to the Premises by or on
behalf of Tenant, then such work shall be performed by contractors selected by
Landlord (the "ADA Contractors") at the sole cost and expense of Tenant.
Landlord shall consult with Tenant concerning the selection of the ADA
Contractors, provided, however, that in the event of any dispute between
Landlord and Tenant concerning such selection, the final decision shall be made
by Landlord. Except as otherwise expressly provided in this provision, Tenant
shall be responsible at its sole cost and expense for fully and faithfully
complying with all applicable requirements of the ADA, including without
limitation, not discriminating against any disabled persons in the operation of
Tenant's business in or about the Premises, and offering or otherwise providing
auxiliary aids and services as, and when, required by the ADA. Within ten (10)
days after Tenant's receipt thereof, Tenant shall
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advise Landlord in writing, and provide Landlord with copies of (as applicable),
any notices alleging violation of the ADA relating to any portion of the
Premises, the Building or the Project; any claims made or threatened orally or
in writing regarding noncompliance with the ADA and relating to any portion of
the Premises, the Building, or the Project (excluding any claim made orally
which are reasonably determined by Tenant to be frivolous and which are not
reasonably likely to result in any action being taken by the party making such
claim); or any governmental or regulatory actions or investigations instituted
or threatened regarding noncompliance with the ADA and relating to any portion
of the Premises, the Building or the Project.
10. ACCEPTANCE OF PREMISES
Landlord shall cause the HVAC, electrical and plumbing systems serving the
Initial Premises and the Subsequent Premises to be in good working order and the
roof on the Initial Premises and the Subsequent Premises to be in good condition
on the Initial Premises Commencement Date and the Subsequent Premises
Commencement Date, respectively. Subject to the foregoing, by entry hereunder,
Tenant accepts the Premises as suitable for Tenant's intended use and as being
in good and sanitary operating order, condition and repair, AS IS, and without
representation or warranty by Landlord as to the condition, use or occupancy
which may be made thereof. Any exceptions to the foregoing must be by written
agreement executed by Landlord and Tenant.
11. SURRENDER
Tenant agrees that on the last day of the Term, or on the sooner
termination of this Lease, Tenant shall surrender the Premises to Landlord (a)
in good condition and repair (damage by acts of God, fire, acts of Landlord or
Landlord's Agents, and normal wear and tear excepted), but with all interior
walls painted or cleaned so they appear painted, any carpets cleaned, all floors
cleaned and waxed, all non-working light bulbs and ballasts replaced and all
roll-up doors and plumbing fixtures in good condition and working order, and (b)
otherwise in accordance with Paragraph 32(h). Normal wear and tear shall not
include any damage or deterioration to the floors of the Premises arising from
the use of forklifts in, on or about the Premises (including, without
limitation, any marks or stains on any portion of the floors), and any damage or
deterioration that would have been prevented by proper maintenance by Tenant, or
Tenant otherwise performing all of its obligations under this Lease. On or
before the expiration or sooner termination of this Lease, (i) Tenant shall
remove all of Tenant's Property (as hereinafter defined) and Tenant's signage
from the Premises, the Building and the Project and repair any damage caused by
such removal, and (ii) Landlord may, by notice to Tenant given not later than
ninety (90) days prior to the Expiration Date (except in the event of a
termination of this Lease prior to the scheduled Expiration Date, in which event
no advance notice shall be required), require Tenant at Tenant's expense to
remove any or all Alterations (as hereinafter defined) and to repair any damage
caused by such removal. Any of Tenant's Property not so removed by Tenant as
required herein shall be deemed abandoned and
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may be stored, removed, and disposed of by Landlord at Tenant's expense, and
Tenant waives all claims against Landlord for any damages resulting from
Landlord's retention and disposition of such property; provided, however, that
Tenant shall remain liable to Landlord for all costs incurred in storing and
disposing of such abandoned property of Tenant. All Alterations except those
which Landlord requires Tenant to remove shall remain in the Premises as the
property of Landlord. If the Premises are not surrendered at the end of the Term
or sooner termination of this Lease, and in accordance with the provisions of
this Paragraph 11 and Paragraph 32(h) below, Tenant shall continue to be
responsible for the payment of Rent (as the same may be increased pursuant to
Paragraph 35 below) until the Premises are so surrendered in accordance with
said Paragraphs, and Tenant shall indemnify, defend and hold Landlord harmless
from and against any and all loss or liability resulting from delay by Tenant in
so surrendering the Premises including, without limitation, any loss or
liability resulting from any claim against Landlord made by any succeeding
tenant or prospective tenant founded on or resulting from such delay and losses
to Landlord due to lost opportunities to lease any portion of the Premises to
any such succeeding tenant or prospective tenant, together with, in each case,
actual attorneys' fees and costs. In furtherance of the foregoing, Tenant agrees
to give Landlord at least sixty (60) days' prior notice of its intention to
vacate the Premises so that Landlord will have an opportunity to perform an
inspection of the Premises and surrounding areas as contemplated under Paragraph
32(f) below prior to such vacation.
12. ALTERATIONS AND ADDITIONS
(a) Tenant shall not make, or permit to be made, any alteration, addition
or improvement (hereinafter referred to individually as an "Alteration" and
collectively as the "Alterations") to the Premises or any part thereof without
the prior written consent of Landlord, which consent shall not be unreasonably
withheld; provided, however, that Landlord shall have the right in its sole and
absolute discretion to consent or to withhold its consent to any Alteration
which affects the structural portions of the Premises, the Building or the
Project or the Systems serving the Premises, the Building and/or the Project or
any portion thereof. Notwithstanding anything to the contrary in this Section
12, Tenant shall have the right, without the prior written consent of Landlord,
to make Alterations which (i) do not affect the Systems or the structural
components of the Building, and (ii) cost less than Five Thousand Dollars
($5,000) on an individual basis or for a series of related alterations and do
not exceed Twenty-Five Thousand Dollars ($25,000) in the aggregate over the Term
of this Lease (collectively, "Permitted Alterations"), provided that each such
Permitted Alteration is otherwise performed in accordance with the provisions of
Sections 12(b) through (f) of the Lease.
(b) Any Alteration to the Premises shall be at Tenant's sole cost and
expense, in compliance with all applicable Laws and all requirements reasonably
requested by Landlord, including, without limitation, the requirements of any
insurer providing coverage for the Premises or the Project or any part thereof,
and in accordance with plans
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and specifications approved in writing by Landlord, and shall be constructed and
installed by a contractor approved in writing by Landlord. Before Alterations
may begin, valid building permits or other permits or licenses required must be
furnished to Landlord, and, once the Alterations begin, Tenant will diligently
and continuously pursue their completion. Landlord may monitor construction of
the Alterations and Tenant shall reimburse Landlord for its reasonable
out-of-pocket costs (including, without limitation, the costs of any third party
construction manager retained by Landlord) in reviewing plans and documents and
in monitoring construction. Tenant shall maintain during the course of
construction, at its sole cost and expense, builders risk insurance for the
amount of the completed value of the Alterations on an all-risk non-reporting
form covering all improvements under construction, including building materials,
and other insurance in amounts and against such risks as Landlord shall
reasonably require in connection with the Alterations. In addition to and
without limitation on the generality of the foregoing, Tenant shall ensure that
its contractor(s) procure and maintain in full force and effect during the
course of construction a "broad form" commercial general liability and property
damage policy of insurance naming Landlord, Tenant and Landlord's lenders as
additional insureds. The minimum limit of coverage of the aforesaid policy shall
be in the amount of not less than Two Million Dollars ($2,000,000.00) for injury
or death of one person in any one accident or occurrence and in the amount of
not less than Two Million Dollars ($2,000,000.00) for injury or death of more
than one person in any one accident or occurrence, and shall contain a
severability of interest clause or a cross liability endorsement. Such insurance
shall further insure Landlord and Tenant against liability for property damage
of at least One Million Dollars ($1,000,000.00).
(c) All Alterations, including, but not limited to, heating, lighting,
electrical, air conditioning, fixed partitioning, drapery, wall covering and
paneling, built-in cabinet work and carpeting installations made by Tenant,
together with all property that has become an integral part of the Premises or
the Building, shall at once be and become the property of Landlord, and shall
not be deemed trade fixtures or Tenant's Property. If requested by Landlord,
Tenant will pay, prior to the commencement of construction, an amount determined
by Landlord necessary to cover the costs of demolishing such Alterations and/or
the cost of returning the Premises and any damage resulting from such removal
repaired.
(d) No private telephone systems and/or other related computer or
telecommunications equipment or lines may be installed without Landlord's prior
written consent. If Landlord gives such consent, all equipment must be installed
within the Premises and, at the request of Landlord made at any time prior to
the expiration of the Term, removed upon the expiration or sooner termination of
this Lease and the Premises restored to the same condition as before such
installation.
(e) Notwithstanding anything herein to the contrary, before installing any
equipment or lights which generate an undue amount of heat in the Premises, or
if Tenant plans to use any high-power usage equipment in the Premises, Tenant
shall obtain the
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written permission of Landlord. Landlord may refuse to grant such permission
unless Tenant agrees to pay the costs to Landlord for installation of
supplementary air conditioning capacity or electrical systems necessitated by
such equipment.
(f) Tenant agrees not to proceed to make any Alterations, notwithstanding
consent from Landlord to do so, until Tenant notifies Landlord in writing of the
date Tenant desires to commence construction or installation of such Alterations
and Landlord has approved such date in writing, in order that Landlord may post
appropriate notices to avoid any liability to contractors or material suppliers
for payment for Tenant's improvements. Tenant will at all times permit such
notices to be posted and to remain posted until the completion of work.
13. MAINTENANCE AND REPAIRS OF PREMISES
(a) Maintenance by Tenant. Throughout the Term, Tenant shall, at its sole
expense, (1) keep and maintain in good order and condition the Premises, and
repair and replace every part thereof, including glass, windows, interior
doors, interior door frames and interior door closers, interior lighting
(including, without limitation, light bulbs and ballasts), Tenant's signage,
interior demising walls and partitions, equipment, interior painting and
interior walls and floors (excepting only those portions of the Building or the
Project to be maintained by Landlord, as provided in Paragraph 13(b) below), (2)
furnish all expendables, including light bulbs, paper goods and soaps, used in
the Premises, and (3) keep and maintain in good order and condition, repair and
replace all of Tenant's security systems in or about or serving the Premises.
Tenant shall not do nor shall Tenant allow Tenant's Agents to do anything to
cause any damage, deterioration or unsightliness to the Premises, the Building
or the Project. In no event shall Tenant's obligation to repair under this
subsection extend to (i) damage caused in whole or in part by the gross
negligence or willful misconduct of Landlord or Landlord's Agents, (ii) repairs
covered under Expenses or Taxes, or (iii) damage by fire and other casualties or
acts of God and the elements. In the event of any damage to the Premises which
Tenant is required to repair under this Paragraph 13(a) and which is not covered
by any insurance required to be maintained by Tenant under this Lease, but which
is covered by insurance required to be maintained by Landlord hereunder.
Landlord shall make a claim on the applicable insurance policy and shall use the
proceeds, if any, actually received to reimburse Tenant for the actual
reasonable costs and expenses incurred by Tenant in repairing such damage,
subject to Landlord's review and approval of invoices and other data documenting
such costs and expenses.
(b) Maintenance by Landlord. Subject to the provisions of Paragraphs
13(a), 22 and 23, and further subject to Tenant's obligation under Paragraph 4
to reimburse Landlord, in the form of Additional Rent, for Tenant's
Proportionate Share(s) of the cost and expense of the following items, Landlord
agrees to repair and maintain the following items: the roof coverings (provided
that Tenant installs no additional air conditioning or other equipment on the
roof that damages the roof coverings, in which event Tenant shall
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pay all costs resulting from the presence of such additional equipment); window
frames, window casements, skylights, exterior doors, exterior door frames and
exterior door closers; master the Systems serving the Premises and the Building;
the parking areas, pavement, landscaping, sprinkler systems, sidewalks,
driveways, curbs, and lighting systems in the Common Areas; and the roll-up
doors, ramps and dock equipment, including, without limitation, dock bumpers,
dock plates, dock seals, dock levelers and dock lights located in or on the
Premises. Subject to the provisions of Paragraphs 13(a), 22 and 23, Landlord, at
its own cost and expense, agrees to repair and maintain the following items: the
structural portions of the roof (specifically excluding the roof coverings), the
foundation, the footings, the floor slab, the load bearing walls and exterior
walls of the Building (excluding any glass and any routine maintenance,
including, without limitation, any painting, sealing, patching and waterproofing
of such walls), the structural supports, the subfloors and floors (specifically
excluding the floor coverings), and any damage to the Premises caused by the
willful act or the gross negligence of the Landlord or its Agents.
Notwithstanding anything in this Paragraph 13 to the contrary, Landlord shall
have the right to either repair or to require Tenant to repair any damage to any
portion of the Premises, the Building and/or the Project caused by or created
due to any act, omission, negligence or willful misconduct of Tenant or Tenant's
Agents and to restore the Premises, the Building and/or the Project as
applicable, to the condition existing prior to the occurrence of such damage;
provided, however, that in the event Landlord elects to perform such repair and
restoration work, Tenant shall reimburse Landlord upon demand for all costs and
expenses incurred by Landlord in connection therewith. Landlord's obligation
hereunder to repair and maintain is subject to the condition precedent that
Landlord shall have received written notice of the need for such repairs and
maintenance and a reasonable time to perform such repair and maintenance. Tenant
shall promptly report in writing to Landlord any defective condition which
Landlord is required to repair, and failure to so report such defects shall make
Tenant responsible to Landlord for the costs and expenses of repairing any
additional damage or deterioration occurring after the date Tenant obtains
knowledge of such defective condition and any liability incurred by Landlord by
reason of Tenant's failure to notify Landlord of such defective condition in a
timely manner as provided herein.
(c) Tenant's Waiver of Rights. Tenant hereby expressly waives all rights
to make repairs at the expense of Landlord or to terminate this Lease, as
provided for in California Civil Code Sections 1941 and 1942, and 1932(1),
respectively, and any similar or successor statute or law in effect or any
amendment thereof during the Term.
14. LANDLORD'S INSURANCE
Landlord shall purchase and keep in force fire, extended coverage and "all
risk" insurance covering the Building and the Project. Tenant shall, at its sole
cost and expense, comply with any and all reasonable requirements pertaining to
the Premises, the Building and the Project of any insurer necessary for the
maintenance of reasonable fire and commercial general liability insurance,
covering the Building and the Project.
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Landlord, at Tenant's cost, may maintain "Loss of Rents" insurance, insuring
that the Rent will be paid in a timely manner to Landlord for a period of up to
twelve (12) months if the Premises, the Building or the Project or any portion
thereof are destroyed or rendered unusable or inaccessible by any cause insured
against under this Lease.
15. TENANT'S INSURANCE
(a) Commercial General Liability Insurance. Tenant shall, at Tenant's
expense, secure and keep in force a "broad form" commercial general liability
insurance and property damage policy covering the Premises, insuring Tenant, and
naming Landlord and its lenders as additional insureds, against any liability
arising out of the ownership, use, occupancy or maintenance of the Premises. The
minimum limit of coverage of such policy shall be in the amount of not less than
Two Million Dollars ($2,000,000.00) for injury or death of one person in any one
accident or occurrence and in the amount of not less than Two Million Dollars
($2,000,000.00) for injuries or death of more than one person in any one
accident or occurrence, shall include an extended liability endorsement
providing contractual liability coverage (which shall include coverage for
Tenant's indemnification obligations in this Lease), and shall contain a
severability of interest clause or a cross liability endorsement. Such insurance
shall further insure Landlord and Tenant against liability for property damage
of at least Two Million Dollars ($2,000,000.00). Landlord may from time to time
require reasonable increases in any such limits if Landlord believes that
additional coverage is necessary or desirable. The limit of any insurance shall
not limit the liability of Tenant hereunder. No policy maintained by Tenant
under this Paragraph 15(a) shall contain a deductible greater than Two Thousand
Five Hundred Dollars ($2,500.00). No policy shall be cancelable or subject to
reduction of coverage without ten (10) days prior written notice to Landlord,
and loss payable clauses shall be subject to Landlord's approval. Such policies
of insurance shall be issued as primary policies and not contributing with or in
excess of coverage that Landlord may carry, by an insurance company authorized
to do business in the State of California for the issuance of such type of
insurance coverage and rated A:XIII or better in Best's Key Rating Guide.
(b) Personal Property Insurance. Tenant shall maintain in full force and
effect on all of its personal property, furniture, furnishings, trade or
business fixtures and equipment (collectively, "Tenant's Property") on the
Premises, a policy or policies of fire and extended coverage insurance with
standard coverage endorsement to the extent of the full replacement cost
thereof. No such policy shall contain a deductible greater than Two Thousand
Five Hundred Dollars ($2,500.00). During the term of this Lease the proceeds
from any such policy or policies of insurance shall be used for the repair or
replacement of the fixtures and equipment so insured. Landlord shall have no
interest in the insurance upon Tenant's equipment and fixtures and will sign all
documents reasonably necessary in connection with the settlement of any claim or
loss by Tenant. Landlord will not carry insurance on Tenant's Property.
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(c) Worker's Compensation Insurance; Employer's Liability Insurance.
Tenant shall, at Tenant's expense, maintain in full force and effect worker's
compensation insurance with not less than the minimum limits required by law,
and employer's liability insurance with a minimum limit of coverage of One
Million Dollars ($1,000,000).
(d) Evidence of Coverage. Tenant shall deliver to Landlord certificates of
insurance and true and complete copies of any and all endorsements required
herein for all insurance required to be maintained by Tenant hereunder at the
time of execution of this Lease by Tenant. Tenant shall, at least fifteen (15)
days prior to expiration of each policy, furnish Landlord with certificates of
renewal or "binders" thereof. Each certificate shall expressly provide that such
policies shall not be cancelable or otherwise subject to modification except
after ten (10) days prior written notice to Landlord and the other parties named
as additional insureds as required in this Lease.
16. INDEMNIFICATION
(a) Of Landlord. Tenant shall indemnify and hold harmless Landlord and
Landlord's Agents against and from any and all damages, claims, losses,
liabilities, penalties, judgments, costs, demands, causes of action and expenses
(including, without limitation, reasonable attorneys' fees) arising from (1) the
use of the Premises, the Building or the Project by Tenant or Tenant's Agents,
or from any activity done, permitted or suffered by Tenant or Tenant's Agents in
or about the Premises, the Building or the Project, and (2) any act, neglect,
fault, willful misconduct or omission of Tenant or Tenant's Agents, or from any
breach or default in the terms of this Lease by Tenant or Tenant's Agents, and
(3) any violation or alleged violation of the ADA by Tenant or Tenant's Agents,
and (4) any action or proceeding brought on account of any matter in items (l),
(2) or (3). If any action or proceeding is brought against Landlord by reason of
any such claim, upon notice from Landlord, Tenant shall defend the same at
Tenant's expense by counsel reasonably satisfactory to Landlord. Notwithstanding
the foregoing, nothing herein shall be deemed to require Tenant to indemnify or
hold harmless Landlord or Landlord's Agents from claims, liabilities, judgments,
costs, demands, causes of action or expenses arising from the negligence or
willful misconduct of Landlord or Landlord's Agents. As a material part of the
consideration to Landlord, Tenant hereby releases Landlord and Landlord's Agents
from responsibility for, waives its entire claim of recovery for and assumes all
risk of (i) damage to property or injury to persons in or about the Premises,
the Building or the Project from any cause whatsoever (except that which is
caused by the gross negligence or willful misconduct of Landlord or Landlord's
Agents or by the failure of Landlord to observe any of the terms and conditions
of this Lease, if such failure has persisted for an unreasonable period of time
after written notice of such failure), or (ii) loss resulting from business
interruption or loss of income at the Premises. The obligations of Tenant under
this Paragraph 16(a) shall survive any termination of this Lease.
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(b) Of Tenant. Landlord shall indemnify and hold harmless Tenant and
Tenant's Agents against and from any and all damages, claims, losses,
liabilities, penalties, judgments, costs, demands, causes of action and expenses
(including, without limitation, reasonable attorneys' fees) arising from the (1)
gross negligence or willful misconduct of Landlord or the property manager of
the Building, and (2) failure of Landlord to observe any of the terms and
conditions of this Lease, if such failure has persisted for an unreasonable
period of time after written notice of such failure, or any breach of any
representation or warranty of Landlord contained in Paragraph 47(b) below, and
(3) any action or proceeding brought on account of any matter in items (1) and
(2). If any action or proceeding is brought against Tenant by reason of any such
claim, upon notice from Tenant, Landlord shall defend the same at Landlord's
expense by counsel reasonably satisfactory to Tenant. The obligations of
Landlord under this Paragraph 16(b) shall survive any termination of this Lease.
(c) No Impairment of Insurance. The foregoing indemnities shall not
relieve any insurance carrier of its obligations under any policies required to
be carried by either party pursuant to this Lease, to the extent that such
policies cover the peril or occurrence that results in the claim that is subject
to the foregoing indemnity.
17. SUBROGATION
Landlord and Tenant hereby mutually waive any claim against the other and
its Agents for any loss or damage to any of their property located on or about
the Premises, the Building or the Project that is caused by or results from
perils covered by property insurance carried by the respective parties, to the
extent of the proceeds of such insurance actually received with respect to such
loss or damage, whether or not due to the negligence of the other party or its
Agents. Because the foregoing waivers will preclude the assignment of any claim
by way of subrogation to an insurance company or any other person, each party
now agrees to immediately give to its insurer written notice of the terms of
these mutual waivers and shall have their insurance policies endorsed to prevent
the invalidation of the insurance coverage because of these waivers. Nothing in
this Paragraph 17 shall relieve a party of liability to the other for failure to
carry insurance required by this Lease.
18. SIGNS
Tenant shall not place or permit to be placed in, upon, or about the
Premises, the Building or the Project any exterior lights, decorations,
balloons, flags, pennants, banners, advertisements or notices, or erect or
install any signs, windows or door lettering, placards, decorations, or
advertising media of any type which can be viewed from the exterior the Premises
without obtaining Landlord's prior written consent or without complying with
Landlord's signage criteria specified on Exhibit D hereto, as the same may be
modified by Landlord from time to time (the "Signage Criteria"), nor conduct, or
permit to be conducted, any sale by auction on the Premises or otherwise on the
Project;
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provided, however, that Tenant shall have the right to install identification
signage on the Building's monument sign located on West Maude Avenue, provided
that Landlord shall have the right to approve the size, design and style of such
identification signage and such identification signage shall comply with the
Signage Criteria and all applicable laws. Tenant shall remove any sign,
advertisement or notice placed on the Premises, the Building or the Project by
Tenant upon the expiration of the Term or sooner termination of this Lease, and
Tenant shall repair any damage or injury to the Premises, the Building or the
Project caused thereby, all at Tenant's expense. If any signs are not removed,
or necessary repairs not made, Landlord shall have the right to remove the signs
and repair any damage or injury to the Premises, the Building or the Project at
Tenant's sole cost and expense.
19. FREE FROM LIENS
Tenant shall keep the Premises, the Building and the Project free from any
liens arising out of any work performed, material furnished or obligations
incurred by or for Tenant. In the event that Tenant shall not, within ten (10)
days following the imposition of any such lien, cause the lien to be released of
record by payment or posting of a proper bond, Landlord shall have in addition
to all other remedies provided herein and by law the right but not the
obligation to cause same to be released by such means as it shall deem proper,
including payment of the claim giving rise to such lien. All such sums paid by
Landlord and all expenses incurred by it in connection therewith (including,
without limitation, attorneys' fees) shall be payable to Landlord by Tenant upon
demand. Landlord shall have the right at all times to post and keep posted on
the Premises any notices permitted or required by law or that Landlord shall
deem proper for the protection of Landlord, the Premises, the Building and the
Project, from mechanics' and materialmen's liens. Tenant shall give to Landlord
at least five (5) business days' prior written notice of commencement of any
repair or construction on the Premises.
20. ENTRY BY LANDLORD
Tenant shall permit Landlord and Landlord's Agents to enter into and upon
the Premises at all reasonable times, upon notice reasonably in advance (except
in the case of an emergency, for which no notice shall be required), and subject
to Tenant's reasonable security arrangements, for the purpose of inspecting the
same or showing the Premises to prospective purchasers, lenders or tenants or to
alter, improve, maintain and repair the Premises or the Building as required or
permitted of Landlord under the terms hereof, or for any other business purpose,
without any rebate of Rent and without any liability to Tenant for any loss of
occupation or quiet enjoyment of the Premises thereby occasioned (except for
actual damages resulting from the gross negligence or willful misconduct of
Landlord or the property manager of the Building); and Tenant shall permit
Landlord to post notices of non-responsibility and ordinary "for sale" or "for
lease" signs, provided, however, that said "for lease" signs shall be posted on
the Premises only during the last twelve (12) months of the Term. No such entry
shall be construed to be a forcible or
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unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant
from the Premises. Landlord may temporarily close entrances, doors, corridors,
elevators or other facilities without liability to Tenant by reason of such
closure in the case of an emergency and when Landlord otherwise deems such
closure necessary.
21. DESTRUCTION AND DAMAGE
(a) If the Premises are damaged by fire or other perils covered by
extended coverage insurance, Landlord shall, at Landlord's option:
(1) In the event of total destruction (which shall mean destruction
or damage in excess of thirty-three percent (33%) of the full insurable value
thereof) of the Premises, elect either to commence promptly to repair and
restore the Premises and prosecute the same diligently to completion, in which
event this Lease shall remain in full force and effect; or not to repair or
restore the Premises, in which event this Lease shall terminate. Landlord shall
give Tenant written notice of its intention within sixty (60) days after the
date (the "Casualty Discovery Date") Landlord obtains actual knowledge of such
destruction. If Landlord elects not to restore the Premises, this Lease shall be
deemed to have terminated as of the date of such total destruction.
(2) In the event of a partial destruction (which shall mean
destruction or damage to an extent not exceeding thirty-three percent (33%) of
the full insurable value thereof) of the Premises for which Landlord will
receive insurance proceeds sufficient to cover the cost to repair and restore
such partial destruction and, if the damage thereto is such that the Premises
may be substantially repaired or restored to its condition existing immediately
prior to such damage or destruction within two hundred seventy (270) days from
the Casualty Discovery Date, Landlord shall commence and proceed diligently with
the work of repair and restoration, in which event the Lease shall continue in
full force and effect. If such repair and restoration requires longer than two
hundred seventy (270) days or if the insurance proceeds therefor (plus any
amounts Tenant may elect or is obligated to contribute) are not sufficient to
cover the cost of such repair and restoration, Landlord may elect either to so
repair and restore, in which event the Lease shall continue in full force and
effect, or not to repair or restore, in which event the Lease shall terminate.
In either case, Landlord shall give written notice to Tenant of its intention
within sixty (60) days after the Casualty Discovery Date. If Landlord elects not
to restore the Premises, this Lease shall be deemed to have terminated as of the
date of such partial destruction.
(3) Notwithstanding anything to the contrary contained in this
Paragraph, in the event of damage to the Premises occurring during the last
twelve (12) months of the Term which will take more than thirty (30) days to
repair, either party may elect to terminate this Lease by written notice of
such election given to the other party within thirty (30) days after the
Casualty Discovery Date.
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(b) If the Premises are damaged by any peril not covered by extended
coverage insurance, and the cost to repair such damage exceeds any amount Tenant
may agree to contribute, Landlord may elect either to commence promptly to
repair and restore the Premises and prosecute the same diligently to completion,
in which event this Lease shall remain in full force and effect; or not to
repair or restore the Premises, in which event this Lease shall terminate.
Landlord shall give Tenant written notice of its intention within sixty (60)
days after the Casualty Discovery Date. If Landlord elects not to restore the
Premises, this Lease shall be deemed to have terminated as of the date on which
Tenant surrenders possession of the Premises to Landlord, except that if the
damage to the Premises materially impairs Tenant's ability to continue its
business operations in the Premises, then this Lease shall be deemed to have
terminated as of the date such damage occurred.
(c) Notwithstanding anything to the contrary in this Paragraph 22,
Landlord shall have the option to terminate this Lease, exercisable by notice to
Tenant within sixty (60) days after the Casualty Discovery Date, in each of the
following instances:
(1) If more than twenty-five percent (25%) of the full insurable
value of the Building or the Project is damaged or destroyed, regardless of
whether or not the Premises are destroyed.
(2) If the Building or the Project or any portion thereof is damaged
or destroyed and the repair and restoration of such damage requires longer than
two hundred seventy (270) days from the Casualty Discovery Date.
(3) If the Building or the Project or any portion thereof is damaged
or destroyed and the insurance proceeds therefor are not sufficient to cover the
costs of repair and restoration.
(d) If the Premises is damaged or destroyed to the extent that the
Premises cannot with reasonable diligence be fully repaired or restored by
Landlord within two hundred seventy (270) days after the Casualty Discovery
Date, Tenant may terminate this Lease immediately upon notice thereof to
Landlord, which notice shall be given, if at all, not later than fifteen (15)
days after Landlord notifies Tenant of Landlord's estimate of the period of time
required to repair such damage or destruction.
(e) In the event of repair and restoration as herein provided, the monthly
installments of Base Rent shall be abated proportionately in the ratio which
Tenant's use of the Premises is impaired during the period of such repair or
restoration; provided, however, that Tenant shall not be entitled to such
abatement to the extent that such damage or destruction resulted from the acts
or inaction of Tenant or Tenant's Agents and rental abatement insurance proceeds
are not available therefor. Except as expressly provided in the immediately
preceding sentence with respect to abatement of Base Rent, Tenant shall have no
claim against Landlord for, and hereby releases Landlord and Landlord's Agents
from responsibility for and waives its entire claim of recovery for any
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cost, loss or expense suffered or incurred by Tenant as a result of any damage
to or destruction of the Premises, the Building or the Project or the repair or
restoration thereof, including, without limitation, any cost, loss or expense
resulting from any loss of use of the whole or any part of the Premises, the
Building or the Project and/or any inconvenience or annoyance occasioned by such
damage, repair or restoration.
(f) If Landlord is obligated to or elects to repair or restore as herein
provided, Landlord shall have no obligation to repair Tenant's Alterations, if
any, and Tenant shall promptly repair and restore, at Tenant's expense, such
Alterations.
(g) Tenant hereby waives the provisions of California Civil Code Section
1932(2) and Section 1933(4) which permit termination of a lease upon destruction
of the leased premises, and the provisions of any similar law now or hereinafter
in effect, and the provisions of this Paragraph 22 shall govern exclusively in
case of such destruction.
22. CONDEMNATION
(a) If twenty-five percent (25%) or more of either the Premises, the
Building or the Project or the parking areas for the Building or the Project is
taken for any public or quasi-public purpose by any lawful governmental power or
authority, by exercise of the right of appropriation, inverse condemnation,
condemnation or eminent domain, or sold to prevent such taking (each such event
being referred to as a "Condemnation"), Landlord may, at its option, terminate
this Lease as of the date title vests in the condemning party. If twenty-five
percent (25%) or more of the Premises is taken, Tenant shall have the right to
terminate this Lease as of the date title vests in the condemning party. If
either party elects to terminate this Lease as provided herein, such election
shall be made by written notice to the other party given within thirty (30) days
after the nature and extent of such Condemnation have been finally determined.
If neither Landlord nor Tenant elects to terminate this Lease to the extent
permitted above, Landlord shall promptly proceed to restore the Premises, to the
extent of any Condemnation award received by Landlord, to substantially the same
condition as existed prior to such Condemnation, allowing for the reasonable
effects of such Condemnation, and a proportionate abatement shall be made to the
Base Rent corresponding to the time during which, and to the portion of the
floor area of the Premises (adjusted for any increase thereto resulting from any
reconstruction) of which, Tenant is deprived on account of such Condemnation and
restoration, as reasonably determined by Landlord. Except as expressly provided
in the immediately preceding sentence with respect to abatement of Base Rent,
Tenant shall have no claim against Landlord for, and hereby releases Landlord
and Landlord's Agents from responsibility for and waives its entire claim of
recovery for any cost, loss or expense suffered or incurred by Tenant as a
result of any Condemnation or the repair or restoration of the Premises, the
Building or the Project or the parking areas for the Building or the Project
following such Condemnation, including, without limitation, any cost, loss or
expense resulting from any loss of use of the whole or any part of the Premises,
the Building, the Project or the parking areas and/or any inconvenience or
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annoyance occasioned by such Condemnation, repair or restoration. The provisions
of California Code of Civil Procedure Section 1265.130, which allows either
party to petition the Superior Court to terminate the Lease in the event of a
partial taking of the Premises, the Building, or the Project or the parking
areas for the Building or the Project, and any other applicable law now or
hereafter enacted, are hereby waived by Tenant.
(b) Landlord shall be entitled to any and all compensation, damages,
income, rent, awards, or any interest therein whatsoever which may be paid or
made in connection with any Condemnation, and Tenant shall have no claim against
Landlord for the value of any unexpired term of this Lease or otherwise;
provided, however, that Tenant shall be entitled to receive any award separately
allocated by the condemning authority to Tenant for (i) Tenant's relocation
expenses, (ii) the value of Tenant's Property (specifically excluding fixtures,
Alterations and other components of the Premises which under this Lease or by
law are or at the expiration of the Term will become the property of Landlord),
(iii) Tenant's loss of goodwill, and (iv) Tenant's loss of business and business
interruption.
23. ASSIGNMENT AND SUBLETTING
(a) Except as expressly set forth below, Tenant shall not voluntarily or
by operation of law, (1) mortgage, pledge, hypothecate or encumber this Lease or
any interest herein, (2) assign or transfer this Lease or any interest herein,
sublease the Premises or any part thereof, or any right or privilege appurtenant
thereto, or allow any other person (the employees, contractors and invitees of
Tenant excepted) to occupy or use the Premises, or any portion thereof, without
first obtaining the written consent of Landlord, which consent shall not be
withheld unreasonably provided that (i) Tenant is not then in Default under this
Lease nor is any event then occurring which with the giving of notice or the
passage of time, or both, would constitute a Default hereunder, and (ii) Tenant
has not previously assigned or transferred this Lease or any interest herein or
subleased the Premises or any part thereof. When Tenant requests Landlord's
consent to such assignment or subletting, it shall notify Landlord in writing of
the name and address of the proposed assignee or subtenant and the nature and
character of the business of the proposed assignee or subtenant and shall
provide current and prior financial statements for the proposed assignee or
subtenant prepared in accordance with generally accepted accounting principles
("GAAP Financials") or, if GAAP Financials are not available for such assignee
or subtenant, financial statements in an alternate form approved by Landlord.
Tenant shall also provide Landlord with a copy of the proposed sublease or
assignment agreement, including all material terms and conditions thereof.
Except in the case of an assignment or sublease to a Tenant Affiliate (as
hereinafter defined), Landlord shall have the option, to be exercised as soon as
reasonably practicable, but in no event more than twenty (20) days of receipt of
the foregoing, to (1) terminate this Lease as of the commencement date stated in
the proposed sublease or assignment; provided, however, that in the case of a
sublease, Landlord shall have the right to terminate this Lease under this
clause (l) only if Tenant proposes to sublease fifty percent (50%) or
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more of the Premises (taking into account the aggregate of the premises to be
covered by such sublease and all other subleases entered into by Tenant and then
in effect), (2) sublease or take an assignment, as the case may be, from Tenant
of the interest, or any portion thereof, in this Lease and/or the Premises that
Tenant proposes to assign or sublease, on the same terms and conditions as
stated in the proposed sublet or assignment agreement, (3) consent to the
proposed assignment or sublease, or (4) refuse its consent to the proposed
assignment or sublease, providing that such consent shall not be unreasonably
withheld so long as Tenant is not then in Default under this Lease nor is any
event then occurring which with the giving of notice or the passage of time, or
both, would constitute a Default hereunder. In the event Landlord elects to
terminate this Lease or sublease or take an assignment from Tenant of the
interest, or portion thereof, in the Lease and/or the Premises that Tenant
proposes to assign or sublease as provided in the foregoing clauses (1) and (2),
respectively, then Landlord shall have the additional right to negotiate
directly with Tenant's proposed assignee or subtenant and to enter into a direct
lease or occupancy agreement with such party on such terms as shall be
acceptable to Landlord in its sole and absolute discretion, and Tenant hereby
waives any claims against Landlord related thereto, including, without
limitation, any claims for any compensation or profit related to such lease or
occupancy agreement.
(b) Notwithstanding anything to the contrary contained in Paragraph 23(a)
above, Tenant shall have the right with the consent of Landlord, which consent
shall not be unreasonably withheld, to assign this Lease or to sublease the
Premises or any part thereof to a Tenant Affiliate. In the event Tenant proposes
to enter into an assignment or sublease with a Tenant Affiliate, then Tenant
shall provide Landlord with the information required to be delivered pursuant to
said Paragraph 23(a). Landlord shall have the option, to be exercised as soon as
reasonably practicable, but in no event more than twenty (20) days of receipt of
the foregoing, to (1) consent to the proposed assignment or sublease, or (2)
refuse its consent to the proposed assignment or sublease, providing that such
consent shall not be unreasonably withheld. For purposes of this Paragraph 23, a
"Tenant Affiliate" shall mean an entity that controls, is controlled by or is
under common control with, Tenant; and a party shall be deemed to "control"
another party for purposes of the aforesaid definition only if the first party
owns more than fifty percent (50%) of the stock or other beneficial interests of
the second party.
(c) Without otherwise limiting the criteria upon which Landlord may
withhold its consent under Paragraphs 23(a) and (b) above, Landlord shall be
entitled to consider all reasonable criteria including, but not limited to, the
following: (1) whether or not the proposed subtenant or assignee is engaged in a
business which, and the use of the Premises will be in a manner which, is in
keeping with the then character and nature of all other tenancies in the
Project, (2) whether the use to be made of the Premises by the proposed
subtenant or assignee will conflict with any so called "exclusive" use then in
favor of any other tenant of the Building or the Project, and whether such use
would be prohibited by any other portion of this Lease, including, but not
limited to, any rules and regulations then in effect, or under applicable Laws,
and whether such use imposes an
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unacceptable load upon the Premises and the Building and Project services, as
reasonably determined by Landlord, (3) the business reputation of the proposed
individuals who will be managing and operating the business operations of the
assignee or subtenant, and the long-term financial and competitive business
prospects of the proposed assignee or subtenant, and (4) the creditworthiness
and financial stability of the proposed assignee or subtenant in light of the
responsibilities involved. In any event, Landlord may withhold its consent to
any assignment or sublease, if (i) the actual use proposed to be conducted in
the Premises or portion thereof conflicts with the provisions of Paragraph 9(a)
or (b) above or with any other lease which restricts the use to which any space
in the Building or the Project may be put, or (ii) the proposed assignment or
sublease requires Alterations to the Premises or portions thereof except for
Permitted Alterations and Alterations which are approved by Landlord in
accordance with Paragraph 12 above. In the event that Landlord withholds its
consent to an assignment or sublease, it shall notify Tenant of the criteria
upon which such consent was withheld.
(d) If Landlord approves an assignment or subletting as herein provided,
Tenant shall pay to Landlord, as Additional Rent, the difference, if any,
between (1) the Base Rent plus Additional Rent allocable to that part of the
Premises affected by such assignment or sublease pursuant to the provisions of
this Lease, and (2) the rent and any additional rent payable by the assignee or
sublessee to Tenant, less reasonable legal fees and customary market-based
leasing commissions, if any, incurred by Tenant in connection with such
assignment or sublease. The assignment or sublease agreement, as the case may
be, after approval by Landlord, shall not be amended without Landlord's prior
written consent, and shall contain a provision directing the assignee or
subtenant to pay the rent and other sums due thereunder directly to Landlord
upon receiving written notice from Landlord that Tenant is in default under this
Lease with respect to the payment of Rent. In the event that, notwithstanding
the giving of such notice, Tenant collects any rent or other sums from the
assignee or subtenant, then Tenant shall hold such sums in trust for the benefit
of Landlord and shall immediately forward the same to Landlord. Landlord's
collection of such rent and other sums shall not constitute an acceptance by
Landlord of attornment by such assignee or subtenant. A consent to one
assignment, subletting, occupation or use shall not be deemed to be a consent to
any other or subsequent assignment, subletting, occupation or use, and consent
to any assignment or subletting shall in no way relieve Tenant of any liability
under this Lease. Any assignment or subletting without Landlord's consent shall
be void, and shall, at the option of Landlord, constitute a Default under this
Lease.
(e) Notwithstanding any assignment or subletting, Tenant and any guarantor
or surety of Tenant's obligations under this Lease shall at all times remain
fully responsible and liable for the payment of the Rent and for compliance with
all of Tenant's other obligations under this Lease (regardless of whether
Landlord's approval has been obtained for any such assignment or subletting).
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(f) Tenant shall pay Landlord's reasonable fees (including. without
limitation, the fees of Landlord's counsel), incurred in connection with
Landlord's review and processing of documents regarding any proposed assignment
or sublease.
(g) Notwithstanding anything in this Lease to the contrary, in the event
Landlord consents to an assignment or subletting by Tenant in accordance with
the terms of this Paragraph 24, Tenant's assignee or subtenant shall have no
right to further assign this Lease or any interest therein or thereunder or to
further sublease all or any portion of the Premises. In furtherance of the
foregoing, Tenant acknowledges and agrees on behalf of itself and any assignee
or subtenant claiming under it (and any such assignee or subtenant by accepting
such assignment or sublease shall be deemed to acknowledge and agree) that no
sub-subleases or further assignments of this Lease shall be permitted at any
time.
(h) Tenant acknowledges and agrees that the restrictions, conditions and
limitations imposed by this Paragraph 23 on Tenant's ability to assign or
transfer this Lease or any interest herein, to sublet the Premises or any part
thereof, to transfer or assign any right or privilege appurtenant to the
Premises, or to allow any other person to occupy or use the Premises or any
portion thereof, are, for the purposes of California Civil Code Section 1951.4,
as amended from time to time, and for all other purposes, reasonable at the time
that the Lease was entered into, and shall be deemed to be reasonable at the
time that Tenant seeks to assign or transfer this Lease or any interest herein,
to sublet the Premises or any part thereof, to transfer or assign any right or
privilege appurtenant to the Premises, or to allow any other person to occupy or
use the Premises or any portion thereof.
24. TENANT'S DEFAULT
The occurrence of any one of the following events shall constitute an
event of default on the part of Tenant ("Default"):
(a) The vacation or abandonment of the Premises by Tenant for a period of
fifteen (15) consecutive days or any vacation or abandonment of the Premises by
Tenant which would cause any insurance policy to be invalidated or otherwise
lapse, or the failure of Tenant to continuously operate Tenant's business in the
Premises for a period of fifteen (15) consecutive days, in each of the foregoing
cases irrespective of whether or not Tenant is then in monetary default under
this Lease. Tenant agrees to notice and service of notice as provided for in
this Lease and waives any right to any other or further notice or service of
notice which Tenant may have under any statute or law now or hereafter in
effect;
(b) Failure to pay any installment of Rent or any other monies due and
payable hereunder, said failure continuing for a period of five (5) business
days after the same is due;
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(c) A general assignment by Tenant or Guarantor (as hereinafter defined)
for the benefit of creditors;
(d) The filing of a voluntary petition in bankruptcy by Tenant or
Guarantor, the filing by Tenant or Guarantor of a voluntary petition for an
arrangement, the filing by or against Tenant or Guarantor of a petition,
voluntary or involuntary, for reorganization, or the filing of an involuntary
petition by the creditors of Tenant or Guarantor, said involuntary petition
remaining undischarged for a period of sixty (60) days;
(e) Receivership, attachment, or other judicial seizure of substantially
all of Tenant's assets on the Premises, such attachment or other seizure
remaining undismissed or undischarged for a period of sixty (60) days after the
levy thereof;
(f) The failure by Tenant to maintain its legal existence, if Tenant is a
corporation, partnership, limited liability company, trust or other legal
entity;
(g) Failure of Tenant to execute and deliver to Landlord any estoppel
certificate, subordination agreement, or lease amendment within the time periods
and in the manner required by Paragraphs 30 or 31 or 42;
(h) An assignment or sublease of this Lease or the Premises by Tenant
contrary to the provision of Paragraph 23, unless such assignment or sublease is
expressly conditioned upon Tenant having received Landlord's consent thereto;
(i) Failure of Tenant to restore the Security Deposit to the amount and
within the time period provided in Paragraph 7 above;
(j) Failure in the performance of any of Tenant's covenants, agreements or
obligations hereunder (except those failures specified as events of Default in
subparagraphs (b), (1) or (m) above or any other subparagraphs of this Paragraph
24, which shall be governed by such other Paragraphs), which failure continues
for thirty (30) days after written notice thereof from Landlord to Tenant,
provided that, if Tenant has exercised reasonable diligence to cure such failure
and such failure cannot be cured within such thirty (30) day period despite
reasonable diligence, Tenant shall not be in default under this subparagraph so
long as Tenant thereafter diligently and continuously prosecutes the cure to
completion and actually completes such cure within ninety (90) days after the
giving of the aforesaid written notice;
(k) Chronic delinquency by Tenant in the payment of Rent, or any other
periodic payments required to be paid by Tenant under this Lease. "Chronic
delinquency" shall mean failure by Tenant to pay Rent, or any other payments
required to be paid by Tenant under this Lease within three (3) days after
written notice thereof for any three (3) months (consecutive or nonconsecutive)
during any period of twelve (12) months. In the event of a Chronic Delinquency,
in addition to Landlord's other remedies for Default provided in
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this Lease, at Landlord's option, Landlord shall have the right to require that
Rent be paid by Tenant quarterly, in advance;
(l) Chronic overuse by Tenant or Tenant's Agents of the number of
undesignated parking spaces set forth in the Basic Lease Information. "Chronic
Overuse" shall mean use by Tenant or Tenant's Agents of a number of parking
spaces greater than the number of parking spaces set forth in the Basic Lease
Information more than three (3) times during the Term after written notice by
Landlord;
(m) Any insurance required to be maintained by Tenant pursuant to this
Lease shall be canceled or terminated or shall expire or be reduced or
materially changed, except as permitted in this Lease; provided, however, that
if such insurance is canceled or terminated for reasons outside of the control
of, and not as a result of any act or omission on the part of, Tenant, then
Tenant shall not be in Default hereunder provided that Tenant obtains
replacement insurance acceptable to Landlord within five (5) days after the
cancellation or termination of the aforesaid coverage; and
(n) Any failure by Tenant to discharge any lien or encumbrance placed on
the Project or any part thereof in violation of this Lease within ten (10) days
after the date such lien or encumbrance is filed or recorded against the Project
or any part thereof.
Tenant agrees that any notice given by Landlord pursuant to Paragraph
24(j), (k) or (l) above shall satisfy the requirements for notice under
California Code of Civil Procedure Section 1161, and Landlord shall not be
required to give any additional notice in order to be entitled to commence an
unlawful detainer proceeding.
25. LANDLORD'S REMEDIES
(a) Termination. In the event of any Default by Tenant, then in addition
to any other remedies available to Landlord at law or in equity and under this
Lease, Landlord shall have the immediate option to terminate this Lease and all
rights of Tenant hereunder by giving written notice of such intention to
terminate. In the event that Landlord shall elect to so terminate this Lease
then Landlord may recover from Tenant:
(1) the worth at the time of award of any unpaid Rent and any other
sums clue and payable which have been earned at the time of such termination;
plus
(2) the worth at the time of award of the amount by which the unpaid
Rent and any other sums due and payable which would have been earned after
termination until the time of award exceeds the amount of such rental loss
Tenant proves could have been reasonably avoided; plus
(3) the worth at the time of award of the amount by which the unpaid
Rent and any other sums due and payable for the balance of the term of this
Lease after the time of
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award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided; plus
(4) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course would be likely to result
therefrom, including, without limitation, (A) any costs or expenses incurred by
Landlord (1) in retaking possession of the Premises; (2) in maintaining,
repairing, preserving, restoring, replacing, cleaning, altering, remodeling or
rehabilitating the Premises or any affected portions of the Building or the
Project, including such actions undertaken in connection with the reletting or
attempted reletting of the Premises to a new tenant or tenants; (3) for leasing
commissions, advertising costs and other expenses of reletting the Premises; or
(4) in carrying the Premises, including taxes, insurance premiums, utilities and
security precautions; (B) any unearned brokerage commissions paid in connection
with this Lease; (C) reimbursement of any previously waived or abated Base Rent
or Additional Rent or any free rent or reduced rental rate granted hereunder;
and (D) any concession made or paid by Landlord to the benefit of Tenant in
consideration of this Lease including, but not limited to, any moving
allowances, contributions or assumptions by Landlord of any of Tenant's previous
lease obligations; plus
(5) such reasonable attorneys' fees incurred by Landlord as a result
of a Default, and costs in the event suit is filed by Landlord to enforce such
remedy; and plus
(6) at Landlord's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by applicable law.
As used in subparagraphs (1) and (2) above, the "worth at the time of award" is
computed by allowing interest at an annual rate equal to ten percent (10%) per
annum or the maximum rate permitted by law, whichever is less. As used in
subparagraph (3) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award, plus one percent (1%). Tenant waives redemption
or relief from forfeiture under California Code of Civil Procedure Sections 1174
and 1179, or under any other pertinent present or future Law, in the event
Tenant is evicted or Landlord takes possession of the Premises by reason of any
Default of Tenant hereunder.
(b) Continuation of Lease. In the event of any Default by Tenant, then in
addition to any other remedies available to Landlord at law or in equity and
under this Lease, Landlord shall have the remedy described in California Civil
Code Section 1951.4 (Landlord may continue this Lease in effect after Tenant's
Default and abandonment and recover Rent as it becomes due, provided Tenant has
the right to sublet or assign, subject only to reasonable limitations). In such
event, Landlord shall not be liable in any way whatsoever for its failure or
refusal to relet the Premises. For purposes of this
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Paragraph 25(b), the following acts by Landlord will not constitute the
termination of Tenant's right to possession of the Premises:
(1) Acts of maintenance or preservation or efforts to relet the
Premises, including, but not limited to, alterations, remodeling, redecorating,
repairs, replacements and/or painting as Landlord shall consider advisable for
the purpose of reletting the Premises or any, part thereof; or
(2) The appointment of a receiver upon the initiative of Landlord to
protect Landlord's interest under this Lease or in the Premises.
(c) Re-entry. In the event of any Default by Tenant, Landlord shall also
have the right, with or without terminating this Lease, in compliance with
applicable law, to re-enter the Premises and remove all persons and property
from the Premises; such property may be removed and stored in a public warehouse
or elsewhere at the cost of and for the account of Tenant.
(d) Reletting. In the event of the abandonment of the Premises by Tenant
or in the event that Landlord shall elect to re-enter as provided in Paragraph
25(c) or shall take possession of the Premises pursuant to legal proceeding or
pursuant to any notice provided by law, then if Landlord does not elect to
terminate this Lease as provided in Paragraph 25(a). Landlord may from time to
time, without terminating this Lease, relet the Premises or any part thereof for
such term or terms and at such rental or rentals and upon such other terms and
conditions as Landlord in its sole discretion may deem advisable with the right
to make alterations and repairs to the Premises in Landlord's sole discretion.
In the event that Landlord shall elect to so relet, then rentals received by
Landlord from such reletting shall be applied in the following order: (1) to
reasonable attorneys' fees incurred by Landlord as a result of a Default and
costs in the event suit is filed by Landlord to enforce such remedies; (2) to
the payment of any indebtedness other than Rent due hereunder from Tenant to
Landlord; (3) to the payment of any costs of such reletting; (4) to the payment
of the costs of any alterations and repairs to the Premises; (5) to the payment
of Rent due and unpaid hereunder; and (6) the residue, if any, shall be held by
Landlord and applied in payment of future Rent and other sums payable by Tenant
hereunder as the same may become due and payable hereunder. Should that portion
of such rentals received from such reletting during any month, which is applied
to the payment of Rent hereunder, be less than the Rent payable during the month
by Tenant hereunder, then Tenant shall pay such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in
such reletting or in making such alterations and repairs not covered by the
rentals received from such reletting.
(e) Termination. No re-entry or taking of possession of the Premises by
Landlord pursuant to this Paragraph 25 shall be construed as an election to
terminate this Lease unless a written notice of such intention is given to
Tenant or unless the termination
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thereof is decreed by a court of competent jurisdiction, Notwithstanding any
reletting without termination by Landlord because of any Default by Tenant,
Landlord may at any time after such reletting elect to terminate this Lease for
any such Default.
(f) Cumulative Remedies. The remedies herein provided are not exclusive
and Landlord shall have any and all other remedies provided herein or by law or
in equity.
(g) No Surrender. No act or conduct of Landlord, whether consisting of the
acceptance of the keys to the Premises, or otherwise, shall be deemed to be or
constitute an acceptance of the surrender of the Premises by Tenant prior to the
expiration of the Term, and such acceptance by Landlord of surrender by Tenant
shall only flow from and must be evidenced by a written acknowledgment of
acceptance of surrender signed by Landlord. The surrender of this Lease by
Tenant, voluntarily or otherwise, shall not work a merger unless Landlord
elects in writing that such merger take place, but shall operate as an
assignment to Landlord of any and all existing subleases, or Landlord may, at
its option, elect in writing to treat such surrender as a merger terminating
Tenant's estate under this Lease, and thereupon Landlord may terminate any or
all such subleases by notifying the sublessee of its election so to do within
five (5) days after such surrender.
26. LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
(a) Without limiting the rights and remedies of Landlord contained in
Paragraph 25 above, if Tenant shall be in Default in the performance of any of
the terms, provisions, covenants or conditions to be performed or complied with
by Tenant pursuant to this Lease, then Landlord may at Landlord's option,
without any obligation to do so, and without notice to Tenant perform any such
term, provision, covenant, or condition, or make any such payment and Landlord
by reason of so doing shall not be liable or responsible for any loss or damage
thereby sustained by Tenant or anyone holding under or through Tenant or any of
Tenant's Agents. In the event Landlord performs any obligations of Tenant under
this Lease pursuant to this Paragraph 26(a), Landlord shall endeavor to provide
notice thereof to Tenant promptly after such performance by Landlord, provided,
however, that Landlord shall have no liability for any failure to provide such
notice to Tenant.
(b) Without limiting the rights of Landlord under Paragraph 26(a) above,
Landlord shall have the right at Landlord's option, without any obligation to do
so, to perform any of Tenant's covenants or obligations under this Lease without
notice to Tenant in the case of an emergency, as determined by Landlord in its
sole and absolute judgment, or if Landlord otherwise determines in its sole
discretion that such performance is necessary or desirable for the proper
management and operation of the Building or the Project or for the preservation
of the rights and interests or safety of other tenants of the Building or the
Project.
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(c) If Landlord performs any of Tenant's obligations hereunder in
accordance with this Paragraph 26, the full amount of the cost and expense
incurred or the payment so made or the amount of the loss so sustained shall
immediately be owing by Tenant to Landlord, and Tenant shall promptly pay to
Landlord upon demand, as Additional Rent, the full amount thereof with interest
thereon from the date of payment by Landlord at the lower of (l) ten percent
(10%) per annum, or (2) the highest rate permitted by applicable law.
27. ATTORNEY'S FEES
(a) If either party hereto fails to perform any of its obligations under
this Lease or if any dispute arises between the parties hereto concerning the
meaning or interpretation of any provision of this Lease, then the defaulting
party or the party not prevailing in such dispute, as the case may be, shall pay
any and all costs and expenses incurred by the other party on account of such
default and/or in enforcing or establishing its rights hereunder, including,
without limitation, court costs and reasonable attorneys' fees and
disbursements. Any such attorneys' fees and other expenses incurred by either
party in enforcing a judgment in its favor under this Lease shall be recoverable
separately from and in addition to any other amount included in such judgment,
and such attorneys' fees obligation is intended to be severable from the other
provisions of this Lease and to survive and not be merged into any such
judgment.
(b) Without limiting the generality of Paragraph 27(a) above, if Landlord
utilizes the services of an attorney for the purpose of collecting any Rent due
and unpaid by Tenant or in connection with any other breach of this Lease by
Tenant, Tenant agrees to pay Landlord actual attorneys' fees as determined by
Landlord for such services, regardless of the fact that no legal action may be
commenced or filed by Landlord.
28. TAXES
Tenant shall be liable for and shall pay, prior to delinquency, all taxes
levied against Tenant's Property. If any Alteration installed by Tenant pursuant
to Paragraph 12 or any of Tenant's Property is assessed and taxed with the
Project or Building, Tenant shall pay such taxes to Landlord within ten (10)
business days after delivery to Tenant of a statement therefor.
29. EFFECT OF CONVEYANCE
The term "Landlord" as used in this Lease means, from time to time, the
then current owner of the Building or the Project containing the Premises, so
that, in the event of any sale of the Building or the Project, Landlord shall be
and hereby is entirely freed and relieved of all covenants and obligations of
Landlord hereunder, and it shall be deemed and construed, without further
agreement between the parties and the purchaser at any
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such sale that the purchaser of the Building or the Project has assumed and
agreed to carry out any and all covenants and obligations of Landlord hereunder.
30. TENANT'S ESTOPPEL CERTIFICATE
From time to time, upon written request of Landlord, Tenant shall execute,
acknowledge and deliver to Landlord or its designee, a written certificate
stating (a) the date this Lease was executed, the Initial Premises Commencement
Date and the Subsequent Premises Commencement Date and the Expiration Date; (b)
the date Tenant entered into occupancy of the Initial Premises and the
Subsequent Premises; (c) the amount of Rent and the date to which such Rent has
been paid; (d) that this Lease is in full force and effect and has not been
assigned, modified, supplemented or amended in any way (or, if assigned,
modified, supplemented or amended, specifying the date and terms of any
agreement so affecting this Lease); (e) that this Lease represents the entire
agreement between the parties with respect to Tenant's right to use and occupy
the Premises (or specifying such other agreements, if any); (f) that all
obligations under this Lease to be performed by Landlord as of the date of such
certificate have been satisfied (or specifying those as to which Tenant claims
that Landlord has yet to perform); (g) that all required contributions by
Landlord to Tenant on account of Tenant's improvements have been received (or
stating exceptions thereto); (h) that on such date there exist no defenses or
offsets that Tenant has against the enforcement of this Lease by Landlord (or
stating exceptions thereto); (i) that no Rent or other sum payable by Tenant
hereunder has been paid more than one (1) month in advance (or stating
exceptions thereto); (j) that security has been deposited with Landlord, stating
the original amount thereof and any increases thereto; and (k) any other matters
evidencing the status of this Lease that may be reasonably required either by a
lender making a loan to Landlord to be secured by a deed of trust covering the
Building or the Project or by a purchaser of the Building or the Project. Any
such certificate delivered pursuant to this Paragraph 30 may be relied upon by a
prospective purchaser of Landlord's interest or a mortgagee of Landlord's
interest or assignee of any mortgage upon Landlord's interest in the Premises.
If Tenant shall fail to provide such certificate within fifteen (15) days of
receipt by Tenant of a written request by Landlord as herein provided, such
failure shall, at Landlord's election, constitute a Default under this Lease,
and Tenant shall be deemed to have given such certificate as above provided
without modification and shall be deemed to have admitted the accuracy of any
information supplied by Landlord to a prospective purchaser or mortgagee.
31. SUBORDINATION
Landlord shall have the right to cause this Lease to be and remain subject
and subordinate to any and all mortgages, deeds of trust and ground leases, if
any ("Encumbrances") that are now or may hereafter be executed covering the
Premises, or any renewals, modifications, consolidations, replacements or
extensions thereof, for the full amount of all advances made or to be made
thereunder and without regard to the time or character of such advances,
together with interest thereon and subject to all the terms
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and provisions thereof; provided only that in the event of termination of any
such ground lease or upon the foreclosure of any such mortgage or deed of trust,
so long as Tenant is not in Default, the holder thereof ("Holder") shall agree
to recognize Tenant's rights under this Lease as long as Tenant shall pay the
Rent and observe and perform all the provisions of this Lease to be observed and
performed by Tenant. Within fifteen (15) days after Landlord's written request,
Tenant shall execute, acknowledge and deliver any and all reasonable documents
required by Landlord or the Holder to effectuate such subordination. If Tenant
fails to do so, such failure shall constitute a Default by Tenant under this
Lease. Notwithstanding anything to the contrary set forth in this Paragraph 31,
Tenant hereby attorns and agrees to attorn to any person or entity purchasing or
otherwise acquiring the Premises at any sale or other proceeding or pursuant to
the exercise of any other rights, powers or remedies under such Encumbrance.
32. ENVIRONMENTAL COVENANTS
(a) Prior to executing this Lease, Tenant has completed, executed and
delivered to Landlord a Hazardous Materials Disclosure Certificate ("Initial
Disclosure Certificate"), a fully completed copy of which is attached hereto as
Exhibit E and incorporated herein by this reference. Tenant represents and
warrants to Landlord that the information on the Initial Disclosure Certificate
is true and correct and accurately describes the Hazardous Materials which will
be manufactured, treated, used or stored on or about the Premises by Tenant or
Tenant's Agents. Tenant shall, on each anniversary of the Commencement Date and
at such other times as Tenant desires to manufacture, treat, use or store on or
about the Premises new or additional Hazardous Materials which were not listed
on the Initial Disclosure Certificate, complete, execute and deliver to Landlord
an updated Disclosure Certificate (each, an "Updated Disclosure Certificate")
describing Tenant's then current and proposed future uses of Hazardous Materials
on or about the Premises, which Updated Disclosure Certificates shall be in the
same format as that which is set forth in Exhibit E or in such updated format as
Landlord may require from time to time. Tenant shall deliver an Updated
Disclosure Certificate to Landlord not less than thirty (30) days prior to the
date Tenant intends to commence the manufacture, treatment, use or storage of
new or additional Hazardous Materials on or about the Premises, and Landlord
shall have the right to approve or disapprove such new or additional Hazardous
Materials in its sole and absolute discretion. Tenant shall make no use of
Hazardous Materials on or about the Premises except as described in the Initial
Disclosure Certificate or as otherwise approved by Landlord in writing in
accordance with this Paragraph 32(a).
(b) As used in this Lease, the term "Hazardous Materials" shall mean and
include any substance that is or contains (1) any "hazardous substance" as now
or hereafter defined in ss. 101(14) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA") (42 U.S.C. ss.
9601 et seq.) or any regulations promulgated under CEPCLA; (2) any "hazardous
waste" as now or hereafter defined in the Resource Conservation and Recovery
Act, as amended ("RCRA") (42 U.S.C. ss. 6901 et seq.) or any regulations
promulgated under RCRA; (3) any
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substance now or hereafter regulated by the Toxic Substances Control Act, as
amended ("TSCA") (15 U.S.C. ss. 2601 et seq.) or any regulations promulgated
under TSCA; (4) petroleum, petroleum by-products, gasoline, diesel fuel, or
other petroleum hydrocarbons; (5) asbestos and asbestos-containing material, in
any form, whether friable or non-friable; (6) polychlorinated biphenyls; (7)
lead and lead-containing materials; or (8) any additional substance, material or
waste (A) the presence of which on or about the Premises (i) requires reporting,
investigation or remediation under any Environmental Laws (as hereinafter
defined), (ii) causes or threatens to cause a nuisance on the Premises or any
adjacent area or property or poses or threatens to pose a hazard to the health
or safety of persons on the Premises or any adjacent area or property, or (iii)
which, if it emanated or migrated from the Premises, could constitute a
trespass, or (B) which is now or is hereafter classified or considered to be
hazardous or toxic under any Environmental Laws.
(c) As used in this Lease, the term "Environmental Laws" shall mean and
include (1) CERCLA, RCRA and TSCA; and (2) any other federal, state or local
laws, ordinances, statutes, codes, rules, regulations, orders or decrees now or
hereinafter in effect relating to (A) pollution, (B) the protection or
regulation of human health, natural resources or the environment, (C) the
treatment, storage or disposal of Hazardous Materials, or (D) the emission,
discharge, release or threatened release of Hazardous Materials into the
environment.
(d) Tenant agrees that during its use and occupancy of the Premises it
will (1) not (A) permit Hazardous Materials to be present on or about the
Premises except in a manner and quantity necessary for the ordinance performance
of Tenant's business or (B) release, discharge or dispose of any Hazardous
Materials on, in, at, under, or emanating from, the Premises, the Building or
the Project; provided, however, that Tenant shall have the right to use and
dispose of (and to permit Tenant's employees and independent contractors
providing janitorial services to the Premises to use and dispose of) de minimis
amounts of cleaning materials, toner fluids and other office and janitorial
supplies, provided that the same are necessary for the conduct of Tenant's
business operations in the Premises and are used and disposed of at all times in
full compliance with all Environmental Laws; (2) comply with all Environmental
Laws relating to the Premises and the use of Hazardous Materials on or about the
Premises and not engage in or permit others to engage in any activity at the
Premises in violation of any Environmental Laws; and (3) immediately notify
Landlord, upon gaining actual knowledge, of (A) any inquiry, test, investigation
or enforcement proceeding by any governmental agency or authority against
Tenant, Landlord or the Premises, Building or Project relating to any Hazardous
Materials or under any Environmental Laws or (B) the occurrence of any event or
existence of any condition that would cause a breach of any of the covenants set
forth in this Paragraph 32.
(e) If Tenant's use of Hazardous Materials on or about the Premises
results in a release, discharge or disposal of Hazardous Materials on, in, at,
under, or emanating from,
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the Premises, the Building or the Project, Tenant agrees to investigate, clean
up, remove or remediate such Hazardous Materials in full compliance with (1) the
requirements of (A) all Environmental Laws and (B) any governmental agency or
authority responsible for the enforcement of any Environmental Laws; and (2) any
additional requirements of Landlord that are reasonably necessary to protect the
value of the Premises, the Building or the Project.
(f) Upon reasonable notice to Tenant, Landlord may inspect the Premises
and surrounding areas for the purpose of determining whether there exists on or
about the Premises any Hazardous Material or other condition or activity that is
in violation of the requirements of this Lease or of any Environmental Laws.
Such inspections may include, but are not limited to, entering the Premises or
adjacent property with drill rigs or other machinery for the purpose of
obtaining laboratory samples. Landlord shall not be limited in the number of
such inspections during the Term of this Lease. In the event (1) such
inspections reveal the presence of any such Hazardous Material or other
condition or activity in violation of the requirements of this Lease or of any
Environmental Laws, or (2) Tenant or its Agents contribute or knowingly consent
to the presence of any Hazardous Materials in, on, under, through or about the
Premises, the Building or the Project or exacerbate the condition of or the
conditions caused by any Hazardous Materials in, on, under, through or about the
Premises, the Building or the Project, Tenant shall reimburse Landlord for the
cost of such inspections within ten (l0) days of receipt of a written statement
therefor. Tenant will supply to Landlord such historical and operational
information regarding the Premises and surrounding areas as may be reasonably
requested to facilitate any such inspection and will make available for meetings
appropriate personnel having knowledge of such matters. The right granted to
Landlord herein to perform inspections shall not create a duty on Landlord's
part to inspect the Premises, or liability on the part of Landlord for Tenant's
use, storage, treatment or disposal of Hazardous Materials, it being understood
that Tenant shall be solely responsible for all liability in connection
therewith.
(g) Landlord shall have the right, but not the obligation, prior or
subsequent to a Default, without in any way limiting Landlord's other rights and
remedies under this Lease, to enter upon the Premises, or to take such other
actions as it deems necessary or advisable, to investigate, clean up, remove or
remediate any Hazardous Materials or contamination by Hazardous Materials
present on, in, at, under, or emanating from, the Premises, the Building or the
Project in violation of Tenant's obligations under this Lease or under any
Environmental Laws. Notwithstanding any other provision of this Lease, Landlord
shall also have the right, at its election, in its own name or as Tenant's
agent, to negotiate, defend, approve and appeal, at Tenant's expense, any action
taken or order issued by any governmental agency or authority with regard to any
such Hazardous Materials or contamination by Hazardous Materials. All costs and
expenses paid or incurred by Landlord in the exercise of the rights set forth in
this Paragraph 32 shall be payable by Tenant upon demand.
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(h) Tenant shall surrender the Premises to Landlord upon the expiration or
earlier termination of this Lease free of debris, waste or Hazardous Materials
placed on, about or near the Premises by Tenant or Tenant's Agents. and in a
condition which complies with all Environmental Laws and any additional
requirements of Landlord that are reasonably necessary to protect the value of
the Premises, the Building or the Project, including, without limitation, the
obtaining of any closure permits or other governmental permits or approvals
related to Tenant's use of Hazardous Materials in or about the Premises.
Tenant's obligations and liabilities pursuant to the provisions of this
Paragraph 32 shall survive the expiration or earlier termination of this Lease.
If it is determined by Landlord that the condition of all or any portion of the
Premises, the Building, and/or the Project is not in compliance with the
provisions of this Lease with respect to Hazardous Materials, including, without
limitation, all Environmental Laws, at the expiration or earlier termination of
this Lease, then at Landlord's sole option, Landlord may require Tenant to hold
over possession of the Premises until Tenant can surrender the Premises to
Landlord in the condition in which the Premises existed as of the Commencement
Date and prior to the appearance of such Hazardous Materials except for normal
wear and tear, including, without limitation, the conduct or performance of any
closures as required by any Environmental Laws. The burden of proof hereunder
shall be upon Tenant. For purposes hereof, the term "normal wear and tear" shall
not include any deterioration in the condition or diminution of the value of any
portion of the Premises, the Building, and/or the Project in any manner
whatsoever related to directly, or indirectly, Hazardous Materials. Any such
holdover by Tenant will be with Landlord's consent, will not be terminable by
Tenant in any event or circumstance and will otherwise be subject to the
provisions of Paragraph 35 of this Lease.
(i) Tenant agrees to indemnify and hold harmless Landlord from and against
any and all claims, losses (including, without limitation, loss in value of the
Premises, the Building or the Project, liabilities and expenses (including
attorney's fees)) sustained by Landlord attributable to (1) any Hazardous
Materials placed on or about the Premises, the Building or the Project by Tenant
or Tenant's Agents, or (2) Tenant's breach of any provision of this Paragraph
32.
(j) Notwithstanding anything in this Paragraph 32 to the contrary, Tenant
shall not be responsible for the clean up or remediation of, and shall not
required to indemnify Landlord against, any costs or liabilities attributable
to, Hazardous Materials placed on or about the Premises (i) prior to the
Commencement Date by third parties not related to Tenant or its Agents, or (ii)
by Landlord at any time, except in either case to the extent that Tenant or its
Agents have contributed to or exacerbated the presence of such Hazardous
Materials.
(k) The provisions of this Paragraph 32 shall survive the expiration or
earlier termination of this Lease.
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33. NOTICES
All notices and demands which are required or may be permitted to be given
to either party by the other hereunder shall be in writing and shall be sent by
United States mail, postage prepaid, certified, or by personal delivery or
overnight courier, addressed to the addressee at Tenant's Address or Landlord's
Address as specified in the Basic Lease Information, or to such other place as
either party may from time to time designate in a notice to the other party
given as provided herein. Copies of all notices and demands given to Landlord
shall additionally be sent to Landlord's property manager at the address
specified in the Basic Lease Information or at such other address as Landlord
may specify in writing from time to time. Notice shall be deemed given upon
actual receipt (or attempted delivery if delivery is refused ), if personally
delivered, or one (1) business day following deposit with a reputable overnight
courier that provides a receipt, or on the third (3rd) day following deposit in
the United States mail in the mariner described above.
34. WAIVER
The waiver of any breach of any term, covenant or condition of this Lease
shall not be deemed to be a waiver of such term, covenant or condition or of any
subsequent breach of the same or any other term, covenant or condition herein
contained. The subsequent acceptance of Rent by Landlord shall not be deemed to
be a waiver of any preceding breach by Tenant, other than the failure of Tenant
to pay the particular rental so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such Rent. No delay or
omission in the exercise of any right or remedy of Landlord in regard to any
Default by Tenant shall impair such a right or remedy or be construed as a
waiver. Any waiver by Landlord of any Default must be in writing and shall not
be a waiver of any other Default concerning the same or any other provisions of
this Lease. No delay or omission in the exercise of any right or remedy of
Tenant in regard to any default by Landlord shall impair such a right or remedy
or be construed as a waiver. Any waiver by Tenant of any default by Landlord
must be in writing and shall not be a waiver of any other default concerning the
same or any other provisions of this Lease.
35. HOLDING OVER
Any holding over after the expiration of the Term, without the express
written consent of Landlord, shall constitute a Default and, without limiting
Landlord's remedies provided in this Lease, such holding over shall be construed
to be a tenancy at sufferance, at a rental rate of one hundred fifty percent
(150%) of the Base Rent last due in this Lease, plus Additional Rent, and shall
otherwise be on the terms and conditions herein specified, so far as applicable;
provided, however, in no event shall any renewal or expansion option or other
similar right or option contained in this Lease be deemed applicable to any such
tenancy at sufferance. If the Premises are not surrendered at the
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end of the Term or sooner termination of this Lease, and in accordance with the
provisions of Paragraphs 11 and 32(h). Tenant shall indemnify, defend and hold,
Landlord harmless from and against any and all, loss or liability resulting from
delay by Tenant in so surrendering the Premises including, without limitation,
any loss or liability resulting from any claim against Landlord made by any
succeeding tenant or prospective tenant founded on or resulting from such delay
and losses to Landlord due to lost opportunities to lease any portion of the
Premises to any such succeeding tenant or prospective tenant, together with, in
each case, actual attorneys' fees and costs.
36. SUCCESSORS AND ASSIGNS
The terms, covenants and conditions of this Lease shall, subject to the
provisions as to assignment, apply to and bind the heirs, successors, executors,
administrators and assigns of all of the parties hereto. If Tenant shall consist
of more than one entity or person, the obligations of Tenant under this Lease
shall be joint and several.
37. TIME
Time is of the essence of this Lease and each and every term, condition
and provision herein.
38. BROKERS
Landlord and Tenant each represents and warrants to the other that neither
it nor its officers or agents nor anyone acting on its behalf has dealt with any
real estate broker except the Broker(s) specified in the Basic Lease Information
in the negotiating or making of this Lease, and each party agrees to indemnify
and hold harmless the other from any claim or claims, and costs and expenses,
including attorneys' fees, incurred by the indemnified party in conjunction with
any such claim or claims of any other broker or brokers to a commission in
connection with this Lease as a result of the actions of the indemnifying party.
Landlord shall pay a brokerage commission to Landlord's Broker specified in the
Basic Lease Information with respect to this Lease pursuant to a separate
written agreement between Landlord and Landlord's Broker, and Tenant shall have
no responsibility for such commission. Landlord's Broker shall pay a brokerage
commission to Tenant's Broker specified in the Basic Lease Information with
respect to this Lease pursuant to a separate agreement between those parties,
and neither Landlord nor Tenant shall have any responsibility for such
commission.
39. LIMITATION OF LIABILITY
Tenant agrees that, in the event of any default or breach by Landlord with
respect to any of the terms of the Lease to be observed and performed by
Landlord (a) Tenant shall look solely to the then-current landlord's interest in
the Project for the satisfaction of Tenant's remedies for the collection of a
judgment (or other judicial process) requiring
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the payment of money by Landlord; (b) no other property or assets of Landlord,
its partners, shareholders, officers, directors or any successor in interest
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies; (c) no personal liability shall at any time
be asserted or enforceable against Landlord's partners or successors in interest
(except to the extent permitted in (a) above), or against Landlord's
shareholders, officers or directors, or their respective partners, shareholders,
officers, directors or successors in interest; and (d) no judgment shall be
taken against any partner, shareholder, officer or director of Landlord. The
provisions of this section shall apply only to the Landlord and the parties
herein described, and shall not be for the benefit of any insurer nor any other
third party.
40. FINANCIAL STATEMENTS
Within ten (10) days after Landlord's request, Tenant shall deliver to
Landlord the then current financial statements of Tenant (including interim
periods following the end of the last fiscal year for which annual statements
are available), including a balance sheet and profit and loss statement for the
most recent prior year, all prepared in accordance with generally accepted
accounting principles consistently applied. Such financial statements shall not
be required to be prepared or compiled by a certified public accountant,
provided, however, that if Tenant does retain a certified public accountant to
prepare or compile such statements, then Landlord shall have the right to review
such statements. Landlord shall keep Tenant's financial statements confidential,
except that Landlord shall have the right to disclose such statements to
Landlord's partners, lenders, consultants and advisors, including accountants
and attorneys, and otherwise as required by law or legal process.
41. RULES AND REGULATIONS
Tenant agrees to comply with such reasonable rules and regulations as
Landlord may adopt from time to time for the orderly and proper operation of the
Building and the Project, provided that the terms of such rules and regulations
do not contradict the terms of this Lease. Such rules may include but shall not
be limited to the following: (a) restriction of employee parking to a limited,
designated area or areas; and (b) regulation of the removal, storage and
disposal of Tenant's refuse and other rubbish at the sole cost and expense of
Tenant. The then current rules and regulations shall be binding upon Tenant upon
delivery of a copy of them to Tenant. Landlord shall not be responsible to
Tenant for the failure of any other person to observe and abide by any of said
rules and regulations. Landlord's current rules and regulations are attached to
this Lease as Exhibit C.
42. MORTGAGEE PROTECTION
(a) Modifications for Lender. If, in connection with obtaining financing
for the Project or any portion thereof, Landlord's lender shall request
reasonable modifications to
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this Lease as a condition to such financing. Tenant shall not unreasonably
withhold, delay or defer its consent to such modifications, provided such
modifications do not adversely affect Tenant's rights or increase Tenant's
obligations under this Lease, in the reasonable opinion of Tenant.
(b) Rights to Cure. Tenant agrees to give to any trust deed or mortgage
holder ("Holder"), by registered mail, at the same time as it is given to
Landlord, a copy of any notice of default given to Landlord, provided that prior
to such notice Tenant has been notified, in writing, (by way of notice of
assignment of rents and leases, or otherwise) of the address of such Holder.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time provided for in this Lease, then the Holder shall have an
additional twenty (20) days after expiration of such period, or after receipt of
such notice from Tenant (if such notice to the Holder is required by this
Paragraph 42(b)), whichever shall last occur within which to cure such default
or if such default cannot be cured within that time, then such additional time
as may be necessary if within such twenty (20) days, any Holder has commenced
and is diligently pursuing the remedies necessary to cure such default
(including but not limited to commencement of foreclosure proceedings, if
necessary to effect such cure), in which event this Lease shall not be
terminated.
43. RIGHT OF FIRST NEGOTIATION
During the Term of this Lease, Landlord shall not lease the portion of the
Building currently occupied by Konica Technology, Inc., a California corporation
("Konica") and consisting of approximately 10,060 rentable square feet, as more
particularly shown on Exhibit F hereto (the "Negotiation Space"), except as
provided in this Paragraph 43. Subject to the current rights of Konica, and
provided that Tenant is not then in Default under this Lease (nor is any event
then occurring which with the giving of notice or the passage of time, or both,
would constitute a Default hereunder), if during the Term of this Lease the
Konica lease terminates and Konica vacates the Negotiation Space and Landlord
determines to lease the Negotiation Space to a third party or to market the
Negotiation Space for lease to third parties generally, Landlord shall notify
Tenant of the availability of the Negotiation Space. Tenant shall have a period
of ten (10) days after the delivery of such notice (the "Negotiation Period") to
negotiate with Landlord for the lease of the Negotiation Space by Tenant. In the
event Landlord and Tenant reach agreement during the Negotiation Period on the
terms and conditions on which Tenant shall lease the Negotiation Space from
Landlord (including, without limitation, the duration of the term and any
renewal options, the Base Rent and Additional Rent payable by Tenant and the
amount of any improvement allowance) (collectively, the "Relevant Terms"), then
the parties shall immediately execute an amendment to this Lease stating the
addition of the Negotiation Space to the Premises on the Relevant Terms. If for
any reason whatsoever Landlord and Tenant, each in the exercise of its sole and
absolute discretion, fail to agree on the Relevant Terms during the Negotiation
Period, then Tenant's rights hereunder with respect to the Negotiation Space
shall terminate and Landlord shall thereafter have the right to lease the
Negotiation Space to any party on
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terms and conditions deemed acceptable by Landlord in its sole and absolute
discretion. The right granted to Tenant under this Paragraph 43 shall be a
one-time right effective during the Term only upon the termination of the Konica
lease and the vacation of the Negotiation Space by Konica.
44. ENTIRE AGREEMENT
This Lease, including the Exhibits and any Addenda attached hereto, which
are hereby incorporated herein by this reference, contains the entire agreement
of the parties hereto, and no representations, inducements, promises or
agreements, oral or otherwise, between the parties, not embodied herein or
therein, shall be of any force and effect.
45. INTEREST
Any installment of Rent and any other sum due from Tenant under this Lease
which is not received by Landlord within ten (10) days from when the same is due
shall bear interest from the date such payment was originally due under this
Lease until paid at a rate equal to the prime rate then established by Wells
Fargo Bank plus two percent (2%) per annum. Payment of such interest shall not
excuse or cure any Default by Tenant. In addition, Tenant shall pay all costs
and attorneys' fees incurred by Landlord in collection of such amounts.
46. CONSTRUCTION
This Lease shall be construed and interpreted in accordance with the laws
of the State of California. The parties acknowledge and agree that no rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall be employed in the interpretation of this Lease, including
the Exhibits and any Addenda attached hereto. All captions in this Lease are for
reference only and shall not be used in the interpretation of this Lease.
Whenever required by the context of this Lease, the singular shall include the
plural, the masculine shall include the feminine, and vice versa. If any
provision of this Lease shall be determined to be illegal or unenforceable, such
determination shall not affect any other provision of this Lease and all such
other provisions shall remain in full force and effect.
47. REPRESENTATIONS AND WARRANTIES
(a) Tenant hereby makes the following representations and warranties, each
of which is material and being relied upon by Landlord, is true in all respects
as of the date of this Lease, and shall survive the expiration or termination of
the Lease.
(1) Each Tenant which is an entity represents and warrants that it
is duly organized, validly existing and in good standing under the laws of the
state of its organization and the persons executing this Lease on its behalf
have the full right and
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authority to execute this Lease on its behalf and to bind it without the consent
or approval of any other person or entity. Each Tenant represents and warrants
that it has full power, capacity, authority and legal right to execute and
deliver this Lease and to perform all of its obligations hereunder and that this
Lease is a legal, valid and binding obligation, enforceable in accordance with
its terms.
(2) Each Tenant represents that it has not (A) made a general
assignment for the benefit of creditors, (B) filed any voluntary petition in
bankruptcy or suffered the filing of an involuntary petition by any creditors,
(C) suffered the appointment of a receiver to take possession of all or
substantially all of its assets, (D) suffered the attachment or other judicial
seizure of all or substantially all of its assets, (E) admitted in writing its
inability to pay its debts as they come due, or (F) made an offer of settlement,
extension or composition to its creditors generally.
(b) Landlord hereby makes the following representations and warranties,
each of which is material and being relied upon by Tenant, is true in all
respects as of the date of this Lease, and shall survive the expiration or
termination of the Lease.
(1) If Landlord is an entity, Landlord is duly organized, validly
existing and in good standing under the laws of the state of its organization
and the persons executing this Lease on behalf of Landlord have the full right
and authority to execute this Lease on behalf of Landlord and to bind Landlord
without the consent or approval of any other person or entity. Landlord has full
power, capacity, authority and legal right to execute and deliver this Lease and
to perform all of its obligations hereunder. This Lease is a legal, valid and
binding obligation of Landlord, enforceable in accordance with its terms.
(2) Landlord has not (A) made a general assignment for the benefit
of creditors, (B) filed any voluntary petition in bankruptcy or suffered the
filing of an involuntary petition by any creditors, (C) suffered the appointment
of a receiver to take possession of all or substantially all of its assets, (D)
suffered the attachment or other judicial seizure of all or substantially all of
its assets, (E) admitted in writing its inability to pay its debts as they come
due, or (F) made an offer of settlement, extension or composition to its
creditors generally.
48. SECURITY
(a) Tenant acknowledges and agrees that, while Landlord may engage
security personnel to patrol the Building or the Project, Landlord is not
providing any security services with respect to the Premises, the Building or
the Project and that Landlord shall not be liable to Tenant for, and Tenant
waives any claim against Landlord with respect to, any loss by theft or any
other damage suffered or incurred by Tenant in connection with any unauthorized
entry into the Premises or any other breach of security with respect to the
Premises, the Building or the Project.
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(b) Tenant hereby agrees to the exercise by Landlord and Landlord's
Agents, within their sole discretion, of such security measures as, but not
limited to, the evacuation of the Premises, the Building or the Project for
cause, suspected cause or for drill purposes, the denial of any access to the
Premises, the Building or the Project and other similarly related actions that
it deems necessary to prevent any threat of property damage or bodily injury.
The exercise of such security measures by Landlord and Landlord's Agents, and
the resulting interruption of service and cessation of Tenant's business, if
any, shall not be deemed an eviction or disturbance of Tenant's use and
possession of the Premises, or any part thereof, or, except for damages caused
by the gross negligence or willful misconduct of Landlord or Landlord's Agents,
render Landlord or Landlord's Agents liable to Tenant for any resulting damages
or relieve Tenant from Tenant's obligations under this Lease.
49. JURY TRIAL WAIVER
Landlord and Tenant each hereby waive any right to trial by jury with
respect to any action or proceeding (i) brought by Landlord or Tenant or any
other party, relating to (A) this Lease and/or any understandings or prior
dealings between the parties hereto, or (B) the Premises, the Building or the
Project or any part thereof, or (ii) to which Landlord is a party. Landlord and
Tenant each hereby agree that this Lease constitutes a written consent to waiver
of trial by jury pursuant to the provisions of California Code of Civil
Procedure Section 631.
50. JOINT AND SEVERAL LIABILITY
In the event more than one party is named as Tenant hereunder, each such
party shall be jointly and severally liable for the obligations of the Tenant.
Landlord and Tenant have executed and delivered this Lease as of the Lease
Date specified in the Basic Lease Information.
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LANDLORD: TENANT:
AETNA LIFE INSURANCE COMPANY, NAVIO COMMUNICATIONS,
a Connecticut corporation a Delaware corporation
By: Allegis Realty Investors LLC
Its Investment Advisor By: /s/ Wei Yen
--------------------------------
Print Name: Wei Yen
------------------------
Its: President & CEO
-------------------------------
By: /s/ Cynthia Stevinin
--------------------
Cynthia Stevinin
Vice President
By:
-------------------------
Print Name:
------------------------
Its:
-------------------------------
NETSCAPE COMMUNICATIONS
CORPORATION,
a Delaware corporation
By: /s/ Peter Currie
-------------------------
Print Name: Peter Currie
------------------------
Its: Vice President & CFO
-------------------------------
By:
-------------------------
Print Name:
------------------------
Its:
-------------------------------
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EXHIBIT 10.29
================================================================================
CIRCLE STAR LEASE AGREEMENT
by and between
CIRCLE STAR CENTER ASSOCIATES, L.P.
("Landlord")
and
NETWORK COMPUTER, INC.
("Tenant")
================================================================================
<PAGE>
TABLE OF CONTENTS
PARAGRAPH DESCRIPTION PAGE
- --------------------------------------------------------------------------------
BASIC LEASE INFORMATION .................................................v
1. Occupancy and Use .................................................1
2. Terms and Possession ..............................................1
3. Rent; Rent Adjustments; Additional Charges for Expenses
and Taxes .........................................................2
(A) Monthly Base Rent .............................................2
(B) Adjustments in Base Rent ......................................2
(C) Additional Charges for Expenses and Taxes .....................2
(1) Definitions of Additional Charges: ............................2
(A) "Tax Year" ....................................................2
(B) "Tenant's Share" ..............................................2
(C) "Real Estate Taxes" ...........................................2
(D) "Expenses" ....................................................3
(E) "Expense Year" ................................................4
(2) Payment of Real Estate Taxes: .................................4
(3) Payment of Expenses: ..........................................4
(4) Other: ........................................................4
(5) Audit: ........................................................4
(D) Late Charges ..................................................5
4. Restrictions on Use ...............................................5
5. Compliance with Laws ..............................................5
6. Additional Alterations.............................................6
7. Repair and Maintenance ............................................6
8. Liens .............................................................7
9. Assignment and Subletting .........................................7
10. Insurance and Indemnification .....................................9
11. Waiver of Subrogation ............................................10
12. Services and Utilities ...........................................10
13. Tenant's Certificates ............................................11
14. Holding over .....................................................11
15. Subordination ....................................................12
16. Rules and Regulations ............................................12
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17. Re-entry by Landlord .............................................12
18. Insolvency or Bankruptcy .........................................13
19. Default ..........................................................13
20. Damage by Fire, Etc ..............................................14
21. Eminent Domain ...................................................14
22. Sale by Landlord .................................................15
23. Right of Landlord to Perform .....................................15
24. Surrender of Premises ............................................15
25. Waiver ...........................................................15
26. Notices ..........................................................15
27. Taxes Payable by Tenant ..........................................16
28. Abandonment ......................................................16
29. Successors and Assigns ...........................................16
30. Attorney's Fees ..................................................16
31. Light and Air ....................................................16
32. Security Deposit .................................................16
33. Corporate Authority; Financial Information .......................17
34. Parking ..........................................................18
35. Miscellaneous.....................................................18
36. Tenant's Remedies ................................................18
37. Real Estate Brokers ..............................................18
38. Lease Effective Date .............................................18
39. Hazardous Substance Liability ....................................18
40. Arbitration of Disputes ..........................................19
41. Signage ..........................................................19
42. Option to Renew ..................................................19
ii
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43. Rent During Extension Term .......................................19
44. Second Building...................................................20
Exhibit "A" Premises
Exhibit "B" Work Letter
Exhibit "B-I" Landlord's Plans
Exhibit "B-2" Minimum Information Required
Exhibit "C" Rules and Regulations
Exhibit "D" Form of Tenant Estoppel Certificate
Exhibit "E" Encumbrances
Exhibit "F" Form of Letter of Credit
Exhibit "G" Second Building
iii
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BASIC LEASE INFORMATION
- ----------------------------------------------------------------------------
Lease Date: April 27 1999
LANDLORD: CIRCLE STAR CENTER ASSOCIATES, L.P.
a California limited partnership
Managing Agent: THE MOZART DEVELOPMENT COMPANY
Landlord's and Managing Agent's Address:
c/o THE MOZART DEVELOPMENT COMPANY
1068 East Meadow Circle
Palo Alto, CA 94303
TENANT: NETWORK COMPUTER, INC.
a Delaware Corporation
Tenant's Address: Prior to Occupancy: After Commencement Date:
1000 Bridge Parkway at the Premises
Redwood Shores, CA 94065 Attn: Chief Financial Officer
Building: Two Circle Star Way, San Carlos, California
Suite: 100, 300, and 400
Rentable Area
of the Premises: First Floor: 24,696; Third Floor: 26,561; Fourth Floor:
26,561; Total: 77,818
Rentable Area
of the Building: 102,997 square feet
Tenant's Use
of the Premises: General Office and Administration, research and
development; hardware and software labs, and incidental
uses including demonstration rooms and multi-purpose
rooms.
Lease Term: Ten (10) years
Option to Terminate: See paragraph 2(e)
Scheduled
Commencement Date: August 1, 1999
Scheduled
Expiration Date: July 31, 2009
Tenant Allowance: $1,945,450 ($25 psf x 77,818 sf).
Additional Allowance: $389,090 ($5 psf x 77,818 sf).
Tenant's Plan
Delivery Date: April 21, 1999
Outside Delivery Date: December 31, 1999
Monthly Base Rent: $2.60 per Rentable Square Foot of the Rentable Area of
the Premises, provided, however, the Monthly Base Rent
for the first month (in respect of the Initial Premises)
shall be waived. The term "Initial Premises" shall mean
the premises described on Exhibit "A" prior to the
effect of any increase in the Premises that results from
an election of Tenant to lease any First Right
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Space pursuant to Paragraph 45.
Base Rent Adjustment: On each anniversary, of the Commencement Date the
Monthly Base Rent shall increase by three percent (3%)
over the Monthly Base Rent applicable to the month
immediately prior to the applicable anniversary. (Note:
there is also an initial adjustment to Monthly Base Rent
required by Paragraph 3(b)(i)).
Tenant's Share of
Expenses and Taxes
("Additional Charges"): 75.55%
Security Deposit: See Paragraph 32.
Guarantor of Lease: Oracle Corporation, a Delaware corporation
Broker: Cornish & Carey Commercial (Landlord & Tenant)
Broker's Fee or
Commission, If Any,
Paid By: Landlord
The foregoing Basic Lease Information is hereby incorporated into and made a
part of this Lease. Each reference in this Lease to any of the Basic Lease
Information shall mean the respective information hereinabove set forth and
shall be construed to incorporate all of the terms provided under the particular
paragraph pertaining to such information. In the event of any conflict between
any Basic Lease Information and the Lease, the latter shall control.
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LANDLORD:
CIRCLE STAR CENTER ASSOCIATES, L.P.
a California limited partnership
By: M-D Ventures, Inc.
Its: General Partner
By: /s/ Steve Dostart
-----------------------------
Steve Dostart
Its: Vice President
TENANT:
NETWORK COMPUTER, INC.
A Delaware corporation By:
By: /s/ Mitchell Kertzman
-----------------------------------
Mitchell Kertzman
Its: CEO & President
By: /s/ Nancy J. Hilker
-----------------------------------
Nancy J. Hilker
Its: Vice President & Chief
Financial Officer
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LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into as of April 27, 1999, by and
between CIRCLE STAR CENTER ASSOCIATES, L.P., a California limited partnership,
(herein called "Landlord"), and NETWORK COMPUTER, INC., a Delaware corporation,
(herein called "Tenant").
Upon and subject to the terms, covenants and conditions hereinafter set
forth, Landlord hereby leases to Tenant and Tenant hereby hires from Landlord
those premises (the "Premises") comprising the area substantially as
crosshatched on the attached Exhibit "A", in the building (hereinafter referred
to as the "Building") specified in the Basic Lease Information attached hereto.
The number of square feet designated as Rentable Area of the Premises on the
Basic Lease Information may include portions of the Building Common Area
attributed to the Premises and not located within the area outlined on Exhibit
A. Tenant acknowledges that the number of square feet of Rentable Area of the
Premises and the Building has been determined according to the measurement
standard described in the letter of Kenneth Rodriguez Associates dated September
18, 1998. The Building is located on land on which Landlord intends to develop
two buildings as an integrated project (the "Project"). The term "Common Area"
shall mean all areas and facilities within the Project that are not designated
by Landlord for the exclusive use of Tenant or any other tenant or other
occupant of the Project, including the parking areas, access and perimeter
roads, pedestrian sidewalks, landscaped areas, trash enclosures, recreation
areas and the like.
1. OCCUPANCY AND USE. Tenant may use and occupy the Premises for the
purpose specified in the Basic Lease Information and for no other use or purpose
without the prior written consent of Landlord. Landlord shall have the right to
grant or withhold consent to a proposed change of use in its sole discretion.
Tenant shall be entitled to the benefit on a nonexelusive basis of (i) the
Building Common Areas with other occupants of the Building, and (ii) to the
extent and for so long as Landlord continues to own the Project, the Project
Common Areas with other occupants of the Project in accordance with the Rules
and Regulations established by Landlord from time to time. Provided, however,
that if Landlord sells a portion of the Project, Landlord shall assure to Tenant
that Tenant's rights to access and parking are assured through a Reciprocal
Easement Agreement or other like mechanism. Notwithstanding the above, Tenant
understands and agrees that (a) a Declaration of Covenants, Conditions and
Restrictions made as of June 24, 1997 by and between Mozad, L.P.. a California
limited partnership and Homestead Village Inc., a Maryland corporation
("CC&R's"). (b) the Lease between Mozad, L.P. as Lessor and Circle Star Center
Associates, L.P. as Lessee dated as of October 15. 1997 ("Ground Lease") and (c)
a Conditional Use Permit, Office Complex, 1717 Industrial Road, San Carlos, CA
94070, effective date June 12, 1997, may encumber the Land and Project and that
Tenant's Occupancy and Use of the Premises may be restricted by such
encumbrances. If necessary, Tenant shall execute such documents as are
reasonably necessary to cause this Lease to become subordinate to such
encumbrances (see the attached Exhibit "E", Encumbrances).
2. TERM AND POSSESSION; OPTION TO TERMINATE.
(a) The term of this Lease (the "Term") shall be for the period
specified in the Basic Lease Information (or until sooner terminated as herein
provided), subject extension pursuant to Paragraph 42 and/or Paragraph
45(c)(3)(E). Subject to Tenant's termination right set forth below in this
Paragraph, if Landlord, for any reason whatsoever, cannot deliver possession of
the Premises in the condition required under this Lease (including the
Substantial Completion of the Tenant Improvements), with all governmental
permits required for the occupancy of the Premises, to Tenant on the date
specified in the Basic Lease Information for the commencement of the Term, this
Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for
any loss or damage resulting therefrom. In that event, however, the Term of the
Lease shall not commence until such commencement date as is determined pursuant
to Exhibit B. In such event, the scheduled commencement date and scheduled
expiration date shall be adjusted accordingly. Payment of Rent and Additional
Charges by Tenant due to delay in delivery of the Premises caused by Tenant
shall also be governed by Exhibit B hereof. Notwithstanding the provisions above
and of Exhibit B, if the delivery of the Premises is delayed beyond Outside
Delivery Date, as set forth in the Basic Lease Information, Tenant shall have
the right to terminate this Lease by notifying Landlord in writing of its intent
to do so no later than ten (10) business days after the Outside Delivery Date.
The Outside Delivery Date shall be extended one day for each day of
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delay caused by (i) Tenant Delays as more particularly set forth in Exhibit B
hereof and (ii) acts of God or the elements, acts of the Government, labor
disturbances of any character, a shortage of material or labor, or other causes
beyond the reasonable control of Landlord for a period up to sixty (60) days
(any of the foregoing, "Force Majeure"). The dates upon which the Term shall
actually commence and terminate pursuant to this Paragraph 2(a) are herein
called the "Commencement Date" and the "Expiration Date," respectively.
(b) Completion of the improvements to the Premises and Building
shall be governed by the terms and conditions of the separate work letter ("Work
Letter"), attached hereto as Exhibit "B".
(c) The Premises shall be deemed "delivered" and the Term shall
commence as defined in Exhibit B.
(d) Tenant shall, no later than thirty (30) days after Substantial
Completion of the Tenant Improvements, occupy a portion of the Premises or
deliver a letter to Landlord confirming that possession of the Premises has been
tendered to and accepted by Tenant and that Tenant, by virtue of such
acceptance, is in occupancy of the Premises. Time is of essence. This
subparagraph 2(d) shall not be construed as an obligation of Tenant to
continuously occupy the Premises.
(e) Tenant shall have the option to terminate this Lease with
respect to not less than all of the Initial Premises effective upon the end of
the eighth anniversary of the Commencement Date (subject to the extension of
this period pursuant to Paragraph 45(e)(3)(C)) if, and only if, Tenant provides
written notice to Landlord no less than twenty (20) months prior to the
effective date of such termination. This option to terminate shall not be
exercisable from and after Tenant's exercise of its option to renew pursuant to
Paragraph 42 below. As a condition to Tenant's termination of this Lease
pursuant to this subparagraph (e), Tenant shall pay the unamortized portion of
the Additional Allowance applicable to the Initial Premises as of the date of
such termination based upon amortization over the period commencing on the first
day of the second month of the Term and ending on the Expiration Date, with the
return of nine percent (9%) per annum. In the event Tenant exercises its option
to terminate pursuant to this paragraph, effective upon such termination all of
its rights to occupy the Initial Premises and the portions of the Project
associated therewith shall terminate including but not limited to its right to
building signage pursuant to the second sentence of Paragraph 41 and its right
to use the roof top for an Antenna pursuant to Paragraph 44.
3. RENT; RENT ADJUSTMENTS; ADDITIONAL CHARGES FOR EXPENSES AND TAXES.
(a) Monthly Base Rent.
(i) Payment of Base Rent. Commencing on the Commencement Date
(but subject to the waiver in clause (ii) below), Tenant shall pay to Landlord
throughout the Term an amount equal to the Monthly Base Rent rate specified in
the Basic Lease Information as adjusted pursuant to Paragraph 3(b), multiplied
by the Rentable Area of the Premises, as specified in the Basic Lease
Information ("Base Rent"), which sum shall be payable by Tenant in equal monthly
installments on, or, at Tenant's election, before, the first day of each month,
in advance, in lawful money of the United States (without any prior demand
therefor and without deduction or offset whatsoever, except as expressly
provided for in Paragraphs 20 & 21) to Landlord or its managing agent at the
address specified in the Basic Lease Information or to such other firm or to
such other place as Landlord or its Managing Agent, may from time to time
designate in writing. Tenant shall pay to Landlord all charges and other amounts
whatsoever as provided in this Lease ("Additional Charges") at the place where
the Base Rent is payable, and Landlord shall have the same remedies for a
default in the payment of Additional Charges as for a default in the payment of
Base Rent. As used herein, the term "Rent" shall include all Base Rent and
Additional Charges (including, without limitation. Additional Charges for Real
Estate Taxes and Expenses pursuant to Paragraph 3(c) below, and Additional
Charges pursuant to Paragraphs 7(b), 8. 10(d) and 23). If the Commencement Date
should occur on a day other than the first day of a calendar month, or the
Expiration Date should occur on a day other than the last day of a calendar
month, then the Rent and Additional Charges for such fractional month shall be
prorated on a daily basis.
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(ii) Partial Waiver of Monthly Base Rent. Landlord shall waive
the Monthly Base Rent for the first month (in respect of the Initial Premises)
of the Term.
(b) Adjustments in Monthly Base Rent.
(i) Adjustment for Additional Allowance. Effective as of the
first day of the second month of the Term, the initial Monthly Base Rent shall
be increased by $12.73 per $1,000 of the Additional Allowance drawn by Tenant
pursuant to the Work Letter.
(ii) Annual Adjustment. The Monthly Base Rent under Paragraph
3(a) (excluding the amount payable pursuant to Paragraph 3(b)(i)), shall be
adjusted as provided in the Basic Lease Information under the "Base Rent
Adjustment".
(c) Additional Charges for Expenses and Taxes.
(1) Definitions of Additional Charges: For purposes of this
Paragraph 3(c), the following terms shall have the meanings hereinafter set
forth:
(A) "Tax Year" shall mean each twelve (12) consecutive
month period commencing January 1st of the calendar year during which the
Commencement Date of this Lease occurs, provided that Landlord, upon
notice to Tenant, may change the Tax Year from time to time to any other
twelve (12) consecutive month period and, in the event of any such change,
Tenant's Share of Real Estate Taxes (as hereinafter defined) shall be
equitably adjusted for the Tax Years involved in any such change.
(B) "Tenant's Share" shall mean the percentage figure so
specified in the Basic Lease Information.
(C) "Real Estate Taxes" shall mean all taxes,
assessments and charges levied upon or with respect to the Project or any
personal property of Landlord used in the operation of thereof, or
Landlord's interest in the Project or such personal property. Real Estate
Taxes shall include, without limitation, all general real property taxes
and general and special assessments, charges, fees or assessments for
transit, housing, police, fire or other governmental services or purported
benefits to the Building (provided, however, that any refunds of Real
Estate Taxes paid by Tenant (as part of Tenant's Share of Real Estate
Taxes) shall be credited against Tenant's further obligation to pay Real
Estate Taxes during the Term, or paid to Tenant if received after
expiration of the Term), service payments in lieu of taxes, and any tax,
fee or excise on the act of entering into this Lease, or any other lease
of space in the Building, or on the use or occupancy of the Building or
any part thereof, or on the rent payable under any lease or in connection
with the business of renting space in the Building, that are now or
hereafter levied or assessed against Landlord by the United States of
America, the State of California, or any political subdivision, public
corporation, district or any other political or public entity, and shall
also include any other tax, fee or other excise, however described, that
may be levied or assessed as a substitute for, or as an addition to, in
whole or in part, any other Real Estate Taxes, whether or not now
customary or in the contemplation of the parties on the date of this
Lease. Real Estate Taxes shall not include franchise, transfer,
inheritance or capital stock taxes, gift or estate taxes, any assessments
in excess of the amount which would be payable if such tax or assessment
expense were paid in installments over the longest permitted term, any
increases in taxes due to the improvement of the Project for the sole use
of other occupants, or income taxes measured by the net income of Landlord
from all sources unless, due to a change in the method of taxation, any of
such taxes is levied or assessed against Landlord as a substitute for, in
whole or in part, any other tax that would otherwise constitute a Real
Estate Tax. Additionally, Real Estate Taxes shall not include any
assessments or like charges to pay for any remediation of contamination
from any Hazardous Substance (which are not the liability of Tenant
pursuant to Paragraph 39 hereof). Real Estate Taxes shall also include
reasonable legal fees, costs and disbursements incurred in connection with
proceedings to contest, determine or reduce Real Estate Taxes: provided
that such fees, costs and disbursements do not
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exceed the actual savings in Real Estate Taxes obtained by Tenant over the
Term Of the Lease. If any assessments are levied on the Project, Tenant
shall have no obligation to pay more than that amount of annual
installments of principal and interest that would become due during the
Lease Term had Landlord elected to pay the assessment in installment
payments, even if Landlord pays the assessment in full. From and after
commencement of construction of the Second Building (as defined in
Paragraph 45 below) Real Estate Taxes shall be adjusted so as to exclude
any taxes attributable to the construction of such Second Building during
the period of construction thereof. Upon completion of construction of the
Second Building, Real Estate Taxes shall include only the Building's Share
(as defined below) thereof.
(D) "Expenses" shall mean the total costs and expenses
reasonably paid or incurred by Landlord in connection with the management,
operation, maintenance and repair of the Building, including, without
limitation (i) the cost of air conditioning, electricity, steam, heating,
mechanical, ventilating, elevator systems and all other utilities and the
cost of supplies and equipment and maintenance and service contracts in
connection therewith; (ii) the cost of repairs and general maintenance and
cleaning; (iii) the cost of fire, extended coverage, boiler, sprinkler,
public liability, property damage, rent, earthquake (if Landlord
determines that it is available at commercially reasonable rates) and
other insurance obtained by Landlord in connection with the Project, all
including, without limitation, insurance premiums and any deductible
amounts paid by Landlord; (iv) fees, charges and other costs, including
management fees, consulting fees, legal fees (which are allowed elsewhere
in the Lease) and accounting fees of all independent contractors engaged
by Landlord directly related to the operation of the Building or
reasonably charged by Landlord if Landlord performs management services in
connection with the Building, (though the management fee shall not exceed
the cap noted in the following paragraph); (v) the cost of any capital
improvements made to the Building after the Commencement Date (a) as a
labor saving device or to effect other economies in the operation or
maintenance of the Building (from which a reasonable person would
anticipate that savings would actually result), (b) to repair or replace
capital items which are no longer capable of providing the services
required of them, or (c) that are made to the Building after the date of
this Lease and are required under any Laws (as defined in Paragraph 5),
where such capital improvements were not required under any such Laws to
be completed with respect to the Building prior to the date the Lease was
executed, and the cost of any such capital improvements incurred during
any calendar year, shall be amortized over the useful life (but not more
than ten years) of the capital item in question as determined in
accordance with generally accepted accounting principles ("GAAP"),
together with interest on the unamortized balance at (x) the rate paid by
Landlord on funds borrowed for the purpose of constructing such capital
improvements; or (y) if paid from Landlord's own funds, 10% per annum;
provided, however, the first $.24 per square foot of the Rentable Area of
the Premises of such cost of capital improvements may be included in
Expenses even if such amount exceeds the foregoing amortization and any
remaining balance of the cost of such capital improvements shall be
amortized in accordance with the foregoing (such amortization to commence
in the year following the year in which the $.24 was taken as an expense
item); and (vi) any other reasonable expenses of any other kind whatsoever
reasonably incurred in managing, operating, maintaining and repairing the
Building, including, but not limited to, costs incurred pursuant to the
Encumbrances identified in Exhibit "E" and the Building's Share of Project
Common Expenses. "Project Common Expenses" shall mean any expenses
reasonably paid or incurred by Landlord in connection with the management,
operation, maintenance and repair of the Project Common Areas in the
Project and any other Expenses reasonably paid or incurred by Landlord for
the benefit of the Project as a whole, including, but not limited to, the
cost of maintaining the parking lot and facilities and landscaping.
"Building's Share" shall mean the pro rata portion of all Project Common
Expenses based on the amount of gross floor area of the Building as a
portion of the gross floor area of all applicable buildings in the
Project, all as reasonably determined by Landlord. Any "deductible"
amounts relating to capital improvements required to be paid by Tenant
hereunder in connection with any casualty policy carried by Landlord shall
be amortized over the useful life of the restoration work in accordance
with GAAP; provided, however, such amounts shall no longer constitute
Expenses from and after the date upon which Monthly Base Rent is adjusted
to fair market rental pursuant to the terms and conditions of this Lease.
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Notwithstanding anything to the contrary herein contained, Expenses shall
not include, and in no event shall Tenant have any obligation to pay for
pursuant to this Paragraph 3 or Paragraph 7(b), (aa) the initial
construction cost of the Project or real property on which the Building is
located; (bb) the cost of providing tenant improvements, renovations,
painting or redecorating (other than in Common Areas) to Tenant or any
other tenant; (cc) any Base Monthly Rental or Percentage Rental payable
pursuant to the Ground Lease and/or debt service (including, but without
limitation, interest, principal and any impound payments) required to be
made on any mortgage or deed of trust recorded with respect to the
Building and/or the real property on which the Building is located other
than debt service and financing charges imposed pursuant to Paragraph
3(c)(l)(D)(v) above; (dd) the cost of special services, goods or materials
provided to any tenant; (ee) depreciation; (ff) the portion of a
management fee paid to Landlord or affiliate in excess of three percent (3
%) of Base Rent and Additional Charges (excluding the management fee);
(gg) the portion of a management fee paid in excess of two percent (2%) of
Base Rent and Additional Charges (excluding the management fee) if Tenant
manages all services (eg. janitorial, HVAC, security, etc.) in respect of
its Premises; (hh) costs occasioned by Landlord's fraud or willful
misconduct under applicable laws; (ii) costs for which Landlord has a
right of reimbursement from others (jj) costs to correct any construction
or design defects in the original construction of the Premises, the
Building or the Project; (kk) costs arising from a disproportionate use of
any utility or service supplied by Landlord to any other occupant of the
Building; (ll) repairs, replacement and upgrades to the structural
elements of the Building (including foundation, floor slabs, exterior
wails and roof structure); (mm) environmental pollution remediation
related costs in connection with the remediation of the Project including
costs for which Landlord has indemnified Tenant pursuant to Paragraph 39,
except any such costs incurred as the result of Tenant's use of the
Premises; (nn) advertising or promotional costs; (oo) leasing
commissions; (pp) except as provided in Paragraph 20, costs occasioned by
casualties or by the exercise of the power of eminent domain (other than
deductible amounts under insurance policies which shall be included as an
Expense); and (qq) legal costs incurred in connection with negotiations or
disputes with any other occupant (or prospective occupant) of the Project.
In the event that the Building or the Project is not at least ninety-five
percent (95.%) occupied during any fiscal year of the Term as determined
by Landlord, an adjustment shall be made in computing the Expenses and/or
the Project Common Expenses, as applicable, for such year so that Expenses
and/or Project Common Expenses, as applicable, which vary with occupancy
shall be computed as though the Building or Project, as applicable, had
been ninety-five percent (95 %) occupied provided, however, that in no
event shall Landlord be entitled to collect in excess of one hundred
percent (100%) of the total Expenses from all of the tenants in the
Building including Tenant. All costs and expenses shall be determined in
accordance with generally accepted accounting principles which shall be
consistently applied (with accruals appropriate to Landlord's business).
Expenses shall not include specific costs incurred for the account of,
separately billed to specific tenants.
(E) "Expense Year" shall mean each twelve (12)
consecutive month period commencing January 1 of the calendar year during
which the Commencement Date of the Lease occurs, provided that Landlord,
upon notice to Tenant, may change the Expense Year from time to time to
any other twelve (12) consecutive month period, and, in the event of any
such change, Tenant's Share of Expenses shall be equitably adjusted for
the Expense Years involved in any such change.
(2) Payment of Real Estate Taxes: Commencing on the
Commencement Date, unless otherwise provided for in Paragraph 3 (a), Tenant
shall pay to Landlord as Additional Charges one-twelfth (1/12th) of Tenant's
Share of Real Estate Taxes fairly allocable to the Building as reasonably
determined by Landlord for each Tax Year on or before the first day of each
month during such Tax Year, in advance, in an amount reasonably estimated by
Landlord and billed by Landlord to Tenant, and Landlord shall have the right
initially to determine monthly estimates and to revise such estimates from time
to time. With reasonable promptness after Landlord has received the tax bills
for any Tax Year, Landlord shall furnish Tenant with a statement (herein called
"Landlord's Tax Statement") setting forth the amount of Real Estate Taxes for
such Tax Year, and Tenant's Share thereof. If the actual Tenant's Share of Real
Estate Taxes for such Tax Year exceed the estimated Real Estate Taxes paid by
Tenant for such Tax Year, Tenant shall pay to Landlord the difference between
the amount paid by Tenant and the actual Real Estate Taxes within twenty (20)
days after the receipt of Landlord's Tax Statement, and if the total amount paid
by Tenant for any such Tax Year shall exceed
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the actual Tenant's Share of Real Estate Taxes for such Tax Year, such excess
shall be credited against the next installment of Real Estate Taxes due from
Tenant to Landlord hereunder. If it has been determined that Tenant has overpaid
Real Estate Taxes during the last year of the Lease Term, then Landlord shall
reimburse Tenant for such overage on or before the twentieth (20th) day
following the Expiration Date. Upon Tenant's written request, Landlord will
provide an explanation of any allocation of taxes made by Landlord among
different parts of the Project.
(3) Payment of Expenses: Commencing on the Commencement Date,
unless otherwise provided for in Paragraph 3(a), Tenant shall pay to Landlord as
Additional Charges one-twelfth (1/12th) of Tenant's Share of the Expenses for
each Expense Year on or before the first day of each month of such Expense Year,
in advance, in an amount reasonably estimated by Landlord and billed by Landlord
to Tenant, and Landlord shall have the right initially to determine monthly
estimates and to revise such estimates from time to time. With reasonable
promptness after the expiration of each Expense Year, Landlord shall furnish
Tenant with a statement (herein called "Landlord's Expense Statement"), setting
forth in reasonable detail the Expenses for such Expense Year and Tenant's Share
thereof. If the actual Expenses for such Expense Year exceed the estimated
Expenses paid by Tenant for such Expense Year, Tenant shall pay to Landlord the
difference between the amount paid by Tenant and the actual Tenant's Share of
Expenses within twenty (20) days after the receipt of Landlord's Expense
Statement, and if the total amount paid by Tenant for any such Expense Year
shall exceed the actual Tenant's Share of Expenses for such Expense Year, such
excess shall be credited against the next installment of the estimated Expenses
due from Tenant to Landlord hereunder or if the Term has ended it shall be
returned to Tenant within twenty (20) days. Any utility rebates for the Project
which Landlord receives for payments made by Tenant (as part of Tenant's Share
of Expenses) shall be forwarded to Tenant so long as such rebate is received
within one year following the Expiration Date or sooner termination of the
Lease. If it has been determined that Tenant has overpaid Expenses during the
last year of the Lease Term (including rebates of utilities applicable to
Tenant), then Landlord shall reimburse Tenant for such overage on or before the
twentieth (20th) day following the Expiration Date. Upon Tenant's written
request, Landlord will explain any "gross-up" of expenses and the allocation of
any particular item of expense among different parts of the Project.
(4) Other: To the extent any item of Real Estate Taxes or
Expenses is payable by Landlord in advance of the period to which it is
applicable (e.g. insurance and tax escrows required by Landlord's Lender), or to
the extent that prepayment is customary for the service or matter, Landlord may
(i) include such items in Landlord's estimate for periods prior to the date such
item is to be paid by Landlord and (ii) to the extent Landlord has not collected
the full amount of such item prior to the date such item is to be paid by
Landlord, Landlord may include the balance of such full amount in a revised
monthly estimate for Additional Charges. If the Commencement Date or Expiration
Date shall occur on a date other than the first day of a Tax Year and/or Expense
Year, Tenant's share of Real Estate Taxes and Expenses, for the Tax Year and/or
Expense Year in which the Commencement Date occurs shall be prorated.
(5) Audit: Within twelve (12) months after receipt of any
Expense Statement or Tax Statement from Landlord, Tenant shall have the right to
examine Landlord's books and records, copies of which shall be maintained in the
San Francisco, Bay Area, relating to such Expense Statements and Tax Statements,
or cause an independent audit thereof to be conducted by an accounting firm to
be selected by Tenant and subject to the reasonable approval of Landlord, If the
audit conclusively proves that Tenant has overpaid either Expenses or Real
Estate Taxes, then Landlord shall promptly reimburse Tenant for such overage,
and if such overage exceeds five percent (5%) of the actual amount of Expenses
or Real Estate Taxes paid by Landlord for the Tax or Expense Year covered by
such audit, then Landlord shall bear the reasonable cost of such audit, up to a
maximum cost of $10,000. If Tenant fails to object to any such Expense Statement
or Tax Statement or request an independent audit thereof within such twelve (12)
month period, such Expense Statement and/or Tax Statement shall be final and
shall not be subject to any audit, challenge or adjustment.
(d) Late Charges. Tenant recognizes that late payment of any Base
Rent or Additional Charges will result in administrative expenses to Landlord,
the extent of which additional expense is extremely difficult and economically
impractical to ascertain. Tenant therefore agrees that if any Base Rent or
Additional Charges remain unpaid three (3) days after such amount is due, the
amount of such unpaid Base Rent or
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Additional Charges shall be increased by a late charge to be paid to Landlord by
Tenant in an amount equal to four percent (4%) of the amount of the delinquent
Base Rent or Additional Charges. Tenant shall be excused once each twelve (12)
month period of the Term from the application of a late fee to any Base Rent or
Additional Charge which became delinquent without a prior written invoice or
other notice of Landlord of such delinquency: provided, however, the late fee
shall nevertheless be payable if Tenant does not cure the delinquency within ten
(10) days after written notice from Landlord. In addition, any outstanding Base
Rent, Additional Charges, late charges and other outstanding amounts shall
accrue interest at an annualized rate of the lesser of (i) the greater of, 10%
or The Federal Reserve Discount Rate plus 5%, or (ii) the maximum rate permitted
by law (the "Default Rate"), until paid to Landlord. Tenant agrees that such
amount is a reasonable estimate of the loss and expense to be suffered by
Landlord as a result of such late payment by Tenant and may be charged by
Landlord to defray such loss and expense. The provisions of this Paragraph 3(d)
in no way relieve Tenant of the obligation to pay Rent or Additional Charges on
or before the date on which they are due, nor do the terms of this Paragraph
3(d) in any way affect Landlord's remedies pursuant to Paragraph 19 in the event
any Base Rent or Additional Charges are unpaid after the date due.
4. RESTRICTIONS ON USE. Tenant shall not do or permit anything to be done
in or about the Premises which will unreasonably obstruct or interfere with the
rights of other tenants or occupants of the Building or the Project or injure or
annoy them, nor use or allow the Premises to be used for any unlawful purpose,
nor shall Tenant cause or maintain or permit any nuisance in, on or about the
Premises. Tenant shall not commit or suffer the commission of any waste in, on
or about the Premises.
5. COMPLIANCE WITH LAWS.
(a) Tenant's Compliance Obligations. Tenant shall not use the
Premises or permit anything to be done in or about the Premises which will in
any way conflict with any present and future laws, statutes, ordinances,
resolutions, regulations, proclamations, orders or decrees of any municipal,
county, state or federal government or other governmental or regulatory
authority with jurisdiction over the Project, or any portion thereof, whether
currently in effect or adopted in the future and whether or not in the
contemplation of the parties hereto (collectively, "Laws"), and Tenant shall
promptly, at its sole expense, maintain the Premises, any Alterations (as
defined in Paragraph 6 below) permitted hereunder and Tenant's use and
operations thereon in strict compliance at all times with all Laws. "Laws" shall
include, without limitation, all Laws relating to health and safety (including,
without limitation, the California Occupational Safety and Health Act of 1973 an
the California Safe Drinking Water and Toxic Enforcement Act of 1986, including
posting and delivery of notices required by such Laws with respect to the
Premises) and disabled accessibility (including, without limitation, the
Americans with Disabilities Act, 42 U.S.C. Paragraph 12101 et seq.), Hazardous
Substances, and all present and future life safety, fire, sprinkler, seismic
retrofit, building code and municipal code requirements' provided however, that
Tenant's obligation to comply with Laws relating to Hazardous Substances is
subject to the terms and conditions of Paragraph 39, and Tenant shall not be
responsible for compliance with clean-up provisions of any Laws with respect to
Hazardous Substances except to the extent of any release caused by the Tenant
Parties or otherwise included in Tenant's indemnity contained in Paragraph 39.
Notwithstanding the foregoing, Landlord, and not Tenant, shall be responsible
for correcting any condition at the Premises which is in violation of applicable
Laws on or prior to the Commencement Date, except to the extent such condition
is caused by the acts or omissions of the Tenant Parties or such violation
results from Tenant's use of the Premises in a manner other than as permitted
trader this Lease. Notwithstanding the first sentence of this Paragraph 5(a),
Tenant shall not be required to make any alterations to the Premises in order to
comply with Laws unless the requirement that such alterations be made is
triggered by any of the following (or, if such requirement results from the
cumulative effect of any of the following when added to other acts, omissions,
negligence or events, to the extent such alterations are required by any of the
following): (i) the installation, use or operation of any Alterations, or any of
Tenant's trade fixtures or personal property; (ii) the acts, omissions or
negligence of Tenant, or any of its servants, employees, contractors, agents or
licensees; or (iii) the particular use or particular occupancy or manner of use
or occupancy of the Premises by Tenant, or any of its servants, employees,
contractors, agents or licensees (as opposed to the use of the Premises for
general office use). Any alterations that are Tenant's responsibility pursuant
to this Paragraph 5 shall be made in accordance with Paragraph 6 below. The
parties acknowledge and agree that Tenant's obligation to comply with all Laws
as provided in this paragraph (subject to the limitations contained herein) is a
material part of the bargained-for
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consideration under this Lease. Tenant's obligations under this Paragraph and
under Paragraph 7(c) below shall include, without limitation, the responsibility
of Tenant to make substantial or structural repairs and alterations to the
Premises to the extent provided above, regardless of, among other factors, the
relationship of the cost of curative action to the Rent under this Lease, the
length of the then remaining Term hereof, the relative benefit of the repairs to
Tenant or Landlord, the degree to which the curative action may interfere with
Tenant's use or enjoyment of the Premises, and the likelihood that the parties
contemplated the particular Law involved.
(b) Insurance Requirements. Tenant shall not do or permit anything
to be done in or about the Premises or bring or keep anything therein which will
in any way increase the rate of any insurance upon the Project or any of its
contents (unless Tenant agrees to pay for such increase) or cause a cancellation
of any insurance on the Project or otherwise violate any requirements,
guidelines, conditions, rules or orders with respect to such insurance. Tenant
shall at its sole cost and expense promptly comply with the requirements of the
ISO, board of fire underwriters, or other similar body now or hereafter
constituted relating to or affecting Tenant's use or occupancy of the Project
(other than in situations where compliance involves repair, maintenance or
replacement of items that Landlord is expressly required to repair, maintain or
replace under this Lease).
(c) No Limitation on Obligations. The provisions of this Paragraph 5
shall in no way limit Tenant's maintenance, repair and replacement obligations
under Paragraph 7 or Tenant's obligation to pay Expenses under Paragraph 3(c).
The judgment of any court of competent jurisdiction or the admission of Tenant
in an action against Tenant, whether Landlord is a party thereto or not, that
Tenant has so violated any such Law shall be conclusive of such violation as
between Landlord and Tenant.
6. ADDITIONAL ALTERATIONS. Tenant shall not make or suffer to be made any
additional alterations, additions or improvements ("Alterations") in, on or to
the Premises or any part thereof without the prior written consent of Landlord.
Landlord shall not unreasonably delay its processing of Tenant's written request
for such request. Tenant's written request for consent shall contain the
following language in bold print: "This request is made pursuant to Paragraph 6
of the Lease and requires a response within a reasonable time". Any alterations
in, on or to the Premises, except for Tenant's movable furniture and equipment
(including the telephone system, security system, demountable partitions,
secretarial stations, cubicles, cabinets or shelving systems and kitchen
equipment, except to the extent paid for with the Tenant Improvement Allowance
or Additional Allowance), shall be the property of Tenant during the Term and
shall become Landlord's property at the end of the Term without compensation to
Tenant. Landlord shall not unreasonably withhold its consent to Alterations that
(i) do not materially affect the structure of the Building or its electrical,
plumbing, HVAC. security or other systems, (ii) are not visible from the
exterior of the Premises, (iii) are consistent with Tenant's permitted use
hereunder, and (iv) do not adversely affect the value or marketability of
Landlord's reversionary interest upon termination or expiration of this Lease.
In the event Landlord consents to the making of any Alterations by Tenant, the
same shall be made by Tenant, at Tenant's sole cost and expense, in accordance
with plans and specifications reasonably approved by Landlord, and any
contractor or person selected by Tenant to make the same must first be
reasonably approved in writing by landlord. Upon the expiration or sooner
termination of the Term, Tenant shall upon demand by Landlord, at Landlord's
election either (x) at Tenant's sole cost and expense, forthwith and with all
due diligence remove any Alterations made by or for the account of Tenant,
designated by Landlord to be removed (provided, however, that upon the written
request of Tenant prior to installation of such Alterations, Landlord shall
advise Tenant at that time whether or not such Alterations must be removed upon
the expiration or sooner termination of this Lease), and restore the Premises to
its original condition as of the Commencement Date, subject to normal wear and
tear and the rights and obligations of Tenant concerning casualty damage
pursuant to Paragraph 20 or (y) pay Landlord the reasonable estimated cost
thereof; provided, however, if Tenant wishes to proceed pursuant to clause (x)
it may do so if it completes all such work prior to the expiration or
termination of the Term.
Notwithstanding the foregoing Tenant shall be permitted to make Alterations
without Landlord's prior written consent if all of the following conditions are
met:
(A) The Alterations meet the conditions specified in clauses
(i)-(iii) above;
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(B) Tenant provides Landlord at least twenty (20) days prior written
notice of the commencement of construction of such Alterations
together with the plans and specifications for such Alterations;
(C) Such Alterations are constructed by Devcon Construction;
(D) Such Alterations are consistent with the floor plan of the floor
of the Premises being altered; and
(E) The total cost of such Alterations when taken together with all
Alterations constructed by Tenant in reliance upon this provision
(allowing construction without Landlord's prior written approval)
over the prior 24 months, does not exceed $50,000.
7. REPAIR AND MAINTENANCE.
(a) Landlord shall be responsible for the following repair,
replacement and maintenance obligations: (i) maintenance and repair of the
exterior of the Building, roof (including roof membrane) and structural portions
of the Building, (ii) repairs, replacement, and maintenance of the Building
systems, including, without limitation, electrical, mechanical, HVAC and
plumbing and all controls appurtenant thereto, (iii) repairs, replacement and
maintenance of any elevators in the Building, (iv) repair, replacement and
maintenance of Common Areas, (v) alterations to the Premises required under
applicable Laws to the extent not the responsibility of Tenant pursuant to
Paragraph 5 or 6 hereof, (vi) any repair, maintenance or improvements which
could be treated as a "capital expenditure" under generally accepted accounting
principles, (vii) any repair, maintenance or improvements which are a result of
casualty or the exercise of the power of eminent domain which are Landlord's
responsibility under Paragraph 20 or 21, (viii) repairs and replacements of
lighting equipment (including light bulbs), (ix) any repair, maintenance or
improvements which are required as a consequence of construction defects in
Landlord's work or the Tenant Improvements, (x) any repair, maintenance or
improvements for which Landlord has a right of reimbursement from others. As
part of Landlord's maintenance of the building systems, Landlord shall implement
and carry out throughout the term of this Lease an ongoing program of regular
and preventative maintenance of all building systems (such program to include
the periodic replacement of HVAC filters in accordance with manufacturers'
specifications and the monitoring of HVAC systems settings (i.e., percentage of
outside air to ensure compliance with the specifications of the equipment
manufacturers and the design of the HVAC system)) and shall in any event cause
the Building HVAC system and indoor air quality of the Common Areas within the
Building and the Premises to meet for the entire term of this Lease the
standards set forth in Standard 62-1989 ("Ventilation for Acceptable Indoor Air
Quality"), including both the requirements of the Ventilation Rate Procedure and
Indoor Air Quality Procedure and the maintenance requirements, recommendations
and guidelines contained therein, promulgated by the American Society of
Heating, Refrigerating and Air Conditioning Engineers ("ASHRAE"), and any
applicable laws, ordinances, rules air regulations now in effect or thereafter
promulgated by any governmental authority having jurisdiction over the Building
or persons occupying or working in the Building relating to office building
indoor air quality (collectively, the "Indoor air Quality Standard"). Landlord
shall make available to Tenant Landlord's records evidencing such maintenance
efforts by Landlord, and Landlord shall cooperate with Tenant's efforts to
monitor and to maintain the Indoor Air Quality Standard in the Premises. Tenant
shall have the right, from time to time, to test the air quality within the
Premises; if at any time air within the Premises or a portion thereof is
determined to contain carbon dioxide in excess of 1,000 parts per million (PPM)
(or such lesser amount as may then violate the applicable Indoor Air Quality
Standard), at Tenant's request, Landlord will promptly make such adjustments or
alterations to the ventilation system serving the Premises as are reasonably
necessary to be performed which will increase ventilation in the Premises such
that carbon dioxide levels in the Premises are in compliance with the Indoor Air
Quality Standard. Notwithstanding the foregoing, Tenant shall be responsible for
Tenant's Share of the costs described in this paragraph to the extent such costs
are properly included in Expenses.
(b) Tenant shall maintain and repair the interior portion of the
Premises and any Alterations installed by or on behalf of Tenant within the
Premises, however, excluding any portions thereof which are structural in nature
or which are the obligation of Landlord under Paragraph 7(a) (subject to
Paragraphs 5 and
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7(c)). Tenant shall be responsible for the expense of installation, operation,
and maintenance of its telephone and other communications cabling from the point
of entry into the Building to the Premises and throughout the Premises' though
Landlord shall have the right to perform such work on behalf of Tenant in Common
Areas. Tenant hereby waives and releases its right to make repairs at Landlord's
expense under Paragraphs 1941 and 1942 of the California Civil Code or under any
similar law, statute or ordinance now or hereafter in effect. In addition,
Tenant hereby waives and releases its right to terminate this Lease under
Paragraph 1932(1) of the California Civil Code or under any similar law statute
or ordinance now or hereafter in effect. If Tenant fails after thirty (30) days'
written notice by Landlord to proceed with due diligence to make repairs
required to be made by Tenant, the same may be made by Landlord at the expense
of Tenant and the expenses thereof incurred by Landlord shall be reimbursed
(with interest at the Default Rate from the date Landlord incurs such cost) as
Additional Charges within thirty (30) days after submission of a bill or
statement therefor.
(c) The purpose of Paragraph 7(a) and 7(b) is to define the
obligations of Landlord and Tenant to perform various repair and maintenance
functions; the allocation of the costs therefor are covered under this Paragraph
7(e) and Paragraph 3. Tenant shall bear the full cost of repairs or maintenance
interior or exterior, structural or otherwise, to preserve the Premises and the
Building in good working order and condition, arising out of (i) the existence,
installation, use or operation of any Alterations, or any of Tenant's trade
fixtures or personal property; (ii) the moving of Tenant's property or fixtures
in or out of the Building or Project or in and about the Premises; or (iii)
except to the extent any claims arising from any of the foregoing are reimbursed
by insurance carried by Landlord, are covered by the waiver of subrogation in
Paragraph 11 or are otherwise provided for in Paragraph 20, the acts, omissions
or negligence of Tenant, or any of its servants, employees, contractors, agents,
visitors, or licensees, or the particular use or particular occupancy or manner
of use or occupancy of the Premises by Tenant or any such person (as opposed to
general office use). Any Alterations required with respect to Tenant's
responsibilities pursuant to this Paragraph 7(c) shall be made in accordance
with Paragraph 6.
(d) Except to the extent any claims arising from any of the
foregoing are reimbursed by rental abatement insurance carried by Landlord, are
covered by the waiver of subrogation in Paragraph 11 or are otherwise provided
for in Paragraph 20, there shall be no abatement of Rent with respect to, and
except for Landlord's active negligence or willful misconduct, Landlord shall
not be liable for any injury to or interference with Tenant's business arising
from, any repairs, maintenance, alteration or improvement in or to any portion
of the Building, including the Premises, or in or to the fixtures, appurtenances
and equipment therein.
8. LIENS. Tenant shall keep the Premises free from any liens arising out
of any work performed, material furnished or obligations incurred by Tenant. In
the event that Tenant shall not, within thirty (30) days after Tenant receives
actual notice of the imposition of any such lien, cause the same to be released
of record by payment or posting of a proper bond, Landlord shall have, in
addition to all other remedies provided herein and by law, the right, but not
the obligation, to cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All such sums
paid by Landlord and all expenses incurred by it in connection therewith shall
be considered Additional Charges and shall be payable to it by Tenant on demand
with interest at the Default Rate. Landlord shall have the right at all times to
post and keep posted on the Premises any notices permitted or required by law,
or which Landlord shall deem proper, for the protection of Landlord, the
Premises, the Building and any other party having an interest therein, from
mechanics' and materialmen's liens, and Tenant shall give notice to Landlord at
least five (5) business days' prior notice of commencement of any construction
on the Premises.
9. ASSIGNMENT AND SUBLETTING.
(a) Tenant shall not directly or indirectly, voluntarily or by
operation of law, sell, assign, encumber, pledge or otherwise transfer or
hypothecate all or any part of the Premises or Tenant's leasehold estate
hereunder (collectively, "Assignment"), or permit the Premises to be occupied by
anyone other than Tenant or sublet the Premises or any portion thereof
(collectively, "Sublease"), without Landlord's prior written consent in each
instance, which consent shall not be unreasonably withheld or delayed by
Landlord. Without otherwise limiting the criteria upon which Landlord may
withhold its consent to any proposed Sublease or Assignment, if Landlord
withholds its consent where either (i) the creditworthiness of the proposed
Sublessee or
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Assignee (given to financial obligations of the proposed Sublease or Assignment)
is not reasonably acceptable to Landlord or, (ii) the proposed Sublessee's or
Assignee's use of the Premises is not in compliance with the allowed Tenant's
Use of the Premises as described in the Basic Lease Information, such
withholding of consent shall be presumptively reasonable. If Landlord consents
to the Sublease or Assignment, Tenant may thereafter enter into a valid Sublease
or Assignment upon the terms and condition set forth in this Paragraph 9.
Notwithstanding anything to the contrary herein, unless and until the Guaranty
of this Lease by Oracle Corporation terminates pursuant to Paragraph 22(a)
thereof, Landlord shall have no obligation to consent to any Sublease or
Assignment or to respond to any request by Tenant for approval thereto, unless
and until Landlord receives written approval by Oracle Corporation of the
proposed Sublease or Assignment executed by an Authorized Officer of Oracle
Corporation which includes the identity of the proposed sublessee or assignee,
in substantially the following form:
Oracle Corporation, as Guarantor of the obligations of the
tenant under that certain Lease dated April ___, 1999 by and
between Circle Star Center Associates, L.P. as Landlord, and
Network Computer, Inc. as Tenant, for the benefit of Landlord
hereby approves the proposed [sublease or assignment] of
[describe the portion of Premises subleased and term of
sublease or the entire Premises and entire term if an
assignment] to [identify proposed sublessee or assignee].
Oracle Corporation hereby confirms to Landlord and its
successors and assigns that the Guaranty by Oracle Corporation
of the obligations under the above mentioned Lease shall
remain in full force and effect notwithstanding the proposed
[sublease or assignment].
Oracle Corporation
__________________
By: ______________
Its: _____________
The term "Authorized Officer" shall have the meaning given in Paragraph 45
below. The above referenced approval of Oracle Corporation shall be accompanied
by an incumbency certificate signed by the Secretary or Assistant Secretary of
Oracle Corporation certifying that the person signing the above referenced
approval on behalf of Oracle Corporation is a corporate officer of Oracle
Corporation holding one of the offices constituting an Authorized Officer.
(b) If Tenant desires at any time to enter into an Assignment of
this Lease or a Sublease of the Premises or any portion thereof, it shall first
give written notice to Landlord of its desire to do so, which notice shall
contain (i) the name of the proposed assignee, subtenant or occupant; (ii) the
name of the proposed assignee's, subtenant, or occupant's business to be carried
on in the Premises; (iii) the terms and provisions of the proposed Assignment or
Sublease; (iv) such financial information as Landlord may reasonably request
concerning the proposed assignee, subtenant or occupant; and (v) the following
language in bold print: "This request is made pursuant to Paragraph 9(b) of the
Lease and requires a response within fifteen (15) days from the date of this
notice".
(c) At any time within fifteen (15) days after Landlord's receipt of
the notice specified in Paragraph 9(b), Landlord may by written notice to Tenant
elect to (i) consent to the Sublease or Assignment or (ii) disapprove the
Sublease or Assignment.
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If Landlord consents to the Sublease or Assignment within said
fifteen (15) day period, Tenant may thereafter within one hundred twenty (120)
days after Landlord's consent, but not later than the expiration of said one
hundred twenty (120) days, enter into such Assignment or Sublease of the
Premises or portion thereof upon the terms and conditions set forth in the
notice furnished by Tenant to Landlord pursuant to Paragraph 9(b). However,
during any period of time in which Tenant directly occupies less than
seventy-five percent (75 %) of the Premises (regardless of whether such
occupancy threshold is not met at the time the Sublease is entered into or at
any time during the term of such Sublease), fifty percent (50%) of any rent or
other consideration realized by Tenant under any such Sublease in excess of the
Base Rent and Additional Charges payable hereunder (or the amount thereof
proportionate to the portion of the Premises subject to such Sublease) shall be
paid to Landlord ("Bonus Rent"), after first deducting from such excess the
unamortized costs of any portion of the Tenant Improvements paid for by Tenant
(and not from the Tenant Improvement Allowance or Additional Allowance) or costs
reasonably incurred for tenant improvements installed by Tenant to obtain the
Sublease in question, each of which are installed in that portion of the
Premises which is the subject of the Sublease and which unamortized costs shall
be amortized on a straight line basis (without interest) over the term of the
Sublease in equal installments, and after deducting therefrom any customary
brokers' commissions that Tenant has incurred in connection with such Sublease
amortized on a straight line basis (without interest) over the term of the
Sublease.
(d) No consent by Landlord to any Assignment or Sublease by Tenant
shall relieve Tenant of any obligation to be performed by Tenant under this
Lease, whether arising before or after the Assignment or Sublease. The consent
by Landlord to any Assignment or Sublease shall not relieve Tenant from the
obligation to obtain Landlord's express written consent to any other Assignment
or Sublease. Any Assignment or Sublease that is not in compliance with this
Paragraph 9 shall be void and, at the option of Landlord, shall constitute a
material default by Tenant under this Lease. The acceptance of Base Rent or
Additional Charges by Landlord from a proposed assignee or sublessee shall not
constitute the consent to such Assignment or Sublease by Landlord.
(e) The following shall be deemed a voluntary assignment of Tenant's
interest in this Lease: (i) any dissolution, merger, consolidation, or other
reorganization of Tenant; and (ii) if the capital stock of Tenant is not
publicly traded, the sale or transfer to one person or entity stock possessing
more than fifty percent (50%) of the total combined voting power of all classes
of Tenant's stock issued, outstanding and entitled to vote for the election of
directors. Notwithstanding anything to the contrary contained in this Paragraph
9, Tenant may enter into any of the following transfers (a "Permitted Transfer")
without Landlord's prior written consent: (1) Tenant may assign its interest in
the Lease to a corporation which results from a merger, consolidation or other
reorganization, so long as the surviving corporation has a net worth immediately
following such transaction that is equal to or greater than the net worth of
Tenant as of the date immediately prior to such transaction; and (2) Tenant may
assign this Lease to a corporation which purchases or otherwise acquires all or
substantially all of the assets of Tenant, so long as such acquiring corporation
has a net worth immediately following such transaction that is equal to or
greater than the net worth of Tenant as of the date immediately prior to such
transaction.
(f) No Assignment shall be binding on Landlord unless the assignee
or Tenant shall deliver to Landlord a counterpart of the Assignment in form that
contains a covenant of assumption by the assignee satisfactory in substance and
form to Landlord, consistent with the requirements of this Paragraph 9(f), but
the failure or refusal of the assignee to execute such instrument of assumption
shall not release or discharge the assignee from its liability hereunder. No
Sublease shall be binding on Landlord unless Landlord shall agree in writing
following termination of this Lease to recognize such Sublessee and such
Sublessee agrees in writing to attorn to Landlord on the terms and conditions of
the sublease (including the obligations under this Lease to the extent that they
relate to the portion of the Premises subleased).
(g) Tenant shall have the right, without Landlord's consent but with
written notice to Landlord at least ten (10) days prior thereto, to enter into
an Assignment of Tenant's interest in the Lease or a Sublease of all or any
portion of the Premises to an Affiliate (as defined below) of Tenant, provided
that in connection with an Assignment that is not a sublease, (i) the Affiliate
delivers to Landlord concurrent with such Assignment a written notice of the
Assignment and an assumption agreement whereby the Affiliate assumes and agrees
to
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perform, observe and abide by the terms, conditions, obligations, and provisions
of this Lease; and (ii) the entity remains an Affiliate throughout the term of
this Lease (and the assumption agreement shall contain provisions consistent
with the provisions of this subparagraph allowing Landlord to terminate this
Lease at such time as the entity is no longer an Affiliate of the original
Tenant). If this Lease is assigned to an Affiliate and thereafter any
circumstance occurs which causes such assignee to no longer be an Affiliate of
the original Tenant, Tenant shall give written notice thereof to Landlord, which
notice, to become effective, shall refer to Landlord's right to terminate this
Lease pursuant to this subparagraph ("Affiliation Termination Notice").
Following occurrence of the circumstance giving rise to the discontinuation of
such assignee being an Affiliate ("Affiliate Termination") of the original
Tenant, Landlord shall be entitled to terminate this Lease unless Landlord has
given its prior written consent to such circumstance, which consent shall not be
unreasonably withheld by Landlord so long as such assignee (after giving effect
to such circumstance) has financial strength (as demonstrated by audited
financial statements) equal to or greater than the original Tenant (including
its net worth) as of the date of execution of this Lease, or the original Tenant
executes a guaranty in usual form reasonably acceptable to Landlord (however,
this does not imply that Tenant would be released without such guaranty). No
Sublease or Assignment by Tenant made pursuant to this Paragraph shall relieve
Tenant of Tenant's obligations under this Lease. As used in this paragraph, the
term "Affiliate" shall mean and collectively refer to a corporation or other
entity which controls, is controlled by or is under common control with Tenant,
by means of an ownership of either (aa) more than fifty percent (50%) of the
outstanding voting shares of stock or partnership or other ownership interests,
or (bb) stock, or partnership or other ownership interests, which provide the
right to control the operations, transactions and activities of the applicable
entity.
(h) Notwithstanding anything to the contrary herein (x) Guarantor is
hereby approved in respect of an Assignment or Sublease by Tenant to Guarantor
regardless of whether Guarantor is an Affiliate of Tenant at the time and (y) in
connection with an Assignment to Guarantor, Guarantor shall assume all of
Tenant's obligations tinder this Lease. Upon such assumption by Guarantor any
security held by Landlord in respect to the portion of the Premises which is the
subject of the Assignment or Sublease assumed by Guarantor, shall be released by
Landlord.
10. INSURANCE AND INDEMNIFICATION.
(a) Except to the extent caused by the negligence or willful
misconduct of Tenant Parties (as defined in Paragraph 10(c) below) or Tenant's
breach of this Lease, Landlord shall indemnify and hold Tenant harmless from and
defend Tenant against any and all claims or liability for any injury or damage
to any person or property including any reasonable attorney's fees (but
excluding any consequential damages or loss of business) occurring in, on, or
about the Project to the extent such injury or damage is caused by the
negligence or willful misconduct of Landlord, its agents, servants, contractors,
employees (collectively, including Landlord, "Landlord Parties") or Landlord's
breach of this Lease.
(b) Landlord shall not be liable to Tenant, and Tenant hereby waives
all claims against Landlord Parties for any injury or damage to any person or
property in or about the Premises by or from any cause whatsoever (other than
the negligence or willful misconduct of Landlord Parties, including Landlord's
negligence or willful misconduct as related to construction or property
management), and without limiting the generality of the foregoing, whether
caused by water leakage of any character from the roof, walls, basement, or
other portion of the Premises or the Building, or caused by gas, fire, oil,
electricity, or any cause whatsoever, in, on, or about the Premises, the
Building or any part thereof (other than that caused by the negligence or
willful misconduct of Landlord Parties). Tenant acknowledges that any casualty
insurance carried by Landlord will not cover loss of income to Tenant or damage
to the alterations in the Premises installed by Tenant or Tenant's personal
property located within the Premises. Tenant shall be required to maintain the
insurance described in Subparagraph 10(d) below during the Term.
(c) Except to the extent caused by the negligence or willful
misconduct of Landlord Parties or Landlord's breach of this Lease, Tenant shall
indemnify and hold Landlord harmless from and defend Landlord against any and
all claims or liability for any injury or damage to any person or property
whatsoever: (i) occurring in or on the Premises; or (ii) occurring in, on, or
about any other portion of the Project to the extent such injury or damage shall
be caused by the negligence or willful misconduct by Tenant, its agents,
servants,
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employees, or invitees (collectively, including Tenant, "Tenant Parties").
Tenant further agrees to indemnify and hold Landlord harmless from, and defend
Landlord against, any and all claims, losses, or liabilities (including damage
to Landlord's property) arising from (x) any breach of this Lease by Tenant
and/or (y) the conduct of any work or business of Tenant Parties in or about the
Project and/or (z) any matter referred to in Paragraph i0(g). This Paragraph 10
does not govern liability for Hazardous Substances, which subject is governed by
Paragraph 39 of the Lease concerning Hazardous Substance liability.
(d) Tenant shall procure at its cost and expense and keep in effect
during the Term the following insurance: (i) commercial general liability
insurance including contractual liability with a minimum combined single limit
of liability of Three Million Dollars ($3,000,000). Such insurance shall name
Landlord as an additional insured, shall specifically include the liability
assumed hereunder by Tenant, and shall provide that it is primary insurance, and
not excess over or contributory with any other valid, existing, and applicable
insurance in force for or on behalf of Landlord, and shall provide that Landlord
shall receive thirty (30) days' written notice from the insurer prior to any
cancellation or change of coverage; (ii) "all risk" property insurance
(including, without limitation, boiler and machinery (if applicable); sprinkler
damage, vandalism and malicious mischief) on all leasehold improvements
installed in the Premises by Tenant at its expense (if any), and on all Tenant's
personal property. Such insurance shall be an amount equal to full replacement
cost of the aggregate of the foregoing and shall provide coverage comparable to
the coverage in the standard ISO All Risk form, when such form is supplemented
with the coverages required above; (iii) worker's compensation insurance; and
(iv) such other insurance as may be required by the law. Tenant shall deliver
policies of such insurance or certificates thereof to Landlord on or before the
Commencement Date, and thereafter at least thirty (30) days before the
expiration dates of expiring policies; and, in the event Tenant shall fail to
procure such insurance, or to deliver such policies or certificates, Landlord
may, at its option, procure same for the account of Tenant, and the cost thereof
shall be paid to Landlord as Additional Charges within five (5) days after
delivery to Tenant of bills therefor.
(e) The provisions of this paragraph l0 shall survive the expiration
or termination of this Lease with respect to any claims or liability occurring
prior to such expiration or termination.
(f) Landlord shall maintain insurance on the Project against fire
and risks covered by "all risk" (excluding earthquake and flood, though
Landlord, at its option, may include this coverage) on a 100% of "replacement
cost" basis (though reasonable deductibles may be included under such coverage).
Landlord's insurance shall also cover the improvements installed by Landlord
prior to the commencement of the Term, shall have a building ordinance
provision, and shall provide for rental interruption insurance covering a period
of twelve (12) full months. In no event shall Landlord be deemed a co-insurer
under such policy. Landlord shall also maintain contractual liability coverage
(or with contractual liability endorsement) on an occurrence basis in amounts
not less than Three Million Dollars ($3,000,000) per occurrence with respect to
bodily injury or death and property damage. Notwithstanding the foregoing
obligations of Landlord to carry insurance, Landlord may modify the foregoing
coverages if and to the extent it is commercially reasonable to do so.
(g) Tenant acknowledges that even if Landlord installs and operated
security cameras or other security equipment and/or provides any other services
that could be construed as being intended to enhance security, Landlord shall
have no obligation to Tenant or to any of Tenant's employees, customers or
invitees for any damage, claim, loss or liability related to any claim that
Landlord had a duty to provide security or that the equipment or services
provided by Landlord were inadequate, inoperative or otherwise failed to provide
adequate security. Any such claim made against Landlord by any employee,
customer or invitee of Tenant shall be included within Tenant's obligation of
indemnity and defense set forth in subparagraph (c) above.
11. WAIVER OF SUBROGATION. Notwithstanding anything to the contrary in
this Lease, the parties hereto release each other and their respective agents,
employees, successors, assignees and subtenants from all liability for injury to
any person or damage to any property that is caused by or results from a risk
(i) which is actually insured against, to the extent of receipt of payment under
such policy (unless the failure to receive payment under any such policy results
from a failure of the insured party to comply with or observe the terms and
conditions of the insurance policy covering such liability, in which event, such
release shall not be so limited), (ii) which is required to be insured against
under this Lease, or (iii) which would normally be covered
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by the standard form of "all risk-extended coverage" casualty insurance, without
regard to the negligence or willful misconduct of the entity so released.
Landlord and Tenant shall each obtain from their respective insurers under all
policies of fire, theft, and other property insurance maintained by either of
them at any time during the Term insuring or covering the Project or any portion
thereof of its contents therein, a waiver of all rights of subrogation which the
insurer of one party might otherwise, if at all, have against the other party,
and Landlord and Tenant shall each indemnify the other against any loss or
expense, including reasonable attorneys' fees, resulting from the failure to
obtain such waiver.
12. SERVICES AND UTILITIES.
(a) Landlord shall provide the maintenance and repairs described in
paragraph 7(a), except for damage occasioned by the act of Tenant, in which
case, but in any event subject to the terms of Paragraph 11 above, such damage
shall be repaired by Landlord at Tenant's expense.
(b) Subject to the provisions elsewhere herein contained and to the
rules and regulations of the Building, Landlord agrees to furnish to the
premises during ordinary business hours of generally recognized business days,
to be determined by Landlord (but exclusive, in any event, of Saturdays, Sundays
and legal holidays), hot and cold water and electricity suitable for the
intended use of the Premises, heat and air conditioning required in Landlord's
judgment for the comfortable use and occupation of the Premises, janitorial
services during the times and in the manner that such services are, in
landlord's judgment, customarily furnished in comparable office buildings in the
immediate market area, and elevator service (if the Building has an elevator)
which shall mean service either by non-attended automatic elevators or elevators
with attendants, or both, at the option of the Landlord. Notwithstanding the
above, except in the case of emergencies, utilities to the Building and elevator
service shall be provided every day. At Tenant's request, Landlord shall provide
additional or after hours heating or air conditioning and Tenant shall pay to
Landlord a reasonable charge for such services as determined by Landlord (not to
exceed Landlord's actual costs, which costs do not include depreciation). Tenant
agrees at all times to cooperate fully with Landlord and to abide by all the
regulations and requirements which Landlord may prescribe for the proper
functioning and protection of the heating, ventilating and air conditioning
system. Wherever heat generating machines, excess lighting or equipment are used
in the Premises which affect the temperature otherwise maintained by the air
conditioning system, Landlord reserves the right to install supplementary air
conditioning units in the Premises, and the cost thereof, including the cost of
installation and the cost of operation and maintenance thereof, shall be paid by
Tenant to Landlord upon demand by Landlord. To the extent Tenant requires water,
electricity, heat, air conditioning or other services in portions of the
Premises which are not metered separately from other tenants of the Project and
in amounts in excess of amounts delivered to such other tenants of the Project
as reasonably determined by Landlord, Tenant shall pay to Landlord a reasonable
charge for such excess amounts as determined by Landlord. Landlord shall make
available to Tenant reasonable documentation supporting its charges for such
excess services.
(c) Tenant will not without the written consent of Landlord, which
consent shall not be unreasonably withheld or delayed, use any apparatus or
device in the Premises which, when used, puts an excessive load on the Building
or its structure or systems, including, without limitation, electronic data
processing machines, punch card machines and machines using excess lighting or
voltage in excess of the amount for which the Building is designed, which will
in any way materially increase the amount of gas, electricity or water usually
furnished or supplied for use of the Premises as general office space; nor
connect with electric current, except through existing electrical, outlets in
the Premises, or water pipes or gas outlets, any apparatus or device for the
purposes of using gas, electrical current or water. If Tenant shall require
water or electrical current or any other resource in excess of that usually
furnished or supplied for use of the Premises as general office space, Tenant
shall first obtain the consent of Landlord, which Landlord may refuse, to the
use thereof, and Landlord may cause a special meter to be installed in the
Premises so as to measure the amount of water, electric current or other
resource consumed for any such other use. The cost of any such meters and of
installation, maintenance an repair thereof shall be paid for by Tenant, and
Tenant agrees to pay Landlord promptly upon demand by Landlord for all such
water, electric current or other resource consumed, as shown by said meters, at
the rates charged by the local public utility, furnishing the same, plus any
additional expense incurred in keeping account of the water, electric current or
other resource so consumed.
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(d) Landlord shall not be in default hereunder, nor be deemed to
have evicted Tenant, nor be liable for any damages directly or indirectly
resulting from, nor shall the rental herein reserved be abated by reason of (i)
the installation, use or interruption of use of any equipment in connection with
the foregoing utilities and services; (ii) failure to furnish or delay in
furnishing any services to be provided by Landlord when such failure or delay is
caused by Force Majeure, or by the making of repairs or improvements to the
Premises or to the Building (unless such failure or delay is caused by
Landlord's negligence or willful misconduct); or (iii) the limitation,
curtailment, rationing or restriction on use of water, electricity, gas or any
other form of energy, or any other service or utility whatsoever serving the
Premises, the Building or the Project. Furthermore, Landlord shall be entitled
to cooperate with the mandatory requirements of national, state or local
governmental agencies or utilities suppliers in connection with reducing energy
or other resources consumption. If the Premises become unsuitable for Tenant's
use as a consequence of cessation of gas and electric utilities or other
services provided to the Premises resulting from a casualty covered by
Landlord's insurance, then Tenant's Base Rent and Additional Charges shall abate
during the period of time in which Tenant cannot occupy the Premises for
Tenant's use, but only to the extent of rental abatement insurance proceeds
received by Landlord. Landlord shall use reasonable diligence to make such
repairs as may be required to lines, cables, wires, pipes equipment or machinery
within the Project to provide restoration of the services Landlord is
responsible for providing under this Paragraph 12 and, where the cessation or
interruption of such services has occurred due to circumstances or conditions
beyond Project boundaries, to cause the same to be restored, by diligent
application or request to the provider thereof. In no event shall any mortgagee
or beneficiary under any mortgage or deed of trust on all or any portion of the
Project, the Building, or the land on which all or any portion of the Project is
located (any such mortgagee or beneficiary, a "Mortgagee") be or become liable
for any default of Landlord under this Paragraph 12.
13. TENANT'S CERTIFICATES. Tenant, at any time and from time to time,
within ten (10) days from receipt of written notice from Landlord, will execute,
acknowledge and deliver to Landlord and, at Landlord's request, to any
prospective tenant, purchaser, ground or underlying lessor or Mortgagee or any
other party acquiring an interest in Landlord, a certificate of Tenant
substantially in the form attached as Exhibit "D" and also containing any other
information that may reasonably be required by any of such persons. It is
intended that any such certificate of Tenant delivered pursuant to this
Paragraph 13 may be relied upon by Landlord and any prospective tenant,
purchaser, ground or underlying lessor or Mortgagee, or such other party. If
requested by Tenant, Landlord shall provide Tenant with a similar certificate.
14. HOLDING OVER. If Tenant (directly or through any successor-in-interest
of Tenant) remains in possession of any or all of the Premises after the
expiration or termination of this Lease with the consent of Landlord, such
continued possession shall be construed to be a tenancy from month to month at
one hundred twenty-five percent (125%) of the Monthly Base Rent herein specified
(and shall be increased in accordance with Paragraph 4(b) [Adjustments in Base
Rent]), together with an amount estimated by Landlord for the monthly Additional
Charges payable under this Lease, and shall otherwise be on the terms and
conditions herein specified so far as applicable. If Tenant (directly or through
any successor-in-interest of Tenant) remains in possession of all or any portion
of the Premises after the expiration or termination of this Lease without the
consent of Landlord, Tenant's continued possession shall be on the basis of a
tenancy at the sufferance of Landlord. In such event, Tenant shall continue to
comply with or perform all the terms and obligations of Tenant under this Lease,
except that the Monthly Base Rent during Tenant's holding over shall be the
greater of the then-fair market rent for the Premises (as reasonably determined
by Landlord) or one hundred fifty percent (150%) of the Monthly Base Rent and
Additional Charges payable in the last full month prior to the termination
hereof (and shall be increased in accordance with Paragraph 4(b) [Adjustments in
Base Rent]). In addition to Rent. Tenant shall pay Landlord for all damages
proximately caused by reason of the Tenant's retention of possession. Landlord's
acceptance of Rent after the termination of this Lease shall not constitute a
renewal of this Lease, and nothing contained in this provision shall be deemed
to waive Landlord's right of reentry or any other right hereunder or at law.
Tenant acknowledges that, in Landlord's marketing and re-leasing efforts for the
Premises, Landlord is relying on Tenant's vacation of the Premises on the
Expiration Date. Accordingly, Tenant shall indemnify, defend and hold Landlord
harmless from and against all claims, liabilities, losses, costs, expenses and
damages arising or resulting directly or indirectly from Tenant's failure to
timely surrender the Premises, including (i) any loss, cost or damages suffered
by any prospective tenant of all or any part of the Premises, and (ii)
Landlord's damages as a result of such prospective tenant rescinding or refusing
to
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enter into the prospective lease of all or any portion of the Premises by reason
of such failure of Tenant to timely surrender the Premises.
15. SUBORDINATION.
(a) Without the necessity of any additional document being executed
by Tenant for the purpose of effecting a subordination, this Lease shall be
subject and subordinate at all times to: (i) the Encumbrances and all ground
leases or underlying leases which may now exist or hereafter be executed
affecting the Building or the land upon which the Building is situated or both;
(ii) any CC&R's, currently in effect or that Landlord may enter into in the
future, that affect the Building or the Common Areas and (iii) the lien of any
mortgage or deed of trust which may now exist or hereafter be executed in any
amount for which the Building, land, ground leases or underlying leases, or
Landlord's interest or estate in any of said items, is specified as security.
Notwithstanding the foregoing, Landlord shall have the right to subordinate or
cause to be subordinated any such ground leases or underlying leases or any such
liens to this Lease. In the event that any ground lease or underlying lease
terminates for any reason or any mortgage or deed of trust is foreclosed or a
conveyance in lieu of foreclosure is made for any reason, Tenant shall,
notwithstanding any subordination, attorn to and become the Tenant of the
successor in interest to Landlord at the option of such successor in interest.
Notwithstanding anything to the contrary contained herein (but subject to
subparagraph 15(b) below), this Lease shall not be subject or subordinate to any
ground or underlying lease or to any lien, mortgage, deed of trust or other
security interest affecting the Premises, unless the ground lessor, lender or
other holder of the interest to which this lease would be subordinated executes
a reasonable recognition and non-disturbance agreement which provides that
Tenant shall be entitled to continue in possession of the Premises on the terms
and conditions of this Lease if and for so long as Tenant fully performs all of
its obligations hereunder. Tenant covenants and agrees to execute and deliver
upon demand by Landlord and in the form requested by Landlord and reasonably
acceptable to Tenant, any customary additional documents evidencing the priority
or subordination of this Lease with respect to any such ground leases or
underlying leases or the lien of any such mortgage or deed of trust. Tenant
shall execute, deliver and record any such documents within twenty (20) days
after Landlord's written request.
(b) Notwithstanding the provisions of subparagraph 15(a) above to
the contrary, specifically with regard to the Ground Lease (as defined in
Exhibit "E"), this Lease shall be subject to and subordinate to the terms,
covenants and conditions of the Ground Lease and the rights of the Lessor (as
defined in the Ground Lease), without the requirement that the Lessor enter into
a separate recognition and non-disturbance agreement as contemplated by
subparagraph 15(a), provided that Landlord and Tenant agree to the following
conditions as required by Article 25 of the Ground Lease:
(1) Upon any termination or surrender of the Ground Lease,
this Lease shall continue in full force and effect and the Tenant (defined as
"sublessee" in the Ground Lease) shall attorn to, or, at the option of Lessor
(as defined in the Ground Lease), enter into a direct lease on identical terms
(i.e. the terms of this Lease) with, Lessor;
(2) Lessor shall not be bound by any prepayment of rent
hereunder; and
(3) Tenant and Landlord agree that this Lease is an arm's
length transaction between Landlord (defined as "Lessee" in the Ground Lease)
and Tenant (defined as "the subtenant" in the Ground Lease), and that Tenant is
not an Affiliate (as defined in the Ground Lease) of Landlord.
16. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with
the rules and regulations attached to this Lease as Exhibit "C" and all
reasonable modifications thereof and additions thereto from time to time put
into effect by Landlord. Landlord shall not be responsible for the
nonperformance by any other Tenant or occupant of the Building or the Project of
any said roles and regulations. In the event of an express and direct conflict
between the terms, covenants, agreements and conditions of this Lease and those
set forth in the roles and regulations, as modified and amended from time to
time by Landlord, this Lease shall control.
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17. RE-ENTRY BY LANDLORD. Landlord reserves and shall at all reasonable
times, upon reasonable prior notice (except in the case of an emergency), and
subject to Tenant's reasonable security precautions and the right of Tenant to
accompany Landlord at all times, have the right to re-enter the Premises to
inspect the same, to supply janitor service and any other service to be provided
by Landlord to Tenant hereunder (unless Tenant is supplying such service), to
show the Premises to prospective purchasers, Mortgagees or tenants (as to
prospective tenants, only during the last twelve (12) months of the Lease Term),
to post notices of nonresponsibility or as otherwise required or allowed by this
Lease or by law, and to alter, improve or repair the Premises and any portion of
the Building and may for that purpose erect, use, and maintain scaffolding,
pipes, conduits, and other necessary structures in and through the Premises
where reasonably required by the character of the work to be performed. Landlord
shall not be liable in any manner for any inconvenience, disturbance, loss of
business, nuisance or other damage arising from Landlord's entry and acts
pursuant to this Paragraph and Tenant shall not be entitled to an abatement or
reduction of Base Rent or Additional Charges if Landlord exercises any rights
reserved in this paragraph. Tenant hereby waives any claim for damages for any
injury or inconvenience to or interference with Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby, except for Landlord's negligence or willful misconduct. For each of the
aforesaid purposes, Landlord shall at all times have and retain a key with which
to un-lock all of the doors in, upon and about the Premises, excluding Tenant's
vaults and safes, or special security areas (designated in advance), and
Landlord shall have the right to use any and all means which Landlord may deem
necessary or proper to open said doors in an emergency, in order to obtain entry
to any portion of the Premises, and any entry to the Premises, or portion
thereof obtained by Landlord by any of said means, or otherwise, shall not under
any emergency circumstances be construed or deemed to be a forcible or unlawful
entry into, or a detainer of, the Premises, or an eviction, actual or
constructive, of Tenant from the Premises or any portions thereof. Landlord
shall use best efforts during re-entry to not unreasonably interfere with
Tenant's use of the Premises or its business conducted therein. Tenant
acknowledges that the first floor telephone equipment room provides third party
access to the electronic sign equipment that operates the sign facing Highway
101 and that Landlord retains the right to access to such facilities at all
times without notice. Tenant acknowledges that it has no right hereunder to use
of such electronic sign.
18. INSOLVENCY OR BANKRUPTCY. The appointment of a receiver to take
possession of all or substantially all of the assets of Tenant, or an assignment
of Tenant for the benefit of creditors, or any action taken or suffered by
Tenant under any insolvency, bankruptcy, reorganization or other debtor relief
proceedings, whether now existing or hereafter amended or enacted (collectively
"Insolvency Proceeding"), shall at Landlord's option constitute a breach of this
Lease by Tenant unless a petition in bankruptcy, or receiver attachment, or
other remedy pursued by a third party is discharged within sixty (60) days. Upon
the happening of any such event or at any time thereafter, this Lease shall
terminate five (5) days after written notice of termination from Landlord to
Tenant. In no event shall this Lease be assigned or assignable by operation of
law or by voluntary or involuntary bankruptcy proceedings or otherwise and in no
event shall this Lease or any rights or privileges hereunder be an asset of
Tenant under any bankruptcy, insolvency, reorganization or other debtor relief
proceedings.
19. DEFAULT.
(a) The failure to perform or honor any covenant, condition or
representation made under this Lease shall constitute a "default" hereunder by
Tenant upon expiration of the appropriate grace or cure period hereinafter
provided. Tenant shall have a period of three (3) days from the date of written
notice from Landlord (which notice shall be in lieu of and not in addition to
the notice required by Section 1161 of the California Code of Civil Procedure)
within which to cure any failure to pay Base Rent or Additional Charges;
provided, however, that Landlord shall not be required to provide such notice
more than four times during any two (2) year period during the Term with respect
to non-payment of Base Rent or Additional Charges, the fifth such non-payment
constituting default without requirement of notice. Tenant shall have a period
of thirty (30) days from the date of written notice from Landlord within which
to cure any other curable failure to perform any obligation under this Lease:
provided, however, that with respect to any curable failure to perform other
than the payment of Base Rent or Additional Charges that cannot reasonably be
cured within thirty (30) days, the cure period shall be extended if Tenant
commences to cure within thirty (30) days from Landlord's notice and continues
to prosecute diligently the curing thereof. Notwithstanding the foregoing, (i)
if a different cure
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period is specified elsewhere in this Lease or the Work Letter with respect to
any specific obligation of Tenant, such specific cure period shall apply with
respect to a failure of such obligation; and (ii) the foregoing cure rights
shall not extend the specified time for compliance with any required delivery,
approval or performance obligation of Tenant under the Work Letter. Upon a
default of this Lease by Tenant, Landlord shall have the following rights and
remedies in addition to any other rights or remedies available to Landlord at
law or in equity:
(1) The rights and remedies provided by California Civil Code,
Section 1951.2, including but not limited to, recovery of the worth at the time
of award of the amount by which the unpaid Base Rent and Additional Charges for
the balance of the Term after the time of award exceeds the amount of rental
loss for the same period that the Tenant proves could be reasonably avoided, as
computed pursuant to subsection (b) of said Section 1951.2;
(2) The rights and remedies provided by California Civil Code,
Section 1951.4, that allows Landlord to continue this Lease in effect and to
enforce all of its rights and remedies under this Lease, including the right to
recover Base Rent and Additional Charges as they become due, for so long as
Landlord does not terminate Tenant's right to possession; provided, however, if
Landlord elects to exercise its remedies described in this Paragraph 19(a)(ii)
and landlord does not terminate this Lease, and if Tenant requests Landlord's
consent to an assignment of this Lease or a sublease of the Premises at such
time as Tenant is in default, Landlord shall not unreasonably withhold its
consent to such assignment or sublease. Acts of maintenance or preservation,
efforts to relet the Premises or the appointment of a receiver upon Landlord's
initiative to protect its interest under this Lease shall not constitute a
termination of Tenant's rights to possession;
(3) The right to terminate this Lease by giving notice to
Tenant in accordance with applicable law;
(4) If Landlord elects to terminate this Lease, the right and
power to enter the Premises and remove therefrom all persons and property and,
to store such property in a public warehouse or elsewhere at the cost of and for
the account of Tenant, and to sell such property and apply such proceeds
therefrom pursuant to applicable California law.
(b) Landlord shall have a period of thirty (30) days from the date
of written notice from Tenant within which to cure any default by Landlord under
this Lease; provided, however, that with respect to any default that cannot
reasonably be cured within thirty (30) days, the default shall not be deemed to
be uncured if Landlord commences to cure within thirty (30) days from Tenant's
notice and continues to prosecute diligently the curing thereof. Tenant agrees
to give any Mortgagee, by registered or certified mail, a copy of any Notice of
Default served upon the Landlord, provided that prior to such notice Tenant has
been notified in writing, (by way of Notice of Assignment of Rents and Leases,
or otherwise) of the address of such Mortgagee. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
this Lease, then the Mortgagee shall have an additional thirty (30) days
(provided that Tenant notifies Mortgagee concurrently with Tenant's notice to
Landlord at the beginning of Landlord's thirty (30) day period; otherwise
Mortgagee shall have sixty days from the date on which it is noticed) within
which to cure such default or if such default cannot be cured within that time,
then the cure period shall be extended for such additional time as may be
necessary to cure such default shall be granted if within such applicable period
Mortgagee has commenced and continues to prosecute diligently the cure of such
default (including, but not limited to, commencement of foreclosure proceedings,
if necessary to effect such cure).
20. DAMAGE BY FIRE, ETC. If the Premises or the Building are damaged by
fire or other casualty. Landlord shall forthwith repair the same, provided that
such repairs can be made within two hundred seventy (270) days after the date of
such damage under the laws and regulations of the federal, state and local
governmental authorities having jurisdiction thereof. In such event, this Lease
shall remain in full force and effect except that Tenant shall be entitled to a
proportionate reduction of Base Rent and Additional Charges while such repairs
to be made hereunder by Landlord are being made. Such reduction of rent, if any,
shall be based upon the greater of (i) the proportion that the area of the
Premises rendered untenantable by such damage
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bears to the total area of the Premises; or (ii) the extent to which such damage
and the making of such repairs by Landlord shall interfere with the business
carried on by Tenant in the Premises, where clause (ii) is limited to the extent
of rental abatement insurance allowed by Landlord's casualty insurance policy.
Within twenty (20) days after the date of such damage, Landlord shall notify
Tenant of the approximate date by which Landlord believes that it can complete
the repair of such damage ("Estimated Damage Completion Date") (including such
dates for each floor of the Premises if the completion thereof will occur on
different dates) and the date by which Landlord would need to commence
construction ("Estimated Construction Commencement Date") in order to complete
repairs by the Estimated Damage Completion Date and Landlord's determination
thereof shall be binding on Tenant. If Landlord's Estimated Damage Completion
Date is more than two hundred seventy (270) days from the date of such damage,
Landlord shall have the option within thirty (30) days after the date of such
damage either to: (i) notify Tenant of Landlord's intention to repair such
damage and diligently prosecute such repairs, in which event (subject to
Tenant's right to terminate specified below) this Lease shall continue in full
force and effect and the Base Rent and Additional Charges shall be reduced as
provided herein; or (ii) notify Tenant of Landlord's election to terminate this
Lease as of a date specified in such notice, which date shall not be less than
thirty (30) days nor more than sixty (60) days after notice is given; provided,
however, in the event the damage giving rise to such right to terminate this
Lease by Landlord is the result of damage in only one of the two buildings in
the Project, Landlord's right to terminate this Lease shall only apply to the
portion of the Premises, if any, in such building, and in such event the Lease
shall remain in full force and effect with respect to the balance of the
Premises and the Base Rent and Tenant's Share shall be appropriately adjusted to
reflect the portion of the Premises, if any, with respect to which this Lease is
terminated. In the event that such notice to terminate is given by Landlord,
this Lease shall terminate on the date specified in such notice. In the event
that Landlord notifies Tenant that Landlord's Estimated Damage Completion Date
is more than two hundred seventy days (270) days following the date of the
damage, Tenant shall have a right to terminate the Lease in respect of all
floors of the Premises to which Landlord's notice applies ("Affected Premises
Portion") within fifteen (15) days following receipt of Landlord's notice, by
providing Landlord with written notice of its election to do so. In such event
(and also in the event Landlord terminates the lease pursuant to the immediately
preceding sentence), Tenant shall have no liability in respect of the portion of
the Premises with respect to which the Lease was terminated, for payment of the
deductible under Landlord's insurance relating to such damage. In case of
termination by either event, the Base Rent and Additional Charges shall be
reduced by a proportionate amount based upon the extent to which such damage
interfered with the business carried on by Tenant in the Premises, and Tenant
shall pay such reduced Base Rent and Additional Charges up to the date of
termination. Landlord agrees to refund to Tenant any Base Rent and Additional
Charges previously paid in respect of a portion of the Premises with respect to
which the Lease has terminated, for any period of time subsequent to such date
of such termination. In the event the Lease is terminated in respect of only a
portion of the Premises leaving the Lease in effect with respect to the balance
of the Premises the Base Rent and Tenant's Share shall be appropriately
adjusted. If, and to the extent, neither Landlord nor Tenant have terminated
this Lease pursuant to the provisions set forth above, and the construction of
the repairs has not commenced within ninety (90) days of the Estimated
Construction Commencement Date, Tenant shall have the additional right to
terminate this Lease in respect of the Affected Premises Portion during the
first five (5) business days of each calendar month following the end of such
period until such time as construction of the repairs has commenced, by notice
to Landlord (the "Damage Termination Notice"), effective as of a date set forth
in the Damage Termination Notice (the "Damage Termination Date"), which Damage
Termination Date shall be no earlier than thirty (30) days or later than sixty
(60) days following the date of such Damage Termination Notice. At any time,
from time to time, after the date occurring sixty (60) days after the date of
the damage, Tenant may request that Landlord inform Tenant of Landlord's
reasonable opinion of the date of completion of the repairs and Landlord shall
respond to such request in reasonable detail within five (5) business days
following receipt of such request. The repairs to be made hereunder by Landlord
shall not include, and Landlord shall not be required to repair, any damage by
fire or other cause to the property of Tenant or any repairs or replacements of
any paneling, decorations, railings, floor coverings or any alterations,
additions, fixtures or improvements installed on the Premises by or at the
expense of Tenant (excluding the initial Tenant Improvements constructed by
Landlord). Tenant hereby waives the provisions of Section 1932.2, and Section
1933.4, of the Civil Code of California. Notwithstanding anything contained
herein to the contrary, if a Major Casualty occurs with respect to any portion
of the Building, and the net insurance proceeds obtained as a result of such
casualty are ninety percent (90%) or a lesser percentage of the cost of
restoration, rebuilding or replacement, then Landlord shall not be obligated to
undertake such restoration, rebuilding or replacement
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unless Landlord elects to do so in writing. For the purpose of this Lease, a
"Major Casualty" shall mean a casualty that renders unusable twenty percent
(20%) or more of the Net Rentable Area of the Building or which materially
adversely affects the use of such Building.
21. EMINENT DOMAIN. If any part over 15% of the Premises shall be taken or
appropriated under the power of eminent domain or conveyed in lieu thereof,
Tenant shall have the right to terminate this Lease at its option. If any part
of the Building shall be taken or appropriated under power of eminent domain or
conveyed in lieu thereof and such taking is so extensive that it renders the
remaining portion of the Building unsuitable for the use being made of the
Building on the date immediately preceding such taking, Landlord may terminate
this Lease at its option. In either of such events, Landlord shall receive (and
Tenant shall assign to Landlord upon demand from Landlord) any income, rent,
award or any interest therein which may be paid in connection with the exercise
of such power of eminent domain, and Tenant shall have no claim against Landlord
for any part of sum paid by virtue of such proceedings, whether or not
attributable to the value of the unexpired term of this Lease except that Tenant
shall be entitled to petition the condemning authority for the following: (i)
the then unamortized cost of any Alterations or tenant improvements paid for by
Tenant from its own funds (as opposed to any allowance provided by Landlord);
(ii) the value of Tenant's trade fixtures; (iii) Tenant's relocation costs; (iv)
Tenant's goodwill, loss of business and business interruption; and (v) one-half
of the amount which is the lesser of (a) the bonus value of this lease, or (b)
the amount of the award in excess of the sum of amounts payable to Landlord's
ground lessor (if any) and any holder of a mortgage or other third party lien
encumbering Landlord's ground lease estate or fee simple ownership in the
Property. If a part of the Premises shall be so taken or appropriated or
conveyed and neither party hereto shall elect to terminate this Lease and the
Premises have been damaged as a consequence of such partial taking or
appropriation or conveyance, Landlord shall restore the Premises continuing
under this Lease at Landlord's cost and expense; provided, however, that
Landlord shall not be required to repair or restore any injury or damage to the
property of Tenant or to make any repairs or restoration of any Alterations
installed on the Premises by or at the expense of Tenant. Thereafter, the Base
Rent and Additional Charges to be paid under this Lease for the remainder of the
Term shall be proportionately reduced, such that thereafter the amounts to be
paid by Tenant shall be in the ratio that they are of the portion of the
Premises not so taken bears to the total area of the Premises prior to such
taking. Notwithstanding anything to the contrary contained in this Paragraph 21,
if the temporary use or occupancy of any part of the Premises shall be taken or
appropriated under power of eminent domain during the Term, this Lease shall be
and remain unaffected by such taking or appropriation and Tenant shall continue
to pay in full all Base Rent and Additional Charges payable hereunder by Tenant
during the Term; in the event of any such temporary appropriation or taking,
Tenant shall be entitled to receive that portion of any award which represents
compensation for the use of or occupancy of the Premises during the Term, and
Landlord shall be entitled to receive that portion of any award which represents
the cost of restoration of the Premises and the use and occupancy of the
Premises after the end of the Term. If such temporary taking is for a period
longer than two hundred and seventy (270) days and unreasonably interferes with
Tenant's use of the Premises or the Project Common Areas, then Tenant shall have
the right to terminate the Lease. Landlord and Tenant understand and agree that
the provisions of this Paragraph 21 are intended to govern fully the rights and
obligations of the parties in the event of a Taking of all or any portion of the
Premises. Accordingly, the parties each hereby waives any right to terminate
this Lease in whole or in part under Sections 1265.120 and 1265.130 of the
California Code of Civil Procedure or under any similar Law now or hereafter in
effect.
22. SALE BY LANDLORD. If Landlord sells or otherwise conveys its interest
in the Premises, Landlord shall be relieved of its obligations under the Lease
from and after the date of sale or conveyance (including the obligations of
Landlord under Paragraph 39), only when Landlord transfers any security deposit
of Tenant to its successor and the successor assumes in writing the obligations
to be performed by Landlord on and after the effective date of the transfer
(including the obligations of Landlord under Paragraph 39), whereupon Tenant
shall attorn to such successor.
23. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be
performed by Tenant under any of the terms of this Lease shall be performed by
Tenant at Tenant's sole cost and expense and without any abatement of Base Rent
or Additional Charges. If Tenant shall default in the payment of any sum of
money, other than Base Rent or Additional Charges, required to be paid by it
hereunder or shall fail to perform any other act on its part to be performed
hereunder, and such failure shall continue for the applicable
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cure period provided in Paragraph 19 (except in the event of emergency, when no
cure period shall be required), Landlord may, but shall not be obligated so to
do, and without waiving or releasing Tenant from any obligations of Tenant, make
any such payment or perform any such act on Tenant's part to be made or
performed as provided in this Lease. All sums so paid by Landlord and all
necessary incidental costs together with interest thereon at the Default Rate,
from the date of such payment by Landlord shall be payable as Additional Charges
to Landlord on demand.
24. SURRENDER OF PREMISES.
(a) At the end of the Term or any renewal thereof or other sooner
termination of this Lease, Tenant will peaceably deliver to Landlord possession
of the Premises, together with all improvements or additions upon or belonging
to Landlord, by whomsoever made, in the same condition as received, or first
installed, subject to the terms of Paragraphs 39 & 21 and the rights and
obligation of Tenant concerning casualty damage pursuant to Paragraph 20, damage
by fire, earthquake, Act of God, ordinary wear and tear, Hazardous Substances
(other than those for which Tenant is indemnifying Landlord pursuant to
Paragraph 39) or the elements alone excepted. Tenant may, upon the termination
of this Lease, remove all movable furniture and equipment belonging to Tenant,
at Tenant's sole cost, provided that Tenant repairs any damage caused by such
removal. Property not so removed shall be deemed abandoned by Tenant, and title
to the same shall thereupon pass to Landlord. Upon request by Landlord, and
unless otherwise agreed to in writing by Landlord, Tenant shall remove, at
Tenant's sole cost, any or all Alterations to the Premises installed by or at
the expense of Tenant and all movable furniture and equipment belonging to
Tenant which may be left by Tenant and repair any damage resulting from such
removal.
(b) The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation thereof, shall not work a merger, and shall, at the option
of Landlord, terminate all or any existing subleases or subtenancies, or may, at
the option of Landlord, operate as an assignment to it of any or all such
subleases or subtenancies.
25. WAIVER. If either Landlord or Tenant waives the performance of any
term, covenant or condition contained in this Lease, such waiver shall not be
deemed to be a waiver of any subsequent breach of the same or any other term,
covenant or condition contained herein. Furthermore, the acceptance of Base Rent
or Additional Charges by Landlord shall not constitute a waiver of any preceding
breach by Tenant of any term, covenant or condition of this Lease, regardless of
Landlord's knowledge of such preceding breach at the time Landlord accepted such
Base Rent or Additional Charges. Failure by Landlord to enforce any of the
terms, covenants or conditions of this Lease for any length of time shall not be
deemed to waive or to decrease the right of Landlord to insist thereafter upon
strict performance by Tenant. Waiver by Landlord of any term, covenant or
condition contained in this Lease may only be made by a written document signed
by Landlord.
26. NOTICES. Except as otherwise expressly provided in this Lease, any
bills, statements, notices, demands, requests or other communications given or
required to be given under this Lease shall be effective only if rendered or
given in writing, sent by certified mail, return receipt requested, reputable
overnight carrier, or delivered personally, (i) to Tenant (A) at Tenant's
address set forth in the Basic Lease Information, if sent prior to Tenant's
taking possession of the Premises. or (B) at the Premises if sent subsequent to
Tenant's taking possession of the Premises, or (C) at any place where Tenant may
be found if sent subsequent to Tenant's vacating, deserting, abandoning or
surrendering the Premises; or (ii) to Landlord at Landlord's address set forth
in the Basic Lease Information; or (iii) to such other address as either
Landlord or Tenant may designate as its new address for such purpose by notice
given to the other in accordance with the provisions of this Paragraph 26.
If and for so long as Oracle Corporation is a Guarantor of the obligations of
Tenant under this Lease any notice sent to Tenant shall be given to Oracle
Corporation in writing in the manner described above with respect to notices to
Tenant.
Any such bill, statement, notice, demand, request or other communication shall
be deemed to have been rendered or given on the date the return receipt
indicates delivery of or refusal of delivery if sent by certified
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mail, the day upon which recipient accepts and signs for delivery from a
reputable overnight carrier, or on the date a reputable overnight carrier
indicates refusal of delivery, or upon the date personal delivery is made. If
Tenant is notified in writing of the identity and address of any Mortgagee or
ground or underlying lessor, Tenant shall give to such Mortgagee or ground or
underlying lessor notice of any default by Landlord under the terms of this
Lease in writing sent by registered or certified mail, and such Mortgagee or
ground or underlying lessor shall be given the opportunity to cure such default
(as defined in Paragraph 19(b)) prior to Tenant exercising any remedy available
to it.
27. TAXES PAYABLE BY TENANT. At least ten (10) days prior to delinquency
Tenant shall pay all taxes levied or assessed upon Tenant's equipment,
furniture, fixtures and other personal property located in or about the
Premises. If the assessed value of Landlord's property is increased by the
inclusion therein of a value placed upon Tenant's equipment, furniture, fixtures
or other personal property, Tenant shall pay to Landlord, upon written demand,
the taxes so levied against Landlord, or the proportion thereof resulting from
said increase in assessment.
28. ABANDONMENT. Tenant shall not abandon the Premises and cease
performing its financial and maintenance obligations under this Lease at any
time during the Term, and if Tenant shall abandon and cease performing its
financial and maintenance obligations under this Lease, or surrender the
Premises or be dispossessed by process of law, or otherwise, any personal
property belonging to Tenant and left on the Premises shall, at the option of
Landlord, be deemed to be abandoned and title thereto shall thereupon pass to
Landlord. Notwithstanding anything to contrary contained herein, Tenant shall
not be allowed to vacate the Premises if such would result in a termination of
Landlord's insurance. Upon Tenant's request, Landlord will ask its insurer if
such vacation of the Premises would result in termination of its current
insurance policy. For purposes of this Paragraph 28, the Tenant shall not be
deemed to have abandoned the Premises solely because the Tenant is not occupying
the Premises.
29. SUCCESSORS AND ASSIGNS. Subject to the provisions of Paragraph 9, the
terms, covenants and conditions contained herein shall be binding upon and inure
to the benefit of the parties hereto and their respective legal and personal
representatives, successors and assigns.
30. ATTORNEY'S FEES. If Tenant or Landlord brings any action for any
relief against the other, declaratory or otherwise, arising out of this Lease,
including any suit by Landlord for the recovery of Base Rent or Additional
Charges or possession of the Premises, the losing party shall pay to the
prevailing party a reasonable sum for attorney's fees, which shall be deemed to
have accrued on the commencement of such action and shall be paid whether or not
the action is prosecuted to judgment.
31. LIGHT AND AIR. Tenant covenants and agrees that no diminution of
light, air or view by any structure which may hereafter be erected (whether or
not by Landlord) shall entitle Tenant to any reduction of rent under this Lease,
result in any liability of Landlord to Tenant, or in any other way affect this
Lease or Tenant's obligations hereunder.
32. SECURITY DEPOSIT.
(a) Letter of Credit. Concurrently with Tenant's execution of this
Lease, Guarantor shall deliver to Landlord its Guaranty of Tenant's obligations
hereunder. Such Guaranty provides for the termination of the Guaranty when
certain criteria have been met including the deposit with Landlord of a letter
of credit meeting the requirements of this Paragraph 32. Concurrently with
Landlord's written confirmation of termination of the Guaranty, Tenant shall
deliver to Landlord an unconditional, irrevocable, transferable letter of
credit, in an amount equal to the "Required Amount" (defined below) issued by a
financial institution acceptable to Landlord in the form attached hereto as
Exhibit "F", with an original term of no less than one year and automatic
extensions through the end of the Term of this Lease and sixty (60) days
thereafter (the "Letter of Credit"). Landlord shall not unreasonably withhold
its approval of such a financial institution if it is a national bank with
office in the San Francisco Bay Area (including an office allowing the Letter of
Credit to be presented to and paid by such office) with assets in excess of
twenty billion dollars. The term "Required Amount" shall mean a sum reasonably
determined by Landlord as of the date the Letter of Credit is delivered
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hereunder to be the amount of ten (10) months Base Rent plus Additional Charges.
Tenant shall keep the Letter of Credit, at its expense, in full force and effect
until the sixtieth (60th) day after the Expiration Date or other termination of
this Lease, to insure the faithful performance by Tenant of all of the
covenants, terms and conditions of this Lease, including, without limitation,
Tenant's obligations to repair, replace or maintain the Premises and Tenant's
obligations under the Work Letter; provided, however, at any time during the
term that Landlord holds cash as a security deposit hereunder in the amount of
the Letter of Credit, Tenant shall not be in default hereunder for failing to
maintain the Letter of Credit. Landlord shall be entitled to draw the full
amount of the Letter of Credit (i) at any time Tenant is in "default" (as
defined in Paragraph 19(a)), (ii) at any time an event has occurred which, with
the passage of time or giving of notice or both, would constitute a default,
where Landlord is prevented from, or delayed in, giving such notice because of
an Insolvency Proceeding or (iii) on or after thirty (30) days prior to the
expiration of the Letter of Credit. The Letter of Credit shall provide for full
payment to Landlord, upon presentation of the following to the issuer of the
Letter of Credit (x) a letter signed by an authorized agent of Landlord stating
that Landlord is entitled to draw the Letter of Credit and (y) the original
Letter of Credit. In the event of such payment to Landlord, Landlord shall hold
the funds so obtained as the security deposit required under this Lease. Any
unused portion of the funds so obtained by landlord shall be returned to Tenant
upon replacement of the Letter of Credit or deposit of cash security in the full
amount required as the face amount of the Letter of Credit hereunder. If
Landlord uses any portion of the Letter of Credit, or the cash security deposit
resulting from a draw on the Letter of Credit, to cure any default by Tenant
hereunder, Tenant shall replenish the security deposit to the original amount
within ten (10) days of notice from Landlord. Tenant's failure to do so shall
become be a material breach of this Lease. Landlord shall keep any cash security
funds separate from its general funds, and shall invest such cash security at
Tenant's reasonable direction, and any interest actually earned by Landlord on
such cash security shall be paid to Tenant quarterly. If an event of default
occurs under this Lease or the Work Letter (including, without limitation, any
default by Tenant with respect to its payment and performance obligations under
the Work Letter), or if Tenant is the subject of an Insolvency Proceeding,
Landlord may present its written demand for payment of the entire face amount of
the Letter of Credit and the funds so obtained shall become due and payable to
Landlord. Landlord may retain such funds to the extent required to compensate
Landlord for damages incurred, or to reimburse Landlord as provided herein, in
connection with any such default, and any remaining funds shall be held as a
cash security deposit. Without limiting the foregoing, in the event of a default
in Tenant's obligations to complete or pay for the Tenant Improvements in
accordance with the Work Letter, Landlord may use the security deposit to
complete and/or pay for the Tenant Improvements to the extent of Tenant's
obligations as contemplated by the Work Letter. Landlord shall be entitled to
assign the Letter of Credit and its rights thereto in connection with an
assignment of this Lease to its Lender as security for the obligations of
Landlord to such lender. Tenant shall cooperate with Landlord in connection with
any modifications of the Letter of Credit that may be reasonably requested in
connection with such assignment.
(b) Annual Reduction of Letter of Credit. Tenant shall be entitled
to reduce the Letter of Credit on the sixth through tenth anniversaries of the
Commencement Date in the amount of one-fifth (l/5th) of the initial balance, so
long as (i) Tenant is not in default (and no event has occurred which, with the
passage of time or giving of notice or both, would constitute a default) under
the Lease on such anniversary date, and (ii) Landlord has not delivered a notice
of Tenant's failure to perform any of its monetary obligations hereunder during
the previous six months, regardless of whether such failure was cured by Tenant
within any applicable grace or cure period; provided, however, that any such
notice of failure to perform relating to a non-monetary failure to perform which
was disputed, in good faith, by Tenant and ultimately determined (by agreement
of the parties, arbitration or judicial action) not to be a violation of this
Lease shall not be considered for purposes of determining whether such condition
has been met.
(c) Return of Letter of Credit. The Letter of Credit shall be
returned to Tenant if, at any time after the fifth anniversary of the
Commencement Date, Tenant (A) can establish to Landlord's reasonable
satisfaction that as of the end of any fiscal year of Tenant following the fifth
anniversary of the Commencement Date, Tenant has (i) had revenues for eight
consecutive quarters in excess of an annual rate of $75,000,000 "Revenue
Criteria", (ii) Market Capitalization of an average of $750,000,000 over the
proceeding twelve months, and (iii) cash and cash equivalents ("Cash Criteria")
(including up to twenty five percent (25%) of which may be comprised of the
amount Tenant would receive from a factor, without recourse, in respect of
current ninety day or less accounts receivables (which are not and shall not be
pledged or factored), certified to
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Landlord by an independent third party factor) in excess of Forty Million
Dollars ($40,000,000), all as determined in accordance with GAAP and as
reflected on certified, audited financial statements; and (b) is not in default
(and no event has occurred which, with the passage of time or giving of notice
or both, would constitute a default) under the Lease as of the date the Letter
of Credit is returned to Tenant. The term "Market Capitalization" shall mean the
average daily closing price of a class of Tenant's stock which is publicly
traded multiplied by the number of shares of Tenant's stock that is held by
shareholders who may freely trade such stock.
(d) Conversion of Deposit to Loan. Landlord and Tenant acknowledge
and agree that, if Tenant defaults under this Lease and Landlord elects to
pursue its remedies under California Civil Code Section 1951.2 or under this
Lease to terminate this Lease (any such event, a "Landlord Action"), (i)
Landlord will incur certain damages, costs and expenses, including, without
limitation, marketing costs, commissions, relocation costs, tenant improvement
costs (but limited to costs for improvements consistent with the level of finish
and build out of Tenant's Improvement), and carrying costs in connection with
releasing the Premises, in addition to the other damages, costs and expenses
Landlord may incur as a result of such default and/or other defaults under this
Lease (all of the foregoing collectively, "Default Damages"); (ii) Landlord has
no assurance of a source of funds to cover such Default Damages other than the
proceeds of the Letter of Credit (or cash collateral); and (iii) the proceeds of
the Letter of Credit (or cash collateral) should be available to Landlord to
apply to Default Damages, even if the amount thereof exceeds that amount to
which Landlord is ultimately determined to be entitled under this Lease and
pursuant to applicable law. Accordingly, at Landlord's sole election, Landlord
shall be entitled to draw the full amount of the Letter of Credit (or the full
amount of cash collateral shall be released to Landlord) which is then existing
(after any previous application of funds by Landlord and/or replenishment by
Tenant pursuant to Paragraph 32(a) above), simultaneously with commencement of a
Landlord Action or at any time thereafter. All proceeds thereof in excess of
amounts applied (pursuant to Paragraph 32(a)) to Default Damages incurred by
Landlord prior to commencement of the Landlord Action shall be deemed a loan
from Tenant to Landlord (the "Default Loan"). The Default Loan shall be
unsecured and shall not bear interest, and repayment thereof shall be limited to
the terms and conditions set forth in this paragraph. Any sums to which Landlord
from time to time becomes entitled hereunder and pursuant to law as a result of
Tenant's default and any previous defaults of the Lease, to which the Letter of
Credit (or cash collateral) has not previously been applied pursuant to
Paragraph 32(a), shall be offset against the principal balance of the Loan. The
amount of the Default Loan remaining, if any, after such offset shall be
referred to herein as the "Excess Amount". The Excess Amount shall be payable by
Landlord to Tenant from, and only from, first any proceeds from the Letter of
Credit (or cash collateral) which have not been applied to Default Damages
incurred by Landlord after the same are finally determined (the "Remaining
Proceeds"), and then Excess Rent. The Remaining Proceeds shall be paid by
Landlord to Tenant promptly upon final determination after the entire Premises
are leased to a third party or parties. If Tenant disputes the amount of
Remaining Proceeds paid by Landlord, Tenant may submit such dispute to
arbitration in accordance with Paragraph 40 [Arbitration of Disputes] of this
Lease. "Excess Rent" shall mean the amount by which (x) rent received by
Landlord (from the tenant or tenants leasing all or any portion of the Premises
after Tenant's default) in any month exceeds (y) the amount of rent that would
have been payable under this Lease for such month if this Lease had not been
terminated. Landlord shall pay Tenant one-half of the Excess Rent until the
earlier of (A) the date the Excess Amount is fully repaid or (B) the date that
would have been the Expiration Date (excluding any Renewal Term) of this Lease.
Any remaining balance of the Default Loan on such date shall be deemed forgiven.
If the Default Loan is insufficient to cover all Default Damages, Tenant shall
pay Landlord any such shortfall immediately upon demand by Landlord, and
Landlord shall have all rights and remedies available at law or elsewhere in the
Lease with respect to such shortfall.
33. CORPORATE AUTHORITY; FINANCIAL INFORMATION. If Tenant signs as a
corporation each of the persons executing this Lease on behalf of Tenant does
hereby covenant and warrant that Tenant is a duly authorized and existing
corporation, that Tenant has and is qualified to do business in California, that
the corporation has full right and authority to enter into this Lease, and that
each and both of the persons signing on behalf of the corporation were
authorized to do so. Upon Landlord's request, Tenant shall provide Landlord with
evidence reasonably satisfactory to Landlord confirming the foregoing covenants
and warranties. Tenant hereby further covenants and warrants to Landlord that
all financial information and other descriptive information regarding Tenant's
business, which has been or shall be furnished to Landlord, is to
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Tenant's best knowledge accurate and complete at the time of delivery to
Landlord.
34. PARKING. Tenant shall have the right to use the Building's parking
spaces in common with other tenants or occupants of the Building, if any,
subject to the Encumbrances and the rules and regulations of Landlord for such
parking facilities which may be established or altered by Landlord at any time
or from time to time during the term. Landlord represents and warrants to Tenant
that the number of parking spaces initially constructed by Landlord in
connection with the Project shall be equal to or greater than the minimum number
required by the City of San Carlos and that Landlord will not thereafter
voluntarily reduce the number of parking spaces available to the Project below
such minimum number except as may be required by law or in connection with
condemnation. Landlord shall not voluntarily agree to an amendment or
modification or waiver of provisions of the CC&Rs in a manner that reduces or
impairs the parking available to the Project except as may be required by law or
in connection with condemnation. Tenant acknowledges that the parking structure
is not scheduled to be completed by the Scheduled Commencement Date. Neither
Tenant nor any of its employees, visitors or invitees shall have an obligation
to pay for parking in the parking structure or otherwise on the Project.
Landlord will operate a valet parking service from 8:30 a.m. to 5:30 p.m. Monday
through Friday excluding holidays from the date Tenant first takes possession of
the Initial Premises (for the operation of its business) through the date the
parking structure is completed and available for use.
35. MISCELLANEOUS.
(a) The term "Premises" wherever it appears herein includes and
shall be deemed or taken to include (except where such meaning would be clearly
repugnant to the context) the office space demised and improvements now or at
any time hereafter comprising or built in the space hereby demised. The
paragraph headings herein are for convenience of reference and shall in no way
define, increase, limit or describe the scope or intent of any provision of this
Lease. The term "Landlord" shall include Landlord and its successors and
assigns. In any ease where this Lease is signed by more than one person, the
obligations hereunder shall be joint and several. The term "Tenant" or any
pronoun used in place thereof shall indicate and include the masculine or
feminine, the singular or plural number, individuals, firms or corporations, and
their and each of their respective successors, executors, administrators, and
permitted assigns, according to the context hereof.
(b) Time is of the essence of this Lease and all of its provisions.
This Lease shall in all respects be governed by the laws of the State of
California. This Lease, together with its exhibits, contains all the agreements
of the parties hereto and supersedes any previous negotiations. There have been
no representations made by the Landlord or understandings made between the
parties other than those set forth in this Lease and its exhibits. This Lease
may not be modified except by a written instrument by the parties hereto.
(c) If for any reason whatsoever any of the provisions hereof shall
be unenforceable or ineffective, all of the other provisions shall be and remain
in full force and effect.
(d) Upon Tenant paying the Base Rent and Additional Charges and
performing all of Tenant's obligations under this Lease, Tenant may peacefully
and quietly enjoy the Premises during the Term as against all persons or
entities lawfully claiming by or through Landlord; subject, however, to the
provisions of this Lease.
36. TENANT'S REMEDIES. If any default hereunder by Landlord is not cured
within the applicable cure period provided in Subparagraph 19(b), Tenant's
exclusive remedies shall be an action for specific performance or action for
actual damages. Tenant hereby waives the benefit of any laws granting it (A) the
right to perform Landlord's obligation, or (B) the right to terminate this Lease
or withhold Rent on account of any Landlord default. Tenant shall look solely to
Landlord's interest in the Project for the recovery of any judgment from
Landlord. Landlord, or if Landlord is a partnership, its partners whether
general or limited, or if Landlord is a corporation, its directors, officers or
shareholders, shall never be personally liable for any such judgment. Any lien
obtained to enforce such judgment and any levy of execution thereon shall be
subject and subordinate to any mortgage or deed of trust (excluding any mortgage
or deed of trust which was created as part of an effort to defraud creditors,
i.e., a fraudulent conveyance); provided, however that any such judgement
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and any such levy of execution thereon shall not be subject or subordinated to
any mortgage or deed of trust that shall have been created or recorded in the
official records of Santa Clara County after the date of the judgement giving
rise to such lien. Landlord's interest in the Project shall include any
insurance proceeds received by Landlord which are not controlled by Landlord's
lender and any proceeds of the Security Deposit under this Lease that are then
held by Landlord.
37. REAL ESTATE BROKERS. Each party represents that it has not had
dealings with any real estate broker, finder or other person with respect to
this Lease in any manner, except for any broker named in the Basic Lease
Information, whose fees or commission, if earned, shall be paid as provided in
the Basic Lease Information. Each party shall hold harmless the other party from
all damages resulting from any claims that may be asserted against the other
party by any other broker, finder or other person with whom the other party has
or purportedly has dealt.
38. LEASE EFFECTIVE DATE. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for lease,
and it is not effective as a lease or otherwise until execution and delivery by
both Landlord and Tenant.
39. HAZARDOUS SUBSTANCE LIABILITY. Tenant has received from Landlord a
copy of the following reports (the "Environmental Reports"); "Phase I and II
Environmental Assessment Report, Circle Star Theater Property, 1717 Industrial
Way, San Carlos, California, January 31, 1997" prepared by McLaren/Hart
Environmental Engineering Corporation. Except as noted in the Environmental
Reports, Landlord represents and warrants that to the best of its knowledge, the
Premises and Project are presently free of asbestos, toxic waste, underground
storage tanks and other Hazardous Substances in amounts exceeding legally
established maximum thresholds. Additionally, except as noted in the
Environmental Reports, Landlord represents that it has received no written
notice of any violation or claimed violation with respect to the presence of
toxic or Hazardous Substances on, in or under the Project or of any pending or
contemplated investigation or other action relating thereto.
(a) Definition of Hazardous Substances. For the purpose of this
Lease, "Hazardous Substances" shall be defined, collectively, as oil, flammable
explosives, asbestos, radioactive materials, hazardous wastes, toxic or
contaminated substances or similar materials, including, without limitation, any
substances which are "hazardous substances," "hazardous wastes," "hazardous
materials" or "toxic substances" under applicable environmental laws, ordinance
or regulation.
(b) Tenant Indemnity. Tenant releases Landlord from any liability
for, waives all claims against Landlord and shall indemnify, defend and hold
harmless Landlord, its employees, partners, agents, subsidiaries and affiliate
organizations against any and all claims, suits, loss, costs (including costs of
investigation, clean up, monitoring, restoration and reasonably attorney fees),
damage or liability, whether foreseeable or unforeseeable, by reason of property
damage (including diminution in the value of the property of Landlord), personal
injury or death directly arising from or related to Hazardous Substances
released, manufactured, discharged, disposed, used or stored on, in, or under
the Property or Premises during the initial Term and any extensions of this
Lease by Tenant or its employees, agents, sublessees, assignees or contractors.
The provisions of this Tenant Indemnity regarding Hazardous Substances shall
survive the termination of the Lease.
(e) Landlord Indemnity. Landlord releases Tenant from any liability
for, waives all claims against Tenant and shall indemnify, defend and hold
harmless Tenant, its officers, employees, and agents to the extent of Landlord's
interest in the Project, against any and all actions by any governmental agency
for clean up of Hazardous Substances on or under the Property, including costs
of legal proceedings, investigation, clean up, monitoring, and restoration,
including reasonable attorney fees, if, and to the extent, arising from the
presence of Hazardous Substances on, in or under the Property or Premises,
except to the extent caused by the release, disposal, use or storage of
Hazardous Substances in, on or about the Premises by Tenant, its employees,
agents, sublessees, assignees, or contractors. The provisions of this Landlord
Indemnity regarding Hazardous Substances shall survive the termination of the
Lease.
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Tenant has informed Landlord, that except for very immaterial amounts of toxic
materials incidental to its office use (e.g. copier toner). Tenant will not use
and Hazardous Substances in material amounts within the Building and shall
comply with any applicable laws to the extent that it does,
40. ARBITRATION OF DISPUTES.
ANY CONTROVERSY OR CLAIM ARISING OUT OF THIS LEASE OR A BREACH OF
THIS LEASE SOLELY BETWEEN LANDLORD AND TENANT RELATING TO A MONETARY DEFAULT IN
AN AMOUNT OF LESS THAN TWENTY-FIVE THOUSAND DOLLARS ($25,000), BUT NOT INCLUDING
A DEFAULT WITH RESPECT TO THE TIMELY PAYMENT OF BASE RENT AND ADDITIONAL
CHARGES, SHALL BE SETTLED BY ARBITRATION BEFORE THE JUDICIAL ARBITRATION
MEDIATION SERVICE (JAMS) IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION, AND JUDGMENT ON THE AWARD RENDERED BY THE ARBITRATOR(S)
MAY BE ENTERED IN ANY COURT HAVING JURISDICTION.
NOTICE: BY INITIALLY IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU
ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A
COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY
INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO
THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT
DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION.
Consent to neutral arbitration by: /s/ [ILLEGIBLE] (Landlord):
/s/ [ILLEGIBLE] (Tenant).
41. SIGNAGE. Tenant shall be allowed to use a proportional share (based on
square footage) of the main lobby directory and the monument sign located at the
Project's entry off of Industrial Road, as well as building standard signage at
the lobby on Tenant's floor as well as Tenant's main entry door. In addition
Tenant shall be entitled to one sign each on the northeast (ie. the glass
curtain wall adjacent to the Highway 101 freeway frontage) and northwest (ie.
the pre-cast concrete panel visible from the southbound lanes of Highway 101)
sides of the Building, such signs (in the aggregate) to comprise no more than
one half of the square footage of such exterior building surface signage allowed
in respect of the Project by the City of San Carlos. Such signage shall be in
conformity with standards provided by Landlord, and subject to approval by
Landlord. All signage shall be at Tenant's expense. Landlord shall work with
Tenant to obtain approval of the applicable governmental authorities for
construction of (i) signage on top of the Building and (ii) monument signage at
the main entry to the Project. Such signage shall be subject to the reasonable
approval of Landlord as well as all applicable governmental authorities.
42. OPTION TO RENEW. Upon condition that (i) no event of default is
continuing under this Lease at the time of exercise or at the commencement of
the option term, and (ii) Tenant or its affiliate continues to physically occupy
at least fifty percent (50%) of the Premises, then Tenant shall have the right
to extend the Term for one (1) period of six (6) years ("Extension Term(s)")
following the initial Expiration Date, by giving written notice ("Exercise
Notice") to Landlord at least eighteen (18) months prior to the Expiration of
the Term.
43. RENT DURING EXTENSION TERM. The Monthly Base Rent during the six (6)
year Extension Term shall be the greater of the average Monthly Base Rent
{excluding adjustments pursuant to Paragraph 3(b)(i)) paid during the initial
Term or the Fair Market Rental Value for the Premises as of the
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commencement of the option term, as determined below:
(a) Within thirty (30) days after receipt of Tenant's Exercise
Notice, Landlord shall notify Tenant of Landlord's estimate of the Fair Market
Rental Value for the Premises, as determined below, for determining Monthly Base
Rent during the ensuing Extension Term; provided, however, if Tenant's Exercise
Notice is given more than eighteen (18) months before the Expiration Date,
Landlord's estimate of Fair Market Rental Value may, but need not be given more
than eighteen (18) months before the Expiration Date. Within fifteen (15) days
after receipt of such notice from Landlord, Tenant shall notify Landlord in
writing that it (i) agrees with such rental rate or (it) disagrees with such
rental rate. No response shall constitute agreement. In the event that Tenant
disagrees with Landlord's estimate of Fair Market Rental Value for the Premises,
then the parties shall meet and endeavor to agree within fifteen (15) days after
Landlord receives Tenant's notice described in the immediately preceding
sentence. If the parties cannot agree upon the Fair Market Rental Value within
said fifteen (15) day period, then the parties shall submit the matter to
binding appraisal in accordance with the following procedure except that in any
event neither party shall be obligated to start such procedure sooner than
eighteen (18) months before the expiration of the Lease Term. Within fifteen
(15) days of the conclusion of the period during which the two parties fail to
agree (but not sooner than eighteen (18) months before the expiration of the
Lease Term), the parties shall either (i) jointly appoint an appraiser for this
purpose or (ii) failing this joint action, each separately designate a
disinterested appraiser. No person shall be appointed or designated an appraiser
unless such person has at least five (5) years experience in appraising major
commercial property in San Mateo County and is a member of a recognized society
of real estate appraisers. If within thirty (30) days after the appointment, the
two appraisers reach agreement on the Fair Market Rental Value for the Premises,
that value shall be binding and conclusive upon the parties. If the two
appraisers thus appointed cannot reach agreement on the Fair Market Rental Value
for the Premises within thirty (30) days after their appointment, then the
appraisers thus appointed shall appoint a third disinterested appraiser having
like qualifications within five (5) days. If within thirty (30) days after the
appointment of the third appraiser a majority of the appraisers agree on the
Fair Market Rental Value of the Premises, that value shall be binding. and
conclusive upon the parties. If within thirty (30) days after the appointment of
the third appraiser a majority of the appraisers cannot reach agreement on the
Fair Market Rental Value for the Premises, then the three appraisers shall each
simultaneously submit their independent appraisal to the parties, the appraisal
farthest from the median of the three appraisals shall be disregarded, and the
mean average of the remaining two appraisals shall be deemed to be the Fair
Market Rental Value for the Premises and shall be binding and conclusive upon
the parties. Each party shall pay the fees and expenses of the appraiser
appointed by it and shall share equally the fees and expenses of the third
appraiser. If the two appraisers appointed by the parties cannot agree on the
appointment of the third appraiser, they or either of them shall give notice of
such failure to agree to the parties and if the parties fail to agree upon the
selection of such third appraiser within ten (10) days after the appraisers
appointed by the parties give such notice, then either of the parties, upon
notice to the other party, may request such appointment by the American
Arbitration Association or, on it failure, refusal or inability to act, may
apply for such appointment to the presiding judge of the Superior Court of San
Mateo County, California.
(b) Wherever used throughout this Paragraph (Rent during Extension
Term) the term "Fair Market Rental Value" shall mean the fair market rental
value of the Premises, using as a guide the rate of monthly base rent which
would be charged during the Extension Term (including periodic increases during
the Extension Term, if any) in the Mid-Peninsula area for comparable high image,
Class A office space in comparable condition, of comparable quality, as of the
time that the Extension Term commences, with appropriate adjustments regarding
taxes, insurance and operating expenses as necessary to insure comparability to
this Lease, as the case may be, and also taking into consideration amount and
type of parking, location, leasehold improvements, proposed term of lease,
amount of space leased, extent of service provided or to be provided, and any
other relevant terms or conditions (including consideration of whether or not
the monthly base rent is fixed).
(c) In the event of a failure, refusal or inability of any appraiser
to act, his successor shall be appointed by the party who originally appointed
him, but in the case of the third appraiser, his successor shall be appointed in
the same manner as provided for appointment of the third appraiser.
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(d) The appraisers shall render their appraisals in writing with
counterpart copies to Landlord and Tenant. The appraisers shall have no power to
modify the provisions of this Lease.
(e) To the extent that binding appraisal has not been completed
prior to the expiration of any preceding period for which Monthly Base Rent has
been determined, Tenant shall pay Monthly Base Rent at the rate estimated by
Landlord, with an adjustment to be made once Fair Market Rental Value is
ultimately determined by binding appraisal.
(f) From and after the commencement of the Extension Term, all of
the other terms, covenants and conditions of the Lease shall also apply;
provided, however, that Tenant shall have no further rights to extend the Term.
44. SATELLITE ANTENNA. During the Term, Tenant shall have the
non-exclusive right, subject to relevant regulatory approvals, availability of
space within the roofscreen and Landlord's consent, such consent not to be
unreasonably withheld or delayed, to install a satellite antenna ("Antenna")
within the roofscreen on the roof of the Building in a location satisfactory to
both Landlord and Tenant. Without otherwise limiting the criteria upon which
Landlord may withhold its consent to any proposed Antenna, if Landlord withholds
its consent due to concerns regarding the appearance of the Antenna or the
impact on structural aspects of the Building, such withholding of consent shall
be presumptively reasonable. Tenant shall not be charged any rent for roof
space. Prior to submitting any plans to the City of San Carlos or proceeding
with any installation of an Antenna, Tenant shall submit to Landlord elevations
and specifications for the Antenna. Tenant shall install any approved Antenna at
its sole expense and shall be responsible for any damage caused by the
installation of the Antenna or related to the Antenna. At the end of the Term,
Tenant shall remove the Antenna from its location and repair any damage caused
by such removal.
45. SECOND BUILDING.
(a) Prior to September 1, 1999, for so long as Tenant is not in
default hereunder, Landlord shall not execute a letter of intent or Lease with
another tenant for any portion of the Second Building. The term "Second
Building" shall mean the improvements proposed to be built by Landlord as part
of the Project and more fully described on Exhibit "G"; the Second Building is
commonly known as One Circle Star Way. From and after September 1, 1999 through
October 31, 2000, Tenant shall have the rights described in this Paragraph
("First Right of Offer") to lease the First Right Space (defined below). During
the period of time commencing on September 1, 1999, Landlord shall be free to
negotiate and enter into letters of intent or leases with other parties for all
or any portion of the First Right Space, provided that Landlord shall provide
Tenant with a written "Offer Notice" if Landlord believes that a letter of
intent that it receives from, or submits to, another party is likely to result
in a letter of intent acceptable to Landlord. If such letter of intent is for
the lease of less than the entire Second Building, the Offer Notice will
indicate which portion of the First Right Space the letter of intent covers.
Tenant shall have seven (7) business days (ending at 5:00 p.m. on such seventh
business day) after receipt of the Offer Notice ("Offer Notice Deadline") to
deliver to Landlord the Tenant's Election Notice electing to lease the space
described in the Offer Notice on the terms and conditions set forth in Paragraph
45(c). If Tenant does not deliver to Landlord its Tenant Election Notice within
such seven (7) business day period, Landlord shall be entitled to complete the
transaction with the party with whom Landlord is negotiating or, within one
hundred twenty (120) days following the Offer Notice Deadline, with any other
tenant for the space described in the Offer Notice. The "Tenant Election Notice"
a letter notifying Landlord of Tenant's unconditional election to exercise its
option to lease the space described in the Offer Notice executed by Tenant. To
be effective, the Tenant's Election Notice must contain the following additional
paragraph and be signed by an Authorized Officer of Oracle Corporation:
Oracle Corporation, as Guarantor of the obligations of the
Tenant under that certain Lease dated April __, 1999 by and
between Circle Star Center Associates, L.P. as Landlord and
Network Computer, Inc. as Tenant, hereby agrees that the
additional obligations of Network Computer, Inc. associated
with the foregoing election to lease additional
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space from Landlord is approved by Oracle Corporation pursuant
to Oracle Corporation's guaranty of the obligations of Network
Computer, Inc. under such Lease.
Oracle Corporation
By: ______________
Its: _____________
An "Authorized Officer" shall mean the President or any Executive
Vice-President, Vice-President or Assistant Vice-President, Treasurer or
Assistant Treasurer of Oracle Corporation. In order for the Tenant Election
Notice to be effective, it must be accompanied by an incumbency certificate
signed by the Secretary or Assistant Secretary of Oracle Corporation certifying
that the person signing the Tenant's Election Notice on behalf of Oracle
Corporation is a corporate officer of Oracle Corporation holding one of the
offices specified above. Unless Tenant's Election Notice meets all of the
foregoing requirements and is delivered to Landlord within the seven (7)
business day period specified above, such document shall be ineffective and may
be disregarded by Landlord.
(b) Notwithstanding anything to the contrary herein, Tenant's rights
under this Paragraph 45 shall not apply to the third or fourth floor of the
Second Building in the event that Landlord elects to lease such space to
Centraal Corporation (or its Affiliates). In the event that Centraal Corporation
(or it Affiliates) leases both the third and fourth floors of the Second
Building, then Centraal Corporation (and its Affiliates) shall be required to
vacate the second floor of the Building and the Second Floor of the Building
shall be subject to Tenant's First Right of Offer under the terms and
conditions of this Paragraph 45; provided, however, there shall be no Tenant
Improvement Allowance for the second floor of the Building except such amount as
is required to a ceiling grid with ceiling tiles and install lighting and HVAC
ducting consistent with the initial space leased by Tenant in the Building, but
in no event shall such Tenant Improvement Allowance exceed $7 per rentable
square feet of space located on the second floor of the Building. The term
"First Right Space" shall mean the Second Building (subject to the right of
Landlord to lease portions thereof to Centraal Corporation (or its Affiliates)
in accordance with the foregoing) and the second floor of the Building if, and
when, Centraal Corporation leases both the third and fourth floors of the Second
Building.
(c) Terms of Lease of First Right Space.
(1) Rent. The Base Rent for the First Right Space leased by
Tenant pursuant to this Paragraph 45 shall be based on a Rentable Area of the
Second Building and 25,179 square feet for the second floor of the Building.
Landlord's architect shall determine the Rentable Area of the Second Building
and each floor thereof, and shall certify such Rentable Area in writing to
Landlord and Tenant. The computations called for in the prior two sentences to
be made by Landlord's architect shall be carried out in a manner consistent with
the computations for the Building and so that the total Rentable Square Feet for
all of the floors of the Second Building shall be the sum of the aggregate
Rentable Area of the Building. The initial Base Rent for each First Right Space
shall be the Monthly Base Rent specified on the Basic Lease information subject
to the adjustment pursuant to Paragraph 3(b)(i) for the Additional Allowance
applicable to the First Right Space but at a rate and for the period described
in Paragraph 45(c)(2) below.
(2) Rent Commencement and Expiration Date. If Tenant elects to
lease all or part of the First Right Space pursuant to this Paragraph 45, the
date Rent shall commence for each First Right Space (the "First Right Space Rent
Commencement Date") shall be a date which is the sum of (i) the number of weeks
of Tenant's Plan Approval Period (defined below) plus (ii) Landlord's
Construction Period (defined below), following the date of Tenant's notice
pursuant to Paragraph 45(a), as extended by the number of days in excess of
three (3) business days that it takes Landlord to review and comment upon any
plans submitted by Tenant to Landlord pursuant to the
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Work Letter. The term "Tenant's Plan Approval Period" shall mean forty-two (42)
days. The term "Landlord's Construction Period" shall mean the following time
periods depending upon the number of floors that the First Right Space
comprises:
Number of Floors Landlord's Construction Period
---------------- ------------------------------
1 6 Weeks
2 8 Weeks
3 10 Weeks
The above described Landlord's Construction Periods are estimates of the time
period between the date Tenant has completed Tenant's Plans and obtained
Landlord's approval and processed building permits in respect of the Tenant's
Improvements for the First Right Space, on the one hand, and the date Landlord
achieves Substantial Completion of the Tenant Improvements (excluding any Tenant
Delay), on the other hand. The Rent payable by Tenant in respect of any First
Right Space shall be abated for the number of days, if any, that it takes
Landlord to achieve Substantial Completion in excess of the applicable
Landlord's Construction Period (as reasonably increased if Tenant's proposed
improvements are of a character as will require a longer construction period
than the character of the improvements to be constructed in respect of the
Initial Premises), excluding from such period, Tenant Delays.
Landlord and Tenant acknowledge that until the Tenant Improvements in respect of
any First Right Space are completed it will not be possible to compute the
adjustment to Monthly Base Rent attributable to the Additional Allowance.
Accordingly, Landlord and Tenant agree that upon Substantial Completion of such
Tenant Improvements, Landlord shall deliver written notice to Tenant of its
calculation of the adjustment to Monthly Base Rent in respect of the Additional
Allowance. The Monthly Base Rent shall be increased by an amount equal to the
sum determined by amortizing the amount of the Additional Allowance on a
straight line basis at 9% per annum over the period from the date of such
Substantial Completion through a date ten (10) years following the applicable
First Right Space Rent Commencement Date ("Amortization Ending Date").
There shall be no Outside Delivery Date in respect of any First Right Space.
(3) Lease Terms. If Tenant leases any First Right Space
pursuant to this Paragraph 45, in addition to the terms set forth in clauses (1)
and (2) above, this Lease shall automatically be modified to provide as follows:
(A) Both the Initial Premises and the First Right Space
shall be part of the "Premises" under this Lease, such that the term "Premises"
as used in this Lease shall refer collectively to both the Initial Premises and
the First Right Space;
(B) Tenant's Share of Real Estate Taxes and Expenses
shall be adjusted to reflect the increased Rentable Area of the Premises, based
on the ratio of the Rentable Area of the collective Premises to the total
Rentable Area of the Project;
(C) Tenant's right to terminate this Lease pursuant to
Paragraph 2(e) shall be modified by extending the effective date of such
termination to the eighth anniversary of the last First Right Space Rent
Commencement Date (with a corresponding adjustment to the date by which notice
of the exercise of such termination option must be given by Tenant) and such
right to terminate shall apply only to all (and not less than all) of the
portion of the Initial Premises and shall not be applicable to any First Right
Space;
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(D) Tenant's lease of the First Right Space shall be on
the same terms and conditions as in effect for the Premises from time to time,
except as expressly provided in this Paragraph 45;
(E) The Expiration Date applicable to the Initial
Premises and the First Right Space shall be the date which is ten (10) years
following the last First Right Space Rent Commencement Date. The Base Rent in
respect of any portion of the Initial Premises for the period of the initial
Term (excluding any extension of the Term pursuant to Paragraph 42) in excess of
ten (10) years shall be adjusted by reducing the Base Rent for such excess
period by the amount of the adjustment for the Additional Allowance provided for
in Paragraph 3(b)(i) in respect of the Initial Premises. The Base Rent in
respect of any First Right Space for the period of the initial Term (excluding
any extension of the Term pursuant to Paragraph 42) beyond the Amortization
Ending Date in respect of such First Right Space shall be adjusted by reducing
the Base Rent for such excess period by the amount of the adjustment for the
Additional Allowance provided for in Paragraph 45(c)(2);
(F) All references to percentage of destruction or
taking in Paragraph 20 [Damage by Fire, Etc.] and Paragraph 21 [Eminent Domain]
shall be deemed to mean each of the Building and Second Building separately;
(G) Landlord shall provide the same Base Building
Improvements as provided for the Building (and conduit between the Building and
the Second Building and a covered walk way from the side of the Second Building
nearest the parking garage to the parking garage, subject to receiving all
necessary applicable approvals, which Landlord will use its best efforts to
obtain) together with a Tenant Improvement Allowance (increased by 3 % on each
anniversary of the Commencement Date for the Initial Premises that occurs prior
to the Effective Date of Tenant's written exercise of its right to lease the
First Right Space pursuant to this Paragraph 45) and Additional Allowance in the
same amounts per Rentable Square Foot as shown in the Basic Lease Information
with respect to the initial Premises (except as provided in Paragraph
45(b) above;
(H) The Required Amount of the letter of credit required
pursuant to Paragraph 32(a) and the "Market Capitalization", "Revenue Criteria"
and "Cash Criteria" requirements for the return of the letter of credit pursuant
to Paragraph 32(c) shall be adjusted to the following amounts based upon the
number of additional floors leased by Tenant pursuant to this Paragraph 45 ("M"
means million and "B" means billion):
Additional Number of
Additional Months of Base Rent Market Revenue Cash
Floors plus Additional Charges Capitalization Criteria Criteria
------ ----------------------- -------------- -------- --------
1 12 $850M $100M $65M
2 13 $950M $100M $75M
3 14 $1.1B $125M $85M
4 15 $1.25B $150M $95M
The parties shall execute a written confirmation of the addition of the Second
Building and the foregoing terms and conditions within thirty (30) days after
either party's request, provided that failure to execute such confirmation shall
not affect the automatic modification of the Lease as provided in this Paragraph
45(c).
(1) In the event Tenant leases two floors in the Second
Building, Tenant shall be entitled to one sign on the Second Building similar to
the two signs on the Building to
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which Tenant is entitled pursuant to Paragraph 41, subject to the terms,
conditions and limitations thereof.
(d) No Brokers. Neither party has had any contact or dealings
regarding the Second Building through any licensed real estate broker or other
person who may claim a right to a commission or finder's fee as a procuring
cause of any lease that might be entered into with respect to the Second
Building as contemplated by this Paragraph 45 or otherwise, except for the
broker named in the Basic Lease Information, whose fees or commission, if
earned, shall be paid by Landlord in accordance with a separate agreement with
Landlord. If any other broker or finder makes a claim for a commission or
finder's fee based upon any such contact, dealings, or communications, the party
through whom the broker or finder makes his claim shall be responsible for such
commission or fee, and all costs and expenses (including reasonable attorneys'
fees) incurred by the other party in defending against such claim.
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IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
date first above written.
LANDLORD:
CIRCLE STAR CENTER ASSOCIATES, L.P.
a California limited partnership
By: M-D Ventures, Inc.
Its: General Partner
By: /s/ Steve Dostart
-----------------------------------
Steve Dostart
Its: Vice President
TENANT:
NETWORK COMPUTER, INC.
A Delaware corporation
By: /s/ Mitchell Kertzman
------------------------------------
Mitchell Kertzman
Its: CEO & President
By: /s/ Nancy J. Hilker
------------------------------------
Nancy J. Hilker
Its: Vice President & Chief Financial
Officer
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1st Floor
[FLOOR PLAN OMITTED]
Exhibit "A"
Page 1 of 2
<PAGE>
3rd/ 4th Floor
[FLOOR PLAN OMITTED]
Exhibit "A"
Page 2 of 2
<PAGE>
EXHIBIT "B"
- --------------------------------------------------------------------------------
WORK LETTER
1. Base Building: Landlord shall furnish and install the office building,
as defined in the plans listed in the attached Exhibit B-l, "Landlord's Plans,"
at Landlord's expense ("Base Building").
2. Tenant's Plans: Landlord approves Tenant's use of the architectural
firm known as Ehrlich-Rominger ("Tenant's Architect"). On or before April 1,
1999 Tenant shall submit preliminary plans and specifications including
specifications for finishes for Tenant's proposed tenant improvements
("Preliminary Plans"). Landlord shall have three (3) business days to review and
comment upon, or approve, Tenant's Preliminary Plans, and Landlord's approval
shall not be reasonably withheld or delayed so long as Tenant's Preliminary
Plans are consistent with the Basic Standards as defined below. As part of
Landlord's review of Tenant's Preliminary Plans, Landlord will notify Tenant of
those items, if any, which are "long lead time" items (i.e., items which cannot
reasonably be delivered to the job site early enough to maintain the approved
construction schedule without substantial overtime work), specifying in such
notice the delay in Substantial Completion of the Premises which will be caused
by selection of such items ("Long Lead Time Items"), so long as Tenant's
Preliminary Plans specify sufficient detail (e.g., finishes, materials, etc.) to
allow Landlord to make such determination. Thereafter, in the preparation of the
final Tenant's Plans, Tenant shall have the right to replace such Long Lead Time
Items with other specified items that would not be considered Long Lead Time
Items. On or before Tenant's Plan Delivery Date, as specified in the Basic Lease
Information, Tenant shall submit plans and specifications for Tenant's proposed
tenant improvements within the Premises consistent with Tenant's Preliminary
Plans as approved by Landlord ("Tenant's Plans"). Tenant's Plans shall include
all such information required to prepare construction drawings sufficient to
allow Landlord's contractor to bid and construct said improvements, including
but not limited to those items in Exhibit B-2, "Minimum Information Required."
Such plans shall be subject to Landlord's approval, which shall not be
unreasonably withheld so long as the tenant improvements contemplated therein
are generally generic with drop ceilings throughout, perimeter private offices
around at least 25 % of the perimeter of the floor plate, and otherwise
reasonably comparable to the improvements existing at Tenant's existing premises
at 1000 Bridge Parkway ("Basic Standards"). Landlord's contractor shall prepare
complete mechanical, electrical, plumbing, and other engineering plans for the
installation of the heating, ventilating, air conditioning, electrical and
plumbing to be installed in the Premises, on a design/build basis, and the costs
charged by Landlord's contractor for such services shall be included in the
scope of work by Landlord's contractor for the Tenant Improvements and in the
cost estimate described in paragraph 5 below. The engineering fees for plumbing
and fire sprinkler work shall be competitively bid as design/build with
engineered drawings to be included in Landlord's contractor's scope of work for
the Tenant Improvements.
3. Tenant Improvements: Landlord shall cause Landlord's contractor to
construct, at Tenant's expense, subject to the Tenant Allowance as noted below,
the additional work in addition to the Base Building to complete the Premises
("Tenant Improvements") as required by the plans and specifications approved by
Landlord and Tenant pursuant to this Work Letter. The quantities,
EXHIBIT "B"
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character and manner of installation of all of the foregoing work shall be
subject to the limitations imposed by any applicable regulations, laws,
ordinance, codes and rules.
4. Tenant's Expense: The cost of the Tenant Improvements, as well as space
planning and preparing the working drawings (including Tenant's Plans) for the
Tenant Improvements or any change to the original instruction and/or plans and
specifications shall be paid by Tenant; provided, however, that Landlord shall
provide to Tenant an allowance of the amount specified in the Basic Lease
Information as the "Tenant Allowance". The Tenant Allowance may be applied
toward the following items in respect of the Tenant Improvements: Architectural
and engineering fees, space planning, building permits or other governmental
fees, cost of labor materials and other charges included in the construction
contract for construction of Tenant Improvements. The cost of the Tenant
Improvements to be paid from the Tenant Allowance or by Tenant shall not include
the following (which shall be Landlord's responsibility): (a) costs attributable
to improvements installed outside the demising walls of the Premises; (b) costs
for improvements which are not shown on or described in the Tenant's Plans as
finally approved by Landlord, other than changes required by the City of San
Carlos or other governmental authorities in connection with their review of
Tenant's Plans or issuance of permits, changes necessitated by Tenant Delays (as
defined below), or changes that are requested or approved by Tenant; (c)
attorneys' fees incurred in connection with negotiation of construction
contracts, and attorneys' fees, experts' fees and other costs in connection with
disputes with third parties related to the Tenant Improvements, except to the
extent such disputes result from Tenant's acts or omissions; (d) interest and
other costs incurred by Landlord to finance Landlord's construction costs; (e)
costs incurred as a consequence of delay (other than Tenant Delays),
construction defects or default by Landlord's contractor; (f) costs recoverable
by Landlord upon account of warranties and insurance; (g) restoration costs in
excess of insurance proceeds as a consequence of casualties; (h) penalties and
late charges attributable to Landlord's failure to pay construction costs; (i)
costs to bring the Base Building into compliance with applicable laws and
restrictions at the time building permits are issued for the Tenant
Improvements, including, without limitation, the Americans with Disabilities Act
and environmental law, except to the extent such laws and restrictions are only
triggered by Tenant's acts, improvements or particular use of the Premises; (j)
wages, labor and overhead for overtime and premium time, unless required due to
Tenant Delays; (k) offsite construction management or other general construction
overhead costs incurred by Landlord; and (l) a General Contractor's fee in
excess of that contemplated in Paragraph 5 below. Upon the approval by Landlord
and Tenant of the Landlord's contractor's cost estimate in accordance with
Paragraph 5 below, Tenant shall provide Landlord with a detailed breakdown of
the final costs to be incurred or which have been incurred in connection with
the design and construction of the Tenant Improvements (the "Final Costs").
Prior to the commencement of construction of the Tenant Improvements, Tenant
shall supply Landlord with cash in an amount (the "Over-Allowance Amount") equal
to the difference between the amount of the Final Costs and the Tenant Allowance
(less any portion thereof already disbursed by Landlord, on or before the
commencement of construction of the Tenant Improvements). Interest actually
accrued on the Over-Allowance Amount shall be credited to Tenant and disbursed
with the Over-Allowance Amount. The Over-Allowance Amount shall be disbursed by
Landlord pro rata with the Tenant Allowance as costs are incurred for Tenant
Improvements. Any amounts payable by Tenant under this Work Letter which are in
excess of the Tenant Allowance and Over-Allowance Amount deposited with Landlord
shall be paid by Tenant to Landlord within twenty (20) days of receipt of an
invoice from Landlord. Landlord shall keep full and detailed accounts and shall
exercise such control as may be necessary for the proper financial
EXHIBIT "B"
2
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management of the construction of the Tenant Improvements and disbursement of
the Tenant Allowance and Over-Allowance Amount. Tenant and Tenant's
representative shall be afforded access, from time to time, upon advance written
or oral notice to Landlord, to Landlord's records, books, correspondence,
instructions, drawings, receipts, invoices, agreements (including, without
limitation, subcontracts and purchase orders), vouchers and other data relating
to the Tenant Improvements and the disbursement of the Tenant Allowance and
Over-Allowance Amount for the purpose of reviewing, auditing and/or copying such
material. Landlord shall, on not less than a monthly basis on or before the
tenth (10th) day of each month, deliver to Tenant a statement showing in
complete detail (itemized by contractor, subcontractor, vendors, consultants,
etc.) all monies paid out or costs incurred by the Landlord in connection with
the Tenant Improvements and the disbursement of the Tenant Allowance and the
Over-Allowance Amount, during the period commencing on the first day of each
month preceding the then current month and ending on the last day of said
preceding month, together with such supporting documentation as may be
reasonably required by Tenant.
In addition, the Tenant Improvements shall include window shades meeting the
following specifications: Hunter Douglas 8 Mil Atlantis Mini-Blinds; Color: 190
Bright Aluminum.
5. Cost Estimate: Upon receipt of Tenant's Plans, Landlord shall obtain a
cost estimate for the Tenant Improvements from Landlord's contractor, such cost
estimate to include such detail as may be reasonably requested by Tenant.
Landlord shall require that its general contractor secure independent sealed
bids from three (3) unionized subcontractors mutually acceptable to Landlord and
Tenant for each trade whose costs are in excess of five percent (5 %) of the
total cost estimate. All bids shall be submitted to Landlord and Tenant
simultaneously; at Tenant's request, Landlord and Tenant shall open the bids
together at the offices of the Landlord's general contractor. Landlord agrees to
permit Tenant to designate that the lowest bidding subcontractor be selected.
The General Contractor's fee shall be calculated on a "cost plus a fee" basis
where the fee for overhead and profit is four percent (4 %) of cost and the
amount charged for general conditions and supervision is approved by Tenant,
such approval not to be unreasonably withheld. Tenant shall not be charged any
fee for Landlord's oversight of the construction of Tenant's Improvements. If
the cost estimate exceeds the Tenant Allowance, the cost estimate shall be
submitted to Tenant. Tenant shall approve or disapprove such estimate within
seven (7) days. Failure to disapprove within such period shall constitute
approval. If disapproved, Tenant shall provide new sufficient instruction within
such seven (7) days for the revision of plans and cost estimates for approval by
Landlord. Tenant shall be obligated to approve the cost estimate if the cost is
within the Tenant Allowance or any greater budget approved by Tenant. If the
cost estimate is in excess of the Tenant Allowance or such greater budget,
Tenant shall provide new sufficient instruction which will reduce the cost
estimate for the Tenant Improvements to a level acceptable to Tenant and within
any allowance provided by Landlord within ten (10) days after receipt of the
cost estimate. In the event that, after receiving Tenant's approval of the cost
estimate based upon Tenant's Plans as approved by Landlord and Tenant, changes
to such plans are requested by any governmental agency or building inspector in
order to obtain any required permits or to proceed with the construction of the
Tenant Improvements, Tenant shall promptly respond to such governmental request
and cause such request to be withdrawn or Tenant's Plans to be revised to comply
with such request; and if such revision causes an increase in the cost of the
Tenant Improvements such increase shall be made by a change order approved by
Tenant. Any delay in achieving Substantial Completion resulting from Tenant's
response to such governmental request or
EXHIBIT "B"
3
<PAGE>
approving such change order shall be a Tenant Delay provided for in Paragraph 9
below.
6. Construction of Tenant Improvements: After Tenant's approval of the
cost estimate for Tenant's Plans, Landlord shall administer and diligently
prosecute the construction of Tenant Improvements in accordance with Tenant's
Plans; provided, however, that Landlord shall not be required to install any
Tenant Improvements which do not conform to the plans and specifications for the
Base Building, or do not conform to any applicable regulations, laws,
ordinances, codes and rules; such conformity shall be the obligation of Tenant
(other than mechanical, electrical, plumbing and engineering components of the
Tenant Improvements that are design/build by Landlord's contractor, the
conformity of which with Landlord's Plans and applicable laws shall be the
obligation of Landlord). After the cost estimate has been approved by Landlord
and Tenant as provided above, neither party shall have the right to require
extra work or change orders with respect to the construction of the Tenant
Improvements without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed. All change orders shall specify any
change in the cost estimate as a consequence of the change order. All Tenant
Improvements shall be constructed by Landlord's contractor, which shall be a
reputable, unionized general contractor, subject to approval by Tenant which
approval shall not be unreasonably withheld, who will complete the work in a
good and workmanlike manner and in accordance with the approved Tenant's Plans
and relevant laws and codes. Subject to the limitation on the General
Contractor's fee imposed by Paragraph 5, Tenant approves the use of Devcon
Construction, the General Contractor for the Base Building, as the General
Contractor for the Tenant Improvements.
Tenant shall be entitled to receive copies of all of the general contractor's
progress payment request.
7. Tenant's Contractors: Cable TV connections, telephone, data and
audio-visual equipment and wiring, office equipment and computer wiring, and
furniture and security equipment shall be installed by Tenant's contractors and
shall conform with Landlord's contractor's schedule and work of installation and
shall be handled in such a manner as to maintain harmonious labor relations and
as not to interfere with or delay the work of Landlord's contractors. To the
extent that any such improvements furnished and installed by Tenant's
contractors cause Landlord's contractor to be dependent upon the work of
Tenant's contractors in order for Landlord's contractor to complete its work,
any resulting delays in Landlord's contractor's work shall be "Tenant Delays"
(as defined in Paragraph 9 below). Tenant's contractors, subcontractors and
labor shall be subject to approval by Landlord which approval shall not be
unreasonably withheld or delayed and shall be subject to the reasonable
administrative supervision of Landlord's general contractor and reasonable rules
of the site. Contractors and subcontractors engaged by Tenant shall employ
laborers and means to insure, so far as may be possible, the progress of the
work without interruption on account of strikes, work stoppage or similar causes
for delay. Landlord shall give access and entry to the Leased Premises to
Tenant's contractors as may be reasonably necessary during the course of
construction of the Tenant Improvements, and at various points during
construction as each floor progresses, subject to the requirements of this
Paragraph 7; provided, however, that if such entry is prior to the first day of
the Term such entry shall be subject to all of the terms and conditions of this
Lease except payment of Rent and Additional Charges and Tenant shall not be
allowed to commence business in the Premises.
8. Substantial Completion/Punch List: "Substantial Completion" shall be
defined as when Landlord's contractor has substantially completed all work to be
performed by Landlord in
EXHIBIT "B"
4
<PAGE>
accordance with Tenant's Plans, subject only to (i) the completion or correction
of items on a punch list to be prepared jointly by Landlord, Tenant and their
respective architects which do not substantially interfere with Tenant's use or
occupancy of the Premises (the "Punchlist"), (ii) a certificate of occupancy, or
its equivalent, for the Premises having been obtained, (iii) all utilities
having been turned on and available for use, (iv) all Building common areas
having been substantially completed, and (v) Tenant having reasonable access to
the Premises and use of parking to the extent required by the Lease. The items
on the Punchlist shall be completed by Landlord's contractor promptly using
commercially reasonable efforts.
Landlord agrees to include a provision in its construction contract with it's
general contractor requiring retention of one hundred fifty percent (150%) of
the estimated amount of the cost to complete the items on the Punchlist until
the Punchlist is fully completed.
9. Tenant Delays: "Tenant Delays" shall be defined as those delays caused
in achieving Substantial Completion due to: (a) Tenant's failure to submit (i)
Tenant's Plans, (ii) approval of the cost estimates, or (iii) sufficient
instruction to change Tenant's Plans as a result of disapproval of a cost
estimate on or before the dates or time periods called for; (b) Tenant's
change(s) in plans and specifications after said dates that actually delay
construction, but only to the extent that Tenant received prior written notice
from the Landlord of the amount of delay associated with the changes before the
changes were finally approved and authorized by Tenant; (c) Tenant's request for
Long Lead Time Items; (d) any delays caused by Tenant's contractors as set forth
in Paragraph 7, including, without limitation, strikes, work stoppage or similar
delay caused by labor disharmony between Tenant's contractors and Landlord's
contractor, and delays caused by Landlord's contractor's dependence on any work
clone by Tenant's contractors; or (e) other delays caused by Tenant in
construction; provided, however, no Tenant Delay shall be deemed to have
occurred unless and until Landlord has given written notice to Tenant specifying
any action or inaction which Landlord is aware of and that may cause a Tenant
Delay. If Tenant does not take appropriate measures within one (1) business day
after Tenant's receipt of such notice to prevent such action or inaction from
occurring, then a Tenant Delay, as set forth in such notice, shall be deemed to
have occurred commencing as of the date Tenant received such notice and
continuing for the number of days the Substantial Completion of the Premises was
in fact delayed as a direct result of such action or inaction; provided,
further, that no such notice shall be required in order for Tenant Delay to be
deemed to have occurred if such delay results from Tenant's failure to perform
any obligation within a specific date or time period.
10. Commencement Date: The Premises shall be deemed completed and
possession delivered and Tenant shall accept the Premises upon Substantial
Completion. Notwithstanding anything to the contrary in the Lease, effective
upon delivery of the Premises to Tenant, Landlord does hereby warrant that, (a)
the construction (as opposed to the design which is Tenant's responsibility) of
the Tenant Improvements was performed in accordance with all rules, regulations,
codes, statutes, ordinances, and laws of all applicable governmental and
quasi-governmental authorities and in a good and workman-like manner, (b) all
materials and equipment installed therein was new and otherwise of good quality,
(c) the electrical, plumbing, and mechanical systems servicing the Premises are
in working order and in good condition, and (d) the Base Building is in good
condition and water tight. The foregoing warranties shall automatically expire
one year after Substantial Completion. Tenant's obligation under the Lease to
pay Rent and Additional Charges
EXHIBIT "B"
5
<PAGE>
shall commence upon the later of (i) the Scheduled Commencement Date, as
specified in the Basic Lease Information, or (ii) Substantial Completion. If
Landlord shall be delayed in substantial completion as a result of Tenant
Delays, then the Commencement Date, and Tenant's obligation to begin paying Base
Rent and Additional Charges, shall be adjusted to reflect what the Commencement
Date would have been if there had been no Tenant Delays. Notwithstanding the
foregoing, if Tenant Delays occur and, as a result thereof, Landlord reasonably
anticipates that Substantial Completion will not occur on or before the
Scheduled Commencement Date, then at Landlord's sole election and in addition to
any other remedies that may be available to Landlord under the Lease or at law
or in equity, at Landlord's written request Tenant shall commence payment of
Base Rent and Additional Charges on the date one month following the Scheduled
Commencement Date. If Landlord makes such election, then the installment of Base
Rent, and any installments of any components of Additional Charges, that are
first due after Substantial Completion occurs shall be adjusted to reflect the
actual Commencement Date. Landlord's election, as set forth above, shall not
constitute a waiver of any default by Tenant or any other remedy available to
Landlord as a result thereof, to the extent the circumstances giving rise to a
Tenant Delay constitute a default by Tenant hereunder or under the Lease. Within
seven (7) days after written request of Landlord, Tenant agrees to give Landlord
a letter confirming the Commencement Date and certifying that Tenant has
accepted delivery of the Premises and that the condition of the Premises
complies with Landlord's obligations hereunder.
EXHIBIT "B"
6
<PAGE>
EXHIBIT "B-1"
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LANDLORD'S PLANS
The plans and specifications related to Two Circle Star Way as drawn or
assembled by Kenneth Rodrigues & Partners, Inc. as called out below:
GENERAL
A0.0 COVER SHEET 1/22/98
A0.1 GENERAL INFORMATION SHEET/ 1/22/98
TITLE 24 ENERGY COMPLIANCE
CIVIL
C0.2 STORM WATER POLLUTION PREVENTION PLAN
C0.1 LAYOUT AND PAVING PLAN 11/14/97
C1.2 LAYOUT AND PAVING PLAN 12/19/97
C2.1 GRADING PLAN 11/14/97
C2.2 GRADING PLAN 11/14/97
C3.1 UTILITY PLAN 11/14/97
C3.2 UTILITY PLAN 11/14/97
C4.1 DETAILS 11/14/97
C4.2 DETAILS 11/14/97
C4.3 DETAILS 12/19/97
ARCHITECTURAL
A2.1 BUILDING ONE FIRST FLOOR PLAN 2/26/98
A2.2 BUILDING ONE SECOND FLOOR PLAN 1/22/98
A2.3 BUILDING ONE THIRD FLOOR PLAN 1/22/98
A2.4 BUILDING ONE FOURTH FLOOR PLAN 1/22/98
A2.5 ENLARGED CORE PLAN 1/22/98
A2.6 ENLARGED BATHROOM PLANS 1/22/98
A3.1 BUILDING ONE ROOF PLAN 1/22/98
A4.1 BUILDING ONE ELEVATIONS 2/26/98
A4.2 BUILDING ONE ELEVATIONS 1/22/98
A5.1 BUILDING SECTION 1/22/98
A5.2 TYPICAL WALL SECTIONS 1/22/98
A7.1 REFLECTED CEILING PLANS 3/5/97
A7.2 ENLARGED STAIR PLANS AND SECTIONS 1/22/98
A7.3 ENLARGED ELEVATOR PLANS AND SECTIONS 1/22/98
A7.4 DOOR AND HARDWARE SCHEDULE/ROOM 3/11/98
FINISH SCHEDULE
A8.1 EXTERIOR DETAILS 1/22/98
A8.2 DOOR/WINDOW DETAILS 1/22/98
A8.3 ROOF DETAILS 1/22/98
A9.1 WALL TYPES 1/22/98
A9.2 INTERIOR DETAILS 1/22/98
EXHIBIT "B-1"
1
<PAGE>
A9.3 UL ASSEMBLIES 11/14/97
STRUCTURAL
S0.1 GENERAL NOTES 10/6/97
S2.1 BUILDING ONE FOUNDATION/FIRST 10/6/97
FLOOR FRAMING PLAN
S2.2 BUILDING ONE 2ND FLR. FRAMING PLAN 10/6/97
S2.3 BUILDING ONE 3RD FLR. FRAMING PLAN 10/6/97
S2.4 BUILDING ONE 4TH FLR. FRAMING PLAN 10/6/97
S2.5 BUILDING ONE ROOF FRAMING PLAN 10/6/97
S2.5A BUILDING ONE ROOF SCREEN/SLAB 10/6/97
REINFORCING PLAN
S3.1 TYPICAL CONCRETE DETAILS 7/23/97
S3.2 CONCRETE DETAILS NO. 1 10/6/97
S3.3 CONCRETE DETAILS NO. 2 10/6/97
S3.4 CONCRETE DETAILS NO. 3 10/6/97
S5.1 TYPICAL METAL DECK DETAILS NO. 1 10/6/97
S5.2 TYPICAL METAL DECK DETAILS NO. 2 10/6/97
S5.3 TYPICAL STEEL DETAILS 10/6/97
S5.4 COLUMN SCHEDULE AND DETAILS 10/6/97
S5.5 BRACED FRAME ELEVATIONS AND DETAILS 10/6/97
S5.6 STEEL DETAILS NO. 1 10/6/97
S5.7 STEEL DETAILS NO. 2 10/6/97
S9.1 PRECAST PANEL SUPPORT PLAN 10/6/97
S9.2 PRECAST PANEL SUPPORT PLAN 7/30/97
S9.3 PRECAST PANEL SUPPORT DETAILS 10/6/97
LANDSCAPE
L-1 PHASE ONE NOTES AND LEGEND 2/6/98
L-2 PHASE ONE LAYOUT AND GRADING PLAN 2/6/98
L-3 PHASE ONE PLATING PLAN 2/6/98
L-4 PHASE ONE IRRIGATION 2/6/98
L-5 PHASE ONE DETAILS 7/28/97
L-6 PHASE ONE DETAILS 11/26/97
L-7 PHASE ONE DETAILS 2/6/98
MECHANICAL
AC0.01 TITLE 24, DRAWING SCHEDULE, MANDATORY 3/10/98
MEASURES, AND GENERAL NOTES 3/10/98
AC0.02 EQUIPMENT SCHEDULE 3/10/98
AC1.01 FIRST FLOOR HVAC PLAN 3/10/98
AC1.02 SECOND FLOOR HVAC PLAN 3/10/98
AC1.03 THIRD FLOOR HVAC PLAN 3/10/98
AC1.04 FOURTH FLOOR HVAC PLAN 3/10/98
AC1.05 ROOF PLAN 3/10/98
AC1.06 ROOF COORDINATION PLAN 3/10/98
AC2.01 PIPING SCHEMATICS AND DETAILS 3/10/98
EXHIBIT "B-1"
2
<PAGE>
AC7.01 WIRING AND CONTROLS 3/10/98
ELECTRICAL
CIR-E0 COVER SHEET 7/23/97
CIR-SE1 SITE LIGHTING PLAN 7/23/97
CIR-SE2 SITE LIGHTING PLAN 7/23/97
CIR-E1 FIRST FLOOR LIGHTING PLAN 7/23/97
CIR-E2 SECOND FLOOR LIGHTING PLAN 7/23/97
CIR-E3 THIRD FLOOR LIGHTING PLAN 7/23/97
CIR-E4 FOURTH FLOOR LIGHTING PLAN 7/23/97
CIR-E5 FIRST FLOOR POWER PLAN 7/23/97
CIR-E6 SECOND FLOOR POWER PLAN 7/23/97
CIR-E7 THIRD FLOOR POWER PLAN 7/23/97
CIR-E8 FOURTH FLOOR POWER PLAN 7/23/97
CIR-E9 FIRST FLOOR MECHANICAL PLAN 7/23/97
CIR-E10 SECOND FLOOR MECHANICAL PLAN 7/23/97
CIR-E11 THIRD FLOOR MECHANICAL PLAN 7/23/97
CIR-E12 FOURTH FLOOR MECHANICAL PLAN 7/23/97
CIR-E13 ROOF MECHANICAL PLAN 7/23/97
CIR-E14 SINGLE LINE DIAGRAM 11/24/97
CIR-E15 PANEL SCHEDULES 7/23/97
CIR-E16 PANEL SCHEDULES 7/23/97
CIR-E17 TITLE 24 7/23/97
PLUMBING
P1A 1ST FLOOR BELOW GRADE 12/18/97
P1B 1ST FLOOR ABOVE GRADE 12/18/97
P2 2ND FLOOR 12/18/97
P3 3RD FLOOR 12/18/97
P4 4TH FLOOR 12/18/97
P5 ROOF PLAN 12/18/97
FIRE ALARM SYSTEM
FA-1 FIRST FLOOR BUILDING ONE 12/5/97
FA-2 SECOND FLOOR BUILDING ONE 12/5/97
FA-3 THIRD FLOOR BUILDING ONE 12/5/97
FA-4 FOURTH FLOOR BUILDING ONE 12/5/97
FA-5 ROOF PLAN BUILDING ONE 12/5/97
EXHIBIT "B-1"
3
<PAGE>
EXHIBIT "B-2"
- --------------------------------------------------------------------------------
MINIMUM INFORMATION REQUIRED
FLOOR PLANS INDICATING:
1. Location and type of all partitions;
2. Location and type of all doors. Indicate hardware and provide keying
schedule;
3. Location and type of glass partitions, windows and doors. Indicate
framing if not Building Standard;
4. Location of telephone equipment room;
5. Indicate critical dimensions necessary for construction;
6. Location of all Building Standard electrical items (outlets,
switches, telephone outlets). Building Standard lighting will be
subject to approval by Landlord's architect and contractor;
7. Location and type of all non-Building Standard electrical items,
including lighting.
8. Location and type of equipment that will require special electrical
requirements. Provide manufacturer's specifications for use and
operation;
9. Location, weight per square foot, and description of any
exceptionally heavy equipment or filing system exceeding 50 lbs. psf
live load;
10. Requirements for special air conditioning or ventilation;
11. Type and color of floor covering;
12. Location, type, and color of wall covering;
13. Locations, type and color of; Building Standard and non-Building
Standard paint or finishes;
14. Location and type of plumbing;
15. Location and type of kitchen equipment.
EXHIBIT "B-2"
1
<PAGE>
DETAILS SHOWING:
1. All millwork with verified dimensions (such dimensions to be
verified by Landlord's contractor in the field) and dimensions of
all equipment to be built in;
2. Corridor entrance;
3. Bracing or support of special walls, glass partitions, etc., if
desired.
EXHIBIT "B-2"
2
<PAGE>
EXHIBIT "C"
- --------------------------------------------------------------------------------
RULES AND REGULATIONS
1. Sidewalks, halls, passages, exits, entrances, elevators, escalators and
stairways shall not be obstructed by Tenant or used by Tenant for any purpose
other than for ingress to and egress from the Premises. The halls, passages,
exits, entrances, elevators and stairways are not for the use of the general
public and Landlord shall in all cases retain the right to control and prevent
access thereto by all persons whose presence, in the judgment of Landlord, shall
be prejudicial to the safety, character, reputation and interests of the
Building and its tenants, provided that nothing herein contained shall be
construed to prevent such access to persons with whom Tenant normally deals in
the ordinary course of Tenant's business unless such persons are engaged in
illegal activities. Tenant, and Tenant's employees or invitees, shall not go
upon the roof of the Building, except as authorized by Landlord.
2. No sign, placard, picture, name, advertisement or notice visible from
the exterior of the Premises shall be inscribed, painted, affixed, installed or
otherwise displayed by Tenant either on the Premises or any part of the Building
without the prior written consent of Landlord, and Landlord shall have the right
to remove any such sign, placard, picture, name, advertisement or notice without
notice to and at the expense of Tenant.
If Landlord shall have given such consent to Tenant at any time,
whether before or after the execution of the Lease, such consent shall not in
any way operate as a waiver or release of any of the provisions hereof or of the
Lease, and shall be deemed to relate only to the particular sign, placard,
picture, name, advertisement or notice so consented to by Landlord and shall not
be construed as dispensing with the necessity of obtaining the specific written
consent of Landlord with respect to any other such sign, placard, picture, name,
advertisement or notice. All approved signs or lettering on doors and walls
shall be printed, painted, affixed or inscribed at the expense of Tenant by a
person approved by Landlord.
3. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of tenants (including
subtenants) only and Landlord reserves the right to exclude any other names
therefrom.
4. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, awnings, hangings or decorations shall be attached to, hung or placed
in, or used in connection with, any window, door or patio on the Premises
without the prior written consent of Landlord. In any event with the prior
written consent of Landlord, all such items shall be installed inboard of
Landlord's window coverings and shall not in any way be visible from the
exterior of the Building. No articles shall be placed or kept on the window
sills so as to be visible from the exterior of the Building. No articles shall
be placed against glass partitions or doors which might appear unsightly from
outside the Building.
5. Landlord reserves the right to exclude from the Building between the
hours of 6:00 p.m. and 8:00 a.m. and at all hours on Saturdays, Sundays and
holidays all persons who do not possess a building access card provided by
Landlord or who are not accompanied by Tenant's employees. Landlord will furnish
access cards to persons for whom Tenant requests the same in writing. Tenant
shall be responsible for all persons from who it requests access cards and shall
be liable to Landlord for all
EXHIBIT "C"
1
<PAGE>
acts of such persons. Landlord shall in no case be liable for damages for error
with regard to the admission to or exclusion from the Building of any person.
During the continuance of any invasion, mob, riot, public excitement
or other circumstance rendering such action advisable in Landlord's opinion,
Landlord reserves the right to prevent access to the Building by closing the
doors, or otherwise, for the safety of tenants and protection of the Building
and property in the Building.
6. Tenant shall not employ any person or persons other than the janitor of
Landlord for the purpose of cleaning the Premises unless otherwise agreed to by
Landlord in writing. Except with the written consent of Landlord, no person or
persons other than those approved by Landlord shall be permitted to enter the
Building for the purpose of cleaning the same. Tenant shall not cause any
unnecessary labor by reason of Tenant's carelessness or indifference in the
preservation of good order and cleanliness of the Premises. Landlord shall not
in any way be responsible to Tenant for any loss of property on the Premises,
however occurring, or for any damage done to the effects of Tenant by the
janitor or any other employee or any other person.
7. Tenant shall not obtain for use upon the Premises ice, drinking water,
food, beverage, towel or other similar services except through facilities
approved in writing by Landlord and under regulations fixed by Landlord, or
accept barbering or bootblacking services in the Premises except from persons
authorized by Landlord. Tenant may have a Lunchroom/Break room in the Premises
that has a refrigerator and microwave.
8. Tenant shall see that the doors of the Premises are closed and securely
locked and must observe strict care and caution that all water faucets or water
apparatus are entirely shut off before Tenant or its employees leave such
Premises, and that all utilities shall likewise be carefully shut off, so as to
prevent waste or damage. On multiple-tenancy floors, all tenants shall keep the
door or doors to the Building corridors closed at all times except for ingress
and egress.
9. As more specifically provided in the Lease, Tenant shall not waste
electricity, water or air conditioning and agrees to cooperate fully with
Landlord to assure the most effective operation of the Building's heating and
air conditioning, and shall refrain from attempting to adjust any controls other
than room thermostats installed for Tenant's use.
10. Tenant shall not alter any lock or access device or install a new or
additional lock or access device or any bolt on any door of the Premises without
the prior written consent of Landlord. If Landlord shall give its consent,
Tenant shall in each case furnish Landlord with a key for any such lock.
11. Tenant shall not make or have made additional copies of any keys or
access devices provided by Landlord. Tenant, upon the termination of the
tenancy, shall deliver to Landlord all the keys or access devices for the
Building, offices, rooms and toilet rooms which shall have been furnished to
Tenant or which Tenant shall have had made. In the event of the loss of any keys
or access devices so furnished by Landlord, Tenant shall pay Landlord therefor.
12. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind
EXHIBIT "C"
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whatsoever shall be thrown therein, and the expense of any breakage, stoppage or
damage resulting from the violation of this rule by Tenant or Tenant's employees
or invitees shall be borne by Tenant.
13. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material other than
limited quantities necessary for the operation or maintenance of office or
office equipment. Tenant shall not use any method of heating or air conditioning
other than supplied by Landlord.
14. Tenant shall not use, keep or permit to be used or kept in the
Premises any foul or noxious gas or substance or permit or suffer the Premises
to be occupied or used in a manner offensive or objectionable to Landlord or
other occupants of the Building by reason of noise, odors and/or vibrations or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds be brought or kept in or about the Premises or the
Building.
15. No cooking shall be done or permitted by Tenant on the Premises
(except that use by the Tenant of Underwriter's Laboratory approved equipment
for the preparation of coffee, tea, hot chocolate and similar beverages for
Tenant and its employees shall be permitted, provided that such equipment and
use are in accordance with all applicable federal, state and city laws, codes,
ordinances, rules and regulations), nor shall Premises be used for lodging. See
Paragraph 7.
16. Except with the prior written consent of Landlord, Tenant shall not
sell, or permit the sale, at retail, of newspapers, magazines, periodicals,
theater tickets or any other goods or merchandise in or on the Premises, nor
shall Tenant carry on, or permit or allow any employee or other person to carry
on, the business of stenography, typewriting or any similar business in or from
the Premises for the service or accommodation of occupants of any other portion
of the Building, nor shall the Premises be used for the storage of merchandise
(other than incidental merchandise that Tenant may have on hand from time to
time) or for manufacturing of any kind, or the business of a public barber shop
or beauty parlor, nor shall the Premises be used for any improper, immoral or
objectionable purpose, or any business or activity other than that specifically
provided for in Tenant's Lease.
17. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain and comply with Landlord's reasonable
instructions in their installation.
18. Landlord will direct electricians as to where and how telephone,
telegraph and electrical wires are to be introduced or installed. No boring or
cutting for wires will be allowed without the prior written consent of Landlord.
The location of burglar alarms, telephones, call boxes and other office
equipment affixed to the Premises shall be subject to the written approval of
Landlord, which shall not be unreasonably withheld.
19. Tenant shall not install any radio or television antenna (not
including the satellite antenna referred to in Paragraph 44 of the Lease),
loudspeaker or any other device on the exterior walls or the roof of the
Building. Tenant shall not interfere with radio or television broadcasting or
reception from or in the Building or elsewhere.
20. Tenant shall not lay linoleum, tile, carpet or any other floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved in writing by Landlord.
EXHIBIT "C"
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The expense of repairing any damage resulting from a violation of this rule by
Tenant or Tenant's contractors, employees or invitees or the removal of any
floor covering shall be borne by Tenant.
21. The freight elevator shall be available for use by all tenants in the
Building, subject to such reasonable scheduling as Landlord in its discretion
shall deem appropriate. No furniture, freight, equipment, materials, supplies,
packages, merchandise or other property will be received in the Building or
carried up or down the elevators except between such hours and in such elevators
as shall be designed by Landlord.
Landlord shall have the right to prescribe the weight, size, and
position of all safes, furniture or other heavy equipment brought into the
Building. Safes or other heavy objects shall, if considered necessary by
Landlord, stand on wood strips of such thickness as determined by Landlord to be
necessary to properly distribute the weight thereof. Landlord will not be
responsible for loss of or damage to any such safe, equipment or property from
any cause, and all damage done to the Building by moving or maintaining any such
safe, equipment or other property shall be repaired at the expense of Tenant.
Business machines and mechanical equipment belonging to Tenant which
cause noise or vibration that may be transmitted to the structure of the
Building or to any space therein to such a degree as to be objectionable to
Landlord or to any tenants in the Building shall be placed and maintained by
Tenant, at Tenant's expense, on vibration eliminators or other devices
sufficient to eliminate noise or vibration. The persons employed to move such
equipment in or out of the Building must be acceptable to Landlord.
22. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry and
which is allowed by law. Tenant shall not mark, use double-sided adhesive tape
on, or drive nails, screw or drill into, the partitions, woodwork or plaster or
in any way deface the Premises or any part thereof, without repairing any
resulting damage. Tenant may hang pictures on walls in the Premises. Any damage
to the walls caused by molley bolts, or like hanging materials, will be repaired
by Tenant.
23. There shall not be used in any space, or in the public areas of the
Building, either by Tenant or others, any hand trucks except those equipped with
rubber tires and side guards or such other material-handling equipment as
Landlord may approve. No other vehicles of any kind shall be brought by Tenant
into or kept in or about the Premises.
24. Tenant shall store all trash and garbage within the interior of the
Premises. No material shall be placed in the trash boxes or receptacles if such
material is of such nature that it may not be disposed of in the ordinary and
customary manner of removing and disposing of trash and garbage in the
jurisdiction in which the Premises is located, without violation of any law or
ordinance governing such disposal. All trash, garbage and refuse disposal shall
be made only through entryways and elevators provided for such purposes and at
such times as Landlord shall designate.
25. Canvassing, soliciting, distribution of handbills or any other written
material and peddling in the Building are prohibited, and Tenant shall cooperate
to prevent the same. Tenant shall not make room-to-room solicitation of business
from other tenants in the Building.
EXHIBIT "C"
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26. Landlord shall have the right, exercisable without notice and without
liability to Tenant, to change the name and address of the Building.
27. Landlord reserves the right to exclude or expel from the Building any
person who, in Landlord's judgment, is intoxicated or under the influence of
liquor or drugs or who is in violation of any of the rules or regulations of the
Building.
28. Without the prior written consent of Landlord, Tenant shall not use
the name of the Building in connection with or in promoting or advertising the
business of Tenant except as Tenant's address. Tenant may Use Project's name on
its stationery and business cards.
29. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
30. Tenant assumes any and all responsibility for protecting the Premises
from theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed, unless caused by the gross negligence or
willful misconduct of Landlord, its agents, servants, or employees ("Landlord
Parties").
31. The requirements of Tenant will be attended to only upon application
at the office of the Building by an authorized individual. Employees of Landlord
shall not perform any work or do anything outside of their regular duties unless
under special instructions from Landlord, and no employees will admit any person
(Tenant or otherwise) to any office without specific instructions from Landlord.
32. Landlord may waive any one or more of these Rules and Regulations for
the benefit of any particular tenant or tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of any
other tenant or tenants, nor prevent Landlord from thereafter enforcing any such
Rules and Regulations against any or all tenants of the Building.
33. Landlord reserves the right to make such other and reasonable rules
and regulations as in its judgment may from time to time be needed for safety
and security, for care and cleanliness of the Building and for the preservation
of good order therein. Tenant agrees to abide by all such Rules and Regulations
hereinafter stated and any additional rules and regulations which are adopted.
No new Rule or Regulation shall be designed to discriminate solely against
Tenant.
34. Tenant shall be responsible for the observance of all of the foregoing
Rules and Regulations by Tenant's employees, agents, clients, customers,
invitees and guests.
35. Unless otherwise defined, terms used in these Rules and Regulations
shall have the same meaning as in the Lease.
EXHIBIT "C"
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EXHIBIT "D"
- --------------------------------------------------------------------------------
FORM OF TENANT ESTOPPEL CERTIFICATE
TO: _________________________________, or Assignee ("Lender"), and/or whom else
it may concern:
THIS IS TO CERTIFY THAT:
1. The undersigned is the lessee ("Tenant") under that certain lease dated
________________, 19 __, ("Lease"), by and between
___________________________________________ as lessor ("Landlord") and
________________________________________ as Tenant, covering those certain
premises commonly known and designated as ________________________________
___ ("Premises").
2. The Lease has not been modified, changed, altered, assigned, supplemented
or amended in any respect (except as indicated below; if none, state
"none"). To the best of Tenant's knowledge, the Lease is not in default
and is valid and in full force and effect on the date hereof. The Lease is
the only Lease or agreement between the Tenant and the Landlord affecting
or relating to the Premises. The Lease represents the entire agreement
between the Landlord and the Tenant with respect to the Premises.
______________.
3. The Tenant is not entitled to, and has made no agreement(s) with the
Landlord or its agents or employees concerning free rent, partial rent,
rebate of rent payments, credit or offset or deduction in rent, or any
other type of rental concession, including, without limitation, lease
support payments or lease buy-outs (except as indicated below; if none,
state "none"). ___________________________________________________________
_________________________________________________________________________.
4. The Tenant has accepted and now occupies the Premises, and is and has been
open for business since ______________, 19 ____. The Lease term began
____________________, 19 ___. The termination date of the present term of
the Lease, excluding unexercised renewals, is ________________________,
19____.
5. The Tenant has paid rent for the Premises for the period up to and
including ______________ __, 19 ____. The fixed minimum rent and any
additional rent (including the Tenant's share of tax increases and cost of
living increases) payable by the Tenant presently is $ ____________ per
month. No such rent has been paid more than two (2) months in advance of
its due date, except as indicated below (if none, state "none"). The
Tenant's security deposit is $ ________
_________________________________________________________________________.
6. To the best of Tenant's knowledge, no event has occurred and no condition
exists which, with the giving notice or the lapse of time or both, will
constitute a default under the Lease. To the
EXHIBIT "D"
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best of Tenant's knowledge, the Tenant has no existing defenses or offsets
against the enforcement of this Lease by the Landlord, except
______________________________.
7. The Tenant has received or will receive payment or credit for tenant
improvement work in the total amount of $ ______________________________
(or if other than cash, describe below; if none, state "none"). To the
best of Tenant's knowledge, all conditions under this Lease to be
performed to date by the Landlord have been satisfied. All required
contributions by the Landlord to the Tenant on account of the Tenant's
tenant improvements have been received by the Tenant, except _____________
_________________________________________________________________________.
8. The Lease contains, and the Tenant has, no outstanding options or rights
of first refusal to purchase the Premises or any part thereof or all or
any part of the real property of which the Premises are a part.
9. No actions, whether voluntary or otherwise, are pending against the Tenant
or any general partner of the Tenant under the bankruptcy laws of the
United States or any state thereof.
10. The Tenant has not sublet the Premises to any sublessee and has not
assigned any of its rights under the Lease, except as indicated below (if
none, state "none"). No one except the Tenant and its employees occupies
the Premises. _____________________________________ ______________.
11. The address for notices to be sent to the Tenant is as set forth in the
Lease.
12. Except as otherwise provided in the Lease, the Premises have not been used
and the Tenant does not plan to use the Premises for any activities which,
directly or indirectly, involve the use, generation, treatment, storage,
transportation or disposal of any petroleum product or any toxic or
hazardous chemical, material, substance, pollutant or waste.
13. (INCLUDE THIS PARAGRAPH FOR LOAN TRANSACTIONS.) The Tenant acknowledges
that all the interest of the Landlord in and to the Lease is being duly
assigned to Lender, and that pursuant to the terms thereof, all rent
payments under the Lease shall continue to be paid to the Landlord in
accordance with the terms of the Lease unless and until the Tenant is
notified otherwise in writing by Lender or its successors or assigns.
It is particularly noted that:
(a) Under the provisions of this assignment, the Lease cannot be
terminated (either directly or by the exercise of any option which
could lead to termination) or modified in any of its terms, or
consent be given to the release of any party having liability
thereon, without the prior written consent of Lender or it
successors or assigns, and without such consent, no rent may be
collected or accepted more than two (2) months in advance.
(b) The interest of the Landlord in the Lease has been assigned to
Lender for the purposes specified in the assignment. Lender, or its
successors or assigns, assumes no duty, liability or obligation
whatsoever under the Lease or any extension or renewal thereof.
EXHIBIT "D"
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(c) Any notices sent to Lender or its affiliates should be sent by
registered mail and addressed as follows: _________________________.
14. Tenant agrees to give any Mortgagee and/or Trust Deed Holders
("Mortgagee"), by registered mail, a copy of any notice of default served
upon the Landlord, provided that prior to such notice Tenant has been
notified in writing (by way of Notice of Assignment of Rents and Leases,
or otherwise), of the address of such Mortgagee. Tenant further agrees
that if Landlord shall have failed to cure such default within the time
provided for in this Lease, then the Mortgagee shall have an additional
sixty (60) days within which to cure such default of it such default
cannot be cured within that time, then such additional time as may be
necessary to cure such default shall be granted if within such sixty (60)
days Mortgagee has commenced and is diligently pursuing the remedies
necessary to cure such default (including, but not limited to,
commencement of foreclosure proceedings, if necessary to effect such
cure), in which event the Lease shall not be terminated while such
remedies are being so diligently pursued.
15. This certification is made to induce Lender to make certain fundings,
knowing that Lender relies upon the truth of this certification in
disbursing said funds.
16. The undersigned is authorized to execute this Tenant Estoppel Certificate
on behalf of the Tenant.
DATED THIS ____________________ DAY OF __________________, 19________.
________________________________________
(Tenant)
By: ____________________________________
Its:________________________________
Date:
EXHIBIT "D"
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The undersigned hereby certifies that the certifications set forth above are
true as of the date hereof.
________________________________________
(Owner/Landlord)
By: ____________________________________
Its:________________________________
Date:
EXHIBIT "D"
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EXHIBIT "E"
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ENCUMBRANCES
1. Ground Lease: That certain Lease between Mozad, L.P., as Lessor and
Circle Star Center Associates, L.P., as Lessee, dated
October 15, 1997.
2. C,C&R's: "Declaration of Covenants, Conditions and Restrictions"
dated June 24, 1997 by and between Mozad, L.P. and
Homestead Village Incorporated.
3. Other: "Approved Conditional Use Permit - Office Complex, 1717
Industrial Road, San Carlos, CA 94070" effective date
June 12, 1997.
EXHIBIT "E"
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FORM OF LETTER OF CREDIT
DATE: ____________________
IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: _________________
BENEFICIARY APPLICANT
_____________________________________ ___________________________________
_____________________________________ ___________________________________
_____________________________________ ___________________________________
_____________________________________ ___________________________________
ATTN:________________________________ ___________________________________
AMOUNT: $__________________________
EXPIRATION:________________________
We hereby establish in your favor our irrevocable standby letter of credit
no. ___________ which is available with [bank] by payment against presentation
of the original of this letter of credit and your draft at sight drawn on
[bank].
This letter of credit shall be deemed automatically extended without
amendment for periods of one (1) year unless at least 30 (thirty) days prior to
the then current expiration date, we notify you by registered mail or overnight
courier service at the above address, that we elect not to renew this letter of
credit.
This letter of credit is transferable. Transfer of this letter of credit
is subject to our receipt of our standard form of beneficiary's instructions
regarding the transfer accompanied by the original letter of credit and
amendment(s) if any. Costs or expenses of such transfer shall be for the account
of the beneficiary.
We hereby agree with the beneficiary that the draft drawn under and in
compliance with the terms of this letter of credit will be duly honored upon
presentation, as specified herein.
This letter of credit is subject to the uniform customs and practice for
documentary letter of credit (1993 revision) international chamber of commerce
publication no. 500 and engaged us pursuant to the terms therein.
EXHIBIT "F"
<PAGE>
Exhibit "G"
Description of Second Building: The Second Building is the same size and a
mirror image of the Building and will be located as set forth on Schedule 1
attached hereto and incorporated herein by reference.
EXHIBIT "G"
<PAGE>
[MAP OMITTED]
SCHEDULE 1 TO
EXHIBIT "G"
<PAGE>
EXHIBIT 10.30
GUARANTY OF LEASE
THIS GUARANTY OF LEASE (this "Guaranty") is made as of 4/27/99 by
Oracle Corporation, a Delaware corporation ("Guarantor"), for the benefit of
CIRCLE STAR CENTER ASSOCIATES, L.P., a California limited partnership
("Landlord").
RECITALS
This Guaranty is made upon the basis of the following facts:
A. Network Computer, Inc. ("Tenant") desires to lease from Landlord
certain real property located at Two Circle Star Way, San Carlos, California
(with possible expansions into the portion of the Project located at One Circle
Star Way) (the "Premises") pursuant to that certain Lease (the "Lease") of even
date herewith by and between Landlord and Tenant. Capitalized terms used in this
Guaranty but not defined herein shall have the meanings given them in the Lease.
B. Landlord is not willing to enter into the Lease unless Landlord
is provided this Guaranty in support of Tenant's obligations under the Lease.
Guarantor is willing to provide, and does hereby provide, this Guaranty to
Landlord in order to induce Landlord to enter into the Lease desired by Tenant.
C. Guarantor is willing to execute, deliver and perform this
Guaranty subject to the limitations and terms and conditions of Paragraphs 22,
23 and 24 below ("Qualifications").
NOW, THEREFORE, to induce Landlord to enter into the Lease,
Guarantor agrees as follows:
1. Absolute, Unconditional Guaranty. Subject to the limitations specified
in Paragraph 22 below, Guarantor unconditionally and absolutely guarantees to
Landlord the prompt payment when due of the Base Rent, the Additional Charges,
and all other Rent and other sums payable by Tenant under or in connection with
the Lease, including without limitation interest and late charges (such Base
Rent, Additional Charges, other Rent and other sums are referred to herein for
brevity as the "Rent"), whether such sums are payable to Landlord or to any
third party for the direct or indirect benefit of Landlord, and the full and
faithful performance and observance of any and all covenants, whether present or
future, contained in the Lease to be performed and observed by Tenant. Guarantor
unconditionally covenants to, and agrees with, Landlord that, if any failure
shall have occurred in the timely payment by Tenant of any Rent or in the full
and faithful performance and/or discharge of any of the other duties,
obligations or covenants contained in the Lease to be performed by Tenant,
Guarantor will immediately and unconditionally pay to Landlord such Rent, will
perform and/or discharge such duties, obligations and covenants, and shall
reimburse Landlord for any and all damages that may arise as a result of
Tenant's breach of Tenant's payment or performance obligations under the Lease.
2. Guaranty of Payment and Performance. This is a guaranty of payment and
performance and not merely of collection. The obligations of Guarantor hereunder
are absolute, primary, unconditional and irrevocable obligations, which shall be
enforceable by Landlord, at its election, simultaneously with or after
proceeding against Tenant or without the necessity of any suit or proceedings
against Tenant, and in any event, except as otherwise provided in Paragraph
24(c) below, without the
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necessity of any notice of non-payment, non-performance or non-observance, or of
any notice of acceptance of the Guaranty contained herein or any other notice
or demand to which a guarantor might otherwise be entitled or which may be
required to preserve any rights against a guarantor, all of which Guarantor
hereby expressly waives.
3. Waivers of Defenses. Guarantor expressly agrees that the liability of
Guarantor hereunder shall not be impaired, released, modified, stayed, limited,
terminated or discharged, in whole or in part, by any of the following,
notwithstanding that the same are made with or without notice to Guarantor, and
Guarantor hereby freely and voluntarily waives any defense based upon any of the
following:
a. Subject to the Qualifications, any amendment or modification of
the provisions of the Lease, whether or not consented to by Guarantor;
b. Any extensions of time for performance of the covenants under the
Lease to be performed by Tenant, whether given prior to or after default
thereunder;
c. Any delay by Landlord in asserting any claim, right or cause of
action arising under or in connection with the Lease or this Guaranty,
whether or not Guarantor changes its position in reliance on such delay or
the expectation of the continuance of such delay;
d. Any exchange, surrender or release, in whole or in part, of any
security which may be held by Landlord at any time for or under the Lease;
e. Any other guaranty now or hereafter executed by Guarantor or
anyone else;
f. The release, whether partial or full, of any other guarantor from
liability for the performance or observance of any of the covenants under
the Lease to be performed by Tenant, whether by operation of law or
otherwise;
g. Any lien, charge or encumbrance on or affecting any of the
respective assets and properties of Tenant or Guarantor;
h. Any rejection or disaffirmance of the Lease pursuant to the
Bankruptcy Code of the United States or other statute or from the decision
of any court interpreting any of the same;
i. Any tender of performance by or on behalf of Tenant after the
expiration of any period for performance described in Section 1161 of the
Code of Civil Procedure of the State of California, if, in the reasonable
opinion of Landlord, the acceptance of such tender would in any manner
impair the right of Landlord to terminate the Lease or to evict Tenant by
reason of the non-performance by Tenant;
j. Subject to the Qualifications, any other agreement which may now
or hereafter exist between Landlord and Tenant, whether in respect of the
Lease or any other subject matter and whether or not consented to by
Guarantor; or,
k. Any matter or thing whatsoever other than (i) full and timely
performance of all obligations guaranteed hereby, or (ii) Tenant's or
Landlord's written waiver of any obligation of Tenant made expressly for
the benefit of Guarantor.
4. Waivers as Election of Remedies and Suretyship Rights. Although it is
not the
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intention of Landlord, Tenant or Guarantor that the leasehold interest of Tenant
under the Lease be deemed a security interest, rather than a lease, Guarantor
waives all of the rights which may be waived by a guarantor pursuant to the
provisions of Section 2856 of the Civil Code of the State of California.
Guarantor further waives: (i) all rights and defenses arising out of an election
of remedies by Landlord, and (ii) all suretyship rights or defenses described in
Sections 2787 to 2855, inclusive, of the Civil Code of the State of California.
5. Assumption of Obligations and Waivers as to Financial Condition. The
obligations of Guarantor hereunder shall not be affected by any failure on the
part of Landlord to inform Guarantor concerning Tenant's financial condition or
notify Guarantor of any adverse change in Tenant's financial condition of which
Landlord becomes aware. Guarantor assumes the obligation to make such inquiries
with respect to such financial condition as such Guarantor deems necessary or
prudent in the circumstances.
6. Rights and Waivers as to Modifications of Lease or Other Obligations.
Subject to the Qualifications, at any time and from time to time, without
terminating, affecting or impairing the validity of this Guaranty or the
obligations of Guarantor hereunder, Landlord may deal with Tenant in the same
manner and as fully as if this Guaranty did not exist and shall be entitled (but
not obligated), among other things, to grant Tenant, without notice or demand
and without affecting Guarantor's liability hereunder, such extension or
extensions of time to perform, renew, compromise, accelerate or otherwise change
the time for payment of or otherwise change the terms of payment or any part
thereof contained in or arising under the Lease, or to waive any obligation of
Tenant to perform, any act or acts as the Landlord may deem advisable. If any
agreement or stipulation between Landlord and Tenant shall extend the time of
performance or modify any of the covenants of the Lease to be performed by
Tenant, Guarantor shall continue to be liable under this Guaranty according to
the provisions of any such agreement or stipulation.
7. Effect of Termination of the Lease; Guaranty of Payment of Damages. The
obligations guaranteed hereunder shall not be limited or terminated by the
termination of the Lease, by Landlord or otherwise, in accordance with law
following any default by Tenant in the performance of its obligations
thereunder. The obligations guaranteed hereunder expressly include any
obligations of Tenant which are accelerated in accordance with the provisions
of Section 1951.2 of the Civil Code of the State of California or any similar or
related provision of law, and Guarantor expressly hereby guarantees the prompt
payment of any damages or other sums to which Landlord may become entitled in
accordance with the provisions of Section 1951.2.
8. Waivers as to Litigation. Landlord shall have the right to enforce this
Guaranty with respect to Guarantor without pursuing any rights or remedies of
Landlord against Tenant or any other guarantor or any other party, or any
security Landlord may hold. Landlord may commence any action or proceeding based
upon this Guaranty (i) directly against Guarantor without making any other
guarantor, Tenant or anyone else a party defendant in such action or proceeding,
or (ii) jointly against Guarantor and/or Tenant. Any one or more successive
and/or concurrent actions may be brought hereon against Guarantor, and/or
against Guarantor and/or Tenant, with or without such action being brought
against other parties, as often as Landlord, in its sole discretion, may deem
advisable.
9. Waivers of Rights and Remedies of Guarantor Against Tenant. Until all
the covenants and conditions in the Lease to be performed and observed by Tenant
are fully performed and observed, Guarantor:
a. Shall have no right of subrogation against Tenant by reason of
any payments or acts of performance by Guarantor, in compliance with the
obligations of Guarantor hereunder;
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b. Waives any right to enforce any remedy which Guarantor now or
hereafter shall have against Tenant by reason of any one or more payments
or acts of performance in compliance with the obligations of Guarantor
hereunder; and
c. Subordinates any liability or indebtedness of Tenant now or
hereafter held by Guarantor to the obligations of Tenant to the Landlord
under the Lease.
10. Successors and Assigns. This Guaranty shall be binding upon Guarantor
and its successors and assigns, and shall inure to the benefit of and may be
enforced by the successors and assigns of Landlord or by any person to whom
Landlord's interest in the Lease, or any part thereof, including, without
limitation, all or any part of the Rent, may be assigned. Wherever in this
Guaranty reference is made to Landlord or Tenant, the same shall be deemed to
refer also to the then successor or assign of Landlord or Tenant.
11. Waiver of Defenses Pertaining to Bankruptcy, Disability or Cessation
of Liability of Tenant. Neither Guarantor's obligation to make payment or render
performance in accordance with the terms of this Guaranty nor any remedy for the
enforcement thereof shall be impaired, modified, stayed, released, limited,
terminated or discharged in any manner whatsoever by any impairment,
modification, change, release, limitation or stay of the liability of Tenant or
its estate in bankruptcy or any remedy for the enforcement thereof, resulting
from the operation of any present or future provision of the Bankruptcy Code of
the United States or other statute or from the decision of any court
interpreting any of the same, and Guarantor shall remain obligated under this
Guaranty as if no such impairment, stay, modification, change, release or
limitation had occurred. Guarantor waives any defense arising by reason of any
disability or other defense of Tenant, or by reason of the cessation from any
cause whatsoever of the liability, either in whole or in part, of Tenant to
Landlord, except, and to the extent, that such cessation shall be the result of
payment or performance of the obligation as to which the liability pertains.
Guarantor hereby acknowledges that the obligations of Guarantor hereunder are
independent of, and may exceed, the obligations of Tenant under the Lease.
12. Repayments and Reinstatement. If Landlord is obligated by any
bankruptcy or other law to repay to Tenant or Guarantor or to any trustee,
receiver or other representative of either of them any amounts previously paid,
then this Guaranty shall be reinstated in the amount of such repayment. Landlord
shall not be required to litigate or otherwise dispute its obligation to make
such repayments if it in good faith and on the advice of counsel believes that
such obligation exists.
13. Remedies Separate and Cumulative. All remedies of Landlord by reason
of this Guaranty are separate and cumulative remedies. Neither the existence nor
the exercise of any such remedy shall be deemed to preclude or prevent the
exercise of any other legal or equitable remedy available to Landlord hereunder.
14. Severability of Provisions. If any provision of this Guaranty or the
application thereof to any person or circumstance shall to any extent be held
void, unenforceable or invalid, then the remainder of this Guaranty shall not be
affected thereby, and each provision of this Guaranty shall be valid and
enforced to the fullest extent permitted by law. It is the intention of
Guarantor and Landlord that each provision of this Guaranty be fully
enforceable, and that all of the provisions hereof shall be interpreted so as to
avoid being found void, unenforceable or invalid.
15. [Intentionally Deleted]
16. No Waiver. No waiver or modification of any provision of this Guaranty
nor any termination of this Guaranty shall be effective unless expressly stated
in writing and signed by Landlord,
4
<PAGE>
and then only to the extent so expressly stated, and no such waiver shall be
applicable to any circumstance other than the specific instance for which it is
given. In no event shall a waiver of any provision of this Guaranty be implied
from any course of conduct on the part of Guarantor and/or Landlord and/or any
third party.
17. Representations and Warranties of Guarantor. Guarantor represents and
warrants to the Landlord that:
a. Guarantor is a corporation, (i) duly organized, validly existing
and in good standing under the laws of the state or country of its
incorporation, (ii) has the corporate power, authority and legal right to
conduct the business in which it is currently engaged, (iii) if not
incorporated in California, is duly qualified as a foreign corporation
under the laws of the State of California, and (iv) is in good standing
under the laws of the State of California.
b. Guarantor has the power, authority and legal right to make,
deliver and perform this Guaranty and has taken all necessary action to
authorize the execution, delivery and performance of this Guaranty. No
consent of any other person (including, without limitation, stockholders
and creditors of Guarantor), and no authorization of, notice to, or other
act by or in respect of Guarantor by or with any governmental authority,
agency or instrumentality is required in connection with the execution,
delivery, performance, validity or enforceability of this Guaranty that
has not already been taken or obtained. This Guaranty has been duly
executed and delivered by Guarantor and constitutes a legal, valid and
binding obligation of Guarantor, enforceable against Guarantor in
accordance with its terms.
c. The execution, delivery and performance by Guarantor of this
Guaranty will not violate any provision of any existing law or regulation
applicable to Guarantor or of any award, order or decree applicable to
Guarantor of any court, arbitrator or governmental authority, or of any
security issued by Guarantor or of any mortgage, indenture, lease,
contract or other agreement or undertaking to which Guarantor is a party
or by which Guarantor or any of its properties or assets is bound.
d. Guarantor has full and complete opportunity for obtaining access
to the financial records of Tenant and has fully satisfied itself with
regard to those records prior to entering into this Guaranty.
18. Jurisdiction, Venue and Choice of Law. This Guaranty and all rights,
obligations and liability arising hereunder shall be construed according to the
laws of the State of California. Guarantor hereby agrees that any action to
enforce the provisions of this Guaranty may be brought, in Landlord's sole
discretion, in any federal or state court located within the County of San
Mateo, State of California, and by execution and delivery of this Guaranty
Guarantor expressly, irrevocably and unconditionally (a) accepts for itself the
nonexclusive jurisdiction of such courts, (b) consents to and submits to the
exercise of personal jurisdiction by such courts, (c) agrees to be bound by any
final judgment rendered thereby in connection with this Guaranty, and (d) waives
(i) any objection Guarantor may now or hereafter have to the laying of venue in
any of such courts and (ii) any claim that any action or proceeding brought in
any such court has been brought in an inconvenient forum.
19. Attorney Fees. In the event of any litigation between Landlord and
Guarantor seeking a declaration of rights hereunder, damages for breach or any
other remedy pertaining this Guaranty, the prevailing party shall recover its
reasonable attorneys' fees and court costs.
20. Sublessees and Other Occupants. For purposes of this Guaranty and the
obligations
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and liabilities of Guarantor hereunder, the term "Tenant" shall include any and
all assignees, subtenants or others directly or indirectly leasing or occupying
the Premises or operating or conducting a business in or from the Premises.
21. Time. Time is of the essence of each and every provision hereof.
22. Limitation on Obligations of Guarantor.
a. Notwithstanding anything to the contrary herein, the total
obligations of Guarantor hereunder, whether for the payment of any Rent and/or
the performance of any of the obligations of Tenant under the Lease, shall be
limited to an amount which is equal to the lesser of (i) $10,000,000 or (ii) the
Maximum Formula Amount. The term "Maximum Formula Amount" shall mean a sum equal
to thirty-six (36) months of Base Rent and Additional Charges determined from
time to time (x) as of the date of any given written demand made on Guarantor
while the Lease is still in effect and/or (y) as of the day before the Lease
terminated, if and when the Lease terminates. Any payments by Guarantor
hereunder shall be credited against such maximum liability amount provided,
however, that in the event Guarantor makes a payment to Landlord under this
Guaranty and subsequently recovers all or a portion of such payment from Tenant,
the amount recovered shall be restored to the amounts available to be paid by
Guarantor to Landlord pursuant to this Guaranty. Notwithstanding anything to
the contrary herein, including but not limited to the provisions of Paragraph 24
below, no payment made by Guarantor to Landlord or in respect of any obligation
of Tenant under the Lease shall reduce the amount of Guarantor's maximum
obligations hereunder unless Landlord shall have made a written demand upon
Guarantor specifically requiring Guarantor to make payment and specifying that
such payment will apply to the maximum of Guarantor's obligations pursuant to
this Paragraph 22(a).
b. This Guaranty shall not apply to any Unapproved Increased Tenant
Obligations. The term "Unapproved Increased Tenant Obligations" shall mean any
one of the following obligations to the extent that it increases Tenant's
obligation under the Lease and is not approved in writing by Guarantor:
(i) Any increase in the amount of space leased as a part of
the Premises under the Lease pursuant to Paragraph 45 thereof.
(ii) Any amendment or modification of the Lease which has the
effect of increasing the Rent, Term or other financial obligations
of Tenant under the Lease, or decreasing the Tenant Improvement
Allowance made available by Landlord without adjustment to the
Rent.
Landlord may rely upon any approval or consent given by Guarantor which is
executed by any corporate officer of Guarantor specified in Paragraph 45 of the
Lease.
c. This Guaranty shall not apply to a default by a sublessee or
assignee of Tenant where all of the following circumstances are present:
(i) Landlord has approved the sublease or assignment in
writing (except where such approval followed any written threat by
Tenant that failure to do so would be a breach of the Lease by
Landlord or any order of any court); and
(ii) Guarantor has not approved such sublease or assignment.
Landlord may rely on any approval or consent given by Guarantor
which is executed by any corporate officer of Guarantor specified in
Paragraph 45 of the Lease.
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23. Termination of Guaranty. This Guaranty shall terminate and shall be of
no further force or effect and Landlord shall execute an agreement acknowledging
the termination of this Guaranty when either of the following conditions
described in clauses (i) or (ii) have been satisfied:
(i) (A) Tenant completes an initial public offering (or a series
of public offerings within a twenty four month period) which
results in Tenant raising a minimum of $40,000,000 (net
available to Tenant after payment of all costs associated with
such public offerings);
(B) Guarantor has delivered to Landlord a certificate
representing and warranting to Landlord that (based on the
information supplied by Tenant consisting of one or more
effective registration statements filed by Tenant with the
Securities and Exchange Commission or a certification by
Tenant's underwriter) the conditions specified in clause (i)
above has been satisfied, executed by any corporate officer of
Guarantor specified in Paragraph 45 of the Lease; and
(C) Tenant deposits with Landlord the Letter of Credit
specified in Paragraph 32 of the Lease at a time Tenant is not
in default (and no event has occurred which, with the passage
of time or giving of notice or both, would constitute a
default) under the Lease; or
(ii) Landlord determines after receipt of a written request by
Guarantor and Tenant together with such information as Landlord
shall reasonably request, that all of the circumstances and
conditions specified in Paragraph 32(c) of the Lease have occurred
entitling Tenant to a return of the Letter of Credit and at such
time, neither Tenant nor Guarantor, respectively, is in default
under the Lease or Guaranty (and no default has occurred which, with
the passage, of time or giving of notice or both, would constitute a
default) thereunder.
24. Guarantor's Rights to Cure. During the continuance of the Guaranty
until such time the Guaranty shall terminate pursuant to Paragraph 23 above,
Landlord and Guarantor agree as follows:
(a) Guarantor shall have the right, but not the obligation, at any
time prior to termination of the Lease to pay all Base Rent, Additional Charges
and other Rent due thereunder, to provide any insurance and make any other
payments, to make any repairs and improvements and do any other act or thing
required of Tenant thereunder, and to do any act or thing which may be necessary
and proper to be done in the performance and observance of the covenants,
conditions and agreements thereof to prevent the termination of the Lease. All
payments so made and all things so done and performed by Guarantor shall be as
effective to prevent a termination of the Lease as the same would have been if
made, done and performed by Tenant instead of by Guarantor.
(b) Should any default occur under the Lease, Guarantor shall have
thirty (30) days after receipt of notice from Landlord setting forth the nature
of such default within which to remedy such default.
(c) Landlord shall mail to Guarantor a duplicate copy by certified
mail of any and all notices which Landlord may from time to time give to or
serve upon Tenant pursuant to the provisions of the Lease; and no notice by
Landlord to Tenant hereunder shall be deemed to have been given as to Tenant
unless and until a copy thereof has been mailed to Guarantor.
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<PAGE>
(d) Should the Lease be terminated by reason of any rejection of the
Lease in a bankruptcy proceeding or by Landlord following Tenant's default,
Landlord shall, subject to the terms and conditions of this subsection (e), upon
written request by Guarantor to Landlord made within thirty (30) days after such
termination, execute and deliver a new lease of the Premises to Guarantor for
the remainder of the term of the Lease with the same covenants, conditions and
agreements as are contained therein; provided, however, that Landlord's
execution and delivery of such new lease of the Premises shall be made without
representation or warranty of any kind or nature whatsoever, either express or
implied, including without limitation, any representation or warranty regarding
title to the Premises or the priority of such new lease; and Landlord's
obligations and liability under such new lease shall not be greater than if the
Lease had not terminated and Guarantor had become the Tenant thereunder.
Guarantor shall take the Premises "as is" in their then current condition. Upon
execution and delivery of such new lease, Guarantor, at its sole cost and
expense, shall be responsible for taking such action as shall be necessary to
cancel and discharge the Lease and to remove the Tenant named therein and any
other occupant from the Premises. Landlord's obligation to enter into such new
lease of the Premises with Guarantor shall be conditioned as follows: (i)
Guarantor shall have complied with the provisions of this Agreement applicable
prior to the gaining of possession; and (ii) Guarantor shall pay all costs and
expenses of Landlord, including without limitation, reasonable attorneys' fees,
real property transfer taxes and any escrow fees and recording charges, incurred
in connection with the preparation and execution of such new lease and any
conveyances related thereto. In the event Landlord enters into such new lease of
the Premises with Guarantor, Guarantor shall be fully responsible for the
obligations under the Lease and the limitations on the obligations of Guarantor
in Paragraph 22 above shall not be applicable to the obligations of Guarantor
under such new lease.
IN WITNESS WHEREOF, each Guarantor has executed this Guaranty as of the
day and year first written above.
"Guarantor" "Landlord"
Oracle Corporation Circle Star Center Associates, L.P.,
a California limited partnership
/s/ Bruce M. Lange
- --------------------------------- By: M-D VENTURES, INC.,
By: Bruce M. Lange It General Partner
Its: Vice president and Treasurer
/s/ John Mozart
--------------------------------
By: John Mozart
Its: President
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Exhibit 10.31
TAX ALLOCATION AND INDEMNITY AGREEMENT
This TAX ALLOCATION AND INDEMNITY AGREEMENT, effective as of August 12,
1997 (the "EFFECTIVE DATE"), is made by and between ORACLE CORPORATION, a
Delaware corporation ("PARENT"), and NETWORK COMPUTER, !NC., a Delaware
corporation ("SUBSIDIARY").
RECITALS
1. Parent is the common parent of the Parent Affiliated Group, and
Parent and various of its direct and indirect subsidiaries are members of the
Parent Unitary Group (as those terms are defined below);
2. As of August 11, 1997, Navio Communications, Inc. has merged with
and into Subsidiary, Parent's previously wholly owned subsidiary, and the
parties expect that Subsidiary will continue to be a member of the Parent
Unitary Group, and Subsidiary may in the future become a member of the Parent
Affiliated Group;
3. Parent, on behalf of itself and the members of the Parent Subgroup,
and Subsidiary, on behalf of itself and the members of the Subsidiary
Subgroup (as those terms are defined below), intend in this Agreement to
provide for the allocation among themselves of Tax liabilities relating to
the period that Subsidiary and the other members of the Subsidiary Subgroup
are members of the Parent Affiliated Group and/or the Parent Unitary Group;
reimbursement for payment of Tax liabilities and use of certain Tax benefits
relating to that period; indemnification and procedures for audits and
contests with respect to subsequent adjustments of such Tax liabilities; and
cooperation in filing of returns and other matters relating to Taxes; and
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the capitalized terms set forth
below shall have the meanings set forth in this Article I:
1.1 "AFFILIATED PERIOD" means the period during which Subsidiary or any
other member of the Subsidiary Subgroup is a member of the Parent Affiliated
Group and/or the Parent Unitary Group.
1.2 "AGREEMENT" means this Tax Allocation and Indemnity Agreement, as
amended from time to time.
1.3 "PARENT AFFILIATED GROUP" means the affiliated group of
corporations (within the meaning of Section 1504 of the Code) of which Parent
is the common parent.
<PAGE>
1.4 "PARENT SUBGROUP" means Parent and all other corporations included
in the Parent Affiliated Group and/or the Parent Unitary Group, whether
currently or hereafter existing, other than Subsidiary and other corporations
included in the Subsidiary Subgroup.
1.5 "PARENT UNITARY GROUP" means any group of corporations including
Parent filing or required to file any Combined Return.
1.6 "COMBINED RETURN" means any state, local or, if applicable, foreign
income, franchise or similar tax return which has been or will be filed by
any Parent Subgroup member or Subsidiary Subgroup member on a basis which
reports Taxes for two or more members of such subgroup using combined,
consolidated or unitary business tax reporting principles.
1.7 "CONSOLIDATED RETURN" means a consolidated U.S. federal income tax
return filed by or on behalf of an affiliated group of corporations within
the meaning of Section 1504 of the Code.
1.8 "FINAL DETERMINATION" means, with respect to any liability for
Taxes for any period, (a) a final, unappealable decision by a court of
competent jurisdiction, (b) the expiration of applicable statutes of
limitations on assessment of Taxes or filing of claims for refund, (c) the
execution of a closing agreement under section 7121 of the Code or the
acceptance by the IRS of an offer in compromise pursuant to section 7122 of
the Code (or similar agreements with tax authorities entered into under
applicable state, local or foreign tax law), (d) a binding agreement without
reservation on IRS Form 870-AD or a comparable agreement form under the laws
of any other taxing jurisdiction or (e) any other final, irrevocable and
unappealable determination of Taxes for such period.
1.9 "IRS" means the United States Internal Revenue Service or any
successor thereto.
1.10 "TAX" or "TAXES" means any or all taxes, however denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, territorial, state, local
or foreign government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of the
foregoing, all income or profits taxes (including but not limited to,
federal, state and foreign income taxes), payroll and employee withholding
taxes, unemployment insurance contributions, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, business license taxes, occupation taxes, real and personal property
taxes, stamp taxes, environmental taxes, transfer taxes, and other
governmental charges or obligations of the same or of a similar nature to any
of the foregoing, which are required to be paid, withheld or collected.
1.11 "SUBSIDIARY SUBGROUP" means Subsidiary and all of its direct and
indirect subsidiaries, whether currently or hereafter existing, which would
be included in an affiliated group of corporations (within the meaning of
section 1504 (a) of the Code) and/or combined, consolidated or unitary state
or other tax filing groups of corporations of which Subsidiary would be the
ultimate parent corporation if Subsidiary were not a member of the Parent
Affiliated Group or Parent Unitary Group, respectively.
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ARTICLE II
FILING OF RETURNS
2.1 CONSOLIDATED RETURNS AND COMBINED RETURNS.
(a) Parent shall have exclusive authority and responsibility to
prepare and file Consolidated Returns and Combined Returns on behalf of the
Parent Affiliated Group and Parent Unitary Group, respectively (as well as
any other documents, statements or elections required to be filed or included
with such Consolidated Returns or Combined Returns), for all taxable years
(or portions thereof) included in the Affiliated Period. Parent shall have
sole authority and discretion to determine (i) the manner in which such
Consolidated Returns and Combined Returns (and related documents) shall be
prepared and filed, including without limitation the manner in which any item
of income, gain, loss, deduction or credit included in such returns shall be
reported and the corporations appropriately included in the Parent Unitary
Group filing a Combined Return, (ii) whether any extensions of time to file a
Consolidated Return or Combined Return shall be requested, and (iii) the
elections that will be made in such returns on behalf of the Parent
Affiliated Group, the Parent Unitary Group or any members thereof (including
members of the Subsidiary Subgroup). Subject to the preceding provisions of
this Section 2.1(a), Parent shall provide draft copies of such returns to
Subsidiary a reasonable period of time prior to filing and shall permit
subsidiary to comment on any material matters relating to Subsidiary included
therein, provided that Parent shall have no obligation to make changes to
such returns in response to such comments.
(b) Subsidiary and each member of the Subsidiary Subgroup hereby
irrevocably appoint Parent as their agent and attorney-in-fact to take such
actions (including the execution of documents on behalf of Subsidiary or any
other member of the Subsidiary Subgroup) as may be appropriate to effectuate
the filing of such Consolidated Returns and Combined Returns. Subsidiary and
each Subsidiary Subgroup member agree to file such consents, elections and
other documents, provide information as requested by Parent and otherwise
cooperate with Parent as necessary to carry out the purpose of this section.
(c) Parent shall be liable, and shall indemnify Subsidiary and
each other member of the Subsidiary Subgroup, for any penalties or other
damages attributable to the failure of Parent to make timely filings of
Consolidated Returns or Combined Returns for the Affiliated Period or full
and timely payment of all amounts shown to be due thereon, provided that
Subsidiary and the Subsidiary Subgroup members have complied with their
obligations to make Tax payments to, provide information to, and otherwise
cooperate on a timely basis with Parent as provided under the provisions of
this Agreement.
2.2 OTHER RETURNS.
(a) Except as otherwise provided herein or as the parties hereto
may otherwise agree, Subsidiary shall have exclusive authority and
responsibility to prepare and file all tax returns by or on behalf of it and
any member of the Subsidiary Subgroup, other than Consolidated Returns and
Combined Returns subject to the provisions of Section 2.1. Parent shall
provide (and shall cause each Parent Subgroup member and their
representatives to provide)
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<PAGE>
reasonable access to books, records, returns and other information to the
extent necessary to permit Subsidiary timely to prepare and file such tax
returns and shall otherwise cooperate as reasonably requested by Subsidiary
in connection with the preparation and filing of such returns.
(b) Subsidiary shall be liable, and shall indemnify Parent and
each other member of the Parent Subgroup, for any penalties or other damages
attributable to the failure of Subsidiary to make timely filings of tax
returns for which it is responsible under this Section 2.2 or full and timely
payment of amounts shown to be due thereon, provided that Parent and the
Parent Subgroup members have complied with their obligations to provide
information and otherwise cooperate as provided hereunder.
ARTICLE III
ALLOCATION OF LIABILITIES FOR TAXES
3.1 FEDERAL INCOME TAXES FOR PERIODS COMMENCING ON AND AFTER THE
EFFECTIVE DATE.
(a) For each taxable period commencing on or after the Effective
Date in which Subsidiary and any other members of the Subsidiary Subgroup are
included in the Parent Affiliated Group, the Subsidiary Subgroup shall be
allocated and Subsidiary shall pay to Parent the Subsidiary Subgroup's
federal income Tax liability, if any (including any alternative minimum tax
or environmental tax), as determined under this Section 3.1. Such federal Tax
liability shall equal the hypothetical separate return tax liability of such
subgroup, as determined in accordance with the provisions of Treasury
Regulations Section 1.1552-1(a)(2)(ii) (treating references to a "member"
therein as references to the Subsidiary Subgroup, and including the
adjustments under clauses (a) - (i) thereof) as if the Subsidiary Subgroup
had filed a separate consolidated federal income tax return. If the
Subsidiary Subgroup's federal income Tax liability as so determined is zero,
then Parent shall pay to Subsidiary the excess, if any, of the Parent
Subgroup's federal income Tax liability, determined as if the Parent Subgroup
had filed a separate consolidated federal income tax return for such taxable
period or portion thereof (and any taxable year of the Parent Subgroup to
which a net operating loss or other tax item of the Subsidiary Subgroup is
carried) under the same principles as set forth in the preceding sentence,
over the actual federal income Tax liability of the Parent Affiliated Group
for such taxable period or portion thereof (or such year to which such item
is carried).
(b) For purposes of determining allocation of Tax liabilities and
payment obligations for tax periods commencing on or after the Effective
Date, (i) any Taxes attributable to the restoration of an excess loss account
or intercompany gain in connection with any event causing termination of
membership by Subsidiary and other members of the Subsidiary Subgroup in the
Parent Affiliated Group shall be allocated to whichever subgroup includes the
corporation required to restore such item under applicable Treasury
Regulations pursuant to Section 1502 of the Code, (ii) the benefit of the
graduated Tax rates provided under Section 11 of the Code and any alternative
minimum tax exemption amount under Section 55 of the Code shall be allocated
to the Subsidiary Subgroup in proportion to the ratio of the Subsidiary
Subgroup's federal Tax liability to the total federal Tax liability of the
Parent Affiliated Group (computed without regard to such benefit), and (iii)
items not otherwise specifically addressed hereunder
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<PAGE>
shall be allocated between the Subsidiary Subgroup and the Parent Subgroup in
such manner that reflects the provisions and purposes of this Agreement as
determined by Parent in its reasonable discretion.
(c) The Subsidiary Subgroup's federal Tax liability for the
taxable year during or with which the Affiliated Period ends shall be
determined in accordance with the provisions of Treasury Regulations Section
1.1502-76(b)(2) by closing the books of Subsidiary and the Subsidiary
Subgroup members as of the end of the last day of the Affiliated Period and
taking into account only items accruing during the portion of the taxable
year ending on such date in computing such liability. Items shall not be
pro-rated in accordance with clauses (ii) or (iii) of such section of the
Treasury Regulations except to the extent Parent in its discretion determines
that it is impracticable to allocate particular items in accordance with the
preceding sentence.
(d) The parties acknowledge that the allocation of federal Tax
liability provided for by this Section 3.1 is for purposes of determining the
parties' actual payment obligations to each other with respect to Taxes of
the Parent Affiliated Group for the Affiliated Period and not for purposes of
computing earnings and profits pursuant to Section 1552 of the Code and
recognize that such allocation may differ from the allocation provided by
Section 1552 for earnings and profits purposes.
3.2 STATE INCOME AND FRANCHISE TAXES FOR PERIODS COMMENCING ON OR AFTER
THE EFFECTIVE DATE.
(a) For each taxable period (or portion thereof) commencing on or
after the Effective Date for which Subsidiary and/or any other members of the
Subsidiary Subgroup are included in any Combined Return filed by the Parent
Unitary Group, the Subsidiary Subgroup shall be allocated and Subsidiary
shall pay to Parent the state income Tax liability of Subsidiary and/or such
other Subsidiary Subgroup members that are so included, as determined under
this Section 3.2. Such state income Tax liability shall equal the
hypothetical state income tax liability of the Subsidiary Subgroup members so
included, computed as if they filed a Combined Return (or if only one such
member is so included, a separate state income or franchise tax return)
including only such included member(s) for such taxable period (or portion
thereof). To the extent that the same or analogous federal consolidated
reporting principles as are referred to in Section 3.1 apply for purposes of
filing such Combined Returns, then such principles shall also apply for
purposes of determining the Subsidiary Subgroup's state Tax liability in
respect of any Combined Return of the Parent Unitary Group. If any state
income or franchise Tax liability of the Subsidiary Subgroup (other than any
applicable minimum taxes) for such taxable period (or portion thereof) as so
determined is zero, then Parent shall pay to Subsidiary the excess, if any,
of the Parent Subgroup's state income Tax liability for such taxable period
(or portion thereof), determined as if the Parent Subgroup had filed a
separate Combined Return not including any Subsidiary Subgroup members, over
the actual state income Tax liability of the Parent Unitary Group for such
taxable period (or portion thereof). Parent shall have the discretion to make
determinations of each subgroup's liability for Taxes under this Section
3.2(a) in any manner that it deems consistent with the applicable state and
local Tax reporting principles and the purposes of this Agreement. For
purposes of apportioning the Parent Subgroup's and
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<PAGE>
Subsidiary Subgroup's taxable income or loss for a taxable period commencing
before and ending after the Effective Date, the amount of such taxable income
or loss treated as attributable to the portion of the period commencing with
the Effective Date shall be determined as though such taxable period were two
separate taxable periods, the first of which ended the day prior to the
Effective Date and the second of which commenced with the Effective Date. The
provisions of this Section 3.2(a) will be applied separately to each state or
other applicable taxing jurisdiction.
(b) Subsidiary shall be responsible for payment of any state Taxes
due from it or any members of the Subsidiary Subgroup, and Parent shall be
responsible for payment of any state Taxes due from Parent or any members of
the Parent Subgroup, in connection with state income or franchise tax returns
that are not Combined Returns.
3.3 OTHER TAXES FOR PERIODS COMMENCING ON OR AFTER THE EFFECTIVE DATE.
Any Taxes for taxable periods commencing on or after the Effective Date,
other than Taxes allocated under Sections 3.1 and 3.2, shall be the
responsibility of the party incurring such Tax under applicable law.
Notwithstanding the foregoing, in the event that the applicable law of any
foreign taxing jurisdiction provides for filing of Combined Returns including
one or more members of each of the Subsidiary Subgroup and the Parent
Subgroup, then principles similar to those set forth above in Section 3.2(a)
shall be applied for purposes of determining an appropriate allocation of
Taxes required to be reported with such Combined Returns.
ARTICLE IV
PAYMENT AND INDEMNIFICATION OF TAXES
4.1 ESTIMATED TAX PAYMENTS. Parent shall have the right to assess
Subsidiary for the Subsidiary Subgroup's share of any estimated Tax payment
liability incurred by the Parent Affiliated Group or the Parent Unitary Group
for any taxable year (or portion thereof) included in the Affiliated Period,
as determined by Parent in its reasonable discretion applying the principles
of Sections 3.1 and 3.2. For this purpose, Subsidiary' share of each such
estimated Tax payment liability shall not exceed the Parent Affiliated
Group's or Parent Unitary Group's actual estimated Tax payment liability for
the relevant period and Parent shall have no obligation to make any payment
to Subsidiary. Parent shall provide Subsidiary with notice of its estimated
Tax payment obligation hereunder at least five days prior to the due date
thereof as specified in such notice, together with a summary of the basis for
the calculation of such obligation, and Subsidiary shall pay the amount owed
no later than such due date. Any payments made by Subsidiary under this
Section 4.1 shall be credited against the final Tax payment obligations due
for the entire taxable year (or portion thereof) under Section 4.2.
4.2 FINAL TAX PAYMENTS. As soon as practicable after the end of each
taxable year (or portion thereof) included in the Affiliated Period, but in
no event later than 30 days following the due date (including extensions) for
filing the applicable Consolidated Return or Combined Return therefor, Parent
shall prepare and submit to Subsidiary a statement setting forth the final
amount determined by Parent to be due from Subsidiary or Parent, as the case
may be, in accordance with the provisions of Sections 3.1 and 3.2, taking
into account any amounts credited to
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<PAGE>
Subsidiary under Section 4.1. Such statement shall include sufficient
supporting information to show the basis for the amount determined. Unless
Subsidiary objects to the amount determined, such amount shall be paid no
later than five days thereafter. In the event of a dispute, such dispute
shall be resolved by a nationally recognized independent accounting firm
selected by Parent and approved by Subsidiary, which approval shall not be
unreasonably withheld.
4.3 INDEMNIFICATION. Provided that Subsidiary has made the payments to
Parent required under this Agreement, Parent shall be responsible for, shall
protect, indemnify and hold harmless Subsidiary and each Subsidiary Subgroup
member from, and shall be entitled to any refunds of (i) any Taxes imposed on
the Parent Affiliated Group (or any member thereof) or the Parent Unitary
Group (or any member thereof), including without limitation any obligation to
contribute to the payment of any such Taxes (other than as provided in this
Agreement) and any liability arising from the several liability for Taxes of
an affiliated group under Treasury Regulations Section 1.1502-6 or any
analogous provisions of other applicable law, and (ii) any other Taxes
imposed on Parent or any member of the Parent Subgroup arising before, during
or after the Affiliated Period. Except as provided in the preceding sentence,
Subsidiary shall be responsible for, shall protect, indemnify and hold
harmless Parent and each Parent Subgroup member from, and shall be entitled
to any refunds of, Taxes imposed on the Subsidiary Subgroup or any member
thereof.
ARTICLE V
SUBSEQUENT ADJUSTMENTS
5.1 SUBSEQUENT ADJUSTMENTS. In the event that a Final Determination
adjusts any items of income, gain, loss, deduction or credit of the Parent
Affiliated Group, the Parent Unitary Group or any member thereof for any
taxable year (or portion thereof) included in the Affiliated Period, then the
payment obligations under Article III of this Agreement shall be redetermined
to reflect such adjustments and Parent shall pay Subsidiary or Subsidiary
shall pay Parent, as the case may be, the difference between the amounts owed
under such section as so adjusted and the amounts owed as originally
determined, together with an appropriate share of any interest actually due
or received in respect of such adjustment. Any payment required pursuant to
this Article V shall be made promptly after the occurrence of such Final
Determination.
ARTICLE VI
CONTROVERSIES
6.1 TAXES OF PARENT AFFILIATED GROUP OR UNITARY GROUP. Subject to the
remaining provisions of this Section 6.1, Parent shall have authority to
represent Subsidiary and each Subsidiary Subgroup member in any audit,
examination or other controversy before the IRS or any other governmental
authority or court regarding the Taxes of the Parent Affiliated Group or
Parent Unitary Group for all taxable years or portions thereof included in or
prior to the Affiliated Period. Subsidiary shall be permitted, on behalf of
itself or of any members of the Subsidiary Subgroup, to consult with Parent
to the extent the controversies relate to items of the Subsidiary Subgroup or
items for which Subsidiary is or may be obligated to indemnify Parent or a
member of the Parent Subgroup hereunder. Parent shall timely notify
Subsidiary of any con-
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<PAGE>
troversy relating to Tax items of Subsidiary or any other member of the
Subsidiary Subgroup (or items for which Subsidiary may otherwise be required
to indemnify Parent or a Parent Subgroup members hereunder) and promptly
provide Subsidiary with copies of all correspondence relating to such
controversy.
6.2 OTHER TAXES. Except as the parties may otherwise agree, each of
Parent and Subsidiary shall have exclusive authority to represent itself and
its respective subgroup members in any controversies relating to Taxes of its
respective subgroup (or any members thereof), other than Taxes referred to in
Section 6.1.
6.3 COOPERATION. Parent and Subsidiary shall cooperate with each other,
and shall cause their respective subgroup members and representatives also to
cooperate, in the conduct of any controversy relating to Taxes. Such
cooperation shall include, without limitation, (a) execution of powers of
attorney or other documents, making elections, filing claims for refund, and
receiving funds, and (b) making available to the other party, during normal
business hours and on reasonable terms, all books, records (including, but
not limited to, workpapers and schedules), information and employees
reasonably requested and necessary or useful in connection with such
controversy.
6.4 RECORDS. Parent and Subsidiary agree that all records, including but
not limited to, tax returns, supporting schedules, workpapers, correspondence
and other documents within their possession or the possession of the members of
their respective subgroups and relating to Taxes arising during the Affiliated
Period, shall be retained for as long as such records may be material to the
determination of liabilities or refunds of such Taxes and shall be made
reasonably available to the other party upon request during normal business
hours for inspection and copying. Prior to destroying any such records, the
party in possession thereof shall notify the other of such intent and shall
offer to deliver such records to the other.
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<PAGE>
ARTICLE VII
CARRYBACKS
7.1 CARRYBACKS. If Subsidiary or any member of the Subsidiary Subgroup
incurs any deduction, loss, or credit in a period after the Affiliated Period
that under applicable law is not required to be carried back but is carried
back to a Consolidated Return or Combined Return of the Parent Affiliated
Group or Parent Combined Group for a taxable year (or portion thereof)
occurring during the Affiliated Period, Parent and Subsidiary shall discuss
an appropriate payment, if any, to be made by Parent to Subsidiary in the
event that there is any reduction of Taxes actually realized by the Parent
Affiliated Group (or any member thereof) or Parent Unitary Group (or any
member thereof) as a result of such carryback. Subsidiary shall be entitled
to determine whether or not to waive the right to carry back such item. If
Subsidiary is not permitted under applicable law to waive the right to
carryback such item and the carryback of such item results in an actual
reduction of Taxes of the Parent Affiliated Group (or any member thereof) or
Parent Unitary Group (or any member thereof), Parent shall pay Subsidiary the
amount of such reduction as determined by Parent in its reasonable
discretion, taking into account the principles of Section 2.1(a) and 3.1(a).
Any payment required under this Section 7.1 shall be made within 30 days
after the Parent Affiliated Group or Parent Unity Group, as the case may be,
actually receives the benefit of such reduction of Taxes.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Tax Allocation
Agreement to be executed by their duly authorized representatives.
PARENT
ORACLE CORPORATION
By: /s/ DEBORAH A. LANGE
---------------------
Name: DEBORAH A. LANGE
---------------------
Title: VP TAX
---------------------
SUBSIDIARY
NETWORK COMPUTER, INC.
By: /s/ MITCHELL KERTZMAN
----------------------
Name: MITCHELL KERTZMAN
---------------------
Title: CEO & PRESIDENT
---------------------
<PAGE>
[LOGO]
February 16, 1999
VIA FEDERAL EXPRESS
Don Scott
ORACLE CORPORATION
500 Oracle Parkway
Redwood Shores, California 94065
RE: TAX ALLOCATION AND INDEMNITY AGREEMENT BETWEEN ORACLE CORPORATION
("ORACLE") AND NETWORK COMPUTER, INC. ("NCI")
Dear Mr. Scott:
Enclosed herewith please find one fully executed original of the
above-referenced agreement for your files.
If you have any questions, please call me at (650) 631-5242.
Very truly yours,
/s/ Jordan James
Jordan James, Paralegal to
Nancy Hilker, Vice President/CFO
/jlj
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